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Sustainabilitydata book2024Nissan publishes a sustainability data book to share information on our sustainability strategies and management to help stakeholders gain a better understanding of the social responsibilities we must fulfill and the social value we aim to provide.It also gives an overviews of Nissan Green Program 2030(NGP2030)our fifth medium-term environmental action plan for 2030,and Nissan Social Program 2030(NSP2030)the first program designed to comprehensively promote social initiatives and share the achievements of our fiscal 2023 activities.For further long-term visions and strategies,please refer to our integrated report.Positioning of reportsShort-termLong-termTimeframeInformationResultsVisionStrategySustainability data bookSecuritiesreportBusiness reportCorporate governance reportIntegrated reportScope Period covered:The report covers fiscal 2023(April 2023 to March 2024);content that describes efforts outside this period is indicated in the respective sections.Organization:Nissan Motor Co.,Ltd.,subsidiaries and affiliated companies in the Nissan Group.Referenced reporting guidelinesNissan has prepared this report in accordance with the GRI Standards for the period April 1,2023 through March 31,2024.Publication of GRI content indexPlease visit the following website for the GRI content index.https:/www.nissan- Force on Climate-related Financial Disclosures(TCFD)recommendations Sustainability Accounting Standards Board(SASB)standardsDate of previous reportESG data book 2023,issued July 31,2023.Reporting cycleAnnually since 2004Third-Party assuranceFor more information on the third-party assurance.P061Forward-looking statementsThis sustainability data book contains forward-looking statements on Nissans future plans and targets and related operating investment,product planning and production targets.There can be no assurance that these targets and plans will be achieved.Achieving them will depend on many factors,including not only Nissans activities and development but also the dynamics of the automobile industry worldwide,the global economy and changes in the global environment.For further informationNissan Motor Co.,Ltd.Sustainability Development DepartmentEmail:NISSAN_SRmail.nissan.co.jpSustainability data book 2024Publication date:July 31,2024Our related websitesOur companySustainabilityInnovationInvestorsBrandEditorial policyNissan Motor CorporationCorporate directionEnvironmentalSocialContentsDataGovernanceSustainability data book 2024001Corporate directionCSO message 003Sustainability at Nissan 004EnvironmentalEnvironmental principles and policies 015Understanding of environmental issues 016Strategic approach to environmental issues 017Global environmental management framework and governance system 021Nissan Green Program 024Value chain activity achievements 034Products 035Corporate activities 044Collaborations with relevant partners 059Third-party assurance 061SocialApproach to social issues 064Human rights 065Focus areas in Nissan Social Program 2030Safety 071Quality 074Intellectual property 080Responsible sourcing 083Communities 088Power of employees 092Employee human rights 093Diversity,equity and inclusion 097Learning and development 109Health and safety 113GovernanceRegarding a recommendation from the Japan Fair Trade Commission 119Approach to governance 120Corporate governance 121Risk management 131Privacy and data security 133Compliance 134DataESG dataCorporate overview 141Environmental data 143Social data 159Governance data 163ContentsViewing this reportThis sustainability data book is an interactive PDF.You can easily access the information by clicking on the navigation tabs and buttons.Nissan Motor CorporationCorporate directionEnvironmentalSocialContentsDataGovernanceSustainability data book 2024002Corporate directionEnvironmentalSocialContentsDataGovernanceCategory tabsNavigation buttonsLink buttons Click the tabs to jump to the top page of each category.Jump to linked pageP000Jump to information on the webURLGo back one pageGo forward one pageReturn to previous viewCSO messageAt Nissan,sustainability is core to our business.This ensures that we consider the sustainability implications in every part of our strategic journey towards our long-term vision,Nissan Ambition 2030.Our sustainability commitments were reinforced in March 2024 when Nissan announced The Arc business plan,which is the bridge to our long-term vision.Through the Arc plan,Nissan will accelerate the electric vehicle(EV)transition,prioritize reducing CO emissions,innovative technologies,leaner manufacturing systems,smart partnerships and market growth that will contribute to a more sustainable future and our ultimate goal of carbon neutrality.Our recently refreshed Nissan Green Program(NGP2030)and our newly launched Nissan Social Program(NSP2030)support the plan as its foundation.Nissan first introduced its Nissan Green Program in 2002 with the goal of achieving our environmental philosophy of“A symbiosis of people,vehicles,and nature”.The NGP2030the fifth generation of the programlaunched in 2023,seeks to reduce the impact of our most material environmental issues,such as climate change,resource dependency,air quality and water,and to maximize opportunities.To address climate change,a key priority for Nissan,we have set the goal of achieving carbon neutrality throughout the lifecycle of our products and our business activities by 2050.Within NGP2030,by 2030,we are also aligned with the 1.5 scenario in terms of CO emissions from our factories and products.We aim to reduce CO emissions over the lifecycle of our products by 30%from the 2018 level through various initiatives,including procuring recycled and low-CO parts and by electrifying logistics.Nissan is also working to further enhance the value of EVs as mobile storage batteries.Through the Nissan Energy Share system,electricity from EV batteries can be shared with homes,buildings and society through Nissans unique energy management and interactive charging technologies.As a result,we will be able to use renewable energy more effectively and stably,thereby reducing CO emissions from electricity used by both Nissan and society.Nissans environmental initiatives are highly recognized.For five consecutive years,we have been certified as an A List company for our efforts and information disclosure in the field of water security by CDP,a globally renowned non-profit organization,and for eleven successive years,we have also been certified as a leadership company in the field of climate change.We take pride in this evaluation as a testament to the hard work and dedication of our employees in resolving environmental issues.At Nissan,we are a people-centric company that creates inclusive communities to empower our employees,suppliers,partners,and society to grow together.That is why we launched NSP2030 our first comprehensive social program which is based on understanding,engaging,and creating value for all our stakeholders.This program will focus on critical priority areas for Nissan,which include safety,quality,responsible sourcing,employee human-rights advocation,DEI(diversity,equity and inclusion),and communities.Diversity is a source of strength and resilience for all teams across the organization,from the corporate level to the factory floor.This is why Nissan strongly promotes DEI initiatives,and we are proud to have made great strides in advancing diversity globally.We have increased the percentage of women managers across our global operations to 15.9%,creating Nissan-unique strengths ranging all the way from the product planning phase to our direct contact points with customers.Nissan is working to develop technologies that significantly reduces crashes,such as the next-generation LIDAR technology.Furthermore,we will promote traffic safety awareness among drivers and pedestrians through NSP2030.Another commitment is our continued respect for human rights,one of the five values of the Nissan Way that is the shared values that enable Nissan employees to unleash their full potential.Following internal assessments conducted last year,we are strengthening our efforts on human rights around product safety,AI,privacy,and information security.Our efforts to bolster these areas will continue to ensure they are aligned with industry best practices in a rapidly changing environment.At Nissan,our corporate purpose is“Driving innovation to enrich peoples lives”and both NGP2030 and NSP2030 play a critical role in fulfilling it.By advancing and accelerating our sustainability initiatives across Nissan globally,we aim to realize a cleaner,safer,more inclusive world,and ultimately,a more sustainable future for our valued stakeholders for generations to come.Nissan Motor Co.,Ltd.Senior Vice President,Chief Sustainability OfficerJoji TagawaNissan Motor CorporationSocialEnvironmentalCorporate directionDataGovernanceContentsSustainability data book 2024CSO messageSustainability at Nissan003Sustainability strategySustainability at NissanTo fulfill its corporate purpose of“Driving innovation to enrich peoples lives,”Nissan provides unique and innovative automotive products and services that deliver superior value to all stakeholders.As it evolves as a company through its full range of global activities,Nissan seeks to create economic value and contribute to resolving issues facing society as a leading global automaker.Nissan aims to become a truly sustainable company that plays a vital role for its customers,shareholders,employees,as well as for communities,and all other stakeholders.It is committed to achieving a cleaner,safer and more inclusive world.Identification of material issuesNissan formulates sustainability strategies and promotes activities that account for stakeholder interests and the latest trends,such as technological innovation.When formulating these strategies,we identified key material issues that we need to address on a company-wide level based on an analysis of risks and opportunities.We considered both corporate activities and sustainability from the perspective of the impact of society and the environment on Nissan(financial impact),which is of great interest to investors as well as the new perspective of how Nissan impacts-and benefits-society and the environment,and in doing so demonstrate the value that Nissan creates as well as its priorities.By communicating its approach in greater detail to stakeholders,Nissan hopes to expand opportunities for collaboration in various ways and further strengthen its relationships of trust in the automotive sector as well as further afield in a bid to take its initiatives to the next level.Sustainability at NissanNissan Motor CorporationSocialEnvironmentalCorporate directionDataGovernanceContentsSustainability data book 2024CSO messageSustainability at Nissan004Materiality assessment processStep 1:Clarifying societal and environmental issuesWe assess global agendas by regularly analyzing market-trends,identifying expectations from society through dialogue with stakeholders that include investors,and studying the United Nations Climate Change Conference of Parties(COP),Sustainable Development Goals(SDGs),and risk reports published by the World Economic Forum(WEF).Step 2:Assessing material issues facing Nissan and the automobile sector as a wholeWe assess Nissans material issues by analyzing risks and opportunities from a global perspective.This perspective incorporates both efforts to achieve the Nissan Ambition 2030 long-term vision and the role of the automobile sector.Step 3:Prioritizing materialityWe organize priorities based on risks and opportunities into a matrix to identify the value Nissan creates and determine how to enhance initiatives going forward.Then,we conduct an expert review to reflect feedback provided.Step 4:Reaching consensus among management and the Board of DirectorsWe report our materiality assessment including background information and the reasons for our selections to executives and the Board of Directors to reach a consensus.Nissan materiality matrixHaving assessed 21 material issues,the items at the top of the vertical axis indicate Nissans greatest value and impact on society and the environment,while those in the right-hand column on the horizontal axis indicate the greatest impact on Nissan from society and the environment.Nissan has determined the 12 most important items.Nissan will incorporate each identified into business activities to expand opportunities for collaboration and help promote robust efforts that embody our corporate purpose.Ecosystem service and biodiversity DEI (Diversity,equity and inclusion)Lifecycle management Pursue energy efficiency Engagement with stakeholders Preservation of water,air and soil Wellness and occupational safety/health Risk hedge for physical hazards Human resource developmentExtremely highHighNissans value/impact on society and the environment HighExtremely highImpact on Nissan from society and the environment*No priority in category Top 12 prioritized items Community development Vehicle safety Cleaner emissions Privacy and data security Product quality Supply chain management Sustainable resource management Governance,regulation and compliance Inclusive mobility solutions Human rights Vehicle electrification Renewable energy：Social：Environmental：Governance Nissan Motor CorporationSocialEnvironmentalCorporate directionDataGovernanceContentsSustainability data book 2024CSO messageSustainability at Nissan005Materiality description and its importanceMaterialityDescriptionNissan initiativesESGGovernance,regulation and complianceGuided by corporate purpose,values and business code of conduct,we will operate with the highest level of business integrity through effective governance based on the transparent framework,comply with respective laws and regulations,and ensure we act consistently with respect and integrity towards people and society.Corporate governance(P121)Compliance(P134)Inclusive mobility solutionsBy providing advanced new mobility technologies and services(e.g.,autonomous driving)to more people,we wish to realize an inclusive society where everyone has access to safe and reliable mobility.Safety(P071)Human rightsFoster an organization where every employee shows utmost respect to individual dignity and human rights.Nissan commits to act in accordance with internal ethical standards set by the United Nations Guiding Principles on Business and Human Rights.Human rights(P065)Employee human rights(P093)Vehicle electrificationBy steadily increasing electrified line-up,offering advanced vehicle and battery technologies and supporting EV eco-system,we are accelerating our efforts toward carbon neutrality.Value chain activity achievements-Products(P035)Renewable energyThrough partnerships with various sectors and collaboration with governments and communities,we will promote the use of renewable and alternative energy sources to reduce CO emissions.With 4R*including Vehicle-to-everything(V2X),we continue to empower societies with safe energy management solutions.*4R:Battery reuse,refabricate,resell,recycle Value chain activity achievements-Products(P035),Corporate activities(P044),Collaborations with relevant partners(P059)Vehicle safetyThrough advanced driver assistance technologies accessible to more customers,we wish to realize zero fatality by eliminating the number of deaths in traffic accidents involving Nissan vehicles.Safety(P071)Cleaner emissionsWith the goal of“atmosphere-level clean emissions,”we will ensure cleaner exhaust emissions(e.g.NOx,PM,etc.)from our products and facilities.Value chain activity achievements-Products(P035),Corporate activities(P044)Privacy and data securityCommitted to safeguarding data protection and privacy rights,protecting stakeholder personal data through appropriate security measures,and will be responsible for secure handling of data in consideration of new technologies and security risks.Privacy and data security(P133)Community developmentContribute to the development of communities and empower societies through disaster management support and humanitarian aid and social transformation initiatives like Blue Switch.Value chain activity achievements-Products(P035)Communities(P088)Product qualityProvide reliable,comfortable,and user-friendly mobility by improving the design and product quality including chemical substance management and in-cabin air.Value chain activity achievements-Products(P035)Quality(P074)Supply chain managementAim to conduct our business activities based on our supplier CSR guidelines in an ethical,socially and environmentally responsible manner at each stage of the supply chain.Value chain activity achievements-Collaborations with relevant partners(P059)Responsible sourcing(P083)Sustainable resource managementAvoid resource price fluctuations and procurement risk,reduce dependence on resources by establishing a vehicle manufacturing system that enables effective and sustainable use of material resources by circular economy such as repair/reuse/rebuild/recycle.Value chain activity achievements-Corporate activities(P044)E:environmentalS:socialG:governanceNissan Motor CorporationSocialEnvironmentalCorporate directionDataGovernanceContentsSustainability data book 2024CSO messageSustainability at Nissan006Sustainability initiatives targeting 2030In 2021,we introduced Nissan Ambition 2030,our long-term vision to realize a cleaner,safer,and more inclusive world in which all people can co-exist.We are delivering exciting vehicles and technologies that empower customer journeys.Through various collaborations we are building a smart ecosystem to empower society.In fiscal 2023,we set up the Nissan Green Program 2030(NGP2030)and the Nissan Social Program 2030(NSP2030).Both programs are indispensable for realizing Nissan Ambition 2030 and serve as the foundation of our business plan The Arc.We formulated the NGP2005 medium-term environmental action plan in 2002 to realize Nissans environmental philosophy of“a symbiosis of people,vehicles,and nature.”For more than 20 years since then,we have continued to evolve the way we tackle environmental issues.The fifth generation of the program-the NGP2030-aims to reduce environmental impacts by improving technologies and business processes.It also strives to have a positive impact on society and the environment to ensure our living society is sustainable and in harmony with nature.Breaking new ground,the NSP2030 has been formulated to promote social initiatives comprehensively with a view to 2030.It aims to transform Nissan into a people-centric company that will continue to grow together with employees,suppliers,partners,and broader society.It also seeks to create value for people in the community.With both NGP2030 and NSP2030 we have established goals for 2030 as well as action plans and other objectives in each area where we are now pressing ahead with initiatives.Through these efforts,we aim to conduct sustainable business practices and help bring about a better world for the next generation.Nissan Motor CorporationSocialEnvironmentalCorporate directionDataGovernanceContentsSustainability data book 2024CSO messageSustainability at Nissan007Nissan GreenProgram 2030Nissan SocialProgram 2030Driving Innovation to Enrich Peoples LivesWorking toward a cleaner,safer,more inclusive worldCorporate PurposeTogether we empowermobility and beyondE M P O W E R I N G J O U R N E Y SE M P O W E R I N G S O C I E T YNGP2030Since 2002,we have been formulating medium-term environmental action plans in the form of NGPs to realize our environmental philosophy of“a symbiosis of people,vehicles,and nature.”The objective of NGP2030 is to ensure our living society is sustainable and in harmony with nature.More specifically,we will focus on minimizing our environmental footprint and deploying environmental measures that maximize our opportunities-for example,by accelerating the 1.5 scenario and transitioning to a circular economy.We have identified climate change,resource dependency,air quality and water to be the most significant issues,and we are also working to strengthen traceability as the foundation of our activities.In addressing climate change,we have set a goal for achieving carbon neutrality across the entire life cycle of our vehicles by 2050.By the early 2030s,our plan is for every all-new vehicle offered in key markets to be electrified,and we believe the promotion of the NGP2030 will be integral to the achievement of carbon neutrality.Moreover,we will embrace the idea of a“just transition”and aim to realize a carbon neutral society.NGP2030NGP2030PillarMajor 2030 GoalsRelated materiality issuesSDGs areas where Nissan mainly adds valueClimate changeReduce CO emissions in Lifecycle(t-CO/Vehicles):-30%(Global)(vs.2018)Product(g-CO/km):-32.5%(Global)(vs.2018),-50%(4Majors:Japan,U.S.A.,Europe and China)Manufacturing(t-CO/Vehicles):-52%(Global)(vs.2018)Vehicle electrification Renewable energy Supply chain management Community development Sustainable resource management Pursuit energy efficiency Lifecycle management Risk hedge of physical hazards Ecosystem service and biodiversityResourcedependencyMaterial Expand sustainable material(weight basis):40%(Japan,U.S.A.,Europe and China)Vehicle electrification Renewable energy Sustainable resource management Supply chain management Community development Ecosystem service and biodiversityVehicle Expand energy management function:Equipped rate to EV:100%(Japan,U.S.A.and Europe)Air qualityand waterWater Enhance water risk management at manufacturing sites:Zero high-risk sites Product quality Supply chain management Sustainable resource management Cleaner emissions Ecosystem service and biodiversity Preservation of water,air,soil Risk hedge of physical hazardsAirquality Enhance management of vehicle emission including non-tail pipe:Technology development and adoption Manage VOC at manufacturing sites:Continue current activities(Paint shop)Manage air quality in cabin:Comply with Nissan standard on in-cabin VOCFoundation Secure responsible sourcing:Secure supply chain risk management Secure and integrate value-chain information(traceability):Build and operate carbon footprint etc.management system for corporate activities and parts production,Secure supply-chain data reliability Governance,regulation and compliance Supply chain management Engagement with stakeholdersNissan Motor CorporationSocialEnvironmentalCorporate directionDataGovernanceContentsSustainability data book 2024CSO messageSustainability at Nissan008NSP2030Nissan aims to become a people-centric company.We promote social initiatives and seek to create value for society.Our goal is to enhance corporate value and create social value by fulfilling our responsibilities as a corporation,pursuing what makes Nissan unique,and growing together*1Top three in each market in product and sales&service qualitywith society.Believing that people are the most important element in our business and its processes.In NSP2030 we have identified nine key areas-including four related to employees-and established goals for 2030.We will also continue to carry out,and strengthen initiatives concerning the human rights of our employees,our partners,suppliers and customers as well as the greater community and various other stakeholders.NSP2030NSP2030Focus areas2030 goalsRelated materiality issuesSDG areas where Nissan mainly adds valueHuman rightsSafetyInvest in new technologies,such as autonomous driving and connected car systems,to create safer,more efficient,and more personalized mobility solutionsVehicle safetyInclusive mobility solutionsQualityAchieve top-level quality*1,defect aim zero and no compliance issueProduct qualityIntellectual propertyContribute to solving social issues by promoting IP activities with others to foster innovation(IP ecosystem)Vehicle safetyInclusive mobility solutionsProduct qualityResponsible sourcingEstablish a framework to promote respecting human rights in the supply chain to aim for“No human rights violation”Supply chain managementCommunitiesContribute to solving social issues through“Nissan-ness”as well as to empowering youth and children in communitiesCommunity developmentPower of employeesMake Nissan a great place to work in which all employees feel empowered,supported,and can be their authentic selves,in order for them to realize their full potentialEmployee human rightsRespect human rights to realize“People centric”Human rightsDiversity,equity&inclusionRealize an inclusive and exciting Nissan that values uniquenessDEI(diversity,equity and inclusion)Learning&developmentDevelop a highly skilled and motivated workforceHuman resource developmentHealth&safetyIncrease people who work safely,securely and in good healthRealize a company that can work livelyWellness and occupational safety/healthNissan Motor CorporationSocialEnvironmentalCorporate directionDataGovernanceContentsSustainability data book 2024CSO messageSustainability at Nissan009Sustainable financeNissan,under its corporate purpose,“driving innovation to enrich peoples lives”,is positioning sustainability at the core of its business.Aiming to grow as a company through global business activities and by contributing to solving various issues facing society,Nissan will continue to strive to provide value to stakeholders and support the development of a sustainable society.As one facet of such initiatives,the Nissan Sustainable Finance Framework*1 will enable Nissan to raise funds needed to further enhance its sustainability efforts.Nissan has obtained a second party opinion*2 from Moodys Ratings,an independent organization,stating that Nissans framework is in alignment with the Green Bond Principle 2021,Social Bond Principle 2023,Sustainability Bond Guideline 2021,Green Loan Principle 2021 and Social Loan Principle 2023.A syndicated green loan agreement*3 that we signed in November 2022 represented the first funds raised under the Nissan Sustainable Finance Framework.The“Sakura”bonds for retail investors and corporate bonds for institutional investors issued in January and February 2023 marked the second tranche of funds and the proceeds were allocated in full to eligible green and sustainability projects*4 defined in the framework.*1Nissan and Nissan Sales Finance affiliates Sustainable Finance Framework:https:/www.nissan- Opinion:https:/www.nissan- here for more information.https:/ here for more information.https:/ sustainability bonds reporthttps:/www.nissan- here for more information on the Global Environmental Management Committee P021Funds raised through the framework have been allocated for a wide range of initiatives.These include the development and production of electrified vehicles and batteries as well as technology development and infrastructure development for the creation of EV ecosystems and smart cities and the development of safer and more sustainable mobility.Through its promotion of sustainability,Nissan will continue to provide outstanding value to its stakeholders and contribute to the advancement of a sustainable society.Please refer to our sustainability bonds report for more information about financing*5.Nissan Financial Services green bond issuanceNissan Financial Services Co.,Ltd.has completed its procurement of funds with the issuance of 10 billion yen worth of green bonds for domestic institutional investors in March 2024.The green bonds represent the first issuance of bonds for fundraising by a Nissan group sales finance affiliate following the establishment of the Sustainable Finance Framework.They will be utilized as capital for sales finance receivables for zero-emission vehicles,thereby supporting the uptake of the Nissan groups EVs through sales finance operations.Governance to promote sustainabilityGuided by our corporate purpose of“Driving innovation to enrich peoples lives,”at Nissan we place sustainability at the core of all our business activities.In fiscal 2021,we added a new sustainability performance indicator to the long-term incentive compensation program for the executives.This indicator makes clear the sustainability commitments of executives,which reflects not just the achievement of short-term earnings targets,but also their efforts to enhance corporate value and social value in the mid-long term.The setting of sustainability strategy goals as well as progress on and issues concerning,concrete activities are discussed by the Global Sustainability Steering Committee(GSSC),which is chaired by the Chief Sustainability Officer(CSO).The most important discussions are proposed/reported to the Executive Committee(EC),while the contents are also reported to the Board of Directors as necessary.GSSC meetings take place twice a year and are attended by representatives from the function that undertake activities in each area.Each function is responsible for advancing its own activities and progress is reported to the GSSC.Moreover,environmental issues are discussed by the Global Environmental Management Committee(G-EMC)*6,which is co-chaired by the CSO and the Director who is Representative Executive Officer,President and CEO.The related corporate officers from all areas of the value chain attend this meeting to make decisions on company-wide policies and contents of reports put before the Board of Directors.We implement the PDCA(Plan-Do-Check-Act)cycle in each area in pursuit of improved sustainability performance.Nissan Motor CorporationSocialEnvironmentalCorporate directionDataGovernanceContentsSustainability data book 2024CSO messageSustainability at Nissan010Nissans sustainability decision-making processRepresentatives from sustainability strategy-related functions at global headquarters and regional officesChairpersonChief Sustainability Officer Global Sustainability Steering CommitteeExecutive CommitteeBoard of DirectorsDecisionsProposals/reportsInternal managementExternal communicationPlanNissans Global Sustainability Steering Committee and EC define overall direction and measures for the companys sustainability activities.DoBased on the two committees decisions,the functions represented in the Global Sustainability Steering Committee take action and manage progress.CheckNissan considers societal feedback,such as rating agencies and ESG investment.ActNissan defines priority areas of focus based on analysis of social trends,external evaluations and research on competitors.PDCA cycle*1Please refer to the 2023 Securities Report(P74)for details of the performance indicators for the performance-based incentive compensation program.https:/www.nissan- here for more information on the Compensation Committee.P126*3Click here for more information on the UN Global Compact.https:/unglobalcompact.org/Executives roles on sustainability and its performance assessmentSince fiscal 2021,the company has incorporated the performance indicators for sustainability in performance-based cash incentives that form a part of the long-term incentive program to increase its mid-to long-term corporate and social value.*1*2In fiscal 2024,those performance indicators and evaluation weights were reviewed and updated to further strengthen the initiatives.Environment:From FY2021 External evaluation on carbon neutrality(evaluation weight 5%)From FY2024 A CO performance score covering the entire value chain based on emission reductions across seven areas(evaluation weight 10%)Social:From FY2021 External evaluation on respect for human rights(evaluation weight 5%)From FY2024 Global employee survey scores related to DEI(evaluation weight 10%)Participation in the United Nations Global CompactNissan supports a number of international guidelines and agreements,respecting international policies and standards as it conducts its business.Since January 2004,Nissan has been a member of the UN Global Compact,a corporate responsibility initiative built around 10 universal principles regarding human rights,labor,the environment,and anti-corruption.Nissans sustainability management aims to enhance the full range of the companys activities based on these 10 principles.*3Nissan Motor CorporationSocialEnvironmentalCorporate directionDataGovernanceContentsSustainability data book 2024CSO messageSustainability at Nissan011Stakeholder engagementDialogue with stakeholdersNissan defines stakeholders as those individuals and organizations that influence or are influenced by the companys business.The company aims to align its corporate activities with societal needs.Nissan gathers and integrates stakeholder feedback into its operations to build trustworthy relationships.The company provides various opportunities for dialogue with stakeholders and seeks to identify opportunities and risks in their early stages.These interactions take place at its global headquarters and other facilities in Japan and globally.Nissan established this structure to ensure feedback reaches the company.Nissans StakeholdersCustomersEmployeesNGOs and NPOsShareholders and InvestorsSuppliers and DealersGovernments,industrial Associations,business partners,and international organizationsLocal Communities and Future GenerationsNissans stakeholders and engagement opportunities*1Click here for more information.(Japanese only)https:/ makes financial contributions in line with laws,regulations and the Nissan Global Code of Conduct.(Contribution in FY2023:37 million yen to The Peoples Political Association,Japan)StakeholdersStakeholder engagementStakeholder interests,main topicsMajor initiatives for 2023CustomersCustomer service interaction,contact through dealers,websites,showrooms,events,customer surveys,media(TV,magazines,social media,etc.),owners meetings,vehicle maintenance,mailing service Product and service quality Customer support Customer call center response(receives about 200,000 calls in Japan)Quick VOC(P075)Quick VOC(P079)Calls for participation in Earth Hour 2024 via SNSEmployeesDirect contact(including whistleblowing system),intranet,internal events,interviews,surveys Company performance and issues Workplace diversity Workplace environment Career,training Presidential address Management Information Exchanges(MIEs)by EC members and senior managers Sustainability seminar DEI Fireside Chat(P099)Dialogues through competency appraisal,performance appraisal Global employee survey(P092)Suppliers and dealersSuppliers conferences,dealer conventions,business meetings,direct contact,briefings,events,corporate guidelines,websites Fair trade Nissans sustainability policies,medium-term business plan,and purchasing policies Supplier environmental activity briefing sessions(Japan)(P059)Production information meetings(monthly)(P086)Suppliers meetings(including Purchasing policy briefing sessions)(P086)NISSAN Global supplier awards(P086)Started operation of human rights hotline(Japan)(P084)Nissan Green Shop(Japan)(P022)Shareholders andinvestorsDirect contact with IR team,shareholders meetings,financial results briefings,IR events,IR meetings,websites,mailing service Strategies,performance,and sustainability initiatives to enhance corporate value Shareholder and investor engagement(P013)One on one meeting with investment institutions and othersGovernments,industrial associations,business partners,and internationalorganizationsDirect contact,joint research studies,initiatives with industry organizations,roundtables,opinion-exchanges and other events Legal compliance Cooperation with demonstration experiments and other public measures Promote joint program Electrify Japan:Blue Switch Program activities(P091)Contribution to community development in Fukushima Hamadori(P091)Introducing Nissan Energy Share in Hiroshima university(P041)*1 Traffic Safety Future Creation Lab(P073)Participate in UNDP business and human rights project(P069)Conducted a pilot project with IOM(P084)Collaborations with governments regarding to environment such as GX league(P060)NGOs and NPOsDirect contact,meetings for exchanging opinions,management of programs,events Cooperation and support for the resolution of societal issues Dialogue on human rights with Amnesty International Japan(P070)Participation as a support member in six NPOs/NGOs to exchange information Smile Support Fund(support for seven groups)Local communities andfuture generationsDirect contact with business facilities,local events,plant visits,philanthropic activities,conferences,traffic safety awareness campaigns,assistance via foundations,educational programs,websites Local community contributions Corporate philosophy Nissans sustainability initiatives Omoiyari Light Promotion activities(urging drivers to turn on headlights)(P072)Conducting of on-site lessons at schools by employees(P090)Awarding of the Rikajo(science education grant)development prize(The Nissan Global Foundation)Nissan Motor CorporationSocialEnvironmentalCorporate directionDataGovernanceContentsSustainability data book 2024CSO messageSustainability at Nissan012Nissans approach to shareholder and investor engagementNissan,including its chief financial officer,conducts constructive dialogues with shareholders and investors.To build trustworthy relationships,the company communicates its long-term vision,innovations applied to enhance competitiveness and the latest market trends in a timely manner.Questions and feedback from shareholders and investors are reported to the executive management and reflected in the companys decision-making.To mitigate the risk of insider trading,the company refrains from communicating with investors during the period beginning on the quarter-end date and ending at the time of the earnings results announcement.Communication with shareholders and investorsIn addition to disclosing up-to-date information on its IR website in a timely manner,each year Nissan holds events to present its business activities to investors and analysts,focusing on themes most relevant to them and making available its divisional and regional managers to provide the required information.Through its general meeting of shareholders and other gatherings,the company aims to build trust with its shareholders and enhance their understanding of Nissan.*1 The 124th Ordinary General Meeting of Shareholders was held at Nissans global headquarters on June 27,2023 and also streamed live online.A total of 492 shareholders attended at the venue,while another 1,614 shareholders participated in the meeting online.In March 2024,Nissan held a briefing session on its new business plan:The Arc for all stakeholders including*1Click here for more IR information.https:/www.nissan- commends Nissans water security and climate change leadershiphttps:/ here for more information on the EcoVadishttps:/ here for more information on the FTSE4Good Index Series.https:/ her for more information on the FTSE Blossom Japan Index and FTSE Blossom Japan Sector Relative Index.https:/ and investors,and separately held a Q&A session for investors and analysts.We also participated in conferences for institutional investors hosted by securities companies.The company will continue to disclose information to its stakeholders and investors to enhance their understanding of Nissan.External assessmentNissans initiatives on sustainability have earned high praise from external evaluation agencies.CDPNissan has earned a place on prestigious A List in water security from CDP,a global environmental NGO for the fifth consecutive year.Nissan has also received an A-for climate change,and we have received A or A-in this category for 11 successive years since fiscal 2013.Accordingly,we were recognized for leadership in both categories.*2EcoVadisIn a 2023 assessment conducted by EcoVadis,an international sustainability rating agency,Nissan earned a score of 70,which places us in the top 5%of the roughly 100,000 companies surveyed.*3We have also been included as a constituent stock in the following indexes,recognized globally for their credibility.FTSENissan has been a constituent of the FTSE4Good Index Series and constituent of the FTSE Blossom Japan Index for nine consecutive years.Nissan has also continued to be a constituent of the FTSE Blossom Japan Sector Relative Index since its creation in 2022.*4*5Nissan Motor CorporationSocialEnvironmentalCorporate directionDataGovernanceContentsSustainability data book 2024CSO messageSustainability at Nissan013EnvironmentalNissan Motor CorporationCorporate directionSocialEnvironmentalDataGovernanceContentsSustainability data book 2024Third-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system014Environmental principles and policies 015Understanding of environmental issues 016Strategic approach to environmental issues 017Global environmental management framework and governance system 021Nissan Green Program 024Value chain activity achievements 034Products 035Corporate activities 044Collaborations with relevant partners 059Third-party assurance 061Environmental principles and policies Environmental principlesWe provide customers with innovative products and services by promoting the effective use of energy and resources,promoting diversity and resource circularity.These are just some of the ways in which Nissan is striving to achieve its environmental philosophy“A symbiosis of people,vehicles,and nature”.To achieve our environmental principles,we have clearly defined our ultimate goal:“To manage the environmental impact caused by our operations and products to a level that SunlightThermal radiation Higher efficiency Renewables Reduced use Recycling More efficient mobility Expansion in distance travelledEnergyResourcesSocial&economic activitiesWithin levels nature can absorbEmissions&waste*Based on Beyond Growth:The Economics of Sustainable Development,by Herman E.Dalycan be absorbed by nature and pass on rich natural capital to future generations”and set what we want to be:“A sincere eco-innovator.”This means endeavoring to leave as small an ecological footprint as possible for the Earths future.Beyond deepening our awareness of the environment,we strive to conduct all business activities with consideration and kindness for people,society,nature and the Earth,as a means of contributing to the development of a better society.Nissans environmental philosophy:A symbiosis of people,vehicles,and natureIn addition to deepening our understanding of the environment,we conduct all of our operations,including production and sales,with consideration for people,society,nature and the earth,as a means of contributing to the building of a better society.Ultimate goalWe will reduce the environmental impact and resource consumption of our corporate operations and vehicles throughout their life cycles to a level that can be absorbed by nature and pass on rich natural capital to future generations.What we want to be:A Sincere Eco-InnovatorSincere:Proactively address environmental challenges and reduce our impact on the environment.Eco-Innovator:Develop a sustainable mobility society through innovative technology in products and services.Nissan Motor CorporationCorporate directionSocialEnvironmentalDataGovernanceContentsSustainability data book 2024Third-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system015Understanding of environmental issuesEnvironmental and social issues have received increasing attention in recent years.Society faces various challenges,including poverty and hunger,energy issues,climate change,natural resource security,information security,and conflicts that pose threats to peace.These issues are also being addressed by the World Economic Forum(WEF).In aiming to address these various challenges,Nissan recognizes that providing safe,secure,and sustainable mobility to all individuals and delivering value to society has become increasingly important.Among these issues,climate change is viewed as a factor contributing to large natural disasters that occur frequently around the world each year,and the need to reduce the impact of climate change is now greater than ever before.In the Intergovernmental Panel on Climate Change(IPCC)Sixth Assessment Report released from 2021 to 2023,it was emphasized once again that there is no doubt that climate change is caused by human activities,and that urgent and enhanced measures are needed without delay to limit the global average temperature rise to 1.5.At the 28th Conference of the Parties(COP28)to the United Nations Framework Convention on Climate Change(UNFCCC)was held in December 2023,ambitious targets were proposed to address climate and biodiversity issues.These targets include concrete action plans aimed at halting the loss of nature,reversing current conditions,and promoting the rapid phase-out of fossil fuels by 2030 in order to achieve the global goal of resolving climate and biodiversity issues.The automotive industry is complex and diverse,and it is both dependent on and has an impact on the global environment.Nissan is committed to sustainability initiatives that mitigate climate change and conserve energy,preserve air quality and other natural capital,use mineral resources efficiently,properly manage chemical substances,efficiently allocate scarce resources,and promote good health.In addition,we are pursuing business structure reforms enabling us to move away from dependence on fossil fuels.Nissan Motor CorporationCorporate directionSocialEnvironmentalDataGovernanceContentsSustainability data book 2024Third-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system016Strategic approach to environmental issuesTo solidly contribute to resolving global environmental issues,*1 Nissan engages in direct discussions with environmental experts,investors,NGOs,NPOs,and other organizations throughout the world,analyzing*2 potential opportunities and risks.As a global automotive manufacturer,we consider not only corporate activities but also those upstream and downstream as part of our responsibility.Our scope of analysis covers the entire value chain from the procurement of raw materials for vehicles to transportation,disposal,recycling,and product use,including suppliers.Based on this analysis,we identified materialities*3 that we should address and have identified Climate change,Resource dependency,Air quality and Water as important areas to focus on as Nissans mid-term to long-term environmental strategy.Specific action plans*4 were established through 2030 to target these key areas.Recognizing that the key areas identified are interconnected,and by addressing them comprehensively,Nissan will also contribute to addressing the challenges of nature-related issues,including biodiversity.We will also assess impacts associated with the transition to decarbonization and promote activities that focus on achieving a just transition without adverse impacts in order to achieve carbon neutrality.*1Click here for more information on Nissans understanding of global environmental issues.P016*2Click here for more information on potential risks facing the company,ecosystem assessments,and climate change scenario analyses.P018*3Click here for more information on sustainability materiality,including the environment.P004*4Click here for more information on Nissans medium-term environmental action plan(NGP2030)P024Offices and DealershipsPlaning,R&DProduction(Parts manufacturing and vehicle production)Logistics(in-and out-bound)Suppliers(Material mining and manufacturing,parts manufacturing)Collaborations with relevant partnersRecycling,Repurpose and ReusageVehicle UseFuel and Electricity productionProductsCorporate activitiesNissan Motor CorporationCorporate directionSocialEnvironmentalDataGovernanceContentsSustainability data book 2024Third-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system017Nissan Value ChainInitiatives to identify impacts and dependencies on nature,including biodiversityGlobal trendsAt the 15th United Nations Biodiversity Conference(COP15)held in 2021 and 2022,it was discussed that we are on the verge of an unprecedentedly multifaceted crisis,including significant loss of biodiversity and degradation and pollution of both land and sea.That same year,University of Cambridge Emeritus Professor Sir Partha Dasgupta published The Economics of Biodiversity:The Dasgupta Review espousing the idea of introducing natural capital into the economy,which was referenced at the G7 Summit and contributed to influencing international politics.These international discussions are backed by scientific evidence acquired from the worlds first Millennium Ecosystem Assessment conducted by the United Nations from 20012005.Along with climate change mitigation,maintaining rich ecosystems and biodiversity are important environmental issues for Nissan.The assessment identified two key trends:1.Deterioration of global ecosystems,which is progressing at an unprecedented rate and scale.2.Ecosystems that create many ecosystem services,such as food,freshwater supplies,climate control,and protection from natural disasters,all of which substantially benefit humanity.Analyses of impact and dependency on ecosystem servicesIn light of global trends,Nissan rapidly launched assessments of its overall value chain,from the mining of material resources to the production and operation of*1Developed by the World Resources Institute(WRI)in cooperation with the World Business Council for Sustainable Development(WBCSD)and the Meridian Institute based on the UN Millennium Ecosystem Assessment(MA).*2Click here to read“Ecosystem Services and the Automotive Sector”.https:/www.nissan- on Nature-related Financial Disclosuresits vehicles.Together with the United Nations University,Nissan utilized the Corporate Ecosystem Services Review*1 methodology in conducting research to ascertain the impact and dependency its own corporate activities have on ecosystems.The findings of that research were published in the 2010 report entitled Ecosystem Services and the Automotive Sector*2.Through this assessment,seven ecosystem services were identified as priorities for Nissan and the automotive industry as a whole:Fresh water,air quality regulation,climate regulation,water regulation,erosion regulation,water purification and treatment,and natural hazard regulation.In order to understand the relation of these with the automotive industry,Nissan has identified:Energy sourcing,mineral and material sourcing,and water usage as priority areas and conducted assessments to determine the dependencies on and impacts on these ecosystem services.A detailed analysis was conducted to assess impacts and dependencies with regard to each of these ecosystem services.Also in 2013,we estimated that the use of water resources in the upstream resource procurement process was more than 20 times the amount of water used by Nissan,and we also conducted analyses related to air quality.Ecosystem and biodiversity assessments are reflected in materiality decisions and incorporated into specific actions as Nissan Green Program policies and strategies.Nissan endorsed the TNFD*3s recommendations and joined the TNFD Forum to support its activities,believing that it is important to communicate more clearly and accurately these initiatives to investors and other stakeholders.We will consider further disclosure in line with the recommended framework.Ecosystem services and automotive industrys involvement(impacts and dependencies)Human well-beingPoverty reductionEnsuring healthEnsuring conservation,etc.Biodiversity conservationEcosystem servicesEcosystem services that automotive sector should prioritizeAutomotive sectorDrivers of biodiversity changeReflected in materiality decisionsFresh waterAir quality regulationClimate regulation Water regulationSoil erosion regulation Water purification and waste treatment Protection from natural disastersClimate changeOverexploitationPollution,etc.Nissan Motor CorporationCorporate directionSocialEnvironmentalDataGovernanceContentsSustainability data book 2024Third-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system018Climate change scenario analysis to strengthen strategies for 2050 societyNissans efforts toward the environment have achieved continuous results by consistently reaching milestones backcasted from our long-term vision.However,compared with 2006 when we formulated the long-term vision based on the 2 scenario from the Intergovernmental Panel on Climate Change(IPCC)report,the threat of extreme weather due to climate change is increasing,and thus we believe it is necessary to enhance our strategy and make it more resilient amid growing uncertainties.In 2015,the 21st Conference of the Parties(COP21)to the United Nations Framework Convention on Climate Change(UNFCCC)adopted a framework(the Paris Agreement)aimed at limiting global temperature increase to“well below”2.COP26 in 2021 announced its resolution“to continue efforts to limit temperature rise to 1.5”to emphasize 1.5restriction,while adding the“reduction of global carbon dioxide emissions to virtually zero by mid-century.”Similar to the Paris Agreement,the Sustainable Development Goals(SDGs)adopted by the United Nations in 2015 also called for concrete measures to address climate change.The scenario analysis conducted for the purpose of strategic enhancements assumes societies based on the 4 and 2 scenarios presented in the International Energy Agency(IEA)time horizon up to 2050 and the 1.5 scenario in the IPCC special report.Furthermore,in consideration of factors including changes in customer and market acceptance,tightening automobile regulations and the transition toward clean energy,Nissans business activities,products and services were examined in terms of strategic resilience to the opportunities and risks posed by climate change in the following four steps.Four steps for review Evaluate past materiality,investigate risk factors with a decisive impact on the automotive sector due to climate change in documented studies and define main drivers in categories such as population,economy,geopolitics,climate change policy and technology.Categorizing main drivers into physical risks and transition risks,then considering the trade-off relationships of each,we examined the rise in the Earths average temperature in three scenarios of 1.5,2,and 4,and confirmed the range of risks for the 1.5 and 4 scenarios based on a 2 reference.Based on the degree to which the automobile sector was impacted and the timeline,items with a more substantial impact were screened from the main drivers.Changes,conditions,and effects were adjusted in each scenario to provide guidance based on qualitative evaluation of the elements necessary for enhancing strategies.Policies and regulations,Technological changes,Market changes correspond to transition risks,while Extreme weather falls under physical risks.Envisioned scenarios and associated opportunities and risksScenario assumptionArea of impactBusiness activity opportunities and risks related to ongoing climate change1.5Policies and regulationsComplying with a further tightening of vehicle fuel efficiency and exhaust gas regulations may have an impact on the development of electric powertrain technologies and production costs and may influence production costsIncreased burden of energy costs due to expansion of carbon taxes,expand investment in energy-saving equipment as policyTechnological changesCost effects of utilizing next-generation vehicle technologies such as in-vehicle batteries and other EV-related technologies as well as expanding autonomous driving technologiesIncreased demand will affect supply chains for rare earth metals used for in-vehicle batterys materials and cause an increase in stabilization costsMarket changesChanges in consumer awareness leads to reduced new vehicle sales due to the selection of public transportation and bicycles and the transition to mobility servicesOpportunitiesExpand the provision of power management opportunities with Vehicle to Everything(V2X),an EV energy charging/discharging technology,and redefine the value of EV,especially with Vehicle to Grid(V2G)4Extreme weatherThe impact on the supply chain and the operation of production bases due to extreme weather such as heavy rain and drought will increase property insurance costs and air conditioning energy costsOpportunitiesThe need for securing emergency power sources using EV batteries is increasing as a disaster preparedness and mitigation measureAs a global automobile company,it will be more than 170 countries and markets where our production facilities operate and our products are provided,therefore we will get the impact from climate change all over the world.When taking a comprehensive perspective of this scenario analysis,even the market infrastructure,regulations and actual usage are different.Nissans electrification and other related advanced technologies have the potential to create opportunities for effective capabilities in scenarios other than 2.Nissan has come to recognize once again the importance of further accelerating efforts toward this realization as well as the fact that activities integrated with the supply chain are essential for responding to risks.Nissan Motor CorporationCorporate directionSocialEnvironmentalDataGovernanceContentsSustainability data book 2024Third-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system019In particular,the expansion of zero-emission vehicles is not only a major step towards the shift to a carbon-free society as an automobile sector,it is also a technology that contributes to the resilience of society in power management and disaster preparedness and mitigation.Nissan believes this will create value for society and business.However,if the societal response to climate change is delayed,possible risks include additional transitional policies and regulations for a decarbonized society,increases in R&D efforts and changes in market demand or corporate reputation.Possible physical risks,such as an increase in extreme weather and rising sea levels,may lead to cost increases and declines in vehicle sales that have the potential to substantially influence on our financial situation.To avoid risks such as these to the extent possible and create future opportunities,Nissan is leveraging knowledge gained from scenario analyses for use in actual activities and reviewing strategies for expanding resilience.We believe it is important to more clearly and accurately communicate these impacts and the strategies considered to investors and other stakeholders.Nissan supports the Task Force on Climate-related Financial Disclosures(TCFD)s recommendations and will strive to disclose information in line with its recommended framework.Financial impact assessment of carbon tax effectsIn fiscal 2021,we conducted a financial impact assessment,based on the scenario analysis that we had already disclosed.Below are the results of our assessment of the impact of carbon taxes.Background to financial impact assessment scenario selectionPricing for CO emissions is progressing,and an increasing number of countries and regions are introducing carbon taxes.Although the level of taxation and the industries subject to the tax vary by country and region,this analysis will focus on the financial impact of the carbon taxes due to their significant impact on companies.Evaluation of calculation methods and estimated taxes,assumptionsIn our calculations,we referred to the IEA report and other reports on carbon taxes as the basis for our carbon tax projection.The carbon tax on GHG emissions in 2030 was calculated by comparing cases where:1)Corporate activities as of 2018 have been continued,and2)The Nissan Green Program promotes environmental activities and the impact of annual carbon tax could be curbedRisk:Expanded impact of carbon taxesIncreased burden of energy costs2030 Carbon tax generated on CO2 emissions/per single yearIf corporate activities as of2018 are continuedIf initiatives to address environmentalissues are promoted through the NGPImpact on carbon tax in a single year:Approx.10 billion JPYImpact on business outlookWe estimated that the carbon tax impact of Scope 1 and 2 could be kept to approximately 10 billion JPY if the environmental issues addressed in the Nissan Green Program were implemented,compared with the case where GHG emissions were not reduced.Lifecycle assessment to reduce environmental impactNissan identifies potential risks by conducting life cycle assessment(LCA).The LCA method is used to quantitatively evaluate and comprehensively assess environmental impact,not only during vehicle use,but at all stages,including raw material extraction,manufacturing and transport,as well as reuse or end-of-life vehicle recycling.Our LCA methods received certification from the Japan Environmental Management Association for Industry until 2012.Since 2013,they have been certified by the third-party organization TV Rheinland in Germany,with the certification being renewed in December 2023.The latter certification is based on ISO 14040 and ISO 14044 standards and validates the environmental impact calculations in our product LCA.We have been expanding the application of the LCA method and enhancing our understanding of the environmental impact of our products especially of our best-selling models worldwide in quantitative terms.Coverage on a unit basis has reached approximately 80%of global models and approximately 90%in Europe.Through the continuous implementation of LCA,we will promote the visualization and reduction of environmental impacts throughout the vehicle life cycle.Manufacturing and TransportationRaw material extractionVehicle useEnd-of-life vehiclerecycling or ReuseVEHICLE LIFE CYCLENissan Motor CorporationCorporate directionSocialEnvironmentalDataGovernanceContentsSustainability data book 2024Third-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system020Global environmental management framework and governance systemEnvironmental management governanceTo promote comprehensive environmental management as a global company while responding to a diverse array of environmental issues,Nissan has a governance system built on dialogue and partnership with each region and many corporate functions as well as with a variety of stakeholders.The Global Environmental Management Committee(G-EMC),co-chaired by the Chief Sustainability Officer(CSO)and the Director who is Representative Executive Officer,President and CEO,determines overall policy and the content of reports before the board of directors.Its meetings are attended by the relevant corporate officers to cover the whole value chain.Executives also clarify risks and opportunities at the corporate level and determine the specific programs to be undertaken by each division,using PDCA cycles to manage and operate the environmental programs efficiently.Environmental risks are regularly reported in Internal Control Committee meetings to strengthen corporate governance.We actively communicate with a broad range of stakeholders through our sustainability（ESG）data book and by answering inquiries from various environmental rating agencies.Global environmental management framework and governanceDialogue with stakeholdersNissan global and regional environmental managementMajor issueClimate changeResource dependencyAir quality and waterSuppliers and procurementProduct and tech.developmentManuf.and logisticsSales and officesUse,service and ELVEnvironmental management organizationGlobal/CorporateFunction/RegionalEnvironmentalStrategyOrganizationPlanDoCheckActPDCAPDCAPDCACustomersNGOs/NPOsCommunities/Future GenerationsCommunities/Future GenerationsBusinessPartnersNational/LocalGovernmentsShareholders/InvestorsEmployeesAdvisoryMeetings,etc.Board ofDirectorsGlobal EnvironmentalManagementCommitteeExecutiveCommitteeNissan Motor CorporationSustainability data book 2024Corporate directionSocialEnvironmentalDataGovernanceContentsThird-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system021Climate change in the executives performance-based incentivesSince fiscal 2021,the company has incorporated the performance indicators for sustainability in performance-based cash incentives*1 that form a part of the long-term incentive program to increase its mid-to long-term corporate and social value.In fiscal 2024,those performance indicators and evaluation weights were reviewed and updated to further strengthen the climate change-related initiatives.From FY2021 External evaluation on carbon neutrality(evaluation weight 5%)From FY2024 A CO performance score covering the entire value chain based on emission reductions across seven areas(evaluation weight 10%)*1Click here for the social indicator.P011Enhancing environmental management based on ISO 14001All major production sites around the world have obtained ISO 14001 environmental certification.In Japan,product development processes and all major facilities,including global headquarters,research and development,production,and logistics,have also obtained ISO 14001 certification.The assigned environmental management officer coordinates companywide goals and shares the goals with the employees through local offices.Local offices are responsible for the activities at each facility and division and for coordinating the proposals submitted by employees.By engaging in discussions at least once a month,the ISO secretariat and local offices confirm progress toward established goals,share best practices,improve management systems,develop plans for the next fiscal year,and communicate requests from local facilities and divisions.The items discussed are reported to the environmental management officer twice a year(once at the management review conference)to further enhance overall management.We periodically conduct third-party audits to confirm that management is functioning appropriately.We also conduct internal audits of areas covered by third-party audits and all other environmental activities,prioritizing compliance with regulatory reporting requirements and identifying and assessing risks.Working with consolidated production companiesWe encourage our consolidated production companies in a variety of markets to acquire ISO 14001 certification and to undertake other environmental initiatives based on their respective policies.Working with dealershipsWe believe that concern for the environment at our dealerships is essential to earning the trust and appreciation of our customers for Nissans environmental activities.Europe/AfricaNissan Motor Manufacturing(UK)Ltd.Sunderland PlantNissan Motor Ibrica,S.A.Cantabria PlantAvila PlantNissan South Africa(Pty)Ltd.Pretoria PlantChinaDongfeng Motor Co.,Ltd.Huadu PlantXiangyang PlantDongfeng Motor Co.,Ltd.DongfengNissan Passenger Vehicle CompanyZhengzhou PlantChangzhou PlantDalian PlantWuhan PlantDongfeng Motor Co.,Ltd.DongfengNissan Engine CompanyZhengzhou Nissan Automobile Co.,Ltd.AsiaRenault Nissan Automotive India Private LimitedOragadam PlantNissan Motor(Thailand)Co.,Ltd.Plant 1 and 2(Samutprakarn)North America/Latin AmericaNissan North America,Inc.SmyrnaCantonDecherdNissan Mexicana,S.A.De C.V.AguascalientesCuernavacaNissan Do Brasil Automoveis Ltda.ResendeJapanNissan Motor Co.,Ltd.Yokohama PlantResearch Center(Oppama)Oppama PlantSagamihara Parts CenterTochigi PlantNissan Technical CenterIwaki PlantNissan Advanced Technology CenterZama Operation CenterHokkaido Proving GroundNissan Global headquartersNissan Customer Service CenterNissan Education CenterNissan Global Information System CenterHonmoku WharfNissan Motor Kyushu Co.,Ltd.Kyushu PlantInformation as of the end of March 2024.Nissan Motor CorporationSustainability data book 2024Corporate directionSocialEnvironmentalDataGovernanceContentsThird-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system022Our dealerships in Japan have introduced an original approach to environmental management based on ISO 14001 certification called the“Nissan Green Shop”certification system.This program is managed through internal audits conducted by the dealerships every six months,in addition to annual reviews and certification renewal audits carried out every three years by Nissan Motor Co.,Ltd.(NML).As of the end of March 2024,the system has certified approximately 2,800 dealerships of 149 dealers,including parts dealers,as Nissan Green Shops.Certified dealers introduce and proactively communicate their environmental initiatives to customers.Raising environmental awareness among employeesNissans environmental activities are supported by the environmental knowledge,awareness,and competence of each and every employee.As part of our ISO 14001 activities,we provide Nissan employees and the employees of partner companies working in our offices and plants with education aimed at reducing CO emissions,energy and water consumption,and waste,as well as preventing environmental accidents,based on the Nissan Green Program 2030(NGP2030).We also provide annual training for the purpose of preventing environmental accidents.In addition to education and training,quantitative evaluations of all employees are conducted at plants to develop human resources able to continuously improve their competence and reduce environmental impacts.The training curriculum is reviewed annually to ensure that employees always acquire the necessary competencies.In Japan,we provide orientation for new employees and compliance education for new supervisors and executives to promote an understanding of NGP2030 and the enviromental issues surrounding the automotive industry.We also share new information on environmental initiatives with our employees through our intranet,internal newsletters,and internal cable television broadcasts.*1VOCs：Organic chemicals that readily evaporate and become gaseous at normal temperature and pressure conditions.*2Excluding vehicles manufactured outside of NissanOutside Japan,we share information through our intranet,as well as through videos,events,and other locally appropriate tools and opportunities aimed at raising awareness and sharing information with all our employees.Nissans voluntary operational standardsStricter controls on environment-impacting substances are being implemented in countries around the world.Examples include the European ELV directive,the European Unions Registration,Evaluation,Authorisation and Restriction of Chemicals(REACH)Regulation,which went into effect in June 2007,and Japans Act on the Evaluation of Chemical Substances and Regulation of Their Manufacture.The Japan Automobile Manufacturers Association(JAMA)launched a voluntary program to help minimize the potential release of formaldehyde,toluene,and other volatile organic compounds(VOCs)*1 in values cabins.This program utilized the VOC guidance value established by the Ministry of Health,Labour and Welfare for specific substances in January 2002 to be met for all new models manufactured or sold by Nissan in Japan after April 2007.In accordance with the Ministrys guidance value revision in January 2019,new guideline values have been met for new models released in 2022 or later.Nissan is strengthening its management of chemical substances,adhering to a planned schedule for their reduction and advancing the use of alternative substances.In 2005,we drew up policies regarding the use of substances scientifically recognized as being hazardous or carrying high hazard risks,as well as those identified as dangerous by NGOs.In 2007,these policies,which restrict environment-impacting substances even more than the domestic laws of the countries where we operate,were rolled out globally.Based on the above-referenced policies,Nissan developed a specific Nissan Engineering Standard(NES)for the Restricted Use of Substances,which identifies the chemical substances whose use is either prohibited or controlled.The NES is applied in material selection and also in the components and parts used in our vehicles from initial development onward.For example,four heavy metal compounds(mercury,lead,cadmium,and hexavalent chromium)and the polybrominated diphenyl ether(PBDE)flame retardant have been either prohibited or restricted in models*2 launched globally since July 2007.To control VOC use in car interiors,Nissan adopted the voluntary targets of JAMA as our own standards for global operations,and we are reviewing and reducing the use of prohibited and controlled chemical substances in materials and adhesives for seats,door trim,floor carpet and other parts.Every year,we revise the Restricted Use of Substances standards to reflect changes in international laws and regulations and to add new substances covered by our voluntary internal standards.In the revision for fiscal 2017,we established criteria for proactively reevaluating hazards and risks related to regulations to enhance compliance levels.For example,we disclose information to users and submit REACH reports to the relevant authorities about the vehicles and parts produced in or exported to Europe from Japan and other countries(including some from the U.S.).We also comply with Classification,Labeling and Packaging of Substances and Mixtures regulations.Sanctions and government guidance at Nissan production facilitiesDuring fiscal 2023,in relation to the environmental management system,none of Nissans production facilities government notifications or sanctions regarding significant violations of environmental laws or regulations.However,there were two cases where the agreed-upon limit was exceeded.We coordinated with the administration to take the necessary measures and conduct discussions.Nissan Motor CorporationSustainability data book 2024Corporate directionSocialEnvironmentalDataGovernanceContentsThird-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system023Nissan Green ProgramKey issues and challenges of Nissan Green Program(NGP)medium-term environmental action plan We first formulated the Nissan Green Program(NGP)medium-term environmental action plan in 2002 to achieve our environmental philosophy of“a Symbiosis of People,Vehicles,and Nature”.This plan aim to ultimately reduce our environmental dependence and impact to levels that nature can absorb.The fifth-generation NGP2030 plan,formulated in fiscal 2023,is strengthening and promoting activities towards the realization of a sustainable and harmonious society with nature.Based on Nissans environmental materiality analysis,Climate change,Resource dependency and Air quality and Water have been identified as important issues under NGP2030.We are committed to addressing these three key issues from a long-term perspective,taking into account both compliance and social demands.To contribute to the resolution of these important issues and create new value,we are working to ascertain needs through stakeholder engagement and strengthening our foundations related to environmental issues.Nissan will accelerate efforts to address environmental issues across the entire company,including development and manufacturing departments involved in vehicle manufacturing,as well as sales and service departments.Simultaneously,we will strengthen our foundations and create value for society.We will make efforts to co-create a sustainable society both through our own internal environmental activities,as well as by encouraging business partners and other external stakeholders to take actions.The indicators and progress of initiatives related to key issues will be disclosed annually.Evolution of NGP2023NGP2030Reducing environmental impact on urban and regional areas2002200620112017Reducing global environmental impact to a level that can be absorbed naturally by the EarthReducing use of resources and global environmental impact to a levels that can be absorbed naturally by the EarthResolving social issues to build a better worldEnsuring our living society is sustainable and in harmony with natureNGP2030 key issuesToward the goal of carbon neutrality by 2050,strive for electrification potential and Monozukuri innovation.Carbon neutralClimate changeDrive circular economy byefficient and sustainable use ofresources,and by creating asystem that maximizes the useof mobilityNo new material resource useResource dependencyReduce water usage and manage water quality in response to the regional issues,and reduce the impact on air quality by minimizing emissions from cars and corporate activities.Zero impact/zero riskAir quality and WaterNissan Motor CorporationSustainability data book 2024Corporate directionSocialEnvironmentalDataGovernanceContentsThird-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system024Climate changeNissans initiatives towards achieving a carbon neutral societyThe business structure of the automobile industry is undergoing significant changes in response to the demands for reducing CO emissions and transitioning away from dependence on fossil fuels.Nissan has declared the goal of carbon neutrality by 2050 and is focusing on the electrification of products and innovation in corporate activities,working in collaboration with suppliers to promote activities towards achieving this goal.As renewable energy and charging infrastructure expand,we will continue to promote the electrification of products and pursue the sustainability of our business activities to realize a carbon neutral future.Life cycles CO emissionsOffices and DealershipsManufacturing(Parts manufacturing/vehicle production)Logistics(In/outbound)CO2Procurement(Material mining/manufacturing/component manufacturing)Repurpose/ReuseFuel/electricity productionVehicle UseRecycleDisposal17,476kton-CO2180,882kton-CO2CO2 emissions from corporate activities(Manufacturing,Logistics,Offices and Dealerships)2,413 kton-CO2Base year:2018Scope1,2 and 3NGP2030 involves actively working towards achieving the 1.5 scenario by accelerating efforts to address climate change.The plan focuses on reducing CO emissions,implementing electrification technologies,and creating environmental responsiveness and social value.Efforts to reduce CO emissions across entire product life cyclesNissan is actively working on reducing CO emissions across the entire life cycles of its vehicles.We are promoting the development of new technologies and the introduction of renewable energy in the entire value chain,including suppliers,to achieve CO reduction at every stage,from raw material extraction to manufacturing,transportation,product use,and disposal.We are working to achieve a balance between these efforts and our corporate activities.Nissan promotes CO reductions in all areas of business activity,including procurement,manufacturing,logistics,offices,and dealerships and products.Under NGP2030,we set the target of a 30%reduction in CO emissions by 2030 across entire product life cycles.CO emissions over the life cycles in fiscal 2023 were reduced by 11%compared with fiscal 2018.Long-term vision for life cycles300%（%）1008060402002018base20302050（FY）CO2 emissions per vehicleNissan Motor CorporationSustainability data book 2024Corporate directionSocialEnvironmentalDataGovernanceContentsThird-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system025Initiatives through productsApproach to product initiativesCO emissions from new vehicles(use stage)accounted for more than 80%of total lifecycle emissions as of 2023.To reduce CO emissions from new vehicles(use stage),Nissan will develop and provide vehicle with lower CO emissions to customers.Nissan is working on improving fuel efficiency of ICE*1 vehicles and expanding its lineup of electrified vehicles.CO emissions comparison by power train(WtW*2)Renewable electricity（%）100806040200ICEvehiclee-POWER vehicleElectric vehicle(EV)Fuel-cell electric vehicle(FCEV)Carbon emissions offsetAfter implementing maximum CO emission reduction initiatives,Nissan will consider applying offsets to mitigate the unavoidable CO emissions,aiming to achieve our lifecycle CO emission target.*1ICE:Internal combustion engine*2Nissan is aiming to reduce WtW(well to wheel)CO emissions which are from the mining of fuel to driving on tires.Product launch plansUnder our medium-term business plan,The Arc,we announced that a total of 34 electrified vehicles will be introduced to cover all segments globally between fiscal 2024 and fiscal 2030 and that the electrified vehicle model mix will be 40%by fiscal 2026 and 60%by fiscal 2030.We plan to launch 30 new models by fiscal 2026,including 16 electrified vehicles.Electrification planBy FY3040 %ICEe-POWERPlug-in hybrid(PHEV)EV20 %By FY26MODEL MIXProduct CO emission reduction scenariosLong-term visionWe aim to achieve carbon neutrality in the vehicle life cycle and all business activities by 2050.NGP2030 targetBy 2030,we aim to reduce CO emissions from new vehicles by 32.5%globally and 50%in the four regions,compared with 2018 levels.CO emissions from new vehicles(Four regions:Japan,U.S.A.,Europe and China)500%（%）1008060402002018base20302050（FY）t-CO2/kmNissan Motor CorporationSustainability data book 2024Corporate directionSocialEnvironmentalDataGovernanceContentsThird-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system026Initiatives through corporate activityApproach to corporate activity initiativesReducing CO emissions from corporate activitiesNissan is actively working to reduce CO emissions by promoting energy-saving initiatives and the introduction of renewable energy.In the corporate activities under NGP2030,we have set targets for reducing CO emissions in various areas including,manufacturing activities,logistics,offices,and dealerships,aiming to reduce emissions throughout the entire value chain.In manufacturing activities,we aim to achieve 52%reduction in CO emissions from our global production sites by 2030,accelerating efforts towards achieving the 1.5 scenario(per vehicle,compared with 2018).Regarding activities leading to carbon neutrality,Nissan will first minimize energy consumption through the measurement and management of energy use and energy-saving activities and promote electrification.Nissan promotes the electrification and substitution of fossil fuels with carbon-free energy for our production facilities.We will also promote technological development to create further opportunities.Long-term vision for manufacturing activities520%（%）1008060402002018base20302050(FY)CO2 emissions per vehicleNissan Motor CorporationSustainability data book 2024Corporate directionSocialEnvironmentalDataGovernanceContentsThird-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system027Resource dependencyApproach to resource dependencyNissan aims to incorporate the circular economy,efficiently and sustainably utilizing resources throughout a vehicles entire lifecycle,while maximizing the value provided to customers and society.Nissans circular economyResource circularity with less energyNissan promotes reuse and the saving of resources from the design,purchase,and manufacturing phases.We continuously work on using recycled materials,the proper management of chemical substances,and the reductions of veicle weight.To use resources effectively with less energy,we continue to expand the application of recycled materials to new vehicles,the use of recycled parts for customer repairs and replacements,and EV batteries in secondary applications.Furthermore,we will promote the adoption of circulable materials for cases using new materials as well,toward future sustainable resource circularity.Maximizing vehicle useNissan aims to maximize vehicle usage as mobility through new services such as ride-sharing when driving,and as energy sources sharing battery power with homes and society when parking.()Consideration ofreuse and resource conservationResource circularity with less energyMaximizing vehicle useDesignPurchaseManufacturingConnectedBeyond mobilityElectric PowerMobilityTelematicsRatio of new EVs with energy management functionsNGP2030 ObjectivesSustainable material ratioNGP2030 Objectives Japan,U.S.A.,Europe,China()Japan,U.S.A.,Europe400%Recycle Rebuild Reuse RepairSustainable materials Materials that are not newly mined resources Circulable virgin materials*1Recycled materials,biomaterials,etc.Approach to sustainable materialsAs basic requirements for sustainable materials,the following(1*1)and(2)are set;(1)materials that are not newly mined resources,(2)virgin materials that can be continuously circulable.Nissan defines sustainable materials that meet(1)or(2)and additional sustainability requirements.By promoting their use in new vehicles and replacement parts,we aim to ensure and expand the use of sustainable materials going forward.Sustainability requirementsDe-carbonized materials Non-toxic materialsEthically sourced materials Certified materialsSustainable material long-term vision202%NGP2030Sustainablematerial40%Sustainablematerial100%(%)1008060402002010202320302050(FY)Approach to energy managementBy sharing the electricity of EV batteries with homes and society during parking,EVs can contribute to society as well as utilize the potential of resources in electricity bill savings,the local generation and consumption of renewable energy,providing emergency backup power and so on.To share electricity,EVs need energy management functions such as bidirectional charging and telematics communication.Nissan aims to equip all new EVs with energy management functions by 2030.Nissan Motor CorporationSustainability data book 2024Corporate directionSocialEnvironmentalDataGovernanceContentsThird-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system028WaterApproach to water managementDriven by rising populations and economic development,demand for water will continue to increase globally.With rain patterns also changing due to extreme weather events,the stability of water supplies is likely to become a more pressing social concern with every passing year.Nissan needs to use water especially for painting and cleaning processes,and for cooling purposes.We analyzed the materiality of water risks that Nissan should address from two aspects,“Impact on water risk from Nissan”and the“Impact on Nissan from water risk”,identifying“water stress(drought)”and“wastewater quality”as key priorities.Nissan will continue reducing its dependence and impact on water environments in local business operations,while regularly reviewing water risk assessments.Impact on water risk from NissanImpact on Nissan from water risksReputationEcosystemIntake water qualityFlood related env.accidentsWASH*Water Sanitation and HygieneHighVery highExtremely highExtremely highHighVery highWastewater qualityWater stressHigh priority risksWater is an unevenly distributed resource,and we perceive it as a highly localized issue.Nissan prioritizes activities to reduce water usage,such as recycling wastewater and making effective use of rainwater,in areas with high water stress,while also contributing to the addressing of local water initiaties.Long-term visionReduce the number of manufacturing sites with water risks to zero by 2050.NGP2030 objectivesReduce the number of manufacturing sites with high water risks(high-risk sites)to zero.Reduce water usage at manufacturing sites Manage wastewater quality at manufacturing sitesManaging water usageWater stress analysisAs the amount of usable water varies greatly depending on the basin where our manufacturing sites are located,we assess water stress at all global manufacturing sites.NGP2030 also prioritizes efforts to reduce water usage by designating sites with high water stress having a significant impact on our business as High-risk sites.Additionally,we continue water usage reduction at all sites,not just those with high water risks.Water stressImpact on businessLowHighHighLowHigh-risk sites Water stress on all global manufacturing sites is assessed based on water stress indicators from the Aqueduct Water Risk Atlas provided by the World Research Institute.Impacts on business are assessed based on production volumesWastewater quality managementThe quality of wastewater can affect the amount of water available for use,especially in areas with limited water resources,which further increases its significance.At Nissans main manufacturing sites,we implement wastewater treatment in accordance with stricter standards than local regulations to ensure compliance with wastewater quality management laws.Example of water quality management initiatives At manufacturing sites in Japan,we have installed water quality sensors in the drains of wastewater treatment facilities and introduced systems that automatically stop discharging wastewater outside the sites if any problems are detected,thereby augmenting the prevention of water pollution.Processing recycled water using reverse osmosis(RO)membranes has allowed some manufacturing sites to achieve zero wastewater discharge.Nissan Motor CorporationSustainability data book 2024Corporate directionSocialEnvironmentalDataGovernanceContentsThird-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system029Air qualityApproach to air qualityNissan approaches air quality by focusing on two points:lower emissions from vehicle tailpipes and manufacturing activities,and providing a pleasant in-cabin environment to customers.In this way,we will strive to show consideration for ecosystems while pursuing mobility that provides more comfort and security to customers.According to the State of Global Air 2018 report issued by the U.S.A.-based Health Effects Institute(HEI),95%of the worlds population was at that time living in regions where particulate matter smaller than 2.5 m(PM2.5)exceeds the 10 g/m basic level specified by World Health Organization(WHO)Air Quality Guidelines.In addition,the Euro 7 emission regulation planned for enforcement in Europe will include vehicle tailpipe emissions,as well as the reduction of particulate matter emissions from brakes,tires,and other components.Nissan will expand the scope of its responsibility for air quality to align with global regulatory trends,and by reducing all emissions from vehicles and manufacturing Nissan aims to minimize impacts on local nature and human health.Nissan air quality initiativesEmissions frommanufacturingsitesIn-cabin airqualityNon-tailpipe emissionsEmissions andmicroparticles*1Click here for information.P042Long-term visionMinimize impact on air quality from vehicles and manufacturingNGP2030 objectivesActivitiesObjectivesEnhance management of vehicle emissions,including non-tailpipe emissionsTechnology development and adoptionManage in-cabin air qualityComply with Nissan standard on in-cabin VOCsManage VOC at manufacturing sitesContinue current activities（paint shops）Reduction of emissions from vehiclesTo reduce emissions within and outside vehicles,Nissan is engaged in the following activities.Managing and improving out-cabin air quality Promoting Zero-emissions vehicles(EVs)*1 Enhancing internal combustion engines*1 Reduction of non-tailpipe emissions and particulates Nissan has begun exploring technologies to comply with the next proposed European emission regulation,Euro 7,in terms of particulate emission from brake wear etc.Managing and improving in-cabin air qualityIn addition to cleaner vehicle emissions,we are also conducting research and development on improving the in-cabin environment,including air quality,to make it more comfortable for passengers.Under NGP2030,we will comply with Nissans standards,which are stricter than the laws and regulations of each country regarding in-cabin VOCs.Reduction of emissions from manufacturing activitiesTypical emissions from vehicle manufacturing plants include nitrogen oxides(NOx),sulfur oxides(SOx),and VOCs,and Nissan has continued to employ strict measures to address the emission of these substances.NOx,SOx:Since NOx and SOx are released into the air when fossil fuels are combusted,we have been promoting the adoption of low-NOx burners,change to low-SOx fuels,and so on.Going forward,we expect to reduce emissions from manufacturing even further by electrifying facilities that use fossil fuels.VOC:To reduce VOC emissions,we collect and recycle cleaning thinners and promote the use of water-based coating lines in painting processes.Nissan is working to ensure thorough compliance with management standards and mechanisms relating to substances released into the atmosphere,and will engage in activities to reduce both the usage and emission of causal substances.Nissan Motor CorporationSustainability data book 2024Corporate directionSocialEnvironmentalDataGovernanceContentsThird-party assuranceUnderstanding of environmental issuesStrategic approach to environmental issuesNissan Green ProgramValue chain activity achievementsEnvironmental principles and policiesGlobal environmental managementframework and governance system030FoundationsUnder NGP2030,Nissan will work to ascertain needs through stakeholder engagement and strengthen its business foundations that relate to environmental issues to create new value and contribute to resolving the critical issues of climate change,resource dependency and air quality&water.As a global company,we have a responsibility to address various environmental issues and to be accountable in all aspects of the value chain.We are committed to achieving a sustainable mobility society and sustainable business operations,as well as to contribuing to regional communities through the following initiatives Identifying risks throughout vehicle life cycles using life cycle assessment;working with suppliers to improve environmental performance;establishing systems to realize information management throughout the value chain;and continuous efforts to raise environmental awareness among employees.Secure responsible sourcingNissan must comply with EU battery regulations,the CSRD*1 and other environmental due diligence amid the rising importance of reducing environmental risks throughout the entire value chain.Further,given regulations relating to corporate social responsibility(CSR)and information disclosure frameworks such as TCFD*2 and TNFD*3,companies are required to promote and disclose not only their own environmental/social activities but also those throughout their supply chains.Nissan clearly positions suppliers as important partners in its CSR policy.We have shared our basic philosophy and procurement policies on environmental and social issues with suppliers.Also,we promote collaborations on environmental activities through the formulation and publication of several*1Corporate Sustainability Reporting Directive*2Task Force on Climate-related Financial Disclosures*3Task Force on Nature-related Financial Disclosuresof our policies(Nissan Human Rights Policy Statement,Nissan Global Guideline on Human Rights,Nissan CSR Guidelines for Suppliers,Nissan Green Purchasing Guidelines)and engage with suppliers by holding annual environmental activity briefing meetings.In response to external trends,including legal requirements for information disclosure under NGP2030,we are incorporating the requirements for responsible procurement into our guidelines and actively managing supply chain risks.This includes expanding the use of materials that meet Nissans sustainability requirements.Secure and integrate value-chain information(traceability)To prepare for the trend toward regulation and expanded disclosure throughout the value chain,we are considering the establishment of a system to collect and manage supply chain information across the industry.Further,the disclosure of non-financial information,including CO emissions from corporate activities,is also required in addition to the disclosure of financial information.To respond to these external trends,we aim to realize the integrated information management of environmental impacts throughout the value chain and secure accountability(traceability).To understand and manage climate change,as well as human rights issues in the supply chain,impacts on water,air and the natural environment,we have started to introduce a digital platform for integrated information management.Specifically,we aim to provide timely and appropriate information by ensuring transparency to stakeholders with internal monitoring tools to record and manage our own CO emissions,water and waste.In addition,we aim to further accelerate collaboration with suppliers to reduce environmental risks through information management and inter-company data linkage across the entire Nissan supply chain.Enhance environment governanceIt is important that all employees act with integrity and in accordance with high ethical standards to reduce environmental impact.In all regions where Nissan operates,we have established internal standards to ensure compliance with environmental laws,regulations and the demands of society.In aiming for thorough legal compliance with regard to the environment,under NGP2030 we are promoting the understanding of environmental laws through educational activities f
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2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORTTable of Contents 3 A MESSAGE FROM OUR CHAIRMAN AND CEO4 OUR GLOBAL CITIZENSHIP&SUSTAINABILITY APPROACH 6 ANNUAL HIGHLIGHTS7 PROGRESS ON OUR GOALS11 INTEGRATED CIRCULARITY 15 SUSTAINABLE MATERIALS21 DESIGN WITH INTENT 26 VALUE CHAIN FOR IMPACT31 CLIMATE 36 WATER STEWARDSHIP39 WASTE MANAGEMENT41 CHEMICAL MANAGEMENT43 BIODIVERSITY46 DIVERSITY,EQUITY&INCLUSION53 EMPLOYEE WELL-BEING 56 COMMUNITY ENGAGEMENT&PHILANTHROPY69 RIGHTS&EMPOWERMENT IN THE SUPPLY CHAIN80 GLOBAL CITIZENSHIP&SUSTAINABILITY GOVERNANCE 83 ETHICS&COMPLIANCE85 DATA PRIVACY&SECURITY88 COLLABORATING FOR IMPACT 90 GLOBAL REPORTING INITIATIVE INDEX106 SUSTAINABILITY ACCOUNTING STANDARDS BOARD INDEX109 TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES INDEX110 ABOUT THIS REPORTINTRODUCTION&OVERVIEW 3CREATE WITH INTENT 10PROTECT THE ENVIRONMENT 30CHAMPION BETTER LIVES 45GOVERNANCE 792024 GLOBAL CITIZENSHIP&SUSTAINABILITY SUPPLEMENT 87CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEW 2 2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|3CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWA Message from Our Chairman and CEOSince our founding 57 years ago,Ralph Lauren has stood for timelessness creating beautiful,quality pieces that are made to be worn,loved and passed on to the next generation.Our vision for timelessness not only inspires what we create but also how we create it including how we operate our global business and engage with the communities where we operate.We do this because,like our iconic styles,we want our business to stand the test of time.Guided by our Purpose to inspire the dream of a better life through authenticity and timeless style we advance this work by testing,learning,collaborating and scaling programs to reduce our dependence on limited natural resources,engage and inspire our global teams,and to enrich the communities where we operate because when they thrive,we thrive.Some highlights from this year include:Creating timeless products with innovative materials and manufacturing processes including our Cradle to Cradle(C2C)Certified Denim Flag Trucker Jacket,our first-ever Global Recycled Standard(GRS)certified 100%Recycled Cotton Polo and our first collection of Responsible Wool Standard(RWS)-certified sweaters;Launching our Artist in Residence program with Din(Navajo)artisan Naiomi Glasses to deliver beautiful,authentic products based on a first-of-its-kind model for mutually-beneficial cultural collaboration;Continuing to phase out the use of coal in our supply chain and decreasing our absolute emissions against FY20 baseline with a 33%reduction;and Celebrating the newest Ralph Lauren Center for Cancer Prevention,which will open in Fall 2024 at the University of Southern California,Norris Comprehensive Cancer Center.As a Company,and as an industry,we have much more to do,but we are committed to progressing this important work that supports business longevity and creates value for all of our stakeholders.Thank you to our teams and partners whose leadership,dedication and creativity are represented throughout the pages of this report.Ralph LaurenExecutive Chairman and Chief Creative OfficerPatrice LouvetPresident and Chief Executive Officer 2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|4CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur Global Citizenship&Sustainability Approach For 57 years,we have created products that are timeless that can be worn,loved and passed on through generations.Our Global Citizenship&Sustainability(GC&S)strategy,Timeless by Design,is grounded in this philosophy and how we embed our Companys Purpose throughout our business.Our 2024 GC&S Report outlines progress on our goals and commitments.This is brought to life through our three pillars:2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|5CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWCreate with IntentTimelessness has always defined the creative vision for our products today,this ethos extends to how we create and the stories we tell,and includes our work to embed inclusivity and incorporate circular principles into our design processes,enabling our products to live on from generation to generation.Protect the EnvironmentWhen we shift toward practices that take less from our planet,we can be stewards in protecting our environment for generations to come.In addition to creating products more responsibly,in our business operations we are transitioning to renewable energy,diverting waste from landfill and incineration and efficiently managing water use.Champion Better LivesShaping a business that is timeless and has a positive impact for years to come means building relationships that stand the test of time and focusing on causes and actions that simultaneously benefit our communities,our teams and our Company.Thats why were committed to supporting our employees,our partners and those within our communities working to help people thrive today and build a brighter future for tomorrow.SUSTAINABLE DEVELOPMENT GOALSThrough our work,we aim to address global priorities,contribute to tangible solutions and move closer to achieving targets.To align our approach to global efforts,elements of Timeless by Design support the United Nations Sustainable Development Goals(SDGs).Ralph Laurens current programs,metrics and policies were benchmarked against all 17 SDGs to identify and determine where the Company has the biggest opportunity to contribute to the SDGs:2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|6CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWCREATE WITH INTENTLaunched the first collection of our Artist in Residence program,Polo Ralph Lauren x Naiomi GlassesIntroduced our C2C Certified Denim Flag Trucker Jacket and Flag Cashmere SweaterUnveiled our first-ever GRS-certified 100%Recycled Cotton CLARUS Polo,as part of the 2024 Paris OlympicsPROTECT THE ENVIRONMENTBegan in-depth engagement in Science Based Targets for Nature methodology 84%of chemicals reported conform to the ZDHC Manufacturing Restricted Substances List(MRSL)Initiated process of phasing out on-site1 coal consumption from our manufacturing supply chainCHAMPION BETTER LIVESAnnounced our newest Ralph Lauren Center for Cancer at USC Norris Comprehensive Cancer Center in Los Angeles,CAEarned Fortunes“Worlds Most Admired Companies”(2023&2024);Forbess “Worlds Best Employers”(2023);“Best Employers for Diversity”(2024)and “Best Employers for Women”(2023)rankings Annual Highlights94%Waste Diversion 33solute Greenhouse Gas Emissions Reduction26%Total Water Use Reduction$12.6M 2 Donations10K Volunteer Hours1 On-site refers to the coal consumption of the on-site equipment of our manufacturing partners.2 Includes both Social Partnerships and Philanthropy and The Ralph Lauren Corporate Foundation donations.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|7CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWTARGETPROGRESSINTEGRATED CIRCULARITYEnable our past and future products to live on responsibly by 2030Made advancements toward our circular product,experience and investment goalsMake five of our iconic products Cradle to Cradle(C2C)Certified by the end of 2025Launched our C2C Certified Denim Flag Trucker Jacket and Flag Cashmere Sweater,marking four Ralph Lauren iconic products to be C2C CertifiedOffer high-quality products made with 100%recycled cotton by the end of 2025Introduced high-quality products with 100%recycled cotton,including a Polo shirt as part of our 2024 Olympics Villagewear collection and a denim capsule with the Ellen MacArthur FoundationSet and implement circular design principles into our design and development process by the end of 2025Developed circular principles with a cross-functional team and working to implement within the design and development processInvest in scaling innovative technologies and regenerative practices to advance a circular economy by the end of 2025Continued to develop innovative products with partners like NFW(Natural Fiber Welding)Connect consumers with options to rent,repair and recirculate our products in select key cities by the end of 2025Scaling Ralph Lauren Vintage program and developing strategies to connect consumers to repair services in key cities in FY25SUSTAINABLE MATERIALSAchieve 100%sustainably sourced key materials by the end of 202592%of our units produced met at least one of our sustainable material criteria in FY24 compared to 89%in FY23100%of our key wood suppliers for new Ralph Lauren store interiors will use sustainably sourced wood substrates1 by the end of 202563%of our key suppliers had committed to meeting the benchmark at the end of FY24 compared to 37%in FY23VALUE CHAIN FOR IMPACT80%of our business will be with suppliers that meet our strategic and key supplier criteria,which include business,quality,citizenship and sustainability performance by the end of 202556%of our business was with strategic and key suppliers that met our business,quality,citizenship and sustainability performance criteria compared to 50%in FY23CREATE WITH INTENTProgress on Our Goals1 Certified by a forest management system,repurposed or recycled.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|8CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWTARGETPROGRESSCLIMATEReduce absolute Scope 1,2 and 3 greenhouse gas(GHG)emissions by 30%by 2030(Science Based Targets initiative approved)from a FY20 base yearDecreased absolute emissions by 33%in FY24 from our FY20 baselineAchieve net zero GHG emissions across the value chain by 2040 from a FY20 base yearPower our owned and operated offices,distribution centers and stores with 100%renewable electricity by the end of 2025Continued to invest in renewable energy attribute certificates,accounting for 64%of our global electricity use,and signed our first virtual power purchase agreement for electricity use in Europe WATER STEWARDSHIPAchieve at least a 20%reduction in total water use across our operations and value chain,compared to a FY20 baseline,by the end of 2025Decreased total water use across our operations and value chain by 26%from our FY20 baselineWASTE MANAGEMENTAchieve 100%recyclable,reusable or sustainably sourced packaging materials by the end of 202579%of our total packaging volume met at least one of our sustainable packaging criteria in FY24 compared to 73%in FY23CHEMICAL MANAGEMENTWe are committed to using safer and more sustainable chemicals throughout our business to address their human and environmental impact1Gained 91%visibility of chemical use in manufacturing(by spend);84%of chemicals reported conform to ZDHC Manufacturing Restricted Substances List(MRSL)BIODIVERSITYDevelop a biodiversity strategy and set goals aligned with the Science Based Targets for Nature by 2024Completed Steps 1 and 2 of the Science Based Targets for Nature methodology to inform the development of a comprehensive biodiversity strategyPROTECT THE ENVIRONMENT1 In FY24,we established a new commitment for chemical management to replace our previous goal(“Eliminate the use of hazardous chemicals in our supply chain by 2025”),to align with the industry-wide shifts towards a more holistic chemical management approach prioritizing safety,sustainability and continuous improvement.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|9CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWCHAMPION BETTER LIVESTARGETPROGRESSDIVERSITY,EQUITY&INCLUSIONReach 87vorability on responses to“Ralph Lauren is committed to diversity and inclusion in the workplace”in the employee surveyAchieved 85vorable responses in most recent employee surveyReach 80vorability on responses to“my manager champions diversity and psychological safety”in the employee surveyAchieved 80vorable responses in most recent employee surveyEnsure at least one person of color(U.S.only)and one female candidate interviewed for 80%of VP-level and above open rolesAt least one person of color was interviewed for 88%of all U.S.-based VP-level and above open roles.At least one female candidate was interviewed for 100%of all VP-level and above open rolesEnsure at least one minority business enterprise or female supplier included in 50%of open requests for proposalAt least one minority business enterprise or female supplier was included for 52%of open requests for proposalCOMMUNITY ENGAGEMENT&PHILANTHROPYIncrease Company employee volunteer hours by 25%compared to a FY22 baseline by the end of 2025Achieved in FY23RIGHTS&EMPOWERMENT IN THE SUPPLY CHAINMake empowerment and life skills programs available to 250,000 workers across our supply chain by 2030Reached over 136,000 workers through our empowerment and life skills programs to dateEnsure all strategic and key suppliers will have the capabilities and systems in place to deliver fair and timely compensation by 2030Developed our Human Resources Management(HRM)Playbook,which is a critical tool to support suppliers as they improve their wage management systemsGrounded in our enduring philosophy of timelessness,we are reimagining what and how we create and the stories we tell through our products.This includes our work to embed inclusivity and incorporate circular principles into our design processes,enabling our products to live on from generation to generation.Create with IntentEXPLORE THIS SECTION11 INTEGRATED CIRCULARITY 15 SUSTAINABLE MATERIALS21 DESIGN WITH INTENT26 VALUE CHAIN FOR IMPACT CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEW 102024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|11CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur Approach Our ethos of timelessness has always guided our creative vision.Guided by this philosophy,we are evolving the way our products are designed,made,used and recirculated.Our circularity strategy has three main focus areas:Designing and making products through the lens of circular principles Connecting consumers to services that enable product longevity and reuse Investing in circular systems and innovation across the industryIntegrated Circularity2030 GOALEnable our past and future products to live on responsibly 2025 GOALSMake five of our iconic products Cradle to Cradle(C2C)Certified Offer high-quality products made with 100%recycled cottonSet and implement circular principles into our design and development processInvest in scaling innovative technologies and regenerative practices to advance a circular economyConnect consumers with options to rent,repair and recirculate our products in select key citiesLIVE ON PROMISEOur Live On Promise to enable our past and future products to live on responsibly underpins our vision for a more circular fashion industry.This includes creating products that are made with future uses in mind and connecting consumers with solutions that help improve and extend the life of their garments.LINEAR SYSTEMTakeDesignUseRecirculateRecycleMakeMakeUseWasteCIRCULAR SYSTEM2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|12CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur ActionsDesigning for TimelessnessOur circular design principles,developed through collaborative cross-functional engagement,are intended to support our design and product development teams to create products that can live on for generations to come.Cradle to Cradle CertifiedThis past year,we certified two additional icons the luxury Flag Cashmere Sweater and the Polo Denim Flag Trucker Jacket,our third and fourth products to be C2C Certified Gold.The jacket is also made with 75%Regenagri certified cotton and 25%recycled cotton and has removable buttons to enable recycling at the end of the products life cycle.These products follow the launch of our initial C2C Certified Gold products,the classic,luxury Cashmere Crewneck Sweater and luxury Cashmere Turtleneck Sweater.C2C certification is the global standard for products that are safe and circular.Ralph Lauren partnered with an independent assessment body to ensure every component of these four products met the C2C Certified Product Standards set by the Cradle to Cradle Products Innovation Institute(C2CPII).CREATE RESPONSIBLYDESIGN FOR LONGEVITYINSPIRE CIRCULATIONDESIGN FOR CYCLABILITYUse sustainable materials and processesCreate durable,timeless silhouettesSupport care,repair and recirculationEnable material recyclingBy developing Cradle to Cradle Certified circular icons within their collection,Ralph Lauren demonstrates a true dedication to the circular economy while offering timeless luxury to a broad audience.The cashmere sweater and denim trucker jacket are excellent examples that show C2C Certified collections look fantastic while adhering to all stringent environmental and social requirements of the product standard.We are proud to have Ralph Lauren as a partner in our program,and we celebrate these outstanding results as we eagerly anticipate the upcoming new icons.“ELWYN GRAINGER-JONESExecutive Director,Cradle to Cradle Products Innovation Institute”2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|13CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWNEW PRODUCT LAUNCHESC2C Denim Flag Trucker JacketC2C Flag Cashmere SweaterReclaimed Denim (EMF Jeans Redesign)Ellen MacArthur FoundationLaunched this year,our unisex,classic fit jean and trucker jacket were developed to meet the Ellen MacArthur Foundations The Jeans Redesign guidelines,which were created through the collaborative project that took place from 2019-2023.Crafted with features like removable metal buttons and a rivet-free design,the jean and trucker jacket were made for recyclability at the end of their usable life.Both products include recycled cotton.Since 2021,we have been a Network Partner of the Foundation,participating in collaborative engagements to further a shift to a circular economy throughout our industry.Enable Circular Consumer ExperiencesTo help extend the life of Ralph Lauren products we are helping consumers make conscious decisions when buying,maintaining or parting ways with their items.Ralph Lauren customers can access our products on several rental platforms,including Rent the Runway.This enables consumers to rent items for a one-time event or as part of an ongoing subscription.We are launching a recycling program for 100shmere garments in partnership with Re-Verso,which was developed as part of the C2C certification process for our C2C Certified Gold Cashmere Sweater.We are also engaging with the resale market by selling curated collections of iconic,vintage Ralph Lauren products.These collections can be found on our digital platforms and in select stores.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|14CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEW88 million digital product IDs activated in FY24DISTRIBUTED AND AUTHENTICATED RESALE NETWORKThe World Economic Forum(WEF),Ralph Lauren,Vestiaire Collective and Digimarc(formerly EVRYTHNG),in collaboration with Bain&Company,launched a pilot to support the authentication of fashion products in the secondhand market through digital ID technology.This pilot established a global collaboration between manufacturers and brand owners,suppliers,consumer representatives and regulators,enabling richer consumer experiences in secondhand marketplaces.The first phase of the pilot,completed in FY24,focused on designing the digital architecture and testing it with limited stakeholders.Now in its second phase,the pilot has been extended to multiple marketplaces,brands and technology providers.The working group will build a framework establishing an open standard,which helps demonstrate the power of collaboration.Advance a Circular EconomyWe consider the entire life cycle of our products and invest in innovative,scalable solutions to help deliver the quality our consumers expect.This includes leveraging authentication and digital traceability tools to demonstrate transparency.Digital Product ID(DPID)We have offered DPID since 2019 as a way for consumers to verify the authenticity and details of their Ralph Lauren product easily and seamlessly.With more than 300 million individual items equipped with DPIDs,we are continuing to leverage DPID to identify counterfeiters and to ensure customers can easily report fraudulent products to us.Looking ahead,Ralph Lauren has developed DPID to enable future integration of additional functionality,such as enhanced product traceability and transparency information,as well as product information that can help reduce the need for excess hangtags.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|15CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur Approach We craft our products to stand the test of time and to live on responsibly.We seek to use materials that help to address our environmental impact and animal welfare,while delivering the quality,longevity and durability our customers expect.We focus our efforts on the key materials that make up the chief content of 94%of our apparel units:cotton,polyester,wool,viscose,down1,tanned leather and cashmere.We are committed to sourcing materials certified to credible third-party standards and working towards increasing traceability across our supply chain.For more on our approach and progress around transparency and traceability,see the Value Chain for Impact section of this report.Sustainable Materials2025 GOALSAchieve 100%sustainably sourced key materials 100%of our key wood suppliers for new Ralph Lauren store interiors will use sustainably sourced wood substrates(certified by a forest management system,repurposed or recycled)1 Down is a key material,but as a fill material it is quantified separately.2 Defined as:organic,transitional/in-conversion,Better Cotton,recycled,regenerative,U.S.Cotton Trust Protocol or Fair Trade-certified.3 Down only includes apparel.OUR OVERALL GOALAchieve 100%sustainably sourced key materials by the end of 2025PROGRESS97%Cotton100%of our cotton will be sustainably sourced by the end of 2025278%Viscose100%of viscose will be sourced and verified through CanopyStyle audits by the end of 202587%Polyester100%recycled polyester by the end of 2025100%Down100%Responsible Down Standard-certified or recycled down and feathers by 2023392%Wool100%Responsible Wool Standard-certified or recycled wool by the end of 202590%Tanned Leather100%of our tanned leather will be Leather Working Group-certified by the end of 202585shmere100%Sustainable Fibre Alliance-certified(or equivalent)or recycled cashmere by 202592%of our units produced met at least one of our sustainable material criteria in FY24 compared to 89%in FY232024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|16CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWKey MaterialsThe material development and sourcing teams who work directly with our finished goods suppliers embed sustainability as a key component of their strategy.We had some noteworthy achievements this year,particularly in our cotton and animal-derived material programs,and our core apparel programs continue to have sustainable content.CottonCotton is the most widely used natural fiber for clothing production2 and is the chief content in approximately 80%of our product units.In FY24,97%of the cotton apparel units we produced met at least one of our defined sustainability attributes(organic,transitional/in-conversion,Better Cotton,recycled,regenerative,U.S.Cotton Trust Protocol or Fair Trade-certified).Through the U.S.Regenerative Cotton Fund(USRCF),The Ralph Lauren Corporate Foundation also supports the increased adoption of regenerative practices,such as reduced tillage and cover cropping.For more information on the USRCF,see the Community Engagement&Philanthropy section of this report.PolyesterPolyester is the chief content in 6.5%of our apparel units and is critical to performance in certain categories,such as outerwear,swim or certain types of knit shirts.In FY24,87%of our polyester apparel units had a sustainability attribute.We have successfully transitioned our core programs from conventional to recycled polyester and are focused on addressing the challenges to transition the remaining units.WoolThe Responsible Wool Standard(RWS)is a certification focused on protecting animal welfare and promoting progressive methods of land management at the farm level.As wool moves through the supply chain,the RWS Content Claim Standard ensures a strong chain of custody is in place at every stage so the consumer can be confident the finished product contains wool from an RWS-certified farm.In FY24,92%of our chief content wool apparel products were RWS or recycled wool.Our first fully certified RWS sweaters were launched in our Fall 2023 Polo collection.This included more than 900,000 units spanning 160 styles across our Polo mens,womens and childrens,RLX and Lauren brands.We were proud to provide the Paris 2024 Olympic Team USA with blazers crafted from USA-grown RWS-certified wool for the Opening Ceremony.ViscoseViscose and other man-made cellulosic fibers(MMCF)are used in only 0.4%of the apparel units we produce.These materials are typically made from trees,which presents a risk of sourcing inputs from ancient and endangered forests.Canopy is an environmental nonprofit organization dedicated to protecting 1 Percentage represents total that each key material makes up across our entire portfolio of products.2 World Resources Institute79.5%Cotton8.1%Animal derived6.5%Polyester3.9%Other1.6%Nylon0.4%ViscoseKEY MATERIALS IN OUR PORTFOLIO1ANIMAL DERIVED5.3%Leather/Skins2.5%Wool0.2shmere0.1%Silk2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|17CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWthe worlds forests.Their tool,the Hot Button Report,is the fashion sectors primary tool to identify the sourcing practices of MMCF manufacturers.Our material sourcing team requests that our suppliers only use viscose and other MMCFs from“green shirt”manufacturers,those who score highest on the CanopyStyle audit.In FY24,78%of our yarn and fabric suppliers reported that they sourced MMCF from green shirt manufacturers.DownWe started using Responsible Down Standard(RDS)virgin down in 2019 and have only used 100%RDS-certified down in apparel since 2023.RDS is a globally recognized standard that aims to improve the welfare of ducks and geese used for down and feathers and provides confidence that the chain of custody was intact through the supply chain.Marketing the use of RDS-certified down on a specific product requires every member of the value chain be certified and the usage validated.As part of our Fall and Holiday 2024 Polo outerwear collection,we are offering nearly 400,000 units of RDS-certified products across 90 styles for our mens,womens and childrens lines.Tanned LeatherIn FY24,we continued making progress towards our goal of sourcing all of our tanned leather from Leather Working Group(LWG)-certified tanneries,achieving a total of 90%.LWG seeks to drive best practices and positive environmental and social change in leather production;the cornerstone of its efforts is the LWG Leather Manufacture Audit Standard,which assesses the environmental impact of leather production at the facility level.As part of our Fall 2023 footwear collection,we offered our first shoes made with regenerative leather.The Polo Camp shoes were crafted using leather and suede processed in the U.S.,sourced from farms and ranches that use regenerative grazing practices,such as high-density,short-duration grazing.Traceability in the leather supply chain continues to be an industry-wide challenge.We see opportunity in changing systems at the beginning of the supply chain.This year we continued to support the Leather Impact Accelerator(LIA),a set of tools developed by Textile Exchange focused on enabling key stakeholders from farmers to retailers to foster the development of a more responsible leather supply chain.These tools individually establish minimum social,environmental and animal welfare thresholds for practices at the farm and leather production levels and give recognition to producers who meet them.Cashmere We are focused on sourcing Sustainable Fibre Alliance(SFA)-certified virgin or recycled cashmere,which typically comes from post-consumer recycled textiles or pre-consumer industrial waste.In FY24,85%of our chief content cashmere product was SFA-certified or recycled.As part of our annual Textile Exchange Brand Certification audit in 2024,we added SFA certification to We are committed to ensuring our products are ethically made and adhere to our strict and robust Animal Welfare Policy,which outlines clear sourcing guidelines and requirements for all animal-based raw materials.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|18CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWour scope and launched SFA-certified cashmere sweaters to consumers in our Fall 2024 Polo and Lauren collections.This is in addition to our Cradle to Cradle certified cashmere products,which you can learn more about in the Integrated Circularity section of this report.Our ActionsWe continue to prioritize collaboration with innovative startups to help us create new,high-quality materials that can also help us reduce our environmental footprint.We are also exploring various recycling solutions that are focused on disassembly,decolorization,separation and re-creation.By partnering globally,we can help support the creation of processes that allow materials and products to be recycled at scale.InnovationWe are committed to investing in and using innovative materials to decrease our reliance on virgin raw materials.As part of the 2024 Team USA Olympics Villagewear collection,we were proud to introduce the 100%Recycled Cotton CLARUS Polo Shirt.Weve reimagined our most iconic product using CLARUS welding technology.The shirt is crafted with performance attributes,including less pilling and shrinkage over time,while still retaining the comfort of our signature cotton Polo.CLARUS was developed by NFW.We have invested in NFWs innovative solutions to enable us to reduce our reliance on virgin raw materials and advance a more circular fashion industry.In addition,we are focused on yarn and process optimization for post-industrial recycled cotton.As part of this work and to help reduce waste,we are building recycling hubs within our sourcing regions to deliver high-quality,viable yarns.We currently have pilots in Turkey and Bangladesh and are exploring opportunities to scale in select top regions in FY25.NEW PRODUCT LAUNCHES:RWS-certified Polo sweaters(Fall 2023)RDS-certified Polo outerwear (Fall 2024)Collaborations with leading brands like Ralph Lauren are critical for driving system-level change and ultimately making biobased performance materials available to everyone.The 100%Recycled Cotton Polo shirt a first for performance apparel is emblematic of the purpose behind our partnership:together,we are testing,refining and improving in order to share these solutions with others and raise the bar for the entire industry.“LUKE HAVERHALSFounder and CEO of NFW”2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|19CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWGlobal Research and Development StudioOur Global Research and Development Studio is a physical and virtual resource that contributes to our progress on our sustainable materials goals by expanding our library of materials and processes available for adoption by our design and product teams.As part of the Studios work,our Digital Product Creation program creates prototypes of garments,with the intent to avoid unnecessary production and reduce material waste.The program is comprised of apparel designers in the Polo and Lauren brands,as well as a number of strategic and key suppliers who have been certified as 3D capable by our Digital Sourcing team.FY24 was the first year of the program,which resulted in over 500 prototypes created.2024 OLYMPICS:TEAM USARalph Lauren is proud to be an Official Outfitter of the U.S.Olympic and Paralympic Teams.For the Olympic and Paralympic Games Paris 2024,we thoughtfully considered materials and manufacturing practices for the Team USA collection.Styles throughout the collection,including the athletes Opening and Closing Ceremony outfits,are crafted from recycled polyester and USA-grown RWS-certified wool,among other materials.And as mentioned in the Innovation section on page 18,we were proud to introduce our first-ever 100%Recycled Cotton CLARUS Polo Shirt as part of the 2024 Team USA Olympics Villagewear.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|20CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWSustainable Store InteriorsSustainability guidelines from the U.S.Green Building Council(USGBC)and the Forest Stewardship Council(FSC)currently inform our store interior materials sourcing.Our Forest Protection Policy outlines our commitment to protecting the worlds forests and guides the selection of wood suppliers for our store interiors.Our goal is to have 100%of our key wood suppliers use sustainably sourced(certified repurposed or recycled by a forest management system)wood substrates for new Ralph Lauren store interiors by the end of 2025.Forty suppliers committed to meeting the benchmark by the end of FY24,which represents 63%of our suppliers,compared to 37%in FY23.In FY24,our key wood suppliers represented 97%of our business volume in this category.SUSTAINABLE STORE HIGHLIGHTSIn our new flagship store in Prague,all new millwork elements,such as wall cases and architectural trims,were produced from sustainably sourced woods,and over half of all floor fixtures were reclaimed and repurposed pieces.In North America,the new Polo Menswear shop at Macys State Street in Chicago features FSC-certified wood flooring and hangers,as well as millwork fixtures,perimeter units and trims produced from sustainably sourced woods.71%of our new stores and renovations globally in FY24 included sustainably sourced wood flooringKEY WOOD SUPPLIERS THAT MET BENCHMARK BY END OF FY24:100%of suppliers serving EMEA88%of suppliers serving North America50%of suppliers serving APAC2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|21CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur ApproachSince our founding,Ralph Laurens design ethos has been inspired by the beautiful and interconnected histories,arts,crafts and cultures that make up the fabric of America.Mindful of our efforts to expand our portrayal of America,were on a journey to evolve from inspiration to collaboration with communities that inspire us.That includes taking meaningful steps to be more inclusive throughout our business,from how we design to how products go to market.We are developing and embedding principles of culturally sustainable design into our product creation processes,supporting the preservation of traditional craft and driving economic and social impact within artisan communities.At its core,Design with Intent is about making sure the products we create and the stories we tell are authentic expressions of heritage,which is foundational to our timeless brand.Formally launched in 2022,our Design with Intent department guides and operationalizes Ralph Laurens culturally sustainable design and go-to-market execution with a focus on:Leading internal education efforts about culturally cognizant design Creating and actioning a model for mutually beneficial cultural collaborations Driving community and artisan engagement Establishing a network of external resources to advise on our effortsOur ActionsCultural Collaboration ModelsTo help enable our shift from inspiration to collaboration,we are building and refining two models for collaboration with the communities that own and sustain heritage craft:our Artist in Residence program and our Authentic Makers program.Both models are intended to be mutually beneficial exchanges,combining the unique skill of the artisan with our core brand sensibilities.They also aim to recognize the broader communal ownership of the craft and design motifs represented within collaborations.We are grateful to have received third-party counsel to help guide us in building models that are fair,replicable and may be refined as we learn more with each collaboration.Design with Intent2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|22CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWArtist in Residence ProgramThrough our Artist in Residence program,we invite artisans working with a variety of skill sets,mediums and materials to collaborate with Ralph Laurens design teams.Our first focus is on partnering with Indigenous artisans,but this is intended to be an ongoing program where we will seek to collaborate with those who authentically connect to and inspire us.Acknowledging the broader communal ownership of the traditional expression utilized within these product collaborations,we work closely with each Artist in Residence to identify a beneficiary organization serving members of their community,to which a portion of collaboration product sales will be donated.Authentic Makers ProgramRalph Laurens Authentic Makers program invites artisans to create a product collaboration with our design teams and manufacture the product using traditional techniques.While the program is still in its early stages,we have engaged in several small-scale Authentic Makers collaborations,including:A collection of special-edition concho belts for our womens Collection made by silversmith Jimmy Begay Jr.(Din/Navajo).A special-edition collaboration with Ishi Glinsky(Tohono Oodham Nation)using traditional hand tattooing techniques to adorn USA-made leather moccasins.Navajo weaving is a craft that has carried on through my family for seven generations and preserving these traditions in new ways has been so inspiring to me as an artist.To now be able to share it with people around the world,as seen through my eyes and brought to life in clothing,is a dream come true.It is only through the power of collaboration and Ralph Laurens unique program that this collection was made possible,and the best part is that it brings traditional Navajo weaving to a new generation.“NAIOMI GLASSESSeventh-generation Din(Navajo)textile artist and weaver”2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|23CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWCultural CognizanceOur Design with Intent work is founded upon continued education deepening our understanding of the communities that inspire us and relearning how to use cultural inspirations respectfully and inclusively.EducationOur Cultural Awareness Guidelines support our approach to culturally cognizant product creation and storytelling across the Company.We update these regularly according to emerging best practices and guidance from our network of external advisors and distribute them to all teams with a role in design,merchandising,advertising and marketing.We inform and prepare these teams to apply our guidelines through mandatory cultural awareness educational programs.We also remain dedicated to providing next-generation leaders with opportunities to access education.The Company continues to support scholarship programs via the American Indian College Fund and launched a two-year Master of Fine Arts scholarship at the Institute of American Indian Arts(IAIA),aiming to support Indigenous talent in creative fields of work.Additionally,we supported IAIA as a sponsor of its 2023 benefit event with proceeds going toward their general scholarship fund.Cultural Consultants and LiaisonsOur Cultural Awareness Council(the Council)enables progress by working cross-functionally to create and implement culturally sustainable policies,guidelines and best practices.The Council is made up of team members across disciplines including Legal/Cultural IP,DE&I,Corporate Communications and Design with Intent.They participate in weekly review sessions to ensure cultural responsibility practices are maintained from products conception through their go-to-market campaigns.This year,the Council expanded to include team members from our EMEA and APAC regions to ensure global and regional perspectives are represented.Employee Impact Group(EIG)leaders and external cultural and textile experts are consulted as needed to help inform our decision making and development of authentic partnerships,programs and storytelling.Our External Native and Indigenous Advisory Council includes Indigenous leaders across cultural,historical,educational,legal,media and creative disciplines.The group reviews and provides guidance on our Design with Intent work.The Design with Intent team also engages in continuous education,which has included training with Cultural Intellectual Property Rights Initiative and partnering with Legal and Learning and Development teams to host sessions on Cultural Intellectual Property and Traditional Cultural Expression.Additionally,Design teams are also able to access global textile expertise to understand textile histories,origins and provenance via our extended network.CULTURAL ENGAGEMENTA critical part of our work is building relationships based on respect and trust with the communities that inspire us.We regularly seek opportunities to connect with Native community leaders and Indigenous-serving organizations to apply greater cultural cognizance to our work and scale our impact.In FY24,delegations from Ralph Lauren attended the International Folk Art Market,the Santa Fe Indian Market,the Cherokee Nation Art Market and Original 2023 in Mexico City.In December 2023,Ralph Lauren launched the inaugural collection of the Companys Artist in Residence program,Polo Ralph Lauren x Naiomi Glasses a collaboration with seventh-generation Din(Navajo)textile artist and weaver Naiomi Glasses.Over the past two years,Glasses worked with the Polo Ralph Lauren design teams to reimagine her original weaving designs into three capsule collections inspired by her family,homelands and community on Dintah(Navajo Nation).To accompany each collection,she curated one-of-a-kind silver and turquoise jewelry pieces,handmade by renowned artisans from the Navajo Nation,Hopi Pueblo,San Felipe Pueblo and Zuni Pueblo.Unveiled as three seasonal,special-edition product launches through Fall 2024,this collection celebrates the artistry of timeless Navajo traditions from Naiomis perspective.A beautiful,360 campaign promoting each collection was showcased across Ralph Laurens channels,including a docuseries,two episodes of which were directed by award-winning filmmaker Shaandiin Tome(Din/Navajo).Drops one and two of the campaign were shot by Ryan RedCorn(Osage Nation),alongside photography from Daryn Sells(Din/Navajo)and Lonnie Begay(Din/Navajo).All three drops featured many Native and Indigenous models,including friends and family of Naiomi Glasses.As an avid turquoise and silver collector,Naiomi curated a unique selection of handcrafted pieces by several renowned jewelry makers from Navajo Nation,Hopi Pueblo,San Felipe Pueblo and Zuni Pueblo,showcased throughout the campaign and profiled in a piece in RL Magazine,guest written by Sheyenne Sky Lacy(Din/Navajo).Special handmade silver and turquoise pieces from the artisans were available for purchase online and in select flagship stores.Ralph Laurens External Native and Indigenous Advisory Council advised the Company on the ideation,approach and creation of the campaign,as part of its ongoing role to share guidance on Ralph Laurens representation of and engagement with Indigenous communities.Additionally,a portion of the sales of the Polo Ralph Lauren x Naiomi Glasses collection support organizations serving communities within the Navajo Nation and beyond.CASE STUDYPolo Ralph Lauren x Naiomi Glasses2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|24CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWCASE STUDY(CONTINUED)DROP 1:LOVE OF THE LANDInspired by Naiomis family,homelands and community of Dintah(Navajo Nation)from the beauty and colors of the land to cherished cultural symbols.A portion of the drop one collection sales benefit Change Labs,a Native-led organization focused on fostering the creation of successful Navajo and Hopi small businesses.DROP 2:COLOR IN MOTIONA reflection of the second phase of Naiomis weaving journey,as she began to play with new colorways and more contemporary adaptations of traditional Navajo motifs while refining her skill in the craft.A portion of the drop two collection sales benefit Phoenix Childrens Foundation Patient and Family Assistance Fund for Native American Families and the Center for Cleft&Craniofacial Care.DROP 3:DENIM DAYDREAMAn ode to Naiomis love for rodeo culture,its heritage,and its deep connection to the Navajo way of life reflected across a wardrobe of denim and indigo hues nodding to the signature attire of Navajo rodeo riders and the color of Dintah skies.A portion of the drop three collection sales will be donated to Edward Charles Foundation to benefit Creative Futures Collective an organization working to unearth and empower the next generation of creative leaders from disenfranchised or system-impacted communities.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|25CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEW2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|26CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur ApproachTo build a resilient and responsible value chain,we are continuing to create transparency and traceability,strengthen relationships with partners in our ecosystem and identify areas for improvement.We are also working with our suppliers to respect human rights and promote environmental sustainability.Our Supplier Engagement Strategy(SES)work is a vital part of this,and we started in FY20 with our Tier 1 suppliers and in FY23 expanded the program to our Tier 2 suppliers.Our work in supplier engagement helps create an agile and resilient value chain ecosystem that can respond to disruption and change while meeting our shared and individual goals.We continue to progress towards our goal to conduct 80%of our business with suppliers that meet strategic and key supplier criteria,which includes business,quality,citizenship and sustainability performance.In FY24,56%of our business was with suppliers that met the strategic and key supplier criteria.For more information on our procurement practices,refer to our Supply Chain and Product Sustainability Policy and our Supplier Engagement Strategy.Value Chain for Impact2025 GOAL80%of our business will be with suppliers that meet our strategic and key supplier criteria,which include business,quality,citizenship and sustainability performance by the end of 202556%of our business was with strategic and key suppliers that met our business,quality,citizenship and sustainability performance criteriaSUPPLIER ENGAGEMENT STRATEGYOur Supplier Engagement Strategy(SES)continues to focus on strengthening performance in these key areas:business,quality,citizenship and sustainability.Maintain a responsible,agile and transparent supply chainSecure the right capacity and capability that meets our objectives and standardsSupport supplier empowerment through partnership and performance evaluation;and create value through a Global Supplier NetworkASSESS&DEVELOPCAPACITY MANAGEMENTSOURCINGRESPONSIBLE EXIT1Support supplier owned exit strategy to respect the rights of workersONBOARDINGInvest time and resources to build strong relationships1 Responsible exit may occur when the supplier has a change in strategy or is not meeting our compliance and business requirements.We are in the process of creating a Responsible Exit policy.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|27CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur ActionsTransparency and Traceability Enhancing transparency and traceability across our value chain is foundational to the successful implementation of our GC&S strategy and achievement of our goals.It enables us to better understand our impacts,improve compliance with social and environmental requirements throughout the value chain and track our progress more accurately.We are committed to continuously improving both transparency in global supply chains and the traceability of our products across our value chains.To support this,we have created a strong internal governance system and are investing in a combination of tools and processes that target different aspects of this work in addition to exploring new technologies as they become available.TransparencyIn order to map and disclose our supplier partners,we use Open Supply Hub to publish the name,location and parent company of Tier 1 value-adding processing units including sewing,washing,embroidery and printing facilities.The list is updated as needed and was last updated on April 24,2024.In FY24,we worked with 378 active Tier 1 factories across 31 countries.In addition to finished goods factories,we continued to disclose Tier 1 processing units.We had 190 active processing units for finished goods factories.Overall,FY24 disclosures included 94%of business coverage.TIER 1 SUPPLIERSTIER 2 SUPPLIERSTIER 3 SUPPLIERSTIER 4 SUPPLIERSFinished goods manufacturers and value-adding processes(processing units)such as washing,embroidery and printingMaterial production(mills,weaving,knitting,dye houses and washing facilities,sundry suppliers,tanneries,outsole manufacturers,embroiderers,screen printers,trim suppliers and packaging suppliers)Raw material processing(spinning,yarn production)Raw material source/feedstock production(farms,ginning,forestry,extraction)2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|28CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWTraceabilityTracking products and their inputs across the value chain from source to shelf is emerging as a regulatory requirement globally.This is possible through digital traceability(e.g.,chain of custody)and physical traceability(e.g.,trackers and fiber verification).Traceability also supports our efforts to achieve 100%sustainably sourced key materials(as described in the Sustainable Materials section of this report).To standardize and communicate our expectations around verifiable chain of custody documentation,we created a Transparency&Traceability Playbook for our suppliers,providing clear definitions,training and tools for support.Responsible Purchasing Practices We are addressing the role we play in being a responsible buyer by continuing our commitment to responsible purchasing practices(RPP).Since 2021,we have leveraged the Better Buying Survey to help us further understand the impact of our business practices on factories and workers.This supplier feedback creates an ongoing opportunity for collaborative problem solving.We leverage our Better Buying Survey results through cross-functional working groups covering five categories:planning and forecasting,design and development,cost and negotiations,sourcing and order management and win-win sustainable partnership.These working groups identify improvement areas and create metrics to continuously evaluate and improve our RPP.As a result of this work,in FY24 we expanded our Supply Chain Financing strategy to include additional banking partners to facilitate further competition and provide suppliers with more choices to ensure they receive competitive pricing.Additionally,we are collaborating with the banking partners to establish preferential financing rates to incentivize suppliers who have better performance as defined through our SES.We continue to conduct mandatory training in these practices for our buying and sourcing teams.We connect with our industry peers to benchmark our progress,as well as review standards and expectations from non-governmental organizations(NGOs)to identify opportunities for continuously improving our RPP.With this in mind,we are in the process of developing a Responsible Purchasing Practices Policy and corresponding guidelines.Supplier EngagementWe engage suppliers through two-way communication,sharing our expectations and seeking feedback on how to strengthen our overall partnership via strategies:one-on-one check-ins,roundtable discussions,our Supplier Engagement Scorecard,surveys(including the Better Buying Survey)and semi-annual supplier summits.BETTER BUYING SURVEYIn FY24,the suppliers who joined the survey covered 86%of value and 88%of unit volume of our business.In total,104 suppliers participated in the survey which is 9%more compared to last year.Our suppliers recognized our year-over-year improvements in the areas of payment terms,management of purchasing practices as well as win-win sustainable partnership.Based on our suppliers feedback,we will continue to focus on improvements for planning and forecasting.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|29CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWWe have also created a Supplier Innovation Council,which is a group of key and strategic suppliers that meet our innovation criteria and share innovative practices and solutions collaboratively.We present this cross-supplier forum with startups and new technologies,which they then test,if interested,then share their results to enable scaling in their production.Supplier Engagement ScorecardOur Supplier Engagement Scorecard has social and environmental performance indicators that enable us to communicate our sustainability expectations,evaluate and monitor the progress of our suppliers and strengthen collaboration.This includes the use of industry tools,including the Higg Facility Environment Module(FEM),Better Work and Social Labor Convergence Project(SLCP),Aii Carbon Toolkit,ZDHC chemical monitoring tools,as well as the tracking of sustainable material certifications and resource-efficient production practices to ensure alignment between our sourcing strategy and our goals.In FY24,we diversified our social key performance indicators(KPIs)within the scorecard to align with key areas:career advancement for workers,wage management and effective grievance mechanisms.This year,we also digitized our scorecards,which provides better efficiency and helps us build real time data;and we added Transparency and Traceability KPIs.We collected Higg FEM data from 276 Tier 1 facilities,representing 92%of our supply chain spend.Among the reporting facilities,263 facilities(91%of business volume)have completed data verification by verifiers approved by Cascale(formerly known as Sustainable Apparel Coalition).Facilities scored an average of 63 points across all sections(out of 100),with an average of 72 points in the water section,26 points in chemical management section and 81 in the energy section.For raw material manufacturing,Higg FEM data collection covers 119 mills,representing our woven,knit and sweater yarn production.A total of 115 mills have completed data verification,representing an estimated 62%of core fabric business volume.The mills scored an average of 69 points across all sections(out of 100),with an average of 71 points in the water section,28 points in the chemical management section and 83 points in the energy section.This year,we have significantly increased our FEM roll out to our subcontracted finished goods facilities;a total of 131 facilities completed FEM and 125 facilities completed third-party verification.These facilities scored an average of 60 points across all sections(out of 100),with an average of 71 points in the water section,28 points in the chemical management section and 82 points in the energy section.WORKING WITH LICENSEESIn addition to our own products,we license the Ralph Lauren brands to select companies.We extend our GC&S expectations and standards to licensees and require them to have social compliance programs and standards equivalent to our own.We separately assess licensee supplier compliance programs and review their assessments to ensure that they meet our requirements.We are reviewing the licensee roadmaps for incorporating sustainable materials,packaging and chemical management and adopting energy and water efficiency and coal phase out plans.In FY24,32 licensees used approximately 489 factories to make licensed products.92%of our business volume with Tier 1 facilities was represented in Higg FEMWhen we shift toward practices that take less from our planet,we can be stewards in protecting our environment for generations to come.In addition to creating products more responsibly,in our business operations we are transitioning to renewable energy,diverting waste from landfill and incineration and efficiently managing water use.Protect the EnvironmentEXPLORE THIS SECTION31 CLIMATE 36 WATER STEWARDSHIP39 WASTE MANAGEMENT41 CHEMICAL MANAGEMENT43 BIODIVERSITYCREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEW 30 2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|31CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur Approach The risks posed by climate change require us all to make significant reductions to global GHG emissions so we can protect and preserve our planet.Climate StrategyTo support our roadmap and targets,we have defined key strategies for reducing GHG emissions across our own operations and supply chain.Climate2040 GOALAchieve net zero GHG emissions across the value chain from a FY20 base year2030 GOALReduce absolute Scope 1,2 and 3 GHG emissions by 30%from a FY20 base year(SBTi-approved)2025 GOALPower our owned and operated offices,distribution centers and stores with 100%renewable electricityAchieving and maintaining our target of sourcing 100%renewable electricity for power used at our facilitiesIncreasing the share of low-carbon materials in our products(e.g.,recycled fiber or regenerative cotton farming practices)Expanding and accelerating decarbonization practices with our product manufacturing suppliers,including supplier GHG reduction roadmap development and coal phase outPrioritizing ocean freight and minimizing air freight to transport our productsInvesting in our efforts to advance a circular fashion industryWorking with partners and action networks for industry-wide changeKEY DECARBONIZATION STRATEGIESCollaboration across the industry which is crucial to making impactful progress is one of our strategies for reducing GHG emissions across our operations and supply chain.We participate in industry initiatives,including the United Nations Fashion Industry Charter for Climate Action,Apparel Impact Institutes Carbon Leadership Program,Cascale,Fashion Pact,Clean Energy Buyers Alliance and RE100,among others.Through these collaborations,we gather expert insights to help inform actions for decarbonization,such as our goal to transition to renewable energy across our entire supply chain and shifting toward a more circular economy.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|32CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur Science-Based TargetTo do our part in mitigating the effects of climate change,we have set an ambitious target to achieve net zero emissions across our value chain by 2040.This target has interim goals:1.To power our owned and operated offices,distribution centers and stores with 100%renewable electricity by the end of 2025 2.To reduce our absolute Scope 1,2 and 3 greenhouse gas(GHG)emissions by 30%by 2030 from a FY20 baseline yearOur 2030 goal has been validated by the Science Based Targets initiative(SBTi)and our net zero goal has been submitted for validation to SBTi.Climate RiskClimate-related risks pose challenges to our operations,our supply chain and how we manage the transition to a low-carbon economy.We address these risks with regular assessments and contingency planning.Our Board of Directors and CEO review climate-related risks and management strategies on at least an annual basis.We have established a Climate Risk Taskforce that meets semiannually to update our Climate Risk Report,identifying key physical and transitional climate risks,their likelihood of occurring,potential impact and actions being taken to manage each risk.This process includes assigning a risk rating to each potential threat based on its ability to inhibit our strategic or financial objectives under potential future climate scenarios.Among the top climate risks identified by the Taskforce were:Physical risk from wind and flood to our operations and key manufacturing suppliers.We are responding by deploying crisis management teams to impacted owned and operated facilities to address extreme weather events,as well as diversifying and balancing our sourcing countries and supply locations.Transitional risk from the cost and availability of cotton fiber and fabric.To address this risk,we are implementing a sourcing strategy focused on the use of sustainable materials,like organic and recycled cotton,and adopting energy-and water-efficient fabric production methods.Our work to build greater transparency and traceability in our supply chain is critical to identifying and managing climate risk from raw material availability.Mapping this system will enable a more accurate measurement of our carbon footprint and a better understanding of where our physical risks lie.For more information about how we assess and plan for climate risk,see our CDP 2024 Climate Change Disclosure and TCFD Index.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|33CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur ActionsEmissions ProgressWe reduced our absolute greenhouse gas emissions by 33%in FY24 from our FY20 baseline.This reduction was mainly driven by a reduction in units produced,as a result of our corporate strategy,as well as decarbonization efforts across our supply chain.1 Percentages may not add up to 100 due to rounding.2 Consumer Product Use includes emissions from product washing,drying,dry cleaning and/or ironing.3 Other Value Chain includes upstream energy production,waste generated in operations and licensed stores.1%Heating and Cooling2%Purchased Electricity12%Manufacturing&Processing(Tier 1)16%Manufacturing&Processing(Tier 2)31%Raw Materials6%Transportation&Distribution 16%Consumer Product Use22%Product End of Life3%Business Travel&Employee Commuting10%Non-Merchandise Spend1%Other Value Chain3FY24 GHG FOOTPRINT OVERVIEW:SCOPE 1,2 AND 31 MtCO2eScope 1:Heating&Cooling(1%)Scope 2:Purchased Electricity(2%)Scope 3:Value Chain(97%)33solute Emissions Reduction4 We measure and calculate our emissions according to the World Resources Institute Greenhouse Gas Protocol,the industry standard and international tool for carbon accounting.For a more detailed methodology,see our GC&S Supplement.CARBON FOOTPRINT(SCOPE 1,2 AND 3)(MtCO2e)4FY24FY23FY22FY21FY20(baseline)Total Emissions1,242,6731,317,3481,273,1221,237,0171,861,736Scope 1 Emissions 14,67912,20611,58214,66116,248Scope 2 Emissions22,36262,38169,29178,30590,380Scope 3 Emissions1,205,6321,242,7611,192,2491,144,0311,755,107GHG Intensity(MtCO2e/$million revenue)187.39204.44204.73281.09 302.24Operations EmissionsIn recent years,increased demand for renewable electricity and disruptions in the supply chain have led to sourcing challenges in the energy marketplace.As we continue to pursue projects that will help us meet our 2025 target and bring additional renewable electricity to the grid,we are also seeking novel contract arrangements.Renewable ElectricityIn FY24,we signed a 10-year Collective Virtual Power Purchase Agreement(VPPA)with 12 other Fashion Pact members.The project,located in Spain,is expected to begin operating in 2026 and will match approximately 90%of our power consumption in Europe with renewable electricity.We also sourced renewable energy attribute certificates in North America,EMEA and APAC equivalent to 64%of our global power consumption in FY24.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|34CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWLED LightingWe have finished our LED lighting retrofits at two of our North Carolina distribution centers,which have resulted in a total building electricity reduction of 20%in FY24,compared to FY23.Once fully programmed and integrated,these retrofits are anticipated to decrease the total electricity used in the facilities by 35%and help avoid 6,300 pounds of fluorescent light waste each year.These projects are part of a larger push to achieve LEED certification for our distribution centers in FY25.Supply Chain EmissionsA significant portion of our emissions comes from our supply chain,so we work with suppliers to set and implement goals and plans to reduce their carbon footprint.We recognize that achieving global net zero emissions is a shared responsibility.In addition to addressing the impact within our value chain,we actively participate in and contribute to industry-wide collective movements.For example,we are members of the Steering Committee of the Fashion Industry Charter for Climate Action under the UNFCCC and participate in their Low Carbon Manufacturing working group and Policy working group.We are also an Apparel Impact Institute(Aii)Roundtable member,actively contributing to driving supply chain decarbonization efforts within our industry in a standardized and scalable manner.The Carbon Leadership ProgramIn FY24,we continued our roll out of the Carbon Leadership Program(CLP)through our partnership with the Apparel Impact Institute(Aii).Through the Program,we provided funding for expert technical support for nominated manufacturing facilities to establish their 2030 carbon and water reduction plans in alignment with broader industry ambitions and best practices.We expanded our CLP roll out to cover 95 facilities,representing suppliers with approximately 48%of our core fabric business volume,including 28 finished goods facilities.The average carbon reduction targets committed to by all the nominated facilities so far is 63%by 2030 compared to a 2019 baseline.We continue to engage with facilities in the program quarterly to track and review the implementation progress through Aiis Carbon Target Monitoring(CTM)work.PURSUING LEED CERTIFICATION In May 2024,our two Distribution Centers in North Carolina were awarded LEED Silver certification,the first of our facilities to achieve LEED certification.LEED(Leadership in Energy and Environmental Design)is the internationally accepted benchmark for the design,construction and operation of high-performance green buildings and is a voluntary third-party rating system administered by the U.S.Green Building Council(USGBC).These certifications were achieved as part of our continuous improvement initiatives,which include employee engagement and training,LED lighting retrofits with integrated sensor controls and operating with the Zero Waste program.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|35CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWRenewable EnergyWe are making progress toward transitioning our supply chain towards clean and renewable electricity.Based on the latest verified Higg FEM data,8%of the electricity across Tier 1 and Tier 2 are from on-site and/or off-site renewable energy.We currently have 21 facilities in Bangladesh,Vietnam and Cambodia participating in on-site solar programs in partnership with Cascale and GIZ PDP.The program supports interested facilities in conducting pre-feasibility assessments,developing a business case for top management,and tendering and connecting suppliers to solar contractors and investors.Additionally,the program provides support throughout the implementation of on-site solar power.We also encourage capacity building on on-site/off-site renewable energy to our suppliers through Aii CLP.Coal Phase OutAs we continue expanding visibility into our upstream value chain through transparency and traceability work,we are committed to identifying and working with suppliers to phase out on-site coal consumption.Our goal is to phase out coal from our Tier 1 and Tier 2 manufacturing facilities by the end of 2025.We support our suppliers in this journey by enrolling them in programs to set GHG,energy and water reduction roadmaps.Globally,we have identified 74 active on-site coal-using facilities(Tier 1 and Tier 2),35 of which have successfully phased out coal to date,with the rest on track to meet the 2025 goal.In November 2022,we ceased onboarding any new facilities with on-site coal.For the existing facilities with on-site coal usage that were onboarded prior to November 2022,we require written coal phase out commitments and action plans from facilities and track their progress quarterly.Transportation and DistributionOur Scope 3 footprint includes emissions from product transport such as train,ocean,air and truck freight.To reduce costs and mitigate environmental impact,we prioritize efficiency when choosing how to transport products to our distribution centers.We only allow vendors to deliver products by air in rare circumstances,such as when production does not meet delivery deadlines.Our logistics provider selection process continues to include and consider candidates sustainability practices from the presence of existing company sustainability strategy to working with some parcel carriers to develop performance measurement and continuous improvement plans.In FY24,air freight managed directly by us was 5.8%compared to 7.6%in FY23.This decrease was due to ongoing improvements in our buying practices and inventory strategy as well as fewer production delays.AIR FREIGHT(%OF SHIPMENTS)FY216.7%FY245.8%FY237.6%FY2214.5 24 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|36CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur Approach We are committed to reducing water consumption across our value chain.We strive to conserve water throughout our operations,and support our suppliers to improve their water use efficiency and responsibly manage wastewater.We also engage in programs aimed at helping improve community access to this essential resource.Water Stewardship2025 GOALAchieve at least a 20%reduction in total water use across our operations and value chain,compared to a FY20 baselineWATER FOOTPRINTWe reduced our water use by 26%in FY24 from our FY20 baseline.This reduction was mainly driven by a reduction in units produced,as a result of our corporate strategy,as well as water stewardship efforts across our supply chain.FY24FY23FY22FY21FY20 Manufacturing&Processing10,663,521 m3(98%)10,836,188 m3(97%)11,087,765 m3(98%)9,661,765 m3(97%)14,573,646 m3(98%)Owned&Operated Facilities268,481 m3(2%)314,415 m3(3%)263,541 m3(2%)253,000 m3(3%)296,669 m3(2%)Total10,932,002 m311,150,603 m311,351,306 m39,914,765 m314,870,315 m3Our ActionsWater in Our Supply ChainOur industry depends on water for fiber crop irrigation,dyeing and washing in manufacturing and management of facilities.We continuously evaluate water use across our value chain,looking for ways to drive efficient water management and support our suppliers in setting and reaching water reduction goals.We work with a third-party expert to analyze water hotspots in our supply chain and identify priority areas for improving water use practices in manufacturing and production.Based on the findings from the analysis conducted in FY24,it was identified that water use in our mills and vertical suppliers with wet processing constitutes a significant portion of our water footprint.Additionally,we leverage the World Wildlife Fund(WWF)water risk filter to help us prioritize and engage in targeted supplier engagement in reducing our water impact.TOTAL WATER USE IN OUR OPERATIONS FY24Total Facility Water Use:268,481 m349%Retail32%Office19%Distribution Center26%Total Water Use Reduction 2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|37CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWWater EfficiencyOur Company is committed to achieving a minimum 20%reduction in total water consumption throughout our operations and value chain by the end of 2025.In parallel,we continued our direct collaboration with suppliers to improve water management through the adoption of more water-efficient processing for our materials and product manufacturing.Over the past year,we continued to work with our suppliers to shift from traditional finishing setups to more water-efficient techniques where available.As a result of these processing choices,in FY24 we estimate the avoided use of 200,000 m3 of water.We have been actively seeking innovations,ranging from chemical to machine,that impact various phases of our products manufacturing life cycle.Notably,as the dyeing and finishing of cotton products are water intensive processes,we engage in trials with both startups and established companies to explore innovative solutions aimed at reducing water consumption across the pretreatment,dyeing and rinsing stages of product manufacturing.These innovations have the potential to substantially impact water usage,energy consumption and carbon emissions in our supply chain.The Carbon Leadership ProgramWe continue to support our partners in setting facility-level water reduction targets through the Carbon Leadership Program,whereby nominated facilities set 2025 and 2030 water reduction targets,then create corresponding roadmaps to reach these goals.Based on the roadmaps developed and committed to by the nominated facilities,we estimate 22 million m3 of aggregate water consumption could be saved annually by 2030.Water efficiency projects have been identified as having the highest potential for reduction,followed by water recycling projects,which,on average,reduce freshwater usage by 16%and 13%,respectively.For example,specific actions such as using low liquor ratio baths for dyeing machines,reusing water in the dyeing system and retrofitting existing dyeing machines have been identified as the most effective water-saving measures.We also work closely with our suppliers to track progress and support capability building and collective action programs.Supporting Improved Water Access and ManagementAddressing water challenges across our value chain goes beyond water use in manufacturing,which is why our approach to water stewardship includes supporting organizations providing clean water for those in need and engaging in joint efforts to improve water management at scale.SUPPLY CHAIN WATER USE BY SOURCE54.8%Municipal28.7%Groundwater9.0%Produced/Processed Water6.0%Surface Water0.6%General or Unknown Origin0.1%Rainwater0.8%Wastewater from Another OrganizationSUPPLY CHAIN WATER USE BY FACILITY TYPE2,468,443 m3(23%)Tier 1 Factory3,603,605 m3(34%)Tier 1 Subcontractor4,591,472 m3(43%)Tier 2 Fabric Mill 2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|38CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWWorld Wildlife Fund PartnershipThrough our ongoing partnership with World Wildlife Fund(WWF),we have regularly conducted comprehensive water risk analyses,enabling us to identify water-stressed basins in our supply chain,prioritize action and provide funding to improve watershed health in those locations.In FY24,we began the third year of our current 3-year partnership,which included continued participation in WWFs Noyyal-Bhavani Collective Action Program.This program is focused on ensuring that,by 2030,the Noyyal and Bhavani sub-basins of the Cauvery River in Southern India are healthy ecosystems that ensure water security for people and nature.In addition to addressing regional textile industry impacts on freshwater,the program also focuses on improving farming water management practices,protecting freshwater biodiversity,clearing invasive species,improving groundwater supply and restoring vital habitats and wetlands.Over the past three years,a total of 50 clean-tech facility assessments have been completed through the program,enabling the identification of nearly 500 specific recommendations for water,energy and other operational improvements.Facilities that have adopted these recommendations have achieved a total water savings of more than 209,000 m3 per year.The Ralph Lauren Corporate Foundation has also made several commitments to improve access to clean water,as well as sanitation and hygiene around the world.More information on these Foundation and Company efforts can be found in the Community Engagement&Philanthropy section of this report.58,000 approximate number of people benefited by 58 total water pumps funded with GiveMeTap including 15 new pumps in FY24GIVEMETAP PARTNERSHIPSafe drinking water is the most primary of human needs,yet worldwide,one in three people do not have access to this vital resource.To help address this disparity,we partner with GiveMeTap,which works to provide clean,safe drinking water sources to rural communities in Africa,while also reducing single-use plastic waste.To date,our partnership has funded 58 water pumps in communities,primary schools and health centers including 15 new pumps in FY24.These water pumps directly benefit approximately 58,000 people in the Upper West Region of Ghana and alleviate the need for miles-long walks to the nearest water source,allowing children to stay in school and women to pursue work,while reducing the risk of life-threatening disease.This trip helped me understand how privileged we are to have water and safe shelter.I learned that will can make the impossible,possible.“NAOKO YOKOOAdministrative Assistant,Omotesando Operations”2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|39CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur Approach We are committed to conserving natural resources by managing waste responsibly.We work to minimize waste in our operations and divert waste from landfill and incineration through donation,reuse and recycling.Our goal is to continue incorporating zero-waste principles throughout our business practices.Our ActionsIn Our OperationsWe are proud to have diverted 94%of waste from landfill and incineration across our distribution centers,meeting the Zero Waste International Alliance definition of zero waste.1 Many efforts contributed to this milestone,including our FY24 initiative to replace fluorescent lights with longer-lasting LED lights at two of our North Carolina distribution centers,which will reduce the volume of fluorescent lights disposed of by 6,300 pounds annually.We expect to maintain at least a 90%diversion level and seek ongoing improvements in waste diversion and reduction at all facilities.Our Waste Working Group has established partnerships in several regions to support our waste diversion efforts.This includes piloting and partnering with new recycling vendors globally to identify higher value uses for our excess materials.We also prioritize disposition methods that extend the life of our products with donations and employee sales as a first option.We are continually working to identify actions we can take in our corporate offices that contribute to waste reduction and diversion.For example,we have an ongoing partnership with FABSCRAP to recycle and reuse sample fabric,leading to approximately 13,000 pounds of fabric diverted from landfill in FY24.We have also implemented composting at our corporate headquarters in New York City,which resulted in keeping over 20 tons of organic waste out of the landfill in FY24.PackagingIn FY24,we continued to make progress toward our sustainable packaging goal,including:Beginning a shift to 100%recycled plastic fasteners,which will continue in the coming yearsWaste Management2025 GOALAchieve 100%recyclable,reusable or sustainably sourced packaging materials by the end of 202594%Diversion rate of waste from landfill and incineration across our distribution centers1 Using the Zero Waste International Alliance definition of zero waste,we will divert more than 90%of the waste generated at our distribution centers from landfill and incineration.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|40CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWWASTE GENERATED AT OUR FACILITIESMETRIC TONSDIVERSION RATEDistribution Centers 6,94594%Stores2,48484%Offices61963%Total10,04889y%of our total packaging volume met at least one of our sustainable packaging criteria in FY24 compared to 73%in FY23EXCESS INVENTORY MANAGEMENT PRINCIPLES These principles guide our approach to limiting excess inventory and maximizing waste diversion across our value chain.Prevent Excess at SourcePursue Expanded Sales ChannelsMaximize Product or Materials Next LifeDonate for Positive ImpactRecycleDisposeLEAST PREFERREDMOST PREFERRED Transitioning to alternatives for much of our lock,seal and string volume that contain recycled materials and FSC-certified paper Making our adult clothing hangers from 80%or more recycled content We also continued piloting paper-based alternatives to polybags used in North American Polo Retail Outlets and e-commerce,and kicked off work to begin phasing out polyvinyl chloride(PVC)in our packaging.Of our total packaging volume,79%met at least one of our sustainable packaging criteria in FY24,compared to 73%in FY23.Managing Excess InventoryOur Excess Inventory Management Principles continue to guide our approach for limiting excess inventory and maximizing waste diversion.Through our Fabric First Initiative,we are focused on decreasing lead times in production,allowing us to keep our orders as close as possible to market demand.In FY24,this initiative helped increase flexibility in our supply chain,resulting in significant waste reduction.We also continued to prevent excess by decreasing the amount of product purchased specifically for sale at Polo Retail Outlets and increasing the amount of product originally offered through other channels(e.g.,wholesale)for sale at Polo Retail Outlets.In FY24,we tested our new predictive buying model,an AI-driven purchasing tool that allows for more accurate forecasting,in our European stores.Based on the success of this pilot,we plan to continue scaling its use to an expanded range of categories and markets over time,allowing us to forecast demand more accurately,so we can reduce overproduction and lessen excess inventory.We are committed to identifying and applying sustainable options for managing excess and damaged products.In the past year,we continued to increase diversion of excess inventory with new and expanded recycling and donation partnerships globally.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|41CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur Approach We monitor and reduce hazardous chemical use and discharge,as we are committed to using safer and more sustainable chemicals throughout our business to address their human and environmental impact.We view chemical management as a continuous and collaborative effort to ensure there is no intentional use and discharge of hazardous chemicals in our industrys collective supply chain.The chemistries and chemical applications in our industry continue to develop and evolve.In FY24,in keeping with the industry-wide developments,we enhanced our chemical management strategy,developed more targeted impact measurement and implemented broader integration into our business.Our Sustainable Chemical Management Policy outlines our approach to assessing the impacts of the chemicals in our supply chain and partnering with our manufacturers on responsible chemical management practices.Our ActionsZero Discharge of Hazardous Chemicals ProgrammeRalph Lauren is a signatory in the Zero Discharge of Hazardous Chemicals(ZDHC)Programme,a sector-wide coalition aimed at advancing the industry toward zero discharge of hazardous chemicals.Through this partnership,we collaborate with peers and experts to eliminate the use and discharge of these chemicals across our apparel supply chain.Since 2020,we have adopted the ZDHC Manufacturing Restricted Substances List(MRSL)and ZDHC-approved Chemical Inventory List Management Tools to enable our suppliers to track and report on all chemicals used in the creation of our products,and prioritize the substitution of harmful chemicals with safer,MRSL-conformant alternatives.The MRSL and the industrys collective work in sustainable chemicals management continues to evolve.New materials,safer and more sustainable alternatives,chemical testing,tools and technologies continue to develop over time.We are advancing toward the full elimination of hazardous chemicals in our global supply chain,and we are committed to continuing to do so as our industry evolves.In FY24,we continued expanding our visibility into chemical products used in our manufacturing supply chain,as well as their conformance status with the MRSL.We currently have visibility into chemical inventories of our Tier 1 manufacturing facilities representing 91%of our business volume,compared to 79%in FY23.Of the chemicals reported,84%conform with the Chemical ManagementCOMMITMENTWe are committed to using safer and more sustainable chemicals throughout our business to address their human and environmental impact184%Of chemicals reported in Tier 1 manufacturing facilities conform to the MRSL1 In FY24,we established a new commitment for chemical management to replace our previous goal(“Eliminate the use of hazardous chemicals in our supply chain by 2025”),to align with the industry-wide shifts towards a more holistic chemical management approach prioritizing safety,sustainability and continuous improvement.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|42CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWCHEMICAL INVENTORY VERIFICATION The quality of MRSL conformance data for chemical products used in our manufacturing supply chain depends on the accuracy and completeness of the chemical inventory uploaded by our suppliers.In FY24,we piloted ZDHCs chemical inventory verification methodology,including an additional step to verify the commodity chemical products used in our supply chain.Thirty-six finished goods facilities with wet processing were nominated to the pilot,and the result showed that 100%of them achieved an overall pass result,with an average of 96%of chemical products verified as compliant with the ZDHC standard.MRSL.In our Tier 2 supply chain,we have chemical visibility on 63%of our woven,knit and sweater core fabric business volume.Additionally,94%of the chemicals reported conform with the MRSL.We are working closely with suppliers to achieve full MRSL conformance by the end of 2025 and beyond.In addition to ensuring chemical transparency and MRSL conformance,we evaluated the operational aspects of chemical management at the facility level using the Chemical Management section in the Higg FEM.In FY24,our Tier 1,Tier 2 suppliers and subcontracted facilities achieved average scores of 26,28 and 28 points,respectively.To guide and align our efforts to eliminate the use and discharge of hazardous chemicals with the industrys standards and best practices,we implement the ZDHC MRSL Wastewater Guidelines which provide clear guidance in effluent testing methods,parameters,limits and reporting approach as a way to confirm that our manufacturing facility is not discharging hazardous chemicals to the environment.While the wastewater test is only a snapshot of the effluent quality of the facility,we require annual testing at a minimum,which allows us to follow up and address any nonconformance from its source through a root cause analysis approach that aligns with the ZDHC.This helps inform both the facility and Ralph Lauren on targeted chemicals phase out at the facility level.In FY24,86%of our Tier 1 facilities and 59%of our Tier 2 core fabric facilities by business volume,have performed the wastewater test in accordance with the Guidelines.Of all the facilities that performed the test,72%are in compliance with the ZDHC requirements,and out of the substances screened 99.7%comply with the ZDHC standard.Eliminating Priority ChemicalsWe currently ban the intentional use of the following:PFAS(per-and polyfluoroalkyl substances)in water repellent/resistant fabrics.PFAS have been incorporated into our product testing manual to ensure product compliance with our RSL standard.PVC(polyvinyl chloride)in all materials and prints.PVC has been incorporated into our product testing manual to ensure that our prints are not PVC-based.PP(potassium permanganate)in our denim washes.We are on track to phase out the use of PP spray in non-denim products as well.2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|43CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur ApproachAs ecosystems and species are increasingly threatened,we are committed to leveraging science and globally recognized frameworks to understand and address our key impacts on nature by:Identifying ways to avoid new negative impacts and reduce existing ones,where possible Developing strategies to restore and regenerate ecosystems in our value chain Identifying opportunities to engage in transformative,systems-level efforts to address causes of nature lossWe have begun work to establish a strategy and goals in alignment with Science Based Targets for Nature.Our approach will be integrated and built upon our existing initiatives in areas such as climate change and water stewardship.Biodiversity impacts all aspects of our value chain,so as we continue on our nature strategy development journey,we will seek to engage our supply chain partners in our goals and initiatives.Our ActionsIn FY24,we began leveraging the Science Based Targets(SBTs)for Nature methodology to shape our biodiversity goals and strategy.Through our engagement with Quantis,a leading environmental sustainability consultancy,we conducted a formal assessment of our nature-related impacts.Specifically,we completed Steps 1 and 2,which included conducting a fashion and retail sector materiality assessment,determining where we have the greatest impact within our value chain given our material use,and prioritizing the areas of highest nature impact.Following the SBTs for Nature methodology,our assessment took a location-specific and commodity-specific approach,examining the most pressing nature issues for us which include water quantity,water quality,soil pollution,land use change,land use and biodiversity as well as identifying key raw materials to prioritize,in particular cotton and cashmere.Looking ahead,we will leverage findings from Steps 1 and 2 to inform the development of a comprehensive nature strategy and goals that will cover impact areas such as water,land use and ecosystem engagement.Biodiversity2024 GOALDevelop a biodiversity strategy and set goals aligned with the Science Based Targets for Nature by 2024 2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|44CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWASSESSPRIORITIZESET TARGETSACTTRACK12345 Step 1a:Conduct a fashion and retail sector materiality assessment Step 1b:Understand impact location throughout Ralph Laurens value chain Identify Ralph Laurens influence on the value chain Prioritize areas of highest nature impact Model selection through stakeholder consultation Measure baseline values Set target Avoid Reduce Monitor Report Restore&Regenerate Transform VerifyOUR BIODIVERSITY JOURNEYUsing the SBTs for Nature methodology we are shaping our nature goals and strategy.Addressing DeforestationDeforestation and land conversion are key drivers of biodiversity and habitat loss.For a third year,we purchased Impact Partnership Incentives through the Textile Exchange Leather Impact Accelerator(LIA).Impact Partnership Incentives directly supports Produzindo Certo,an on-the-ground organization working with cattle farms in Brazil.It seeks to improve their practices to achieve animal welfare certification within three years and have their farms third-party verified as deforestation/conversion-free annually.In FY24,our support for LIA helped to empower eight cattle farms in Brazil to work towards achieving Textile Exchanges benchmarked standards for animal welfare and zero deforestation.Partnerships and EngagementOur business,industry and the communities we are a part of depend on healthy,well-functioning natural ecosystems.A key aspect of our sustainable materials and biodiversity strategy is to pioneer,foster and scale impact through industry partnerships and engagements.We continue to actively engage with The Fashion Pacts biodiversity pillar,which is focused on supporting members with developing biodiversity strategies aligned with SBTs for Nature,identifying pathways for reducing nature impacts of key materials and driving collective action at the landscape level.Shaping a business that is timeless means building relationships that stand the test of time and focusing on causes and actions that simultaneously benefit our communities,our teams and our Company.Thats why were committed to helping people thrive today and building a brighter future for tomorrow.Champion Better LivesEXPLORE THIS SECTION46 DIVERSITY,EQUITY&INCLUSION53 EMPLOYEE WELL-BEING56 COMMUNITY ENGAGEMENT&PHILANTHROPY69 RIGHTS&EMPOWERMENT IN THE SUPPLY CHAINCREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEW 45 2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|46CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur ApproachOur Purpose,to inspire the dream of a better life through authenticity and timeless style,drives us to create a culture of diversity,equity,inclusion and belonging inside our Company and throughout the communities we serve.Our Diversity,Equity&Inclusion(DE&I)strategy consists of three pillars talent,engagement and education and is designed to create a culture of belonging,attract and retain diverse talent and offer opportunities that enable all people to thrive.Diversity,Equity&InclusionONGOINGReach 87vorability on responses to“Ralph Lauren is committed to diversity and inclusion in the workplace”in the employee surveyReach 80vorability on responses to“my manager champions diversity and psychological safety”in the employee surveyEnsure at least one person of color(U.S.only)and one female candidate interviewed for 80%of VP-level and above open rolesEnsure at least one minority business enterprise or female supplier included in 50%of open requests for proposalRECOGNITION Global:ForbesWorlds Best Employers 2023Best Employers for Women 2023Best Employers for Diversity 2024North America:Parity.Org2023 Best Companies for Women to Advance 2023 Best Companies for People of Color to AdvanceNewsweek Americas Greatest Workplaces 2023Americas Greatest Workplaces for Women 2023Americas Greatest Workplaces for LGBTQ 2023Americas Greatest Workplaces for Diversity 2023&2024Australia:Great Place to WorkBest Workplaces for WomenKorea:Prime Ministers award for “Excellent Gender Equality and Inclusion Culture”2024 GLOBAL CITIZENSHIP&SUSTAINABILITY REPORT|47CREATE WITH INTENTPROTECT THE ENVIRONMENTCHAMPION BETTER LIVESGOVERNANCE2024 GC&S SUPPLEMENT INTRODUCTION&OVERVIEWOur ActionsEmployee ExperienceAnnually,we conduct an engagement and enablement survey to gain feedback from employees.In FY24,we established a new global goal related to the question we ask employees regarding whether people leaders“champion diversity and psychological safety,”and in FY24 we met our goal with responses 80vorable.To understand employee sentiment related to DE&I,we also ask employees to react to the statement“Ralph Lauren is committed to DE&I in the workplace.”In FY24,responses were 85vorable.TalentAt Ralph Lauren,we are dedicated to cultivating a culture where every team member feels like they belong.Our mission extends beyond assembling diverse teams,it involves embedding the principles of inclusion and belonging into the fabric of our organization,ensuring these values are a top priority enterprise-wide and ensuring there are opportunities for all talent to elevate into our leadership ranks.Early Career TalentTo enhance diverse representation within our early talent pool and ensure our early career talent reflects the communities we serve,we leverage two distinct talent pipelines undergraduate and MBA students.As we deepen our partnerships with professional organizations and educational institutions,we have incorporated baseline criteria to focus our engagement with partners that align with our Company values,beliefs and business objectives.Examples of this include:Partnerships with 12 historically Black colleges and universities(HBCUs),via our Company and the Foundation,including scholarships,mentorship and development opportunities.For more information on our HBCU scholarships,see the Community Engagement&Philanthropy section of this report.Launching our UK-based internship program with Rio Ferdinand Foundation in FY24,allowing four emerging leaders to participate in a year-long internship with Ralph Laurens teams.This supports our work together to create opportunities for young people to tackle inequality,achieve their personal potential and drive social change.Membership in the New York Jobs CEO Council,a coalition of employers focused on providing access to high-potential jobs for low-income New Yorkers,and those within Black,Hispanic/Latinx and Asian communities,including students from the City University of New York(CUNY)system.Through this coalition,we have deepened our relationship with CUNY schools and provided their students access to our early career opportunities.85%of employees believe Ralph Lauren is committed to DE&I in the workplaceSECOND CHANCE BUSINESS COALITIONIn FY24,Ralph Lauren joined the Second Chance Business Coalition(SCBC),a cross-sector coalition of large,private-sector firms committed to expanding second chance hiring
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2 0 2 3 S O C I A L A N D E N V I R O N M E N T A L R E S P O N S I B I L I T Y R E P O R TCommitted to positive impactCommitted to positive impactThe year in briefAt LVMH,we know that unfailing commitment and action from all of our people are vital in addressing the growing challenges in our society.In 2023,we continued our efforts to take responsibility in these areas,with the active involvement of our staff members and partners.Our aim is clear:to begin and accelerate the initiatives required to achieve our social targets by 2025 and our environmental targets by 2026 and 2030.2023 was a year of progress on all four key aspects of the LVMH Groups social action program.In terms of social responsibility,we pursued with determination the commit-ments set out in our Health and Safety Policy,and this clearly paid off with an 8%year-on-year reduction in our accident frequency rate.We also paid particular attention to our employees mental health and held an awareness-raising day dedicated to this topic.The LVMH Mtiers dExcellence continued to grow,with more than 8,000people joining them in 2023.Our LVMH Mtiers dExcellence also expanded in Italy,where our You and ME tour showcased them in events aimed at young people and career-changers.In the diversity and inclusion space,we worked hard on implementing our policy.In particular,female representation in our senior management contin-ued to increase:46%of key roles are now occupied by women.Major events such as Voices of Inclusion also highlighted our Maisons most successful and inspiring ini-tiatives in this area.More than 65,000LVMH staff mem-bers continued to help the most vulnerable members of our society by participating in initiatives in the fields of public health and education.As part of our ongoing col-laboration with LIVE an institute that helps people back into work after long-term unemployment we helped it open its fourth campus in Marseille last year.In environmental terms,we achieved the 2023 targets of our LIFE 360 program.Our efforts in this area included new circular services within our Maisons and the creation of LVMH Circularity,an ecosystem that brings together all of the Groups expertise in reusing materials.We also set up LVMH Gaa,an innovation and research program focus-ing on new materials,and we inaugurated LIFE Academy,our training resource centered on the environment.At the same time,we stepped up our regenerative agriculture program and contributed to the preservation of more than 3million hectares of fauna and flora habitats.As regards the climate,we have reduced CO2 emissions from energy consumption by 28%relative to a 2019 baseline,and our energy mix is now 63%renewable.The certification rates for our main supply chains have increased significantly over the past two years,giving us reasonable assurance that we will hit our full traceability target by 2026.LVMH is raising the bar further,particularly in terms of water stewardship:all Maisons have adopted plans to achieve a 30%reduc-tion in water take by 2030.We are aware of our responsibilities across the whole value chain,and in 2023 we continued to roll out our Convergence program to manage CSR risks in our supply chains.We also launched LIFE360 Business Partners:this program allows us to go further with our environmental efforts,working more closely with our suppliers to reduce their impact.As regards ethics,we strengthened our funda-mentals in 2023 by updating the LVMH Code of Conduct.Through our philanthropy activities,we aim to enable as many people as possible to enjoy their cultural heritage,as well as supporting creative talent.The international suc-cess of the LVMH Prize for Young Fashion Designers and the large number of people visiting the Fondation LouisVuitton are prime examples of how we encourage creativity and make the results of that creativity accessible to the general public.LVMH will play a major role in the Paris2024 Olympic and Paralympic Games as creative partner,sharing the excel-lence and craftsmanship of its artisans for key celebratory moments that will be seen around the world,as well as helping to make the Games a socially and environmentally responsible event.LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t0104 Commitments and actions12 Chairmans message14 LVMH Group businesses and key figures134 Our ESG Performance38 Our social commitment78 Our environmental commitment120 Our commitment tothe arts andcultureLVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t02 03Living up to its sense of commitment,LVMH implements wide-ranging social,environmental andcultural initiatives every year in a bid to make alasting difference.The Group works with a large number of stakeholders that address major social causes.We are shining a spotlight on six initiatives that stood out in 2023 on account of their scale and their positive impact on society,the environment and culture.Commitments andactionsLVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t04 05COMMITMENTS AND ACTIONSThe LVMH Heart Fund,a crucial source of support forallGroup employeesThe global fund provides emergency financial aid and social and psychological support toGroup employees facing serious difficulties in their personal lives.With this anonymous and confidential support that costs them nothing,LVMH demonstrates its commitment to stand alongside its employees,a critical aspect of its responsibility as an employer.The LVMH Heart Fund celebrated its second anniversary in 2023.Voices of Inclusion:celebrating theMaisons commitmentDuring the second edition of LVMHs Voices of Inclusion Week,the Group reaffirmed its unwavering commitment to championing diversity and inclusion andhighlighted the most impactful initiatives by its Maisons and its employees around the world.LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r tCOMMITMENTS AND ACTIONSSkta turns to regenerative agricultureWith the active support of Stella McCartney and the backing of other Maisons,the Group hascollaborated with Skta,a family business located near Izmir in Turkey,as part of aresearch project piloting regenerative cotton.The venture is supported by LVMH and theUnited Nations Economic Commission for Europe(UNECE).To date,regenerative agriculture practices have been introduced on 92hectares,and the current target is to increase this to 250hectares by year-end2024.The ultimate goal is a large-scale transition bysupporting all 5,500farmers in the valley to make the switch.LIFE360 Summit:new milestone inLVMHs commitment to theenvironmentIn December2023,the Group presented the initial results of its LIFE360 program(LVMH Initiatives for the Environment)at an event held at UNESCO headquarters,which was attended by Christophe Bchu(French Minister for Ecological Transition and Territorial Cohesion)and Virginijus Sinkeviius(EU Commissioner for the Environment,Oceans and Fisheries).LIFE360 Business Partners,the new action program that aims to reduce the environmental footprint of the Groups suppliers and partners,was unveiled at the same time.LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t08 09COMMITMENTS AND ACTIONSYoung designers in the spotlightAs the LVMH Prize celebrated its tenth anniversary,the Group confirmed its support foryoung designers.The 2023 LVMH Prize was an unprecedented success,attracting over 2,400 applicants,and it offered increased mentoring opportunities as well as larger grants to each winner.The new Savoir-Faire Prize,in addition to the LVMH Prize and theKarl Lagerfeld Prize,reflects the Groups commitment to exceptional craftsmanship.Keeping an Impressionist masterpiecein FranceThanks solely to LVMHs financial support,Gustave Caillebottes painting Partie de bateau(1877-1878),officially designated as a national treasure in France,is now part of the MusedOrsays collection.This masterpiece will go on public display in several major cities inFrance in 2024 as part of events to celebrate the Impressionist movements 150thanniversary.LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t10 11Bernard Arnault,Chairman and Chief Executive OfficerCommitment in actionYear after year,the strength and power of our model have shone through in our performance.And despite an increasingly turbulence-ridden envi-ronment,we kept this going in 2023.LVMH owes this sparkling success to the creativity of our Maisons and their unrivaled savoir-faire.Its the product of our employees tireless efforts,coupled with a profound sense of responsibility.As an industry leader,we feel duty-bound to direct all our energy towards acting for the common good.Our mission is“The Art of Crafting Dreams”,a goal everyone at LVMH is so proud to pursue.We naturally see it as having ethical,social,environmental and cultural dimensions.We play our part in building a more sustainable world by constantly refining our products to stand the test of time and to minimize their footprint on the environment,while creating value in all our activities.Our employees guardians of responsible creativity and excellence are the ones who really make this happen.Every year we create jobs that energize regions and local areas from big cities to small vil-lages and help to keep this expertise alive for future generations.We make sure we look after the well-being of all our employees,fulfill their potential and development,by offering them opportunities to advance within our Group,and forge an inclusive culture for one and all that will keep us moving for-ward.Our ability to inspire change extends even beyond our Group and across a vast ecosystem.For instance,we support workforce integration initia-tives,such as the new LIVE LInstitut desVocations pour lEmploi campus in Marseille.Alongside our charity partners,we also lend a helping hand to those living at the margins of society.Putting commitment into action also encompasses the far-reaching changes more ambitious by the year and resolutely focused on the long term we are making as part of the environmental transition.That was the whole rationale behind the LIFE360 Summit we held at UNESCO headquarters in December2023.In the three years since the LIFE360 program was launched,we have established a trajectory of progress that is arcing towards our 2030 goals,with our aim being to rethink how we work.Our hope is that the announcement of the LIFE360 Business Partners program,which aims to support our suppliers and partners,and the joint environmental initiatives we are implementing with our competitors will spark positive change for our entire ecosystem.And lastly,how can we omit to mention the Groups and the Maisons cultural commitments,which have always helped to enrich and reinvent our shared her-itage?Visitors from every continent marveled at the Basquiat,Warhol and Rothko works on show at the Fondation LouisVuitton in 2023.In a few months time,the world will witness the rebirth of Notre-Dame Cathedral in Paris.Young designers remain a priority,and we strengthened the LVMH Prize upon its tenth anniversary by creating the Savoir-Faire Prize.Our attention is now shifting to the upcoming Paris2024 Olympic and Paralympic Games,which will turn the eyes of the world towards the historic birth-place of many of our Maisons and the excellence of their savoir-faire.The goal is for this historic event to be a source of inspiration and joy for all.With this in mind,LVMH has joined forces with Secours populaire franais to enable 1,000underprivileged children and young people aged 4 to 25to get involved in sport.Building a fairer and more inclusive society,attempt-ing to usher in a future in which desirability and sustainability are interwoven,keeping our cultural heritage alive and resolutely encouraging artists cre-ativity Thats how the LVMH Group wants to leave its mark on the world,turning its commitment into action for the common good.LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t12 13LVMH Group businesses and key figuresWines&SpiritsMot&Chandon,Dom Prignon,Krug,Veuve Clicquot,Ruinart,Hennessy,Chteau dYquem,Domaine des Lambrays The origins of all these world-famous estates are inextricably linked to the appellations and terroirs of the worlds most pres-tigious wines and spirits.Whether they are in Champagne,Bordeaux,orother famed wine regions,these Maisons,many of which date backmore than a century,all share apowerful culture of excellence.Fashion&Leather GoodsThe Fashion&Leather Goods business group comprises Louis Vuitton,Christian Dior Couture,Celine,Loewe,Kenzo,Givenchy,Fendi,Emilio Pucci,Marc Jacobs,Berluti,Loro Piana,RIMOWA,Patou,etc.While respecting the iden-tity and autonomous management of these brands,LVMH supports their growth by provid-ing them with shared resources.Perfumes&CosmeticsLVMH is a key player in the perfume,makeup and skincare sector,with a portfolio of world-famous French brands:Parfums Christian Dior,Guerlain,Parfums Givenchy and Kenzo Parfums.The Group also owns other beauty brands:Benefit,Fresh,Acqua di Parma,Perfumes Loewe,MakeUp For Ever,Maison Francis Kurkdjian,Fenty Beauty by Rihanna,KVD Vegan Beauty,Officine Universelle BulyWatches&JewelryThe LVMH Watches&Jewelry Maisons are some of the most emblematic brands in the industry.They operate in jewelry and watches with Tiffany,the prestigious American jewelry house acquired in 2021,as well as Bulgari,Chaumet,Fred,TAG Heuer,Hublot,Zenith and Repossi.These Maisons are guided by a daily quest forexcellence,creativity and innovation.Selective RetailingThe Selective Retailing business group com-prises Sephora,the worlds leading selective beauty retailer;LeBon March,a Paris depart-ment store with a unique atmosphere;and travel retailer DFS,which caters specifically tointerna-tional travelers.Other activitiesOther activities notably include Groupe LesEchos,which comprises leading French business and cultur al news publications;Royal Van Lent,the build-er of high-end yachts marketed under the brand name Feadship;Cheval Blanc and Belmond,which are developing acollection of exceptional hotels.81countries190 nationalities6,097stores118production sites in France75Maisons28%reduction in GHG emissions generated by energy consumption(2019 baseline)86.2billionRevenue 13%(1)vs.202222.8billionProfit from recurring operations 8%vs.202215.2billionNet profit,Group share 8%vs.2022GEOGRAPHIC FOOTPRINT(as of December31,2023)Other marketsRevenue:10,523million 706 stores 20,778 employeesUnited StatesRevenue:21,764million 1,128 stores 43,649 employeesFranceRevenue:6,830million 550 stores 39,351 employeesJapanRevenue:6,134million 497 stores 10,496 employeesAsia(excl.Japan)Revenue:26,577million 2,003 stores 52,185 employeesEurope(excl.France)Revenue:14,145million 1,213 stores 46,809 employees2023 REVENUE BY REGION(%)2023 REVENUE BY BUSINESS GROUP(%)12%Other markets31%Asia(excl.Japan)7%Japan8%France17%Europe(excl.France)25%United States21%Selective Retailing and Other activities13%Watches&Jewelry9%Perfumes&Cosmetics8%Wines&Spirits49shion&Leather Goods(1)Organic growth with respect to 2022.LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t14 15A pioneering commitment:key dates2001LVMH publishes the luxury industrys first-ever environmental report2002LVMH Maisons use the Bilan Carbone method to measure their CO2 emissions2003LVMH joins the United NationsGlobal Compact2005LVMH signs the ApprenticeshipCharter2006LVMH signs the Business Charter for Equal Opportunity in Education2007LVMH signs theDiversityCharter2008LVMH drafts a Supplier Code ofConduct to strengthen itscommitments2009LVMH publishes theLVMH Code of Conduct andthe Recruitment Code of ConductLVMH signs the Charter fortheEmployment ofPeoplewith Disabilities2012LVMH signs up to theFrenchNational StrategyforBiodiversityThe Group launches LIFE(LVMH Initiatives For theEnvironment)to boost itsenvironmental policy2013LVMH signs the United NationsWomens EmpowermentPrinciples2015The United Nations adopts theSustainable Development Goals(SDGs)LVMH sets up an internal carbon fund to finance projects that combat climate change:apioneering initiative in the luxury industry2017LVMH creates the Ethics&Compliance DepartmentLVMH draws up the Charter on Working Relations with Fashion Models and their Well-Being,together with Kering and other industry professionalsLVMH revises the LVMH Code of Conduct and the Supplier Code of Conduct to strengthen the commitments of all employees and suppliers1992LVMH creates its Environment Department after the RiodeJaneiro Earth Summit1998Hennessy becomes thefirstwine and spirits producer intheworld toobtainISO14001 environmental certification2018At the Davos World Economic Forum,LVMH participates intheGender Parity Task ForceLVMH launches the LVMH AlertLine2019LVMH signs the United Nations Standards of Conduct for business tackling discrimination against LGBTI peopleLVMH unveils its Animal-Based Raw Materials Sourcing CharterLVMH becomes a partner ofUNESCOs“Man and the Biosphere”(MAB)biodiversity protection program2020LVMH joins the International Labor Organization(ILO)Global Business and Disability Network and signs its charterLVMH creates the Future of Luxury Commission and calculates the environmental footprint of its entire value chain,including Scopes1,2,and3 impacts on climate change,biodiversity,and water resources2021LVMH Alert Line becomesaccessible to allexternal stakeholdersLVMH unveils its LIFE360 environmental strategy,whichsets out ambitious targets for 2023,2026 and 2030The LVMH Groups 75Maisons sign the“WE for ME”pact tosafeguard and promote itsMtiers dExcellenceLVMH signs the Health andSafety Policy,which covers the Groups employees,serviceproviders and customersLVMH creates the LVMH Heart Fund,a global emergency andsupport fund for all ofitsemployees2022LVMH revises the Supplier Codeof ConductLVMH launches its global Diversity&Inclusion roadmap,which has three key aspects:talent,partners and imageIn September2022,LVMH adopts an energy sobriety plan aiming to cut electricity consumption at its sites,workshops and stores by 10%within one yearLVMH creates an ESG Committee as part of the Groups strategic governance arrangements2023LVMH organizes the LIFE360 Summit during which it unveils its new LIFE360 Business Partners action program chiefly aimed at its suppliersLVMH takes part in the official test of the Science-Based Targets for Nature initiative launched in 2023,with projects in China,Mongolia and France,and is appointed leader of the“Textiles and ready-to-wear”subgroupLVMH announces an ambitious water efficiency plan targeting a30%reduction in the Groups water take by 2030LVMH supports the Working withCancer initiative,the first international coalition of companies championing amoresupportive and inclusivecorporate culture foremployees with cancerLVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t16 17Effective corporate governanceThe rights of LVMH shareholders are protected by law and the principles of corporate governance which govern the way the Group operates.OBJECTIVES SET IN LINE WITH THE SOCIAL,ENVIRONMENTAL AND ETHICAL ISSUES FACING THE GROUPS BUSINESSLVMHs Board of Directors is the strategic body of theCompany that is primarily responsible for driving long-term value creation and protecting its corporate interests,focusing in particular on the social,environ-mental and ethical issues facing its business.ROLE OF THE BOARD OF DIRECTORS IN THE COMPANYS STRATEGYThe Board of Directors principal assignments are to approve the Companys and the Groups broad stra-tegic direction particularly with regard to social,environmental and ethical matters and supervise its implementation,as well as verifying the fair and accu-rate presentation of information about the Company and the Group.In addition,it is tasked with protect-ing the Groups corporate assets and ensuring that core business risks are accounted for in its manage-ment.The Board also ensures that procedures to prevent corruption and influence-peddling risks are implemented by the Group and its main partners,and monitors the impact of the Groups non-discrimina-tion and diversity policy,notably with regard to gen-der equality within the governing bodies.Lastly,it acts as guarantor of the rights of all of its sharehold-ers and ensures that they fulfill all of their duties.A charter hasbeen adopted by the Board of Directors which outlines rules governing its membership,duties,procedures,and responsibilities.COMMITTEES OF THE BOARD OF DIRECTORSThe Board of Directors has set up three commit-tees,each specializing in a matter of importance:a committee in charge of performance audit,a com-mittee in charge of governance and compensation,and a committee in charge of ethics and sustainable development.These committees consist of at least three members,appointed by the Board of Directors.The Chairman of each committee is appointed by the Board of Directors and selected from among its members.Meetings or joint working sessions may be organized between the Boards var-ious committees on cross-cutting topics,parti cularly with regard to social and environmental responsibil-ity and climate issues.100%Attendance rate at the Board of DirectorsBoard of DirectorsBernard ArnaultChairman and Chief Executive OfficerAntonio Belloni(1)Group Managing DirectorAntoine Arnault(2)Delphine ArnaultDominique AumontDirector representing the employeesNicolas Bazire(3)MarieVronique BelloeilMelkinDirector representing the employeesSophie Chassat(4)Charles de Croisset(3)(4)Lead DirectorClara Gaymard(4)MarieJose Kravis(4)Laurent Mignon(4)MarieLaure Sauty de Chalon(4)YvesThibault de Silguy(3)(4)Natacha Valla(4)Hubert Vdrine(4)ADVISORY BOARD MEMBERSYann ArthusBertrandDiego Della ValleLord Powell of BayswaterGENERAL SECRETARYMarcAntoine JametAppointments proposed at the Shareholders Meeting of April18,2024BOARD OF DIRECTORSHenri de Castries(4)Alexandre ArnaultFrdric ArnaultPERFORMANCE AUDIT COMMITTEE(5)Clara Gaymard(4)ChairmanCharles de Croisset(3)(4)MarieLaure Sauty de Chalon(4)YvesThibault de Silguy(3)(4)GOVERNANCE AND COMPENSATION COMMITTEE(5)Natacha Valla(4)ChairmanSophie Chassat(4)Charles de Croisset(3)(4)MarieJose Kravis(4)ETHICS&SUSTAINABLE DEVELOPMENT COMMITTEE(5)YvesThibault de Silguy(3)(4)ChairmanDelphine ArnaultMarieLaure Sauty de Chalon(4)Hubert Vdrine(4)STATUTORY AUDITORSDeloitte&Associsrepresentedby Guillaume Troussicotand Bndicte SabadieMazarsrepresentedby Isabelle Sapetand Simon BeillevaireAppointment proposed at the Shareholders Meeting of April18,2024STATUTORY AUDITOR IN CHARGE OF CERTIFYING SUSTAINABILITY INFORMATIONDeloitte&Associsrepresentedby Guillaume Troussicotand Olivier Jan(1)Antonio Belloni will carry out these terms of office and functions until April18,2024.(2)Reappointment proposed at the Shareholders Meeting of April18,2024.(3)Until the close of the Shareholders Meeting of April18,2024.(4)Independent Director.(5)Proposed changes to this committee to be made by decision of the Board of Directors following the Shareholders Meeting of April18,2024.LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t18 19A STRUCTURED ETHICS AND COMPLIANCE FRAMEWORKGovernance firmly embedded at the highest echelonsThe Privacy,Ethics&Compliance Department,which works hand-in-hand with a network of corre-spondents at the Maisons,acts as the guardian for LVMHs policy and guidelines.The Department coor-dinates all LVMHs efforts to fight corruption andmoney laundering,to protect personal data,to comply with international sanctions and to uphold humanrights.The progress made by the Group in these areas is presented to the Ethics&Sustainable Development Committee of LVMHs Board of Directors.A program built on international standards andan internal frameworkIn addition to international standards,which LVMH promotes within its sphere of influence,the Group has put in place its owninternalrules to guide the conduct of its employees and partners on a daily basis.The LVMH Code of Conduct,which serves as the cornerstone for the Groups ethics,lays down rulesby which everyone must abide in their day-to-day activities.The latest version of the Code published in early 2024 reflects the Groups strength-ened commitments to ethics and to social and envi-ronmental responsibility and is divided into threechapters:“A committed Group”;“A responsible employer”;“A Group with integrity”.The Executive Committee members signed up to the new Code of Conduct,whose commitments are promoted by Maisons Presidents.The Code is widely circulated throughout the Group,including to new employees,and is accompanied by an online training module.In addition,the Supplier and Business Partner Code of Conduct promotes a responsible approach to all LVMHs partners.It requires a commitment from the Groups partners to comply with its principles and to take steps to ensure their own suppliers are in compliance.The Anti-Corruption Charter published in early 2024 reiterates LVMHs zero-tolerance policy on corruption and influence peddling.It seeks to give every employee ownership of this policy and sets out key conduct guidelines for them to apply in var-ious situations.Every action taken by the Group and its employees reflects LVMHs commitment to ethics and to social and environmental responsibility.Inkeeping with the highest standards,the Group has established rules ofconduct and action principles to guide its employees behavior andallitsstakeholders on a daily basis.Robust ethical principles guiding employees in their daily activities561whistleblowing reports received in 2023 viatheLVMH Alert Line,63%related tohuman resources140Ethics&Compliance correspondents and compliance officers within the Maisons1,725suppliers audited based on ethical criteria in2023Continuous improvement at the center of LVMHs approachPreventing risks Employees and partners are made aware of the Groups ethics policy by means of the Code of Conduct and the Supplier and Business Partner Code of Conduct Training and awareness raising are organized for employees and suppliersIdentifying risks Risk maps are drawn up,including with respect to the fight against corruption and respect for human rightsCorrecting compliance failures Remedial measures and action plans are put in place to continuously improve the program Disciplinary measures may be taken,up to and including termination,against employees who do not comply with the Groups internal rulesDetecting compliance failures Regular controls are carried out to measure the effectiveness of the actions taken Whistleblowing system for ethical breaches set up at the Maisons and at Group level(LVMH Alert Line)To find out more,please refer to the“Ethics and responsibility”section of theUniversal Registration DocumentLVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t20 21GROUP-WIDE OVERSIGHT BODIESThe Boards Ethics&Sustainability Committee defines the key tenets of LVMHs social and environ-mental responsibility policy.In 2022,LVMH ensured all its Departments fully embraced these concerns by setting up an ESG Committee made up of repre-sentatives from the Operating Departments.It sup-ports and coordinates the implementation of LVMHs strategic social and environmental targets,interna-tional reporting andGroup-level communication on performance.When needed,it can call on two net-works of correspondents specialized in social and environmental issues.SOCIAL AND ENVIRONMENTAL RESPONSIBILITY:TAILORED OPERATIONAL ARRANGEMENTSThe social and environmental responsibility initiatives are designed and implemented at Group level under the aegis of specialized Departments relayed by equiv-alent units within the Maisons.The aim is to leverage the expertise available in our Departments,while giv-ing the Maisons the freedom they need to adapt the Groups commitments to fit their own challenges.LVMHs Social Responsibility Department reports to Chantal Gaemperle,Group Executive Vice President,Human Resources&Synergies and a member of the Executive Committee.The approach consists of general initiatives and commitments,along with pol-icies deployed by the Maisons.It also relies on a set of partnerships and projects for which the impetus comes from the Group level.Within each Maison and each region,asocial responsibility correspondent ensures that the Maisons initiatives are in line with the Group approach and the Maisons policy.LVMHs approach to environmental responsibility is guided by the Environmental Development Department,which reports directly to Antoine Arnault,Image&Environment Officer and a member of LVMHs Board of Directors.Alongside the Maisons,the Department deploys the LIFE360 program and its four action plans(Creative Circularity,Traceability and Transparency,Biodiversity and Climate).It devel-ops appropriate indicators and ensures that the rele-vant information is submitted.It also helps the Maisons to reduce their impacts,guard against risks and seize opportunities.It manages a network of almost 200Environment correspondents and actively raises awareness among employees about environmental issues relating to LVMHs business activities.Lastly,the Environmental Strategy Department takes part in major international summits.COMPENSATION POLICY LINKED TO OUR ENVIRONMENTAL ANDSOCIALPERFORMANCEWith each passing year,LVMH places greater empha-sis on environmental and social targets within employee compensation arrangements,including packages for senior executives and managers.For example,at its meeting on January26,2023,LVMHs Board of Directors took these targets into account when agreeing the terms of an award of annual varia-ble compensation to the Chairman and Chief Executive Officer and to the Group Managing Director for fiscal year2023 in line with the recom-mendations made by the Governance and Compensation Committee.Achievement of the qualitative targets influences 40%of compensation packages,and 25%of the criteria applied in this pro-cess are linked to the Groups ESG performance.These criteria include implementation of the LIFE360 commitments and increased awareness of ethical and compliance issues among employees.In addition,the Groups and its Maisons variable compensation policies set multiple sustainability-related performance targets.For example,in 2023,a target for reducing the energy consumption of build-ings was taken into account in calculating incentive payments to employees of the LVMH holding company.All LeBon Marchs performance-related pay calculations for teams and now its new employee incentive agreement feature an environmental tar-get.Certain Maisons such as Hennessy,Krug,Mot&Chandon,Ruinart and Veuve Clicquot also link pay to social criteria.The Group possesses domain-specific skills andDepartments with specialist expertise to devise tailored strategies,a set of principles and methodologies,and actionplans.Each Maison adapts these to its ownculture,issues and context,whilerespecting LVMHs ethical principles.EachMaisons actions arefed back and collated in acomprehensive reporting document for thepurposes of steering,monitoring and reporting on the Groups progress.In2022,LVMH strengthened this governance framework with the addition ofan ESG Committee.Governance of social andenvironmental responsibility MAIN AREAS OF FOCUS IN 2023Working with the Maisons todetermine operational arrangements for implementing theGroups social and environmental action plansAnalyzing the social and environmental risks to which theGroup isexposedMaking preparations to ensure thatthe Groups CSR reporting complies with the CSRD(CorporateSustainability ReportingDirective)ESG CommitteeCoordinated by the General Administration&Legal Affairs Department7meetings in 2023ResponsibilitiesSupporting and coordinating the implementation of LVMHs strategic environmental,social and governance targets,organizing international reporting andcommunications concerning performance at Group levelPURCHASINGEXTERNAL RELATIONSOPERATIONSINTERNAL CONTROLAUDITPRIVACY,ETHICS&COMPLIANCEENVIRONMENTAL DEVELOPMENTDIVERSITY&INCLUSIONSOCIAL RESPONSIBILITYCOMMUNICATIONFINANCIAL COMMUNICATIONSPUBLIC AFFAIRSCONTROL,REPORTING AND CONSOLIDATIONOrganization and remit of the ESG CommitteeLVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t22 23INDICATORSOur ESG performanceThe Groups performance should notbe measured solely on the basis of its financial results.The ESG indicators reflect the progress wehave made and our determination tobuild a sustainable business modeltogether with our employees and allour other stakeholders.Social indicatorsOWN WORKFORCE46%of key positions held by women1.6%of the workforce have disabilities82%of recruiters underwent non-discrimination training between 2021 and 2023Breakdown by age:under 25:11%-29:180-34:205-39:16-44:12E-49:8P-54:6U-59:5 and over:3%of employees covered by a formal health and safety program within their Maison42%of employees trained in risk prevention and in first aid100%of employees covered by the LVMH Heart Fund3.77 Workplace accident frequency rate0.13 Workplace accident severity rate1,025 meetings with employee representatives in France8,000 hires worldwide in the Mtiers dExcellence2,700 apprentices trained by the Institut desMtiers dExcellence LVMH in 7 countries since its inception in 20141.9 days training per employee on averageWORKERS IN THE VALUE CHAIN1,725 audits at our suppliers and subcontractors(excluding EcoVadis)out of a panel of 2,062 suppliers andsubcontractorsAFFECTED COMMUNITIES88%of employees given the opportunity of taking part in a public-interest initiativeOver 950 social partnerships with nonprofits and foundationsOver 65,000 employees involved in a partnership working for the common goodOver 1million people supported during the yearGovernance indicatorsBUSINESSCONDUCTEnvironmental indicatorsCLIMATE CHANGECarbon trajectory validated by the SBTi28%reduction in GHG emissions generated by energy consumption(2019 baseline)29.9%reduction in GHG emissions linked toScope3 per unit of added value(relativeto2019)63%of the Groups consumption covered by renewable energy79%of stores fitted with LED lightingPOLLUTIONMember of the Zero Discharge of Hazardous Chemicals (ZDHC)initiative2,209 metric tons p.a.of chemical oxygen demand(COD)after processingWATER AND MARINE RESOURCES4,676,915 m3 Water take for process requirementsBIODIVERSITY AND ECOSYSTEMSActive member of the TNFD forum (Taskforce on Nature-related Financial Disclosures)3.1million hectares conserved or rehabilitatedCertification percentage of strategic supply chains:75%for cotton96%for leather96%for LVMH vineyardsRESOURCES USE AND CIRCULAR ECONOMY280,000 meters of fabric upcycled43%of recycled raw materials in glass and plastic packaging7,942 metric tons of virgin-fossil-based plastic used in customer packaging61%of new products sustainably designed(300 products)Over 30,000 products covered by an information system Ethical principles fleshed out and circulatedmore widely:update to the LVMH Code of Conduct and theSupplier and Commercial Partner Code of Conduct Program expanded:publication oftheAnti-Corruption Charter and the ResponsibleLobbying Charter561 concerns raised via the LVMH Alert LineLVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t24 25LVMHs contribution to the SDGsThe Group supports the 17 Sustainable Development Goals(SDGs)adopted by the United Nations in 2015.TheSDGs represent a global call to action over the period to 2030 toreduce inequality,make the world abetter place for future generations and ensure thatall human beings can live in peace and prosperity.The table shows how the Groups social and environ-mental responsibility strategy has contributed tothe 17 SDGs and more specifically the SDG targets on which LVMH intends to focus its commitment,as well as the actions taken to help achieve the objectives set by the SDG targets.In addition,LVMHs business model intrinsically contributes towards SDGs8,9 and 10(targets8.2,8.3,8.9,9.2 and 10.2)by virtue of its economic footprint and its commitments as a responsible employer.Lastly,the Groups ethics pro-gram spearheaded by its Code of Conduct and its Supplier and Commercial Partner Code of Conduct contributes to SDG8(target8.7).SUSTAINABLE DEVELOPMENT GOALS TOWHICH WE CONTRIBUTETARGETSRESPECTING EVERYONES INDIVIDUALITY ANDDIGNITYSDG no.5:5.1,5.5SDG no.8:8.5,8.8SDG no.10:10.2,10.3TAKING ACTION TO ENSURE THE WELL-BEING OFOUR EMPLOYEESSDG no.3:3.4,3.5,3.8SDG no.8:8.2,8.8PASSING ON THE SAVOIR-FAIRE REQUIRED TOACHIEVE EXCELLENCESDG no.4:4.3,4.4,4.5SDG no.8:8.5SDG no.9:9.2,9.3,9.4SDG no.10:10.4SDG no.11:11.4SDG no.17:17.17MAKING COMMITMENTS FOR A BETTER SOCIETYSDG no.3:3.bSDG no.4:4.3,4.4,4.5,4.6SDG no.5:5.5SDG no.8:8.3,8.6SDG no.10:10.2SDG no.11:11.4SDG no.17:17.16,17.17FOSTERING CREATIVE CIRCULARITYSDG no.9:9.4SDG no.12:12.2,12.5,12.8SDG no.17:17.16,17.17CONSERVING BIODIVERSITYSDG no.3:3.9SDG no.13:13.2SDG no.14:14.1SDG no.15:15.1,15.2,15.3,15.5,15.6,15.7SDG no.17:17.16,17.17ACTING FOR THE CLIMATESDG no.6:6.3,6.4SDG no.7:7.2,7.3SDG no.9:9.4SDG no.12:12.2,12.5,12.8SDG no.13:13.2SDG no.14:14.1SDG no.17:17.16,17.17GUARANTEEING TRACEABILITY ANDTRANSPARENCYSDG no.3:3.9SDG no.12:12.8SDG no.13:13.2SDG no.15:15.1,15.2,15.3,15.5,15.6,15.7SDG no.17:17.16,17.17OUR MAJOR CONTRIBUTIONS SINCE 2019REFERENCE PAGES EllesVMH(Groups gender equality initiative)Disability Inclusion Office Commitment to education and equal opportunities Diversity&Inclusion policy Fighting discriminationPage46Page46Page70Pages44 and49Page44 Health and safety approach Quality of life at work program Responsible consumption of wines and spirits Fair Wage principles LVMH Heart Fund(emergency financial and social and psychological support program benefiting Groupemployees)La Maison des StartupsPage53Page54Page54Pages30 and63Page54Page69 LVMH Mtiers dExcellence Fair Wage principlesPage62Pages30 and63 Support for medical research,including research into sickle cell anemia Nonprofit partnerships working for equal opportunities in education and employment LIVE LInstitut des Vocations pour lEmploi Accompagner la ralisation des projets dtudes de jeunes lves et tudiants handicaps(Arpejeh)La Maison des Startups Financial support for the arts and culture Fondation Louis VuittonPage71Page70Pages76 and77Page46Page69Pages120 to133Pages128 and129 LVMH Circularity(ecosystem housing the repurposing and reuse expertise of the Group and its partners)Repair and care task force Partnership with Fairly Made Product and packaging eco-design BiomaterialsPage87Page87Pages88 and112Page88Page89 Established systems and methods for biodiversity footprint analysis(Trase,Global Forest Watch,BiodiversityIntegrity Index,Dryad system)Water conservation plan Regenerative agriculture projects Partnerships with UNESCOs“Man and the Biosphere”(MAB)program and the Foundation for Amazon Sustainability(FAS)Active member of the TNFD forum Animal-Based Raw Materials Sourcing CharterPages95 and97Page95Page96Pages95,96,98 and 99 Page97Page97 Carbon trajectory validated by the SBTi LIFE360 Business Partners(action program that aims to reduce suppliers environmental impact)Adaptation plans Energy efficiency plan for stores and partnerships with mall operators Responsible consumption and generation of decarbonized energyPage103Pages33 and105Page103Page104Page104 Strategic supply chain traceability and certification Consortium partners:Traceability Alliance for Sustainable Cosmetics(TRASCE),EcoBeautyScore Collaboration with Aura Blockchain Consortium Involvement in environmental labeling policy development initiatives Application of Zero Discharge of Hazardous Chemicals(ZDHC)standardsPage111Pages111,112 and117Pages111 and112Page112Page113LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t26 27LIFE CYCLE OF Aleather goods productWorking in tandem with its stakeholders,LVMH upholds its commitment to sustainable luxury from the very first sketch through tothe end of the products life.Eachand every stage in the life of ourproducts reflects our commitment to act responsibly vis-vis theenvironment and society.DesignSourcingManufacturing and assemblyOur products marry timelessaesthetic appeal withthe principles of sustainable design.We support suppliers withtheprocess of adopting bestpractices and obtainingcertification fortheirsocialand environmentalimprovements.In our workshops,we make sure we look after the health,safety and well-being of our employees and we keep our environmental footprint as small as possible.OUR INITIATIVES Teams trained in eco-design Premium-quality,long-lasting products created Certified,recycled andregenerative materialsdeveloped More sustainable materialscreated throughinnovation Groundbreaking ecosystemsupported(LaMaison des Startups,etc.)Partnership formed withacademic and researchinstitutions todiscover the sustainable materials of the futureOUR INITIATIVES Certification of the supplychain based on the most robust standards(chainofcustody)LVMH Alert Line (for raising concerns)Contribution to local economies:our Maisons footprint in the regions Purchases diversified toinclude service providersbased in underprivilegedcommunities Deployment of the LIFE360 Business Partners program toassist suppliers in theprocess of reducing their environmental footprint Collaboration with shelteredemployment sectoroperators Animal-based RawMaterials SourcingCharterOUR INITIATIVES Passing on and keeping alivethe highest caliber ofcraftsmanship andsavoir-faire Embracing a zero-accident culture for health,safetyandwell-being intheworkplace Strictly controlling use ofhazardous chemicals inprocessing(compliance with REACH regulations)Lowering energy and waterconsumption at sites and using renewables Cutting down on waste andencouraging recycling Creating and protecting jobs in the regionsOUR GROUP-WIDE INITIATIVESPrinciples of our Fair Wage policyTransport andlogisticsSales and customerexperienceRepair and maintenanceRecycling andrecoveryWe make adjustments to oursupply chains to optimize flows and encourage use of thecleanest forms of transport.We offer an unrivaled customer experience and help nudge our customers towards more sustainable and more engaged luxury.We offer repair and maintenance services to extend the life of each andevery item we sell.The goal is toreduce the need to replace them and alleviate the pressure on resources.Recycling and recovery are the starting point for something completely new,giving products a new lease of life.OUR INITIATIVES Minimizing the carbon footprintthrough use oflower-emission modes of transport(train,boat)andoptimizing supply chains(streamlining of storage hubs)Cutting energy consumption atlogistics sites and switching over to renewable energiesOUR INITIATIVES Continuous transparency improvements for customers byreleasing social and environmentalinformation aboutproducts Inclusive messaging in advertisingcampaigns and events Reduction in the environmentalfootprint ofmarketingevents andadvertisingcampaigns Lower energy consumption atlogistics sites and stores anduseofrenewable energies Reduction in waste Charter for the well-being offashionmodels Marketing of charity collectionsbenefiting partnerorganizationsOUR INITIATIVES Repair and maintenance servicesdeveloped in stores andworkshops Product life extended byselecting longer-lasting materials Repair expertise andsavoir-fairedevelopedOUR INITIATIVES Development of innovative processes for recovering materials led by LVMH Circularity Unrecoverable materials given away or recycled Recovery and upcycling expertise and savoir-faire developedDiversity&Inclusion policyCarbon trajectoryEthical and compliance commitmentsLVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t28 29A PURCHASING POLICY THAT LIVES UP TOOUR COMMITMENTSOversight of the purchasing policyThe Group Purchasing Department and the Maisons purchasing teams have ultimate responsibility for quality,cost management and sourcing lead times.Their responsibility also extends to compliance by all the Groups value chains with the Supplier and Commercial Partner Code of Conduct.This Code lays down the ethical and social and environmental responsibility requirements that LVMH sets for itspartners,its suppliers and their subcontractors.Oneof the tasks of the Responsible Purchasing Committee,which is made up of Maisons purchasing managers and key strategic supply chain managers,is to monitor compliance with the Groups environmen-tal and human rights commitments.Identifying risks and moving forward togetherFor some considerable time,LVMH has implemented an integrated supplier evaluation and support pro-gram fostering the common pursuit of excellence.Given the diversity of its activities and its global foot-print,the Group adapts its approach to the individual situations it encounters.Its vigilance framework is based on the maps carried out by the Maisons and a global map.The risks analyzed reflect its commit-ments to human rights,environmental protection and the fight against corruption.The ultimate goal is to identify priority action areas and support suppliers with the process of making continuous improvements to their practices.LVMH has also made training for employees and its suppliers the linchpinofitsrespon-sible purchasing program.The programsenvironmen-tal aspects were expanded in December2023,with the announcement of the LIFE360 Business Partners plan.In addition,the Group also actively participates in sector initiatives for high-risk supply chains,such as the Colored Gemstones Working Group,the Diamond Source Warranty Protocol,and the Action for Sustainable Derivatives.GEOGRAPHICAL BREAKDOWN OFOURSUPPLIERS(1)EUROPENORTH AMERICAASIAOthersBreakdown of suppliers based on purchasing volume(%)6418171Breakdown by number of suppliers7810102Breakdown of audits(%)663302Partnering with our suppliers to elevate corporate responsibility standardsThe premium quality of the raw materials it sources is one of the keys underpinning the desirability of LVMHs products and its responsibility framework.Since Scope3 emissions account for 96%of the Groups carbon footprint,thePurchasing Department and the Environmental Development Department are looking to build new,more sustainable supply chains.Specific actions are undertaken aspart of the social program.The Group endeavors to ensure its suppliers andtheir service providers uphold human rights and to support them with applying the best possible employment,health and safety conditions.(1)The data reported in this table are from 2021.A new suppliermapping assessment based on 2023 data is currentlyunderway.A purchasing process based on three complementary stages Risk mapping before any mitigationsOnline assessmentOn-site audits100%TIER1TIER1,TIERS2 AND ABOVETIER1,TIERS2 AND ABOVE2,062 suppliers assessed1,725 suppliers auditedTier1:suppliers in a direct relationship with the Group.Tiers2 and above:suppliers in an indirect relationship with the Group.Allegro is a platform that catalogs all the audits carried out on the suppliers sites.AllegroWith its Convergence program,LVMH aims to maintain tight control over its non-financial risks linked to its suppliers.It is based on a global map prepared in conjunction with Verisk Maplecroft.Suppliers are rated according to how critical they are.Those classi-fied in the high-risk category on account of being mission-critical are assessed using the EcoVadis platform.The program also includes on-site audits.Under this extensive analytical process with its three complemen-tary stages,action plans are implemented with remedial measures when compliance breaches are identified.The goal is to support suppliers so they can make progress by adopting an approach aligned with their specific operational requirements.To guarantee a harmonized approach Group-wide,the Maisons apply standardized audit frameworks.Certain Maisons also solicit anonymous or confidential feedback on working conditions from their suppliers employees so they can detect any breaches of employees fundamental rights.To find out more,please refer to the“Management report”section of theUniversal Registration DocumentLVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t30 31Sample of 1,725suppliers,subcontractors and service providers.For 77%of these suppliers,the 2023 evaluation was a reassessment:69%of these improved on their score from the previous year.AUDITS AT OUR SUPPLIERS AND SUBCONTRACTORS(EXCLUDING ECOVADIS)SUPPLIERS SUBJECT TO AN ECOVADIS EVALUATION1,512Over 1,450202120211,625Over 1,700202220222,021Over 2,06020232023654remedial action plans implemented toaddress unacceptable audit results57points.Average score of suppliers assessed by EcoVadis(compared to 46points onaverage for EcoVadis overall),1.5points higher than in 2022 and 3points above the2021 level2023 PERFORMANCE AND HIGHLIGHTSContinue training our employees in responsible purchasingThe Group has introduced training in responsible pur-chasing designed in conjunction with DesEnjeux et desHommes.The rationale for this is to fully involve everyone directly monitoring the strategic supply chains in achieving LVMHs ethical,social and envi-ronmental targets.Since 2022,nine in-person train-ing sessions have been held in Europe,North America and Asia.Guiding strategic suppliers in their drive toupskillLVMH has introduced a special training framework for its strategic suppliers.In 2023,training sessions focused on the specific needs of certain countries were held again for the fifth year in a row in China and for the third time in Italy.The Maisons also arrange modules specially geared to the operational challenges they encounter with their supply chains.Tiffany&Co.,for example,ran training sessions dur-ing fall2023 in Jaipur and Surat for its diamond and gemstone suppliers in India.Joining in industry efforts to guarantee a living wage under the UTTHAN programSince 2018 LVMH has taken part in UTTHAN,an initi-ative led by major industry buyers in the embroidery sector.The aim is to increase recognition of high-end embroidery skills in Mumbai,where a large number of the Maisons partner embroiderers live and work.Alongside on-site training sessions for embroiderers,the program launched a survey of 3,000karigars(as embroidery workers are known in India)in 2023 and a protocol guaranteeing each of them a living wage and access to healthcare. 24%vs.2022 33%vs.2021 18%vs.2022 38%vs.2021Elevating practices throughout our ecosystemThe Group reaches out to all its suppliers with a view to fostering more andmore responsible practices across the value chain.Employees and partners are the central focus for various LVMH initiatives that aim to provide solutions tailored to the specific challenges arising in supply chains.LIFE 360 Business Partners96%of the Groups GHG emissions are in Scope3Over 50%of Scope3 emissions are linked to raw material purchases(products and packaging)9%of Scope3 emissions originate from inbound andoutbound transport for components andfinished goods“In 2023,LVMH launched the LIFE360 Business Partners program with one simple goal.And thats to involve our suppliers and our partners more closely in achieving LIFE360s ambitious environmental commitments.Its a top priority because Scope3 accounts for 96%of our carbon footprint.Since it all depends on our upstream and downstream value chains,its much harder to control,and so acting alone is not an option.LIFE360 Business Partners will enable the Group and its suppliers to adopt a more sophisticated approach to sustainability.Program initiatives will be formulated and assembled gradually,in tandem with the Environmental Development Department.They will call on operational support from the various areas of expertise within the Group,transcending any organizational boundaries.We will provide valuable assistance to our suppliers in key areas such as raw materials and transport,helping them to minimize their impact on the environment,including water and biodiversity.Sustainability Business Partner Days are organized as part of the initiative to kickstart conversations between the Group and its suppliers.The aim is to identify together operational improvements in order to cut their environmental footprint and to standardize industry practices and the audit framework.”Mohamed Marfouk,LVMHs Operations DirectorLVMH recognizes the complexity of the environmental challenges and is committed to significantly lowering its Scope3 emissions.Itfundamentally believes closer cooperation with its ecosystem is critical for it to achieve its goals.The Group unveiled the LIFE360 Business Partners initiative during the LIFE360 Summit in December2023.This program aims to support suppliers and partners in various aspects of their policies and environmental programs,especially with reducing their carbon emissions and also their impact on water and biodiversity.LIFE360 Business Partners builds on supplier transition plans already introduced by certain Maisons,and itsgoal is to get the entire Group moving as part of a joint action program,which will be adapted to the needs of LVMHs partners.From 2024,suppliers will be able to state their transition-related requirements during Sustainability Business Partners Days.Workinggroups will also focus on creating a dialog between peers.Lastly,theGroup also plans to make its environmental knowledge andtraining programs and its regulatory monitoring insights available tosuppliers.Ultimately,it plans to foster the sharing of solutions andexpertise via a dedicated platform.LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t32 33ADVANCING TOGETHER WITH OURSTAKEHOLDERSLVMH is mobilizing and working alongside internal and external stakeholders,its employees chief among them.The Group nurtures and cultivates a genuine spirit of partnership at every point in its value chain.In deploying its action plans,making pro-gress and achieving its strategic targets,it consults,supports and is supported by its stakeholders.The Group studies their opinions and feedback to fine-tune the way it implements its environmental and social responsibility initiatives.Guided by its commitments,LVMH seeks to create a virtuous circle involving joint progress and mutual benefit from each participants achievements,in all the territories in which it operates.This is why the Group promotes high standards of ethics and compli-ance in order to maintain the trust between itself and its stakeholders,including its customers,suppli-ers,institutions,local government bodies and inter-national organizations.INSPIRING COLLECTIVE CHANGELVMH takes part year-round in multilateral discus-sions and initiatives ledby central and local govern-ment bodies and other institutions,as well as by large numbers of labs,universities,schools,foundations and service providers.Together,they prepare initia-tives and action plans to achieve shared objectives.In 2023,LVMH took part in several major interna-tional events such as COP28,the Future Fabrics Expo event in London and the 42ndUNESCO General Conference.The Group also brought together over 500of its senior executives,its lead-ing partners and industry peers to discuss its envi-ronmental commitments at the December2023 LIFE360 Summit.During the event,it unveiled its LIFE360 Business Partners action program,which aims to support its suppliers with reducing their envi-ronmental footprint.Involving our stakeholders inourefforts to address issuesCollective effortandcommitment are a vital ingredient in the process of reimagining the design,production,use and reuse of LVMHs products inorder to achieve positive social and environmental impacts and to reduce theGroups negative impacts.LVMH and its Maisons are proactively creatingthe luxury of the future by working in synergy with their ecosystem and by interacting and cooperating with their stakeholders.Over 500participants at the December2023 LIFE360SummitOver 65,000employees involved in a partnership working for the common goodA collective commitmentWorkforce-related prioritiesMAINTAINING HEALTH ANDSAFETY STANDARDS INOUR OPERATIONS Local communities Industry and certification bodies Federations and professional associationsPASSING ON SAVOIR-FAIRE ANDCORE SKILLS Customers Partners for innovation Schools and universities Federations and professional associations Local communitiesPURSUING A POLICY OF ADVANCING SOCIAL CAUSES Customers Nonprofits,foundations andNGOs Schools and universitiesOn each of our social and environmental issues Employees Suppliers Service providers Media Luxury market participantsEnvironmental issuesCLIMATE CHANGE-RELATED RISKS Customers Local communities Investors and shareholders International institutions,states and regional authoritiesIMPACT ON BIODIVERSITY AND ECOSYSTEMS Customers Local communities Nonprofits,foundations and NGOs Schools and universities Investors and shareholders International institutions,states and regional authoritiesIMPACT ON RESOURCES (AVAILABILITY,POLLUTION)Customers Local communities Investors and shareholders International institutions,states and regional authoritiesLVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t34 35MISSION FOR THE PARIS 2024 OLYMPIC ANDPARALYMPIC GAMES:UNITE CREATIVE AND SPORTING EXCELLENCELVMH agreed to become a Premium Partner of the Paris 2024 Olympic and Paralympic Games in July2023.It made perfect sense for the Group to join forces with this spectacular event,which will bring France and Paris,the historic birthplace of many of its Maisons,to global prom-inence.Elite athletes and the Groups top craftspeople share a number of values passion,a quest for excellence and a desire to surpass their limits.As artisans of success,LVMH and its Maisons will deploy their savoir-faire and audacious creativity for the benefit of the events and the thrills and emotions they elicit.This commitment reso-nates with LVMHs mission:“The Art of Crafting Dreams”,making for a perfect fit with the Paris 2024 Games.PREPARATIONS ON THE FIELD AND IN OUR WORKSHOPSBerluti will dress the French Olympic and Paralympic Team for the opening ceremonies of the Paris 2024 Games in a contemporary uniform that represents French elegance at its finest.Chaumets talented crafts-people worked on the design for the Olympic and Paralympic medals.Athletes who win gold,silver and bronze medals will take a little piece of France home as the medals have a piece of the Eiffel Tower embedded in them.Sephora will be a Torch Relay partner for the Paris 2024 Olympic and Paralympic Games.Mot Hennessy will provide its exceptional products as part of hospitality programs for the events.Louis Vuitton and Dior are set to unveil the various aspects of their support to the Paris 2024 Olympic and Paralympic Games at a later date.BRINGING ATHLETES INTO THE LVMH FAMILY UNDER THE ARTISANS OFALL VICTORIES PROGRAMLVMH is providing direct support for certain standout athletes in the run-up to the Games.Alongside its Maisons,the Group has welcomed 7athletes as ambas-sadors under the Artisans of All Victories program.Lon Marchand,5-time world champion and record-holder in the 400-meter individual medley,Enzo Lefort,gold medalist in mens team foil fencing in Tokyo in 2021 and individual world champion in 2019 and 2022,Antoine Dupont,member of the French Rugby Sevens Team,voted the worlds best player in 2021 and winner of the Grand Slam in 2022 with the French Rugby Team,and Timothe Adolphe,a silver medalist in the 100-meter sprint at the 2021 Tokyo Paralympic Games,will repre-sent Louis Vuitton.Gymnast Mlanie de Jesus dosSantos,a 4-time European champion,Pauline Droulde,a triple French wheelchair tennis champion,and Marie Patouillet,the 2022 world paralympic cham-pion,will represent Christian Dior.LVMHs creative partnership with theParis 2024 Olympic and Paralympic Games1.The Maisons artisans preparefor Paris 20242.Lon Marchand,fivetime world champion and recordholder in the 400meter individual medley3.Pauline Droulde,triple French wheelchair tennis champion in 2021,2022 and 2023,currently 13th inthe world rankings4.Medals designed by Chaumet7athletes supported by LVMH and its MaisonsA DREAM MOMENT WITH A UNIVERSALLY POSITIVE IMPACTAs its partnership with the Paris 2024 Games gains traction,LVMH has decided to scale up its social com-mitment to sports.To kick off this initiative,LVMH is joining forces with Secours populaire franais,a long-standing charity partner,to support a grassroots pro-gram enabling 1,000underprivileged children and young people aged 4 to 25to get involved in sport.LVMH has also decided to support the“Go for 30”challenge,which aims to champion sports activities in businesses and to encourage employees to do physical activity on a regular basis.Various initiatives and events have been organized within the Group and its Maisons,and a large number of employees have taken part.Lastly,LVMH intends to make art accessible to as many people as possible and will use all its creative savoir-faire to celebrate sport in an unprecedented cultural exhibition.Unique works of art,historic items and breathtaking artistic performances will be showcased by several of LVMHs Maisons and by the Fondation Louis Vuitton as part of the Cultural Olympiad.2143LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t36 37“The real business success stories involve companies thatstand the test of time and help build a sustainable society.At LVMH and our Maisons,this is a long-standing conviction,one that we pursue every day through our commitments and initiatives in the field ofsocial responsibility.”Bernard Arnault,Chairman and Chief Executive OfficerOur social commitmentPART138 39LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t2025 CSR ROADMAP.4201.Cultivating our individuality.4402.Taking action to ensure asafe and healthy workingenvironment.5203.Passing on the expertise required toachieveexcellence.6004.Contributing to a better society.68Chantal GaemperleGroup Executive Vice President Human Resources and Synergies46%of the Groups key positions are occupied bywomenOver 65,000employees participate in public-interest partnershipsThe success of our Group is built on our Maisons,and their unique savoir-faire,aswell as our people.More than 210,000employees around the world strive each and every day to craft and create products of the highest quality and to delight our customers with a memorable experience.Mirroring how we manage our Maisons,our Human Resources strategy takes along-term view and puts people at the heart of everything we do.We have implemented,and indeed expand every year,a series of global initiatives to pursue our goal.Our key action points helping our employees to grow and develop,nurturing a culture of inclusiveness and making commitments to society often break new ground and always stay true to who we are,as we single-mindedly focus on the needs of our talented cast of people,and on hiring,developing and retaining them.They are our most precious asset,and our goal is to harness their full potential.All these initiatives speak to our role as a catalyst within our ecosystem and,more broadly,across all the regions and countries where we operate.To cite just a few of these initiatives,the LVMH Mtiers dExcellence,which aimstopreserve the unique expertise that is crucial to the success of the luxury industry andour Maisons,encompasses more than 280Mtiers dExcellence indesign,craftsmanship and customer experience.In 2017,the Mtiers dExcellence held their first work-study training fair in Clichy-sous-Bois,and thisevent has since morphed into the You&ME tour of France and Italy.Over 10,000visitors,middle and secondary school students,as well as people interested in career change opportunities,attended these events in 2023,seizing the chance tomeet with ourcraftspeople,designers and sales associates.TheEllesVMH program,launched in2007,a long time in advance of any statutory obligation,was designed to safeguard gender equity and pioneering womens careers within our Group.Severalthousand female employees have already joined up and ournew EllesVMH Collective program will provide mentoring opportunities for as many ofthem aspossible.The Disability Inclusion Offices efforts helped increase by over 25%the number of employees with disabilities who joined our teams this year.The Group supported the Pride Parades in several cities around the world Paris,NewYork,Wilton Manors,LosAngeles and Tokyo so our employees were ableto march together under the LVMH banner.The LVMH Heart Fund,which provides psychological,social and financial support to help employees to deal withsudden emergency situations,along with the Groups commitment to theWorking with Cancer initiative,highlight our determination to support our people for the most difficult periods of their personal lives.We are a group that creates jobs and that uses its influence to contribute to amore caring society.The LIVE LInstitut des Vocations pour lEmploi campuses lead our efforts to help to find a path back into employment for people who have long struggled to find work.More than a thousand people have already benefited from the program since its launch in September2019,with more than 80%successfully getting back into work.With the Dner des Maisons engages,wehave supported the Robert-Debr hospital in Paris in its fight against sickle cell anemia for over ten years now.Also in 2023,as in previous years,we joined forces with partners to help to tackle major social issues.Over 65,000employees have supported 1million people through social responsibility partnerships around the world.As the Groups Executive Vice President for Human Resources andSynergies,I am proud of what they are doing.It encapsulates our culture and our collective determination to be a committed and engaged group.“Our key action points helping our employees togrow and develop,nurturing a culture of inclusiveness and making commitments to society often break new ground and always stay true towhowe are.”40 41LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r tOUR SOCIAL COMMITMENTKEY ASPECTS OFTHESTRATEGY2025 TARGETSIndividuality and non-discrimination50%of key positions held by women2%of the workforce have disabilities100%of recruiters having undertaken non-discrimination training30%of leadership roles in the United States occupied by black,indigenous and people of color(BIPOC)(1)Health,safety andwell-being100%of the Health&Safety Policys five commitments achieved:1.Identify health and safety risks2.Establish a health and safety action plan3.Manage the health and safety approach4.Ensure all employees have an active role in health and safety5.Maintain a virtuous culture for a safe environmentExcellence through savoir-faireOver 10,000visitors at the You&ME career orientation and job fairs held in 8cities in France and Italy(2)Over 1,700middle school students informed in France,Italy and the United States(2)Over 750new apprentices in 2024 at the Institut des Mtiers dExcellence(IME)in 7countries(2)Engagement100%of employees having the opportunity to take part in a public-interest initiativeACTION PLAN2025 CSR ROADMAPfor a better societyThe Group is developing an action plan for thebenefit of its employees and society as a whole,consisting of four key aspects andquantitative targets.(1)2026 target.(2)2024 targets.2023 RESULTSCHANGE 2022 2023MAJOR LVMH PROGRAMS46%1.6(% 1pt 14% 11% 4pt EllesVMH Inclusion Index LVMH Disability Inclusion“Recruiting without discriminating”training86%of employees are covered by a formal health andsafety approach within their Maison96%of employees work in a Maison that periodically reviews its health and safety approach92%of employees work in a Maison wheretheManagement Committee analyzeshealth andsafety annually42%of employees have been made aware in risk prevention and first aid100%of Maisons celebrate health,safety and well-being at work once per year 6% 8% 6% 27%=Health and safety approach Staying on the safe side series LVMH Code of Conduct LVMH Heart Fund Fair Wage principles Charter on Working Relations with Fashion Models and their Well-Being8,000 people recruited in LVMHs Mtiers dExcellence3,080middle school students informed of the Mtiers dExcellence through the“Excellent!”program,which has been rolled out in 4 countries since 20212,700apprentices trained by the Institut des Mtiers dExcellence(IME)in 7 countries since its launch in 2014 WE for ME LVMH Mtiers dExcellence DARE INSIDE LVMH88%of employees have the chance to get involved in a community-oriented initiativeOver 950social partnerships formed by the Maisons withnonprofits and foundations acting inthepublic interest Dner des Maisons engages Integration and education partnerships LIVE LInstitut des Vocations pour lEmploi42 43LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t01Cultivating our individualityAn inclusive culture:a key driver of our performancePRIORITIESWith a workforce featuring more than 190nationalities and spanning 4 generations,LVMH is diverse by its nature and inclusive by choice.It is vital that all of the Groups stakeholders staff members,partners and customers feel welcomed,respected and repre-sented.This commitment is embodied by our Diversity&Inclusion policy,which features clear objectives relating to all our stakeholders,talent and suppliers,and to everything connected with the image of the Group and its Maisons.Encouraging diversity of talent at all levelsLVMH is developing inclusive practices in all aspects of its staff members working lives,such as recruit-ment,career management and pay.As well as forming part of LVMHs responsibilities,these practices help to drive long-term performance.The Group has set ambitious targets in terms of representation,including having 50%of key roles occupied by women,2%of its workforce consisting of people with disabilities by 2025,and having 30%of key roles in United States occupied by black,indigenous and people of color(BIPOC)by 2026.The Group and its Maisons have carried out numerous initiatives to reach these tar-gets,including career development opportunities for women such as EllesVMH Mentoring&Coaching,and initiatives to support the emergence of local leaders such as Mot Hennessys Asian Leadership Advancement Program.The Groups clear fundamen-tals and effective tools also help it deliver on its com-mitments.The LVMH Code of Conduct condemns all forms of discrimination,and the Alert Line allows inter-nal and external stakeholders to report any breaches of the Code.These tools are supplemented by robust training programs and regular audits.Since 2011,the Group has introduced mandatory training for recrui-ters on preventing discrimination,and that initiative INITIATIVESIn 2023,LVMH unveiled its vision of a culture that intentionally is inclusive and diverse at its core,with a series of videos entitled“Its everyones business”.This exclusive series contains portraits of several staff members whose careers are as diverse as they are inspiring.It highlights the way inwhich their identity and individuality guide their professional development.The Group encourages the development of staff networks,which are constantly growing around the world.EllesVMH has expanded into Spain,Portugal,Italy,Switzerland and China and iscontinuing to help women develop their careers.The All LVMH Pride network,which combats discrimination against LGBTI people,is now present in Australia,France and New Zealand.LVMH Employees of African Descent(LEAD)promotes BIPOC inclusion:it is continuing to grow inUnited States and is establishing its network in the United Kingdom.In 2023,the Groups second international Voices of Inclusion weektook place.Its aim is to amplify thevoices of LVMHs talented people andshowcase the collective efforts of the Group and its Maisons to foster an increasingly inclusive culture.In particular,the Group and its Maisons highlighted initiatives taken throughout 2023 to promote diversity and inclusion,and the best initiatives were acknowledged in theInclusion Index Awards ceremony.82%of recruitment staff received non-discrimination training between 2021 and 2023has been bolstered by digital resources in all regions and Maisons.Recruitment practices are periodically checked by an independent organization to ensure that they are compliant and do not feature any discri-minatory biases.Ensuring that staff members buy into ourinclusion commitmentsLVMH is continuing to increase its commitment to a culture of inclusion,and to that end introduced a digital training course on the theme of“Managing prejudices and fostering inclusivity at LVMH”in late 2022.All Group staff members can take the course.It aims to raise awareness and provide information among people at all levels of the hierarchy,from production and sales teams to executive managers,regarding unconscious bias.The Group and its Maisons are also developing a training program dealing with subjects such as inclusi-vity in stores and inclusive management.44 45LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r tOUR SOCIAL COMMITMENTCultivating diversity through our commitmentsPRIORITIESThe Diversity&Inclusion policy is led by the Executive Committee at the global level,and involves quantita-tive targets.We have a number of initiatives to achieve those targets,and we offer an increasing number of opportunities to all talented people.Increasing the proportion of leadership roles occupied by womenAt LVMH,where 71%of staff members are women,the professional development of female employees is a key priority.With the EllesVMH program,the Group is maintaining its commitment to having half of all strate-gic roles occupied by women by 2025:46%of the Groups key roles were occupied by women in 2023.The program also promotes equal pay and the passing on of skills,through the collective power of the EllesVMH networks around the world.EllesVMH includes numerous training opportunities and tools to support and accelerate the career development of women at all levels of the Group.In 2023,EllesVMH was bolstered by the launch of its global in-house digi-tal platform EllesVMH.com,which features a num-ber of resources:interviews with female leaders who discuss their career paths and give advice,freely accessible SHERO Academy training sessions and online chat rooms for each EllesVMH network.Recruiting and developing people withdisabilitiesLVMH has been committed to integrating people with disabilities into the workforce for around fifteen years.The Group is a member of the International Labor Organizations Global Business and Disability Network and has signed its Charter.After focusing on France,the Group now has a target of having people with disa-bilities make up 2%of its global workforce by 2025.This effort is being led by LVMHs Disability Inclusion Office,which helps people with disabilities find work and involves 200CSR and Disability correspondents in the Maisons.Day-to-day,the Disability Inclusion community provides employees with resources to sup-port the recruitment and professional development of people with disabilities.The Group is also involved in specific programs such as that of Sephora in the United States,where 10%of employees in its 5 logistics cen-ters have disabilities,and in France as part of a partnership with VETA(Vivre et travailler autrement)to promote the inclusion of autistic people.Since 2022,LVMH has been increasing the digital accessibility of websites across the Group and its Maisons.Increasing efforts in favor of LGBTI inclusionLVMH is a signatory to the UN Standards of Conduct for Business to tackle discrimination against the LGBTI community,and to the LGBT commitment charter of LAutre Cercle.In 2023,LVMHs“Walk the Talk”campaign highlighted its commitment to combating discrimination against LGBTI people and the Group presented the progress it has made in a dedicated report.LVMH also supported its AllLVMH Pride networks participation inpride parades around the world,and supported the Adieu ma honte documentary series,which tells the story of Ouissem Belgacem,a former international footballer,and his battle to accept his homosexuality.The Group also formalized its partnership with non-profit Le Refuge to provide career advice to young LGBTI people.Harnessing the potential of our multigenerational workforceLVMHs workforce spans four generations,and the Group can count on all its people from the youngest to the most experienced to ensure that its Maisons key expertise is passed on.LVMH is putting in place programs and initiatives for all its staff,aimed at strength ening and fostering cohesion across all age groups.For example,the INSIDE LVMH digital platform provides students with exclusive content to help them learn about the luxury industry,while the Groups SPRING graduate programs are a genuine career springboard for recent graduates,allowing them to rotate around several different roles within one of our Maisons.LVMH also supports its senior employees throughout their careers.The Groups holding com-pany helps itsemployees make the transition to reti-rement,particularly through the SWITCH program,while Glenmorangie has devised a series of workshops on this topic.The Group also makes efforts to build bridges between generations,with initiatives such as the intergenerational mentoring program set up by MotHennessy.Developing local leadersTo develop leaders who are more representative of the Groups diverse teams,professional development programs are deployed at the level of the Group,its Maisons and its regions.They include the MotHennessys Asian Leadership Advancement Program and the Connected Leadership Academy inthe United States,a partnership with McKinsey&Company,for the professional development ofBIPOC.PRIORITIESOur Diversity&Inclusion strategy is applied within each Maison,in line with its business sector and core values.To maintain the impetus of the Groups social innovation efforts,LVMH organizes events in which people come together and discuss initiatives to achieve the Groups targets.Each year,the Inclusion Index(diversity and inclusion monitoring unit)looks at all the initiatives put in place by the Group and its Maisons to foster a more inclusive culture,and is a particularly good demonstration of how the Group sets a collective example that inspires people beyond LVMH and its Maisons.Inspiring people through the Inclusion IndexSince 2018,the LVMH group has tracked its efforts to promote gender equality.It has also broadened the scope of the Inclusion Index to cover six key catego-ries:gender equality,LGBTI inclusion,disability inclu-sion,origin,generations and inclusive culture.Last year,close to 200initiatives were submitted by the Groups Maisons and regions,and all LVMH employees were invited to vote for their favorite initiatives.A jury made up of members of LVMHs Executive Committee and CEOs of the Groups Maisons acknowledged the most impactful initiatives in the Inclusion Index Awards,which took place during the second annual Voices of Inclusion initiative.The cere-mony took place at the Fondation Louis Vuitton in the presence of over 250guests,including members of the Groups Executive Committee,Presidents of the Maisons and talented Group employees committed to the Inclusion Index units work.A spe-cial prize was created in 2023 for the Maison with the best diversity and inclusion performance indicators,and the award went to Sephora.The trophies pre-sented during the ceremony were designed by Repossi,an LVMH jewelry Maison that shows its commitment to a more inclusive society in all parts Disseminating our culture of diversity and inclusionINITIATIVESLVMH published its first LGBTI activity report to coincide with its“Walk the Talk”campaign.The report reviews the commitments and initiatives of the Group and its Maisons to promote the inclusion of LGBTI people within itsown staff,among its partners and in their communication.On September5,LVMH North America and HarlemsFashion Row marked the16th anniversary of the Fashion Show&Style Awards,which celebrate BIPOCcreatives.Initiated in 2021,thepartnership with Harlems Fashion Row aims to open doors to talented creative people of color through events and collaborations.In China,through its Angel program,Louis Vuitton currently employs 45people with disabilities across several sites and departments.7prizes awarded to the best D&I initiatives inthe Inclusion Index Awards ceremony andaspecial prize awarded to Sephora foritsculture of inclusion16employee networks around the world(EllesVMH,All LVMH Pride,LEAD)200initiatives identified by the Inclusion Index in2023Over 90,000talented Group employees have access tothe“Managing prejudices and fostering inclusivity at LVMH”training programof its value chain.Repossi was also one of the short-listed Maisons for its partnership with Moyo Gems,which works with women in East Africa and sources precious stones from mining to sale.Fostering an inclusive cultureLVMH is stepping up its efforts to establish an inclusive culture across the Group,and demonstrated thatcommitment several times in 2023.To mark International Day of Persons with Disabilities,LVMH reiterated its dedication to making excellence a driver of social and professional integration.In its PRIDE Walk the Talk event,it celebrated Pride Month and reasserted its commitment to combating discrimina-tion against LGBTI people.During the same event,the Group also put the spotlight on practical grass-roots initiatives adopted by its Maisons and its inter-national All LVMH Pride staff network.International Womens Day is another highlight on the Groups calendar,and its EllesVMH networks organized a num-ber of events around the theme of passing on skills.46 47LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r tOUR SOCIAL COMMITMENTProgress achievedWINNERS IN THE 2023 INCLUSION INDEX AWARDS“With the Polo Circol-Abile initiative,Loro Piana puts inclusion and the circular economy at the heart of the Maisons priorities.Through this program,a team of 9 young people with disabilities processes obsolete Loro Piana clothing to be recycled or donated tocharities.Since 2019,over 24,000 garments have already been donated.”Elvira Grimaldi,Chief Human Resources Officer,Loro Piana“In partnership with local associations,Louis Vuitton is committed in Asia to broaden professional horizons of women from underprivileged backgrounds.This initiative benefited to Xu Zi-Han,an 18-year-old artist whose talent for painting flourishes within our Maison.She can refine her art,and has the means to realize her dream of studying abroad.”Sydney Kim,Vice President Human Resources,Louis Vuitton North Asia“By creating the first LGBTQIA Advisory Board,Belmond is pioneering diversity and inclusion in the luxury travel industry.Our Travel with Pride train journeys are a celebration ofLGBTQIA travelers and their allies,offering a unique experience on board the Venice Simplon-Orient-Express.This was a natural evolution for us,andonethat was necessary in order to continue raising awareness of diversity and inclusion.”Pascal Deyrolle,General Manager of the Venice Simplon-Orient-Express,BelmondGender equity46%of the Groups key positions are held by women(vs.45%in 2022)65%of executives and managers are women18Maison Presidents and Division CEOs are womenEllesVMHA program to support and accelerate the career development of women at all levels of the GroupPeople with disabilities1.6%of the Groups employees had disabilities in 2023,making a total of 3,492people,an increase of 25%vs.2022Disability InclusionOfficewith more than 200 correspondents within the Group1,443people with disabilities were recruited in 2023BIPOC(black,indigenous and people of color)Over400talented BIPOC professionals joined the Connected Leadership Academy in 202328%of leadership roles in United States are held by BIPOC(vs.24%in 2022)48 49LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r tOUR SOCIAL COMMITMENTCHRISTIAN DIOR COUTUREOpen Days to encourage more diverse recruitment To attract a more diverse range of employees,Christian Dior Couture holds Dior Open Days.During these events,the Maison invites jobseekers from avariety ofbackgrounds to discover its brand universe and occupations.Theyfocus onallowing potential applicants to see the Maison close-up and talk to its teams directly,and to pair up with employees for half a day and gain hands-on experience of the work they do,putting the emphasis on operational and interpersonal skills rather than academic qualifications.As a result,they help tocombat imposter syndrome by making participants feel confident and worthy of applying for a role at the Maison.Three Dior Open Days have already been held at the Maisons boutiques on Avenue Montaigne and Avenue des Champs-lyses in Paris:30%of participants were offered jobs,mostly permanent roles.LVMH AND ITS MAISONSSupporting autistic people enter the workforce Alongside nonprofit Vivre et travailler autrement(VETA),LVMH is stepping up its efforts to help autistic people find employment.The partnership between LVMH and VETA,signed in 2023,aims to increase inclusion within the Maisons.Some of them have already put in place several successful programs with VETA.Guerlain in particular has led the way in this area.It welcomed Mavryck,its first autistic employee with high support needs,in 2021,and he has been followed byfour more autistic employees.The Maison has shown the way in terms ofintegration and of the collective pride this generates.In 2024,more people willjoin the Group and its Maisons through this program.Our Maisons commit to taking actionMOT HENNESSYFostering a spirit of curiosity that has no age Mot Hennessy focuses on bridging the gap between the five generations that co-exist today in the workplace.In 2023,the DE&I Shakers,the cross-topic employee network at Mot Hennessy in Paris,launched Ageless Conversations,aprogram that matches two colleagues of different generations.After participating to a kick-off event to learn to master“the art of meeting others”,thepairs were invited to meet once a month,for sixmonths,getting the opportunity to shake their vision of networking within Mot Hennessy and together learn,grow and discuss in a safe environment.An enriching and transformative initiative that promotes collaboration and agility in the workplace while giving value to every generation.TIFFANY&CO.Encouraging creativity Through its Atrium platform,Tiffany&Co.supports initiatives to make the jewelry industry fairer and more inclusive,focusing on three aspects:creativity,education and community.In particular,the Maison supports historically black colleges and universities(HBCUs)in the United States.The aim is to offer educational and professional opportunities to students in the creative arts and media fields.Furthering its commitment to supporting artists who work tirelessly to heal communities through their gift,Tiffany Atrium supports programs like The Last Resort Artist Retreat(TLRAR),founded by Derrick Adams.In November2023,Tiffany&Co.partnered with TLRAR to hold a five-day symposium,bringing together leaders of art and culture institutions.to cultivate individuality50 51LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r t02Taking action to ensure asafe and healthy workingenvironmentMaking safety a priority for all42%of employees received first aid and risk prevention training in 2023PRIORITIESIn line with its resolute focus on occupational health and safety,the LVMH Group has put in place resources and a network of dedicated correspondents to sup-port its Maisons.It made five commitments in 2020,and intends that all Maisons will fulfill them by 2025,in order to instill a Group health and safety culture.Applying demanding health and safety practicesThe Groups health and safety policy is led by a steer-ing committee of experts and implemented in a spirit of continuous improvement.Its main principles are set out in a Health and Safety Charter signed by the Groups Executive Committee and by the Maisons CEOs.Thepolicy is based on five commitments:1.Identify health and safety issues2.Devise a dedicated health and safety action plan3.Deploy and manage the health andsafetyapproach4.Involve each staff member5.Maintain a culture that fosters a safe ecosystemImproving working conditions in each professionIn 2023,LVMH invested more than 189million equal to 1.8%of its gross payroll in improving the working conditions of its employees,including 44.2million spent on the health and safety of its teams(buying protective equipment,recruiting occupational health officers,providing training programs,etc.).The Maisons realize the Groups commitment through their own initiatives,which are tailored to the needs and circums-tances of each team.For example,Hennessy has two safety-related training programs:Leadership Scurit(for all managers)and Cap Prvention(for all non-ma-nagerial staff members).Within Hennessy,compliance with machinery safety standards was also a particular area of focus at production sites in 2023:production lines were audited,instances of non-compliance were noted and the staff members concerned received train ing.Also during the year,Sephora launched awareness-raising and training workshops in Europe and the Middle East.For example,in Poland,Sephora held a webinar for its staff members on managing stress and fatigue at work,and in Turkey it introduced a manda-tory eight-hour health and safety training course for all of its employees.Instilling a zeroaccident cultureLVMHs zero-accident culture is driven by its Health and Safety Charter and supported by a health and safety community consisting of ambassadors from each Maison.This community met five times in 2023 to share tools and step up the deployment of health and safety initiatives.Currently,96%of employees are covered by formal health and safety action plans,put-ting the Group well on track to achieve its aim of having such plans in place at all Maisons by 2025.As part of those efforts,each Maison is adopting safety initiatives suited to its operations.Louis Vuitton,via its Focus initiative,makes major efforts to ensure health and safety at its workshops,and through the commit-ment of its teams they are paying off:five workshops were accident-free in 2023.INITIATIVESThe Group held its first Health and Safety Week in 2023,covering all of itsMaisons.It involved various awareness-raising initiatives,relating in particular tofirst aid and mental health.Chantal Gaemperle,Group Executive Vice President,HumanResources andSynergies,reminded participants oftheprimary importance ofhealth andsafety in theGroups operations.Each Maison has appointed a health and safety ambassador reporting tothe Group.Those 71ambassadors actively disseminate the Groups health and safety culture within their Maisons.Staying on the safe side is a series ofvideos that was launched during the Health and Safety Week,aiming to raise employees awareness ofthe topic acrossthe Groups three main working environments(production,logistics andsales).52 53LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r tOUR SOCIAL COMMITMENTPRIORITIESTo take care of its staff members and make a positive contribution to their quality of life at work,LVMH acts as a partner in supporting their physical and mental health.The Group and its Maisons adjust to the needs of their teams,providing training,psycho-logical support,financial assistance and flexible work-ing arrangements.Taking action to support the physical andmental health of employeesBecause LVMH cares about the well-being of its employees,it makes specific efforts to support their physical and mental health.For example,it has set up assistance units and an internal alert system.To mark World Mental Health Day,the Group reaffirmed its commitment in this area,reminding all its employees around the world of the numerous mental health initia-tives it has taken.The Maisons are committed to employee mental health:for example,Christian Dior Couture has a working group dedicated to mental health and its employees can make appointments with experts a doctor,a psychologist and a social worker whenever they feel the need.Members of the Groupe LesEchos LeParisien human resources team have obtained the PSSM(mental health first aid)certificate,enabling them to detect signs of mental health disor-ders.Fendis health and safety teams in Italy carried out a survey of mental health among the Maisons employees to assess potential causes of stress at work.In June,Parfums Christian Dior held its Quality of Worklife Week,during which staff members were invited to attend talks given by psychologists and coaches.Supporting Group employees facing personal difficulties with the LVMH Heart FundThe LVMH Heart Fund,launched in 2021,provides emer-gency financial aid and social and psychological support to employees experiencing serious difficulties in their personal lives.The service is free,confidential and open Creating the conditions for well-being at workINITIATIVESTo celebrate the LVMH Heart Funds second anniversary,Chantal Gaemperle,Group Executive Vice President,Human Resources and Synergies,Delphine Arnault,Chairman and Chief Executive Officer of Christian Dior Couture,and Laurent Boillot,President of Hennessy,presented three stories inspired by the personal experiences of employees thefund has helped.Mot Hennessy promotes moderate consumption and responsible choices about alcohol among its employees and consumers alike.In its communications and tasting experiences,the Maison stresses the importance of mindful drinking,encouraging people to thinkcarefully about whether or not todrink,when,and how much.Its aim isto promote the art of tasting and tomake as many people as possible aware oftherisks caused by excessive alcoholconsumption.LVMH supports Working with Cancer,aPublicis Foundation initiative,which champions a more open,supportive andinclusive corporate culture for employees with cancer.Through that project,LVMH is seeking to create a working environment in which everyone feels supported,included and heard.to all LVMH employees around the world.Since it was launched,it has received almost 7,500requests for psy-chological,social or financial support(3,244in 2023)from people across 5continents.Working to improve quality of life at workLVMH supports its employees and provides them with training regarding new ways of working,time manage-ment and the right to disconnect,to help them achieve the best possible work/life balance.The Group also promotes flexible working hours and every year holds a week of events dedicated to quality of life at work.Charters and collective agreements relating to remote working and the right to disconnect have been gradually implemented within the Maisons:last year,for example,Kenzo published its Charter on the Right to Disconnect,while at Celine a collective agreement came into force on January1,2023,including rules on quality of life atwork.That agreement provides for a new process for monitoring working hours,making it easier for all employees to exercise their right to disconnect.Almost 7,500requests received by the LVMH Heart Fund since its launch(including 3,244 in 2023)PRIORITIESIn meetings of the European Works Council,the Group Works Council and local bodies,regular efforts are made to raise the awareness of those attending about CSR and disability matters.These bodies play an important role in completing the CSR roadmap.Social dialog at the European levelThe European Works Council organizes dialog in 22countries between its 29members,who serve five-year terms,and the management teams of the LVMH and Christian Dior groups.In the European Works Councils annual plenary meeting,members are infor-med about economic,financial,workforce-related and environmental matters and about CSR initiatives taken by the Christian DiorSE and LVMHSE groups.In par-ticular,they benefited from a presentation on CSR issues and disabilities in 2023.Members also receive training during their terms of office.Social dialog in FranceIn France,the Group Works Council handles dialog between elected representatives and the CEOs of all the Groups divisions.Its 29members hold discussions every year about Group strategy,economic and finan-cial issues,employment-related developments,the environment,CSR initiatives adopted within the Group and the prospects for the current year.In 2022,a new Group Works Council was elected for a four-year term.Dialog within the Maisons in FranceIn France,social dialog also takes place within Economic and Workforce-Relations Committees(EWRCs).For companies with fewer than 50employees,the EWRC resolves individual and collective complaints made by employees about matters such as pay and the Fostering social dialogINITIATIVESIn 2023,Moynat engaged in extensive social dialog,resulting in its signature ofthe Groups Remote Working Charter,which establishes the circumstances inwhich employees can work remotely.To encourage dialog with its staff,Chandon carries out anonymous surveysof its employees in Argentina after eachnew strategic event and organizational change.On January1,2023,Celines new collective agreement with its staff representative bodies came into force,adjusting the Maisons workforce relations arrangements.The agreement includes new rules on quality of life at work,such as a new process for monitoring working hours and the right to maternity leave at full pay without any conditions regarding length of service.40.3millionallocated by the Groups various companiesto social and cultural activities viatheir contribution to EWRCsapplication of the French Labor Code.For companies with 50employees or more,social dialog relates in particular to management decisions,the companys economic and financial development,the organization of work,vocational training and production techniques.As a result,EWRCs play a key role in ensuring that social dialog takes place in an organized,fluid manner with employees of each Maison and within each entity.LVMH Alert LineLVMH has set up an Alert Line()allowing all its stakeholders,both internal and external,to report any breach of the Groups Code of Conduct,directives,principles,internal policies or applicable laws and regulations,anywhere in the world.All staff members,suppliers and customers can access the Alert Line,regardless of their location.54 55LVM H 2023 S o c i a l a n d E nv i ro n m e n t a l R e s p o n s i b i l i t y R e p o r tOUR SOCIAL COMMITMENTProgress achieved“Fendi has an ambitious vision for health and safety,supported at the highest level of the Maison,with more than 100 Senior Managers around the world involved in developing our health and safety strategy.”Veronica Scarano,WW HSE Manager,Fendi“At Mot&Chandon/Ruinart,we are strongly committed to preventing vulnerable situations arising as a result of illness,psychosocial risks,disabilities and addiction,and to providing support to people experiencing such situations.Our Maisons help keep vulnerable people in work.”Noura FourarLefvre,Head of CSR and Head of HR Development,MHEA,Mot&Chandon/Ruinart“I want to thank you for helping me finan
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48Advancing Gender Equality49Resolving the Gender Gap and Empowering Women in Japan53Supporting Womens and Girls Education and Financial Independence Worldwide55Empowering People Throughthe Power of Beauty61Challenging the Unconscious Biases and Prejudices that Limit Individual Beauty56Cultivating Self-Efficacy Through the Power of Beauty72Social Contribution62Promoting Respect for Human Rights63Respecting Human RightsSOCIETY46COO Message53CEO MessageMESSAGEGOVERNANCEDeveloping Sustainable Products27Formulas/Ingredients28Sustainable Packaging32Initiative to Build a Circular Model36Promoting Sustainable and Responsible Procurement38Biodiversity Initiatives and Procurement of Raw Materials39Supplier Management4312ENVIRONMENTEditorial Policy84External Evaluations/DataExternal Evaluations77Sustainability Data79Shiseidos Sustainability7Diversity,Equity and Inclusion(DE&I)of Employees at Shiseido6667Promotion of Diversity,Equity and Inclusion(DE&I)71Initiatives for Having Employees Work with Good HealthCorporate Governance Policy74Corporate Governance System7414Reducing Our Environmental Footprint15Reducing CO2 Emissions 22Reducing Water ConsumptionReducing Waste25ContentsEnvironmentSocietyGovernanceDataSUSTAINABILITY REPORT 20233Top Message CEO Message COO Message Shiseidos SustainabilityAt Shiseido,we aim to realize a sustainable world where everyone can enjoy a lifetime of happiness through the power of beauty toward 2030,along with our corporate mission:BEAUTY INNOVATIONS FOR A BETTER WORLD.For this,we are contributing to building a society which is rich in diversity and where each one person is respected and anyone can participate actively,as well as rich global environment where people can enjoy beauty wholeheartedly.Beauty businesses as our main businesses are rooted in the desire to be beautiful,which is inherent in humans.Cosmetics have a role in the health,livelihood,and even life of a person and enrich ones mind.We are convinced of the possibilities and perpetuity of beauty.We would like to create days filled with hopes,in which people in the world shine beautifully in their own ways,by providing the rich value of cosmetics through our core businesses.Beauty is founded on individuality,thrives on diversity,is free from discrimination,and has the power to unite people.This principle is one of Shiseidos core values,which is why we believe the Company should not only cultivate diversity within our organization,but also take the lead in promoting greater diversity in Japanese society as a whole.Based on this thinking,Shiseido is focusing on diversity,equity&inclusion(DE&I)in the domain of society.Human resources with diverse personal qualities including gender,age,nationality,race,lifestyle,career,and work styles gather to demonstrate their capabilities to the full,which is our great strength.As of January 2024,women hold 40%of management positions within Shiseido Group in Japan.As of April 2024,women comprise 45%of the board of directors,and over 30%of the leadership team comprised of executive officers and regional CEOs are foreign nationals.We aim to increase the percentage of women in management positions at Shiseido Group in Japan to 50%by 2030 to fairly represent gender equality.For this purpose,we are advancing a number of initiatives,including the NEXT LEADERSHIP SESSION for WOMEN for developing women leaders,by involving their superiors and organizations in addition to aiming to reform the awareness of women themselves.These initiatives were highly evaluated by society as well,and in November 2023,Shiseido won first place among approx.1,900 companies in the Forbes JAPAN WOMEN AWARD 2023 Corporate Ranking.This is one of Japans largest award programs related to women,and is hosted by Forbes JAPAN for the purpose of eliminating the gender gap and empowering women.We will create social value as a beauty company and aim to realize a sustainable world where everyone can enjoy a lifetime of happiness through the power of beauty.DirectorRepresentative Corporate Executive Officer,Chairman and CEOMasahiko UotaniCEO MessageContentsEnvironmentSocietyGovernanceDataSUSTAINABILITY REPORT 20234Top Message CEO Message COO Message Shiseidos SustainabilityTo deliver these pieces of knowledge widely to the outside of the company,in February 2023 we established the Shiseido DE&I Lab,an internal research institution that conducts research on active participation of diverse human resources and its relationship with corporate growth.Thus,we launched full-scale empirical research.We conduct empirical research with an economic approach,quantifying and visualizing the DE&I factors of organizations with high performance to find how diversity influences the performance of organizations.In addition,we collect actual examples of cases which led to innovations,analyze factors,and implement other measures.Further,I myself will also reach out proactively to other companies and Japanese society as Chairman of the Diversity Promotion Committee in the Japan Business Federation(Keidanren)and as the Chair of the 30%Club Japan,thereby contributing to gender equality of Japanese society that is said to lag behind the world.With the power of diverse people,we pursue social value creation as a beauty company in the domains of society and the environment,aiming to achieve sustainable growth.What forms the important basis of sustainable growth is corporate governance.In March 2024,Shiseido transitioned from a company with an audit and supervisory committee to a company with a nominating committee,etc.,so as to maintain and further improve management transparency,fairness,and speed even in the rapidly changing market environment.While the Board of Directors concentrates on discussion on long-term visions and strategies,the business execution team implements strategies with speed and flexibility with a lot of power delegated to them.We will strive to maximize our medium-to long-term corporate value and shareholder value and,at the same time,fulfill our responsibilities as a public entity through transparent dialogue with all stakeholders(employees,consumers,business partners,shareholders,the environment,society,and the earth).Our history of over 150 years is also a history of social value creation with the power of beauty.This spirit will remain unchanged.We promise to achieve sustainable growth and continue to fulfill expectations from society by gathering Shiseidos outstanding Research&Development capability,the power of our brands loved all over the world,and the enthusiasm and capabilities of our diverse employees.And we will further evolve our sustainability activities with the power of beauty,aiming to become the most trusted beauty company in the world.ContentsEnvironmentSocietyGovernanceDataSUSTAINABILITY REPORT 20235Top Message CEO Message COO Message Shiseidos SustainabilitySince I joined Shiseido in 1991,I have been engaged mainly in overseas business,having worked with many local employees.Although I was perplexed by differences in culture and custom at times,what was common to all countries was that all of them were proud of working for Shiseido.I believe this is because they have been working by identifying with and sharing the spirit of Shiseido,which,since its foundation,has been taking on challenges to discover and create the value of beauty,bringing joy and excitement to peoples lives across the world through the power of beauty,and working to create social value through its core businesses in addition to economic value.I myself have also been glad and proud to be part of Shiseido.Since I took office as President and COO of Shiseido in January 2023,we have been feeling the rapid changes in the market and the significance of their impacts.However,to take the difficult circumstances created by the changes as an opportunity for our future growth,we have been pressing ahead with a reform in a company-wide manner.Through this reform,each region and business will push forward with activities integrating business strategy and sustainability strategy of each,aiming to achieve our 2030 vision:Personal Beauty Wellness Company.I would like to mention about environment,where expectations and demands from society are high.At Shiseido,we understand the importance of global initiatives and of cooperation with other companies in Japan,while also recognizing our own responsibility to lead the industry.Attaching importance to initiatives in the value chain in particular,we are driving three strategic actions:reducing our environmental footprint,developing sustainable products,and promoting sustainable and responsible procurement.For climate change issues,we have set CO2 reduction targets(SBTi)for the entire value chain toward 2030.We are proactive in taking measures to reduce CO2 emissions,such as introducing renewable energy and sourcing sustainable raw materials,aiming to achieve net zero emissions by 2050.In 2023,we completed a transition to 100%renewable electricity at all 11 factories and Shiseido-owned distribution centers.In the China region,we have also completed the transition to 100%renewable electricity across all sites.We have positioned the reduction of Scope 3 CO2 emissions,which accounts for the largest share of total emissions,as key actions for the future.We will enhance our collaboration with external stakeholders,including business partners.We will work on social value creation with diverse stakeholders by integrating business strategies and sustainability strategies.DirectorRepresentative Corporate Executive Officer,President and COOKentaro FujiwaraCOO MessageContentsEnvironmentSocietyGovernanceDataSUSTAINABILITY REPORT 20236Top Message CEO Message COO Message Shiseidos SustainabilityWe have also been proactive in taking initiatives on climate change and biodiversity.As a result of the 2023 survey by CDP,an international NPO that conducts environmental surveys and discloses information,Shiseido was selected as one of the companies in the A List,the highest-ranked group,in the fields of Climate Change and Forests.We were included in two A Lists for the first time.Regarding climate change and biodiversity,we disclosed the information in the Shiseido Climate/Nature-related Financial Disclosure Report this year again.In product development,we will achieve sustainable value creation,which balances the results and high-quality design of our products with respect for and coexistence between people,society,and the global environment.In April 2023,we launched the BeauRing project,a circular model project to collect and recycle plastic containers.To recycle collected containers into resources,we have started a pilot test by involving consumers,business partners,other companies,and other stakeholders who are important for building the collection scheme.Sustainability has become even more important for corporate management than ever.I believe that,by taking this as a growth opportunity and integrating our business strategies with sustainability strategies,we can create value and new business opportunities.We will continue to work together with our diverse internal and external stakeholders to keep the transparency high and create social value through businesses.We aim to realize a sustainable world where everyone can enjoy a lifetime of happiness through the power of beauty toward 2030,along with our corporate mission:BEAUTY INNOVATIONS FOR A BETTER WORLD.For this,we will contribute to building a society where everyone respects diversity and can enjoy life to the fullest and making the global environment sustainable,with people living in harmony with the nature.ContentsEnvironmentSocietyGovernanceDataSUSTAINABILITY REPORT 20237Top Message CEO Message COO Message Shiseidos SustainabilitySince the foundation of Shiseido in 1872,we have demonstrated our respect for people,society and nature and have worked to create social value.In order to realize our corporate mission,BEAUTY INNOVATIONS FOR A BETTER WORLD,we firmly believe our people to be the capital of value creation and invest them based on the PEOPLE FIRST philosophy.And we are promoting a culture where everyone,regardless of gender,age,or nationality can embrace diversity through respect and have constructive discussions on new value creation.As a beauty company,we are also working to address social issues through our unique approaches,aiming to realize a sustainable world where everyone can enjoy a lifetime of happiness through the power of beauty towards 2030.We have set forth three strategic actions in the areas of society and the environment to create social value through our core business and to solve social and environmental issues.Our actions for society are focused on addressing social issues,primarily through our diversity,equity and inclusion(DE&I)initiatives.These three strategic actions are:“Advancing gender equality,”which we strive to nurture a society where everyone can feel empowered to live their life freely by having fair opportunities regardless of gender,”Empowering people through the power of beauty,”which we strive to eliminate assumptions and prejudices associated with beauty for a world where everyone can celebrate each others beauty;and“Promoting respect for human rights,”which underlies all our activities.Our actions for the environment are based on the idea of banbutsu shisei*1,the phrase from which our company name Shiseido originates.We are working to develop technologies and business models that can reduce environmental footprint and contribute to realize a circular economy.To do so,we are taking the following three strategic actions:“Reducing our environmental footprint,”“Developing sustainable products,”which we work on together with various stakeholders throughout the entire value chain and“Promoting sustainable and responsible procurement”with consideration of the environment and human rights.At Shiseido,we work to promote sustainability across the entire Group,including our brands and regional businesses.Sustainability Committee was set up to ensure timely management decisions related to sustainability efforts and their proper implementation across the Group,the committee was held regularly in 2023.The committee decides on Group-wide sustainability strategies,policies,and discusses specific topics such as risks and opportunities related to climate change and the natural environment,and actions for human rights,as well as monitors the progress of medium-to long-term goals.The committee consists of the representative corporate executive officers and executive officers in charge of Corporate Strategy,Research&Development,Supply Network,Corporate Communications,and our Brand Holders,to discuss a range of issues from different perspectives.Important matters in the execution of business,which require approvals are proposed or reported to the Global Strategy Committee or the Board of Directors.In order to ensure executing and promoting of sustainability actions,a Sustainability TASKFORCE was set up under the Sustainability Committee,consisting of the heads of key relevant functions.At the Sustainability TASKFORCE,practical approaches to achieve our Our Approach to SustainabilitySustainability Governance*1 From a phrase in Chinese Yi Jing,the Book of Changes from the Four Books and Five Classics of Confucianism,“Praise the virtues of the Earth,which nurtures new life and brings forth significant values.”Shiseidos SustainabilityContentsEnvironmentSocietyGovernanceDataSUSTAINABILITY REPORT 20238Top Message CEO Message COO Message Shiseidos Sustainabilitylong-term targets are discussed with relevant functions,regional headquarters,and local subsidiaries as necessary.Oversight functionBusinessexecution functionBoard of DirectorsRepresentative Corporate Executive Officer,Chairman and CEORepresentative Corporate Executive Officer,President and COOCorporate Executive Officer/Executive OfficersGlobal Strategy Committee/Business Plan Meeting*1Global Transformation Committee*2Global Risk Management&Compliance CommitteeBusiness Execution(Divisions/Subsidiaries/Affiliates etc.)OversightProposalReportMeetings according to themes such as Innovation CommitteeSustainability CommitteeSustainability TASKFORCE*1Business plans and important issues are deliberated to ensure multifaceted consideration*2Progress management and review for structural reforms and growth strategiesCommand/Order/InstructionProposal/ReportAt Shiseido,we are committed to creating a sustainable world and enhancing peoples sense of happiness and fulfillment through value creation,as we have done since our founding.To select social and environmental issues to be addressed through our business,we have extracted sustainability issues based on interviews,surveys,and dialogues with stakeholders.We first examined the importance of these issues to Shiseidos business and to all of our stakeholders,from employees and consumers to business partners,shareholders,society,and the earth.Then,in 2019,we categorized and prioritized the issues along the two axes and defined 18 material issues.Additionally,in light of recent changes in the environment surrounding society and the industry,we are considering a review of our current materiality.MaterialityImportance to StakeholdersHighHighDeforestationResponsible procurementEnvironmentSocietyGovernanceCultureDevelopment of eco-friendly formulasWater usageQuality assuranceWaste reductionInformation security and privacyStrengthening of governance and accountabilityDiversity&InclusionClimate change Sustainable packagingOccupational health and safety Respect for human rightsQuality of lifeResponsible marketing and advertisingPeople developmentFair business transactionsArt&HeritageImportance to Shiseidos Business(Approved in 2019)Sustainability Promotion StructureContentsEnvironmentSocietyGovernanceDataSUSTAINABILITY REPORT 20239Top Message CEO Message COO Message Shiseidos SustainabilityThe following process was implemented to define material issues.*1Until the end of 2021,it was“corporate officers”.How We Formulated Our MaterialityIdentify social and environmental issues in consideration of allstakeholders based on their expectations and demands along with various perspectives collected from Experts in environmental and social fields globally Consumer feedback(from company surveys conducted in five countries)External surveys,reports from major international organizations(GRI,SASB,SDGs etc.),investor feedback Executive officer*1 and employee feedbackSTEP1Shortlist the identified issues based on their relevance to our businesses and make a more informed analysis Issues are narrowed down to those highly relevant to our businessesthrough discussions with executive officers*1 and various internal divisions.Issues are then selected by scoring them based on the two axes ofimportance to our businesses and importance to the entire companys stakeholders(employees,consumers,business partners,shareholders,society,and the earth).The questions and strategic actions surrounding these issues are thenconfirmed by the executive officers*1.STEP2Submit the finalized list of material issues to the SustainabilityCommittee for approvalSTEP3ContentsEnvironmentSocietyGovernanceDataSUSTAINABILITY REPORT 202310Top Message CEO Message COO Message Shiseidos SustainabilityShiseido has established three strategic actions based on the material issues we have defined in each area of society and the environment.We have allocated management resources on a priority basis in each department across the entire Group to implement these priority initiatives.*1We do not disclose strategic actions related to governance materiality.Material IssuesStrategic ActionCorresponding SDGsEnvironment Climate change Development of eco-friendly formulas Sustainable packaging Deforestation Responsible procurement Waste reduction Water usage1.Reducing our Environmental Footprint2.Developing Sustainable Products3.Promoting Sustainable and Responsible ProcurementSociety Diversity,equity and inclusion(DE&I)Quality of life Professional development Occupational health and safety Respect for human rights1.Advancing Gender Equality2.Empowering People Through the Power of Beauty3.Promoting Respect for Human RightsGovernance/Culture Strengthening of governance and accountability Fair business transactions Quality assurance Responsible marketing and advertising Information security and privacy Art and heritage We are committed to maintaining and improving the transparency,fairness,and speed of management initiatives by enhancing corporate governanceas well as maximizing corporate and shareholder value over the mediumterm through dialogue with all stakeholdersconsumers,employees,shareholders,the environment,and society at largeto fulfill ourresponsibilities as a public entity and optimize value distribution to eachstakeholder.*1 We promote activities in art and heritage through our corporate culture that generates social value and shares a uniquely Japanese aesthetic with theworld.Strategic Actions&Corresponding SDGsContentsEnvironmentSocietyGovernanceDataSUSTAINABILITY REPORT 202311Top Message CEO Message COO Message Shiseidos SustainabilityMedium-to Long-term Targets and ResultsEnvironmentSocietyStrategic ActionTargetsTarget Year2023 Results1.Reducing our environmental footprintCO Carbon neutral*1202660%(compared with 2019)CO emission reduction(SBTi,Scope 1 2)46.2%*22030Plan to disclose in 2025*4CO emission reduction(SBTi,Scope 3)55%*32030WaterWater consumption reduction40%*5202646%(achieved in 2023)WasteZero landfill*62022 Achieved in 2022(continued in 2023)2.Developing sustainable productsPackagingSwitching to sustainable packaging100%*7202569%3.Promoting sustainable and responsible procurementPalm OilReplacement with sustainable palm oil100%*8202651%PaperReplacement with sustainable paper100%*92023100%(achieved in 2023)Strategic ActionTargetsTarget Year2023 Results1.Advancing gender equality Ratio of women leaders at all levels in Japan502030Directors45.5%*1Executive Officers40.0%*1Managers in Japan40.0%*2 Womens empowerment in Japan Supporting education and financial independence worldwideOne million people(to reach directly)2030Achievement ratio 62%2.Empowering people through the power of beauty Cultivating self-efficacy through the power of beauty Challenging the unconscious biases and prejudices that limit individual beautyOne million people(to reach directly)2030Achievement ratio 13%*1 At all our sites(including offsets)*2 At all our sites(compared with 2019)*3 Throughout our value chain,excluding Shiseido sites,economic intensity target,compared with 2019.*4 Target revision application in progress due to transfer of business.*5 For all our sites,intensity per sales,compared with 2014.*6 For Shiseido owned factories.*7 For sale of products with plastic packaging.*8 Certified based on RSPOs physical supply chain model:identity preserved,segregation,and/or mass balance,palm oil equivalent basis.*9 Such as certified paper and recycled paper,paper weight basis.*1 As of April 1,2024*2 As of January 1,202412Shiseido comes from a phrase in the classical Chinese text,I Ching:“Praise the virtues of the Earth,which nurtures new life and brings forthsignificant value.”This praise for the Earth,which continuously gives birth tonew things,is consistent with Shiseidos goal of sustainability,which aimsto create and circulate new value in society.Since Shiseido was founded in1872,we have developed a business model that combines business successwith respect for people,society,and the planet.In everything we do,we cooperate with our stakeholders across our entirevalue chain from procurement of materials and product developmentthrough to production,use and disposal to create value through ourproducts and services and enable the coexistence of people and theenvironment.This is how we create new sustainable value for the world.ENVIRONMENT13STRATEGIC ACTION 1STRATEGIC ACTION 2STRATEGIC ACTION 3Reducing OurEnvironmental FootprintWe are reducing the environmental footprint of our activitiesby taking actions in three key actions.CO2By 2026 Carbon neutral.*1 By 2030 Reduce CO emissions by 46.2%(SBTi,Scope1 and 2).*2By 2030 Reduce CO emissions by 55%(SBTi,Scope 3).*3WaterBy 2026 Reduce water consumption by 40%.*4WasteBy 2022 Zero landfill.*5Promoting Sustainable andResponsible ProcurementWe work with suppliers to procure raw materials inconsideration of environmental protection,biodiversity andhuman rights.Palm OilBy 2026 100%Replacement with sustainable palm oil.*7PaperBy 2023 100%Replacement with sustainable paper.*8Supplier ManagementCreate a sustainable supply chain.Developing Sustainable ProductsWe use innovation to minimize the environmental impact ofour products and disclose our policies on product development.Formula/IngredientsReduce our environmental and social impact by usingsustainably sourced raw materials that are selected inconsideration of safety,the environment and ethics.PackagingBy 2025 100%Switching to sustainable packaging.*6*1 At all our sites(compared with 2019,including offsets)*2 At all our sites(compared with 2019)*3 Throughout our value chain,excluding Shiseido sites,economic intensity target,compared with 2019.*4 For all our sites,intensity per sales,compared with 2014.*5 For Shiseido owned factories(achieved in 2022,continued in 2023)*6 For sale of products with plastic packaging.*7 Certified based on RSPOs physical supply chain model:identity preserved,segregation,and/or mass balance,palm oil equivalent basis*8 Such as certified paper and recycled paper,paper weight basisContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202314EnvironmentReducing Our Environmental FootprintThe impact of climate change,including extreme weather events caused by global warming,is becoming more apparent each year.Shiseido has set long-term targets for addressing environmental issues and engages in various company-wide activities to achieve the targets,with the aim of preserving the natural environment and its biodiversity while simultaneously ensuring the sustainable growth of society,economy,and its businesses.Shiseido has adopted an Environmental Policy as its requirements for addressing environmental issues and has defined the reduction of CO emissions,the reduction of water consumption,and waste reduction as priority domains in actions for reducing the environmental footprint of its business activities.We will continue to work with stakeholders throughout our value chain to create sustainable impact within each of these actions.STRATEGIC ACTION 1Environmental Policy2030By2026By2022ByCOReduce CO emissions by 46.2%(SBTi,Scope 1Scope 2)At all our sites(compared with 2019)Reduce CO emissions by 55%(SBTi,Scope 3)Throughout our value chain,excluding Shiseido sites,economic intensity target,compared with 2019.CO2023 Results 60%(compared with 2019)Carbon neutralAt all our sites(including offsets)WaterReduce water consumption by 40 23 Results 46hievedFor all our sites,intensity per sales,compared with 2014.WasteZero landfillAchieved in 2022,continued in 2023For Shiseido owned factoriesContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202315EnvironmentClimate change is leading to numerous issues,including natural disasters caused by temperature extremes,insufficient water resources,and an accelerated loss of biodiversity.There are global moves to hold the increase in global average temperature to below 1.5C above pre-industrial levels and to achieve net zero emissions by 2050,in accordance with the Paris Agreement and the Glasgow Climate Pact.At COP28*1 held in UAE in November 2023,importance was attached to more effective actions,and dialogues have been in progress toward specific solutions.While CO emissions from the cosmetics industry are lower than other industries,Shiseido supports the Paris Agreement and the Glasgow Climate pact,and has set response to climate change as its important task.For achieving net zero emissions in 2050 and attaining the 2030 target,we have set CO*2 emissions reduction targets,which are in line with the 1.5C target,by following the Science Based Targets*3 initiative.We obtained certification from SBTi.We are driving initiatives to reduce CO emissions,such as improving energy efficiency by reducing the use of energy and switching to renewable energy.STRATEGIC ACTION 1To mitigate climate change,we are committed to reducing CO emissions from the electricity and fuel used in our business activities.As part of our efforts,we use renewable energy where possible and constantly seek to improve energy efficiency in our factories,offices,and other facilities.To increase energy efficiency,we are introducing several building design improvements at our factories,including improved heat insulation,more energy-efficient equipment,and new environmental measures based on the ISO 14001 environmental management system.Specifically,in addition to using LED lighting to reduce energy consumption,we installed Energy Management Systems(EMS*1)to visualize energy use and CO emissions on equipment that uses electricity,steam,or compressed air.These systems allow us to optimize energy usage in a number of ways.Furthermore,at our Osaka Ibaraki factory and neighboring West Japan Distribution Center our production and logistics hub in Japan we installed sandwich panels in the exterior walls.Lightweight and with excellent heat insulation properties,these panels have helped reduce energy consumption.At our Kakegawa factory,steam was sent from the central energy building on the premises to each production building to be used as the heat source for hot water supply.EMS data analysis showed that steam delivery distances were long and heat loss was not small.Therefore,we have installed a heat pump at each production building to reduce heat loss.We have thus succeeded in improving energy efficiency.Reducing Our Environmental Footprint Reducing CO Emissions from Energy Consumption(Scope 1 and 2)Driving Energy Conservation and Energy Efficiency ImprovementReducing CO Emissions*1 The 28th Session of the UN Climate Change Conference of the Parties*2 Greenhouse gases usually refer to CO,CH4,N2O,HFCs,PFCs,SF6,and NF3.In this report,unless otherwise specified,these greenhouse gases will be collectively referred to as CO.*3 Scope 1,Scope 2,and Scope 3 emissions.Certification was obtained from the Science Based Targets initiative(SBTi).*1 A system that realizes efficient use of energy such as energy saving and load leveling by visualizing the energy usage status using information and communication technologyClimate/Nature-related Financial Disclosure InitiativesMedium-to Long-term Targets and ResultsOsaka Ibaraki factory and neighboring West Japan Distribution CenterContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202316EnvironmentAt our Gien factory in France,we have affixed heat insulating films on the factory windows.The films limit temperature rises inside the factory in summer and reduce power consumption by air conditioners,thereby helping save energy.We are constantly working to increase the use of renewable energy at our factories and offices.In 2023,we finished switching 100%of the electricity at all 11 factories and our distribution centers to renewable electricity.In addition,we are advancing the use of renewable energy at all of our sites worldwide,such as switching 100%of the electricity at our offices to renewable energy.In the China Region,we completed a 100%switchover at all sites.Moreover,at the Beijing Office,which includes the factory of Shiseido Liyuan Cosmetics Co.Ltd.(SLC)in China,we fulfilled requirements under the code for carbon neutrality certification(PAS 2060:2014)and obtained certification.Following the completion of switchover of 100%of the electricity at our Shiodome and Ginza offices in Japan to renewable electricity in 2022,we switched 100%of the electricity at all company-owned buildings of Shiseido Japan to electricity from renewable energy in 2023.We are driving the shift to electricity from renewable energy mainly at the Shiseido Global Innovation Center(Yokohama),in Europe,and at our branch offices in Japan.In addition to promoting the use of renewable energy,we are also proactive in installing solar panels on the premises and in the buildings of our factories and research centers worldwide.Eight of our factories*1 in the world are equipped with solar power generation facilities.As a result,renewable electricity now accounts for 85%of all the electricity used at Shiseido Group.In addition,Shiseido is a member of the RE100 global initiative,which brings together businesses committed to using 100%renewable electricity in their activities.We will continue to accelerate our transition to renewable electricity in our operations to reduce fossil-fuel derived electricity.Increasing the Use of Renewable EnergyFukuoka Kurume factoryIn 2023,we expanded solar power generation facilities at our Fukuoka Kurume factory,thus increasing the total capacity of the facilities to 1.9MW.The total power-generating capacity of all factories of Shiseido has reached 6.8MW.*1 The eight factories are:Kakegawa(Japan),Osaka Ibaraki(Japan),Fukuoka Kurume(Japan),Shanghai(China),Beijing(China),Taiwan factory,East Windsor(US),Gien(France).(Country/Region)Solar panels at the Fukuoka Kurume factory(Japan)ContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202317EnvironmentInitiatives to Reduce Indirect CO Emissions from the Value Chain(Scope 3)Other Than Our SitesOur indirect CO emissions also result from our business activities but they are not directly under our control for example,emissions that derive from the manufacturing and shipping of raw materials or the use and disposal of our products.As part of our work to reduce the impact of our business activities on climate change,we have established science-based long-term reduction targets for our indirect CO emissions,and we are working with our suppliers and other stakeholders to reduce emissions across our entire value chain.We select raw materials with a special emphasis on reducing our environmental footprint in line with the green chemistry principles*1.For the procurement of palm oil and paper,we support the principles of the No Deforestation,No Peat,No Exploitation(NDPE)and procure raw materials that are not linked to deforestation.Furthermore,we are striving to reduce CO emissions related to the development of containers,by promoting the use of recycled resins.In addition,in 2022 Shiseido participated in the CDP Supply Chain Program*2.The goal is to reduce CO emissions from the upstream supply chain,which accounts for over 40%of the indirect CO emissions in the value chain.In 2023,we selected suppliers that participate in the program,based on the spend and importance.We requested 50 companies worldwide to report their CO emissions,reduction targets,and other relevant information.We will use this information to calculate and reduce our Scope 3 emissions.To calculate and reduce Scope 3 emissions,it is crucial that our suppliers understand CDP and Scope 3.Therefore,in 2023,we held an explanatory session with CDP Worldwide-Japan for our suppliers in Japan.We will continue to support and collaborate with our suppliers to achieve our targets.Shiseido transports its products worldwide and is taking steps to reduce CO emissions when shipping its own products.For example,in Japan we conduct joint deliveries with other domestic companies to optimize transportation routes and improve loading efficiency.In February 2023,we introduced an electric truck into our vehicle fleet in Japan on a trial basis.The electric truck is expected to reduce CO emissions by 1 ton per year,and we plan to expand our fleet of electric vehicles moving forward.At our Beijing factory in China,we replaced the gasoline-driven shuttle bus for employee commuting with an electric one(EV),to reduce CO emissions from the shuttle bus.We also optimize the use and design of packaging materials according to the shape and volume of the products shipped and actively promote the reuse of protective materials used in transportation,as part of our efforts to reduce waste and CO emissions.We take these initiatives mainly for bottle suppliers that deliver frequently.In Japan,we are also progressively reducing packaging materials used in the process of transporting products from factories to each Selection and Use of Raw Materials that Reduce Environmental Footprint Reducing CO2 Emissions During Transportation*1 The design of chemical products and processes that reduce or eliminate the use or generation of substances that are hazardous to people or the environment.*2 The Carbon Disclosure Project(CDP)Supply Chain Program is an initiative in which member companies use the CDP platform to request that their suppliers disclose information related to climate change,water,and forestry.Shiseidos EV truckEV shuttle bus for employees commuting to and from our Beijing factoryContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202318Environmentretailer,as these materials have an impact on waste and CO emissions.Furthermore,in order to reduce CO emissions of the bottle delivery,we are collaborating with a bottle supplier that has multiple production sites to conduct production at the site closest to our production facility.In our exports from Japan to overseas destinations,the double stack palletization*1,which we introduced in 2022,further improved the loading efficiency in 2023.*1 A logistics process consisting of placing goods together on top of a pallet to consolidate the load at the warehouse.Environmental DataActions for Scope 3 Emissions by CategoryCategoryExplanationInternal dataEmission factors1Purchased goods and servicesEmissions generated from upstream of the supply chain,such as raw materials,advertising service,land use change due to palm-and paper-derived material production.Raw material procurement volumePOSM procurement volume,Advertising expensesPalm-and paper-related raw material procurementIDEA v3.1Ecoinvent 3.9Reference-1Reference-22Capital goodsEmissions generated from making capital goods.CAPEXReference-13Fuel and energy related activitiesEmissions generated in the process of mining,extraction,refining,transportation of energy and fuels.Amount of energy consumptionIDEA v3.14Upstream transportation and distributionEmissions generated from procurement transportation and shipping transportation.Raw material procurement volumeProduct volumeDistance between our factories and sales sites Means of transportationIDEA v3.1Ecoinvent 3.95Waste generated in operationsEmissions generated in the process of transportation and waste treatment from our operations.Waste generated by material type and disposal methodIDEA v3.16Business travelEmissions from employee business-related travelTravel expensesNumber of trips by destinationTransportation distanceIDEA v3.1Reference-17Employee commutingEmissions from employee commuting between home and Shiseidos siteCommuting expensesIDEA v3.1Reference-18Upstream leased assetsNot applicable.9Downstream transportation and distributionEmissions generated in storage and storesSales volumeProduct bottom areaReference-410Processing of sold productsNot applicable.The products sold do not need to be processed for consumer use11Use of sold productsEmissions from product use,such as rinsing,drying up.Energy,water,and consumable goods consumed in product useIDEA v3.112End-of-life treatment of sold productsEmissions generated in decomposition of ingredients,and the process of transportation and waste treatment from products soldAmount of carbon derived from fossil resources in the molecules that make up the ingredient and packaging componentsWaste generated by material typeIDEA v3.113Downstream leased assets Not applicable.14FranchisesNot applicable.15InvestmentsEmissions from unconsolidated affiliates and stock investees Scope 1 and scope 2 emissions of unconsolidated affiliates and stock investeesShareholding RatioCalculation methods of Scope 3 emissions1)Emission factor database for calculating GHG emissions of an organization through its supply chain v3.2 2)Germer,J.et al.(2008)Environment,Development and Sustainability,10,697-7163)Calculation method and Emission Factors for Reporting of Act on Promotion of Global Warming Countermeasures 4)The Chain Store Industrys Vision toward Carbon Neutral by 2050ContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202319EnvironmentSTRATEGIC ACTION 1Reducing Our Environmental Footprint Given the seriousness of the impact of climate change issues on business growth and social sustainability,Shiseido has been disclosing information with reference to TCFD/TNFD and ISSBs frameworks.We conducted qualitative and quantitative analyses of the risks and opportunities associated with the transition to a decarbonized society and changes in the natural environment due to climate change for both the 1.5/2C and 4C scenarios,as well as our major actions,over the short,medium,and long term.Regarding the natural environment,we identified quantitative long-term risks in consideration of biodiversity loss and dynamic states of water resources and disclosed them in Shiseido Climate/Nature-related Financial Disclosure Report.Climate/Nature-related Financial Disclosure InitiativesShiseido is promoting sustainability initiatives through our brands and regional businesses.Sustainability Committee was set up to ensure timely management decisions related to sustainability efforts and their proper implementation across the Group.In 2023,the committee was held regularly.The committee decides on Group-wide sustainability strategies,policies,and discusses specific topics such as risks and opportunities related to climate change and the natural environment,and actions for human rights,as well as monitors the progress of medium-to-long-term goals.The committee consists of the representative corporate executive officers and executive officers in charge of Corporate Strategy,Research&Development,Supply Network,Corporate Communications,and our Brand Holders,to discuss a range of issues from different perspectives.Important matters in the execution of business,which require approvals are proposed or reported to the Global Strategy Committee or the Board of Directors.In order to ensure executing and promoting of sustainability actions,a Sustainability TASKFORCE was set up under the Sustainability Committee,consisting of the heads of key relevant functions.At the Sustainability TASKFORCE,practical approaches to achieve our long-term targets are discussed with relevant functions,regional headquarters,and local subsidiaries as necessary.We conducted our scenario analysis for both the transitional and the physical risks/opportunities in terms of the 1.5/2C and 4C scenarios,respectively,based on the Representative Concentration Pathways(RCPs)and Shared Socioeconomic Pathways(SSPs)provided by the IPCC.Regarding transitional risk,the elements associated with the transition to a decarbonized society such as policy,regulation,technology,market,and consumer perceptions were considered.Physical risks related to the acute or chronic phenomena caused by the rise in temperature such as floods and water shortages were also considered.Based on these considerations,the financial impacts of the 1.5/2C and 4C scenarios were then analyzed.The influence of carbon tax was identified as the transition risk,with projections pointing toward approximately JPY 0.05-0.87 billion in 2030.For physical risks,JPY 0.89 billion of floods and JPY 3.5 billion of water shortage GovernanceStrategy(Scenario Analysis)ContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202320Environmentwere forecasted potentially.As for opportunities,in the 1.5/2C scenario,high awareness by consumers means there is a market for sustainable brands and products.Similarly,the 4C scenario identifies sales opportunities for products that can help people to live with high temperatures.At Shiseido,we aim to leverage these findings by mitigating risks and making the most of opportunities to provide sustainable products to consumers and promote our beauty innovations.Risks and OpportunitiesClick here for Shiseido Climate/Nature-related Financial Disclosure Report.Risk ManagementRisksOpportunitiesTransition(seen mainly in the 1.5/2C scenario)Carbon tax increase Fuel price increase Loss of sales opportunities for products using single-use plastics Improve energy efficiency Develop more ethical products(e.g.clean beauty)Physical(seen mainly in the 4C scenario)Acute Natural disasters stop operations(e.g.typhoons,floods)Natural disasters disrupt logistics Develop environment-friendly products Develop climate-adaptive solutionsChronic Changes in rainfall conditions impact the cost of procuring raw materials derived from crops Changes in rainfall conditions impact the cost of procuring raw materials derived from crops Risk factor analyzed qualitatively and quantitatively.For nature-related risks and opportunities,we conduct a quantitative analysis of the impact on biodiversity throughout the value chain by means of a Life Cycle Assessment.This revealed that the impact is great,particularly in raw material procurement.In response,we assumed places of origin of cosmetics raw materials with high dependence on biodiversity in line with the LEAP approach recommended by TNFD.We thus monetized ecosystem services by pollinators,such as honey bees,as physical risk analysis in the aspect of dependencies.At the same time,we analyzed risks on sustainability-related regulations as transitional risks along with climate change issues.We assess and identify the impactful risks holistically from a mid-to-long-term perspective.“Environmental(Climate Change,Biodiversity,etc.)”and“Natural Disaster,Infectious Disease and Terrorism”are listed as the categories related to sustainability.Climate-related and biodiversity-related risks are analyzed based on scientific and socioeconomic evidence and integrated into the enterprise risk management system as one of the elements related to climate change or natural disasters.According to their significance,the risks and their countermeasures are deliberated by the Global Risk Management&Compliance Committee and the Global Strategy Committee.The material risks are also proposed or reported to the Board of Directors as necessary.ContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202321EnvironmentMetrics and TargetsAwards Related to Reduction of CO Emissions*1 Scope 1 and Scope 2 emissions are the targets.Carbon offsets made by using credits are included.*2 SBTi is a global initiative that defines and promotes best practice in science-based target setting and independently assesses companies targets.*3 ICP price as of 2024:USD 130.0/t-COClick here for Shiseido Climate/Nature-related Financial Disclosure Report.CDP A List Encouragement Award from Life Cycle Assessment Society of Japan(JLCA)In order to mitigate the climate-related risks,we set the reduction of CO emissions as our target.We aim to achieve carbon-neutrality*1 by 2026 for Scope 1 and Scope 2 emissions.For CO emissions reduction targets of the overall value chain,our 2030 target,which conforms to the 1.5C trajectory,was accredited by SBTi*2 as a science based target,and we are working to reduce CO emissions.With regard to biodiversity,we are replacing paper and palm-derived raw materials,which have a large impact,with certified raw materials.To reduce Scope 1 and 2 CO emissions,we decided to introduce an internal carbon pricing(ICP)system in 2023 and began to apply it for making decisions on decarbonization investments in energy-efficient facilities,renewable energy facilities,and the similar.*3Shiseido was selected by CDP,an international NPO,as one of the companies in the A List 2023 in recognition of its leadership in transparency and performance in the fields of Climate Change and Forests.We were selected for the second consecutive year in Climate Change and for the first time in Forests.We were included in two A Lists for the first time.At the 20th JLCA Awards held in January 2024,Shiseido received the Incentive Award in recognition of its activities for“Climate-and Nature-related Risk Analysis Using LCA:Application to TCFD and TNFD Reports.”Awards ceremony,January 23,2024ContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202322EnvironmentIt is estimated that humans can use only 0.01%of all water on earth as fresh water resources.The increasing severity of water shortages has been a global concern due to population concentrations,which has been caused by changes to the industrial structure and urbanization progressing rapidly in developing and emerging countries in particular,as well as changes in weather conditions associated with climate change.Damage from climate disasters,such as major typhoons and drought,are also indirect causes of water problems.Sustainable use of water resources is expected to grow more important.According to long-term projections based on climate and weather,rainfall is forecast to remain stable toward the end of this century in Japan,where our major factories are located.Moreover,the consumption of water resources in the cosmetics industry is lower than in other industry sectors,so we believe that the impact of water shortages will be limited.However,water supports every aspect of our products,including the development of water-containing products such as lotions;the growth of plants as raw materials;temperature control and equipment cleaning at factories;consumption;and waste disposal.As stated in the Shiseido Environmental Policy,we regard an understanding of the water-related environmental impact and sustainable use of water resources as an important environmental issue from the perspective of the value chain,from product development to production and use.We implement initiatives accordingly.While a lot of water is needed at our factories,such as for motive power facilities,the reuse of water will enable a significant reduction in water consumption.At Shiseidos factories,we have introduced a Discharged Water Recycling System,with which we use some of the discharged wastewater as makeup water for motive power facilities.At factories,where we consume more water than we do at offices and research centers,we constantly monitor not only water intake but also the amount of water discharged,its temperature,and the quality of treated wastewater.We also conduct water environment research of the watersheds where our factories are located.Thus,we are working on water resource management(Water Stewardship*1)with our stakeholders.STRATEGIC ACTION 1Reducing Our Environmental Footprint Reducing Water Consumption*1 Using water in a way that is socially equitable,environmentally sustainable,and economically beneficial.Medium-to Long-term Targets and ResultsUse and Reduction of Consumption of Water Resources in Production ProcessRegarding direct use of water resources,we have set reduction of water consumption at our sites as a target and apply various methods to achieve this target.For example,as each Shiseido factory has various facilities and equipment tailored to the kind of cosmetics it produces,we design specific water reduction initiatives for each site.Examples of our water-saving initiatives include using automatic cleaning to ensure the manufacturing equipment is cleaned more effectively and consolidating the washing locations of equipment parts.At our Val de Loire factory in Francean area where rainfall is expected to drop in futureinitiatives like reduction of water consumption and redesigning the nozzles on our cleaning facilities successfully reduced the amount of water ContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202323EnvironmentWater Stewardship(Initiatives on Water Resources in Communities)used per clean by 30%.At our Shanghai factory in China,we have introduced a system for collecting,storing,and reusing wastewater from production of pure water used for cosmetics production.We reuse the wastewater as cooling water for cooling tower and for various other purposes.As a result of these aggressive reduction activities,in 2023 the overall water consumption at the Shanghai factory decreased by no less than 20%from the previous year.At our Hsinchu factory in Taiwan,we reuse 100%of the wastewater from our water purification systems as cooling water for cooling tower.To ensure more effective use of water,we focus on circular systems that clean water and reuse or recycle it within the process.At our Kakegawa factory,we launched a Discharged Water Recycling System in 2023.With this system,we recycle some of the discharged wastewater to use it as makeup water for motive power facilities,in an effort to make efficient use of water resources and reduce their consumption.This has enabled cyclic use of wastewater from production process,which was discharged before.Use of this system enables to reuse approx.12,000 m3 of water every year.It means water reduction equivalent to approximately 15.6%of water consumed at the Kakegawa factory.At our Osaka Ibaraki factory in Japan,we introduced a circular system that utilizes re-used water to cool the manufacturing tanks.This system enables an annual reduction in water consumption of around 65,000 m3.Other new water utilization initiatives include optimizing our pure water manufacturing equipment as we have done at our Nasu factory in Japan,for example.Pure water manufacturing consumes approximately half of all water used at the factory.Through this initiative,as well as other water recycling schemes,we reduced our annual water consumption by around 72,000 m3,an amount that is approximately one third of the factorys annual water usage.At our Gien factory in France,we switched from water-based cleaning to alcohol-based cleaning for our fragrance manufacturing equipment and transportation components.The alcohol used is cleaned and reused in the process repeatedly.Water treatment facilities at Nasu factory(Japan)To effectively use water resources,we are engaged in the management of water resources as common property of the water basin,including secondary use in cooperation with communities.Nasu factory,one of our major factories in Japan,is located in a vast fan-shaped area(Nasunogahara),which was formed through the deposition of a highly permeable gravel layer.Rainwater readily permeates the ground in this area,making it difficult to use surface water(river water).Therefore,at our Nasu factory,we use groundwater pumped up from a water-bearing layer that lies 150 meters below the ground surface.In an area like this,used water is also a valuable resource.We therefore treat it appropriately into wastewater whose quality conforms to our own strict standards,which are tougher than local ordinance standards,before releasing it into local canals.Thus,the water is reused as agricultural water.Reflecting these geographical characteristics of the watershed where the Nasu factory is located,we believe that understanding the water environment in the overall watershed is important for sustainable use of water resources.Consequently,we are conducting water environment research of the overall Nasunogahara area.We studied Water resources,field investigation:Professor Oki,professor Yoshida and senior researcher Kiguchi of the University of Tokyo and members from Shiseido.ContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202324EnvironmentEngaging Stakeholdersgroundwater sampled at the factory by combining a hydrological model simulation,in which water flows of the overall Nasunogahara area are reproduced on computer,as well as an onsite survey of the watershed around the factory.Findings of the research show that water discharged from the factory nurtures various living things in the surrounding area as it wets local farmlands and pours into rivers.At our Shanghai factory in Chinawhich is located in a water-stressed*1 areawe participate in a local environmental protection association and proactively obtain environmental information,such as environmental laws and regulations regarding factory activities.We also report monthly water consumption to the government,which promotes water conservation and is working to improve water utilization rates and strengthen water conservation management.In the area around our Val de Loire factory in France,rainfall volumes are expected to fall in future.Therefore,we regularly share information with other local industries on good water practices to decrease water consumption.As our Water Stewardship initiative,we have been engaging with local governments and relevant organizations from the watershed of Nasunogahara,where Nasu factory is located,based on our scientific understanding of the overall area obtained through our research.We have also had the research findings and direction of our initiatives reviewed by external academic experts.Shiseido aims to build a Water Stewardship in collaboration with its stakeholders,towards a more comprehensive,sustainable use of water resources,and moreover for protection of biodiversity in watersheds.We ask our suppliers to provide information on their water usage through self-assessment questionnaires such as Sedex and Shiseido SAQ,and strive to ascertain water-related environmental impacts.*1 A situation where there is not enough water of sufficient quantity to meet the demands of people and the environment.ContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202325EnvironmentAs population growth continues and income levels rise,resource consumption and waste increase.To make more effective use and reuse of limited resources,it is important that businesses shift from a disposable,linear economic model to a circular economy.At Shiseido,we are doing this by optimizing the use of raw materials and reducing waste throughout our entire value chain,while complying with all relevant waste management rules in the countries and regions where we operate.STRATEGIC ACTION 1Reducing Our Environmental Footprint Reducing WasteMedium-to Long-term Targets and ResultsReducing,Reusing and Recycling Waste*1 “zero emissions”is a concept defined by UN university in Japan.Recycled waste:99.5%or higher(excluding waste designated as landfill by law)*2 Excluding waste designated as landfill by lawAt Shiseido,we continuously work to reduce,reuse,and recycle the waste we generate.In 2003,we achieved“zero emissions*1”at our domestic factories in Japan,and we continue our waste separation and recycling activities to this day.To give a specific example,we use dehydrators and dryers to minimize the amount of sludge generated by our factories during wastewater treatment.In addition,at our Nasu factory,we have changed the delivery method of certain liquid raw materials from the use of drum cans to delivery by tank trucks.We have thus reduced the generation of waste drum cans as a waste reduction initiative.We also reuse shipping boxes,sort waste by material strictly for recycling them,and undertake other activities for reusing and recycling waste.In 2023,we entirely reviewed cardboard boxes,plastic packaging,and other packaging containers used for product transportation,in a project to reduce the outermost packages.We are moving forward with initiatives to minimize the use of resources while ensuring product quality.We also recycle waste plastics,not to mention cardboard boxes and paper used in transportation,into valuable resources.We compress and melt the waste plastics to reduce their volume before recycling them.While our target was to achieve zero waste*2 to landfill from our factories worldwide by 2022,the actions above enabled us to achieve the target in 2020,two years ahead of schedule,and we have maintained zero waste to landfill to the present.We are also engaging in various initiatives to minimize waste generated outside of our factories and branch offices,including streamlining our product containers and packaging,eliminating package inserts,and switching to cardboard boxes with lighter weight.Moreover,we also work to limit product waste by minimizing excess inventory through improved precision in demand forecasts and shorter lead times in production and procurement.ContentsTop MessageSocietyGovernanceData Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementSUSTAINABILITY REPORT 202326EnvironmentEmployee EducationEnvironmental DataAll our waste reduction initiatives are driven by our PEOPLE.Therefore,we arrange online seminars and training sessions for newly appointed managers and employees in charge of industrial waste in Japan.When we outsource the disposal of waste from our factory or office to a waste disposal contractor,we make sure to assess the contractor,ensure that industrial waste is disposed of appropriately,ensure that a manifest is delivered,and inform the importance of onsite confirmation to the contractor.Following the seminars and training sessions,each participant should be able to identify how to effectively manage waste with the help of our internal guidelines and checklists.ContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202327 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentDeveloping Sustainable ProductsWe are facing a crisis stemming from the finiteness of resources,a result of economic activities exceeding the limits of the planets receptiveness and resilience.We also face issues including climate change,biodiversity,other environmental issues,and population explosion.Manufacturers are expected to follow green chemistry principles towards the development of a circular economy,which is premised on both making effective use of resources to reduce their environmental footprint throughout the product lifecycle and recycling resources.Shiseido positions Sustainability INNOVATION as an important research area and one of the three pillars of its Research&Development strategy for 2030.To achieve this,we have adopted Premium/Sustainability as a research approach under DYNAMIC HARMONY,our unique Research&Development philosophy,based on our compliance with high safety and quality standards that we have had in place for more than a century.We will step up to the challenge of creating sustainable innovations,which balance satisfaction stemming from the results,high-quality design,and feel of our products with respect for and coexistence between people,society,and the global environment.STRATEGIC ACTION 2DYNAMIC HARMONYEnvironmental PolicyShiseido Quality Principle2025By201920202023Disclosed our product development policyRevised in 20242019Disclosed our packaging policy2020Disclosed Shiseido Quality Principle2023Formula/IngredientsFor sale of products with plastic packaging2023 Results 690%Switching to sustainable packagingPackagingShiseidos 5RsContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202328 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentIn line with green chemistry principles,we carefully evaluate our raw materials,ingredients and formulas to ensure they are safe for the human,have minimal environmental impact,and use natural and upcycled materials sourced through ethical procurement.We comply with all relevant regulations in each country where we operate.In addition,we have our own in-house standards for ingredientsand only select ingredients that meet our strict safety,environmental,and ethical standards.Our Global Innovation Center in Yokohama,Japan,which manages all regional centers,is working to select raw materials and develop formulations that are not only safe and functional but also respect the environment.Shiseido develops and provides safe and high-quality products and services based on more than a centurys experience in dermatology and material science.At Shiseido,we want to help tackle issues concerning peoples health and the environment.Therefore,we disclosed our Corporate Product Development Policy,in which we have summarized our policies on product development(formulas and packaging)and use of ingredients and raw materials that could be concerning for consumers.We also monitor trends in product-related regulations,such as PPWR*1 and ESPR*2 in EU,in developing our products.Cosmetics formulations include natural raw materials.Therefore,sustainable and responsible procurement and the use of raw materials is of the utmost importance from an environmental perspective.Based on the idea of the product lifecycle,we focus on developing formulas and ingredients,packaging,and circular recycling models that are aimed at making effective use of limited resources,mitigating climate change,and minimizing our impact on ecosystems.At Shiseido,the proportion of CO emissions from raw material procurement are high among Scope 3 CO emissions.This has made it imperative to reduce CO emissions through selection of raw materials.Cosmetics formulations include natural raw materials.We work with our suppliers to reduce CO emissions by shifting to bio-based raw materials in line with the green chemistry principles.STRATEGIC ACTION 2Developing Sustainable ProductsReducing Environmental Impact Based on Our Product Development Policy and the Concept of Product LifecycleRaw Material Development Aimed at Reducing CO Emissions and Switching to Bio-based Raw MaterialsFormulas/Ingredients*1 EU Packaging and Packaging Waste Regulation*2 Ecodesign for Sustainable Products RegulationClick here for Product Development Policy(About Ingredients/Formulas)Our Approach for Chemical SubstancesContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202329 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentIn 2022,Shiseido joined the MATSURI project,the worlds first corporate joint project to explore how algae can be used to drive a sustainable future,which is led by the CHITOSE Group.Powered by the sun,algae absorb CO through photosynthesis,while also generating useful proteins,lipids,and carbohydrates.More extensive use of algae is expected to contribute to lower CO emissions in future,where algae products can replace fossil-derived raw materials.In 2023,Shiseido invested 1.0 billion yen in the CHITOSE Group and signed a strategic collaboration agreement focused on R&D with the Group.The purposes of this initiative include the development and mass production of cosmetics and container raw materials using algae,as well as the development of raw materials which can be used in the food industry.To maximize the potential of algae,we will work together with MATSURI Project partner companies in ending the use of fossil resources for cosmetics.Exploring the Possibilities of Algae in the MATSURI ProjectUV CareWe are accelerating innovation in the field of suncare to protect against UV and pursue coexistence between people,their ecosystems,and the environment.The effect caused by the climate change,UV exposure for people around the world is expected to increase*1.Exposure to UV rays over extended periods of time causes spots and wrinkles on the skin symptoms of photoaging.Recognizing the importance of innovations for protecting beautiful skin from UV,we will enhance our research efforts to provide products and services with added benefits.Because suncare products are used in the sea,we believe that we need to address their environmental impact appropriately as a company.We are assessing the impact that UV filters used in suncare products have on the ocean.This includes working with universities and research initiatives to assess the impact of each UV filter used in our products on coral*2,and performing simulations*3 of how suncare products spread into the ocean when used by people at the seashore.We are utilizing the results of these assessments for ingredient selection and the development of coral-respecting formulas,while applying them to suncare product development for both SHISEIDO and ANESSA.In 2023,in order to evaluate the impact of cosmetic ingredients on marine ecosystems,we began a partnership agreement with Innoqua Inc.,a start-up company with proprietary technology that reproduces ecosystems in an aquarium.The aquarium can reproduce possible future environmental change scenarios,including rising seawater temperatures,which are predicted to have a tremendous impact on marine life.This allows us to evaluate the impact of various cosmetic ingredients,such as those used in sunscreen,on the entire marine environment,including coral and other organisms.Click here for the news release regarding MATSURI.Marine Protection InitiativesClick here for Corporate website:Research on SustainabilityClick here for Brand website:SHISEIDOClick here for Brand website:ANESSAClick here for the news release regarding Innoqua Inc.(In Japanese only)*1 According to an announcement by the Japan Agency for Marine-Earth Science and Technology.*2 Egg-laying size groups of coral,excluding those in the planktonic larval and juvenile stages.*3 Utilizing the Tokyo Bay risk assessment model developed by the National Institute of Advanced Industrial Science and Technology.Artificial marine ecosystem reproduced in an aquarium using environmental transfer technology developed by Innoqua Inc.Photo:Innoqua Inc.ContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202330 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentNo Animal TestingProcuring Sustainable Raw MaterialsWe strive to provide safe and effective products to consumers while complying with cosmetics regulations and respecting the principles of animal protection.For more than 40 years after we established a safety research department in 1963,we continued to study alternative methods which do not involve animal testing.In 2013,we abolished animal testing entirely*1 and shifted to a safety assurance system that does not use animals.We have established a safety assurance system with our unique strict standards.Working together with external stakeholders,we are striving to establish alternative methods,which were developed on our own or jointly with other companies,as official methods.In February 2023,we announced our involvement in the newly launched International Collaboration on Cosmetics Safety(ICCS).A global project involving manufacturers,suppliers,industry associations,and animal protection organizations,ICCSs goal is to promote and implement animal-free safety assurance in the development of cosmetics and personal care products.Shiseido will promote and implement the safety assurance of cosmetics without animal testing through the sharing of technologies and knowledge on alternative methods of animal testing,discussions and collaboration with related companies and organizations,and approaching the regulations of each country and region.Shiseido strives to procure environmentally friendly,sustainable raw materials.Palm oil is used in cosmetics and household goods for a range of purposes,including as a humectant and as an oil.However,palm oil production can have a significant impact on the environment.We have disclosed our medium-to long-term targets for the procurement of sustainable palm oil,as well as our goal to switch from palm oil to more sustainable raw materials.Click here for Safety Assurance Without Animal TestingPromoting Sustainable and Responsible Procurement*1 Except when required by governmental and regulatory authorities.ContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202331 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentBrands That Cater to Consumer NeedsWhen selecting a product,consumers increasingly place importance on a companys approach to social responsibility,environmental protection,and ethical raw material sourcing.At Shiseido,in addition to disclosing our corporate policy on ingredient and raw material sourcing,we work to develop brands with a strong environmental,social and ethical profile.Drunk Elephant originating in the US,for example,is a leading brand in the clean beauty market sold in 40 countries and regions,known for its sustainable and responsible raw material procurement as well as its promotion of sustainable action.Taking this stance,the brand has gained significant support from Millennial and Generation Z consumers.In 2022,we launched the Ul skincare brand in France.Based on plant-derived ingredients,Ul promotes beauty both inside and outside the body.The brand emphasizes responsible procurement,product efficacy and safety,lower environmental impact,and transparency.To ensure clearer raw material traceability and reduce environmental impact from transportation,the brand buys its three botanical treasures(centella,coleus and tulsi)and produces all its products locally in France.The names and origins of the raw materials can be found on the brand website.UlContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202332 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentWe understand that the Earths resources are limited.In line with Shiseidos 5Rs packaging development policy,we are reducing the amount of plastic we use and reducing our impact on the environment by such as optimizing the size of packaging to suit the product,reducing packaging weight and offering refillable packaging.Refillable packaging significantly reduces resource use.By encouraging the reuse of main packaging,it is possible to reduce the total amount of plastic Climate change and marine plastic waste are pressing environmental issues that need to be addressed on a global scale.It is expected that the Global Plastics Treaty(a resolution of the United Nations Environment Assembly approved by over 175 countries in Nairobi in 2022 which calls for urgent action to end plastic pollution globally by 2040)will be signed by the end of 2024.Shiseido aims to realize a circular economy where all materials are responsibly managed during production through efforts such as recycling to minimize the impact on our ecosystem.It is expected that the interest of consumers and other stakeholders in climate change and other environmental issues will continue to rise.Adapting to changes in societal awareness through product development and other means,is extremely important for the sustainability of our business.Based on the Shiseido 5Rs packaging development policy*1,Shiseido is working to reduce its environmental footprint and contribute to realize a circular economy.To achieve our goal of 100%sustainable packaging*2 by 2025,we are adopting recyclable and reusable designs,using bio-based and post-consumer recycled(PCR)materials,reducing packaging weight and encouraging refills to promote reused packaging.We have also started initiatives designed to reduce the amount of virgin petroleum-based plastic used by adopting non-plastic alternative materials,and we are introducing mono-material packaging to improve recyclability.*3 In addition,we aim to build a Shiseido circular business model that recycles used packaging as new resources in collaboration with consumers and external partners.Sustainable PackagingSTRATEGIC ACTION 2Developing Sustainable ProductsMedium-to Long-term Targets and ResultsProducts with PackagingReduce and ReuseRespectReduceReuseRecycleReplaceShiseidos 5Rs*1 Packaging development policy:respect,reduce,reuse,recycle and replace.*2 For sale of products with plastic packaging.*3 Amount of plastic packaging used in Japan in 2023(Including estimates):9,600t.ContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202333 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentused for packaging.Our Life Cycle Assessment confirms that refillable packaging lowers resource use and waste and significantly reduces CO emissions compared to the continuous disposal of regular(primary)packaging.To significantly contribute to the reduction of the environmental impact,we aim to promote the development of these products widely,not only in Japan but also on a global scale.Since we launched our first refillable product in 1926,we have provided refillable packaging in a wide range of product categories,including skincare and makeup.In 2023,we offered refillable packaging for about 740 stock keeping units(SKUs)within 31 brands globally in an effort to reduce the amount of plastic and ultimately,to reduce the environmental footprint.This included increasing the amount of refillable packaging in our prestige skincare brand Cl de Peau Beaut and launching refillable packaging for the cream LA CRME,which uses 95%*1 less plastic than its regular(primary)packaging.In 2023,the brand launched new refillable packaging for five new products,including SRUM RAFFERMISSANT SUPRME n.In 2023,sales of refillable packaging from Cl de Peau Beaut increased approximately 23%year on year.Before launching a refill option for the IPSA loose powder that became available in 2023,we redesigned the main container to improve durability and to make it more suitable for repeated use.We are also incorporating innovative technologies to reduce environmental impact.In 2023,the brand SHISEIDO,which operates in 88 countries and regions around the globe,became the first company to sell cosmetics using container made with LiquiForm technology.*2 It is a one-step technology for manufacturing bottles and filling them with liquid content.Refillable cosmetics container made using LiquiForm can reduce plastic usage per container*3.Moreover,this technology,inclusive of the reduction of energy consumption through the one-step technology,can reduce CO2 emissions by approximately 70%*4 throughout the supply chainfrom raw materials procurement and production to use and disposalcompared to our standard conventional refillable container of the same volume.We will raise awareness of refillable products by launching them not only in Japan but also in other Asian countries and regions,including China.We will also strengthen our activities to achieve toward a circular economy that seek the cooperation of consumers.In 2024,Ul,a skincare brand that promotes beauty both inside and outside the body,launched a refillable option made from 100%recyclable materials for cleansing gel Dream of Pure.The refill helps reduce plastic and aluminum usage by 23%and 100%respectively,as opposed to purchasing new packaging.In 2023,the luxury brand Serge Lutens launched a fragrance that strikes a delicate balance between sustainability and luxury.The refill packaging is made from 100%recyclable aluminum in consideration of environmental impact.IPSA and Ul.Left:main container,Right:refill/refill container.*1 Weight ratio of regular(primary)packaging*2 The new packaging technology was developed chiefly by Amcor.Shiseido worked with Yoshino Kogyosho,a company that has put the technology to use,to jointly develop cosmetic packaging.*3 Comparison with a refillable container of the same volume,not including contents*4 CO2 emissions per unit for both our existing refillable container and the Liquiform-based refillable container(not including contents)have been verified by the SuMPO Environmental Label Program(in accordance with ISO/TS14067:2013).Figures were compared by Shiseido.Cl de Peau Beaut and SHISEIDO.Left:main container,Right:refill/refill container.ContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202334 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentRecycleReplacePOSMTo realize a circular economy,it is important to select materials and design products with the reuse of resources in mind.To reduce our consumption of single-use plastic,we are developing packaging made from a material that can be more easily sorted and reused/recycled after use without compromising the quality of the packagings design.In 2023,a number of our brands launched products with packaging that is easier to recycle,including SHISEIDO and Cl de Peau Beaut.In addition,the tube packaging for SIDEKICK a cosmetics brand launched for young male consumers in 2022 is made of easily recyclable aluminum.To mitigate climate change and marine plastic pollution,we are focusing on the research of post-consumer recycled(PCR)materials,plastic alternatives,and bio-based materials with low environmental impact and promoting their use.For example,packaging of some Cl de Peau Beaut and ELIXIR products is made from recycled plastic.Over 72%of the PET in the bottles of ELIXIR facial lotion and emulsion is recycled.In 2023,as part of our global sustainability initiatives,a limited edition design of facial lotion and emulsion featuring Doraemon has been released to demonstrate our commitment to enhancing not only the beauty of individuals skin but also ensuring a radiant future for our world.Again,over 72%of the PET used in these bottles is recycled.The facial lotion and emulsion refills help reduce plastic usage by over 85%*1 and CO emissions by 85%.*2We also use some plant-derived bio-based plastic in the outer packaging of our ANESSA suncare brand.BAUM,which celebrates and honors our connection with nature,offers environmentally friendly products.Packaging,for example,use sustainable raw materials such as upcycled wood left over from furniture industry,plant-derived or recycled plastic,and recycled glass.Additionally,many containers are refillable.Products secondary packaging that is made from plastic is being replaced with paper alternative.In addition,Point of Sale Materials(POSM)used at retail stores,such as drug stores,and counters that are made from plastic will also be replaced with paper alternatives in due course to further reduce the amount of plastic we use.In 2022,we switched approximately 70%*3 of our plastic POSM in Japan to paper.At Shiseido,we published the POSM Eco Design Guideline in 2023 for the purpose of reducing the environmental impact related to the lifecycle of promotional materials,including in-store display tools and shopping bags.Based on the guideline,we promote the development of POSM materials in line with the Shiseidos 5Rs*1.We will work with our stakeholders to reduce our environmental impact in the manufacturing of not only our products but also promotional materials.SIDEKICKELIXIR facial lotion and emulsion and a limited edition design of same products featuring DoraemonBAUM facial lotion*1 Comparison between the existing main container and refill*2 Comparison of the existing main container and refill in terms of CO emissions per packaging.The evaluation was carried out by Shiseido using Japan EPD Program by SuMPO(which complies with ISO/TS14067:2013)Calculated using the container of the facial lotion sold in September 2022 and onward*3 For promotional materials of premium Japanese brands,such as set cases and hooks.*1 Packaging development policy:respect,reduce,reuse,recycle and replace.ContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202335 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentParticipation in Related InitiativesR Plus Japan Ltd.Click here for Press Release:R Plus JapanIn March 2020,Shiseido became the first WIPO GREEN*1 partner company from the cosmetics industry.In 2022,we granted Toyo University a license to use our low-energy manufacturing technology,which is listed in the WIPO GREEN database.In 2022,the university developed a prototype of an environmentally friendly product that uses the extract from boysenberries,a local specialty of Tatebayashi City,Gunma Prefecture.The product began to be sold via crowdfunding in 2023.Initiatives with External InstitutionsGranting Technology License to Toyo University for Environmental Impact ReductionTo play a part in solving the global plastics recycling challenge,Shiseido invested in R Plus Japan in 2022 and engaged in recycling used plastics.By bringing together companies across the plastic packaging industry from monomer and polymer manufacturers to packaging producers,trading,food and beverage companies R Plus Japan aims to commercialize an efficient,low-environmental impact recycling technology by 2030.*1 The World Intellectual Property Organization(WIPO)is a specialized agency under the United Nations,responsible for developing international intellectual property systems.WIPO GREEN is an international framework for promoting innovation in environment-related technologies,and has more than 150 partner companies.As of April 2023,Shiseido had licensed out 11 patented technologies registered in the WIPO GREEN database.ContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202336 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentShiseido started a new scheme to collect used plastic cosmetics packaging in stores,utilizing a wide range of business partners and consumer touchpoints.As well as increasing consumer awareness about the value of used containers as a recyclable resource,we hope the scheme will help drive wider behavioral change in society and encourage competitors and companies in other industries to implement circular models.Initiatives to Build a Circular ModelSTRATEGIC ACTION 2Developing Sustainable ProductsTo support and promote recycling,we collect used cosmetics packaging in-store and recycle it as new materials.We work with multiple parties to ensure containers are recycled fully and correctly,including customers,waste collection companies,and other companies.In 2023,in Japan,we collected around 49,000*1 used containers through 88 AEON stores in collaboration with Aeon Retail Co.,Ltd.,TerraCycle Japan*2,and other companies.In-store Collection and RecyclingWhen developing cosmetic containers,protecting the contents,ensuring ease of use,and giving the premium look and feel are considered and designed.As a result,they have to be made from a wide variety of plastics,which can make it challenging to recycle them back into reusable plastic resources.To solve this issue,Shiseido launched an initiative in 2022 in collaboration with SEKISUI CHEMICAL CO.,LTD.and Sumitomo Chemical Co.,Ltd.The initiative involves creating a circular economy in which plastic cosmetics containers are collected and recycled without separating the materials.We are planning to manufacture recycled plastics in the future by collecting used cosmetic packaging,which we then turn into new cosmetic packaging.The three companies will be advancing this cross-sectoral alliance,while also calling on related industries and companies to join the effort to create a circular economy.Collaborating to Build a Circular Model for Plastic Cosmetics ContainersClick here for Press Release:Collaborating in Building a Circular Economy for Plastic Cosmetics Containers*1 Collection period:January 2023-December 2023.*2 TerraCycle is a US-based social enterprise whose mission is“Eliminating the Idea of Waste“.ContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202337 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentIn April 2023,we launched the“BeauRing”project a circular model project to collect and recycle plastic containers into new ones for reuse.We began collecting used containers from several Shiseido product retailers in Yokohama and the Shiseido Global Innovation Center in Yokohama.The POLA brand of POLA ORBIS HOLDINGS INC.joined in the project.As well as driving in-house initiatives,we are encouraging other companies to join the project to expand the circle of resource circulation and,ultimately,create a sustainable society in which consumers use cosmetics with a more positive mindset.“BeauRing”Circular Model Project for Plastic Cosmetics ContainersClick here for Press Release:Circular Model Project“BeauRing”In 2023,Shiseido launched a joint recycling initiative in China with a packaging material supplier.We recycle used plastic bottles for the cosmetics of the AUPRES brand,which we market in China.The bottles were made into desks and chairs by applying the suppliers recycling technology.They were donated to Hope Elementary School in Sichuan province.Recycling Initiatives in ChinaBeauRing BOXBeauRing logoContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202338 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentPromoting Sustainable and Responsible ProcurementSTRATEGIC ACTION 3Value chain,or procurement in particular,involves various sustainability issues including CO emissions,water resources,biodiversity,and human rights at suppliers.Companies are required to check for problems in operating their businesses and to strengthen cooperation not only internally but also with suppliers to ensure the traceability of raw materials.At Shiseido,we utilize the worlds natural resources,which are finite,to develop products and operate our business.To our suppliers,we present a policy,standards,and guidelines,the links to which are indicated below.Shiseido Group Procurement Policy defines our expectations to suppliers in terms of environmental and human rights,outlining a strict and objective process for identifying and correcting supplier risk through third-party audits and supplier sustainability evaluations.Shiseido Group Procurement PolicyShiseido Group Supplier Code of ConductShiseido Group Sustainable Raw Materials Procurement Guidelines202220192026BySupplier managementPaperSuch as certified paper and recycled paper,paper weight basis2023 Results 100hieved100%Replacement with sustainable paperRevised Shiseido Procurement PolicyShiseido Group Sustainable Raw Materials Procurement Guidelines2022Disclosed Shiseido Group Supplier Code of Conduct2019Palm oil100%Replacement with sustainable palm oilCertified based on RSPOs physical supply chain model:identity preserved,segregation,and/or mass balance,palm oil equivalent basis2023 Results 51%ContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202339 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentShiseidos business activities rely on natures rich biodiversity.In recent years,many scientists and non-governmental organizations have warned of rapid biodiversity loss.As a result,from both a species conservation and sustainable business perspective,companies are being called upon to ensure transparent information disclosure regarding the relationship between business and the natural environment and to engage in biodiversity conservation activities.Generally,in raw material production areas,there are concerns over not only the loss of biodiversity caused by overexploitation but also violations of the human rights of the people working there.STRATEGIC ACTION 3Promoting Sustainable and Responsible ProcurementBiodiversity Initiatives and Procurement of Raw MaterialsBiodiversity Initiatives andProcurement of Raw MaterialsMedium-to Long-term Targets and ResultsAt Shiseido,we have analyzed the relationship of our business with terrestrial,freshwater and marine biodiversity and found that our business has a significant dependence and impact on terrestrial ecosystems,especially in the procurement of raw materials.In particular,palm oil and paper have a material impact,so companies are required to be proactive in taking measures.In 2020,we published our medium-to long-term targets for the sustainable procurement of palm oil and paper,and we are currently in the process of switching to more sustainable raw materials.For the procurement of palm oil and paper,we support the principles of the No Deforestation,No Peat,No Exploitation(NDPE).We request suppliers to ensure compliance with NDPE as stated in the Shiseido Group Sustainable Raw Materials Procurement Guidelines.We are also strengthening our efforts to solve issues related to the mining of mica.By clarifying our own procurement policy and building a support system in collaboration with other companies,we aim to create positive change in the mica mining industry.At Shiseido,we use the Taskforce on Nature-related Financial Disclosures(TNFD)framework and the LEAP Approach to analyze risks and opportunities around our business activities dependence and impact on nature.To fulfill the responsibilities of business site managers,we requested MS&AD InterRisk Research&Consulting,Inc.,which has TNFD members,to conduct detailed surveys focused on rare species habitats and reserves and the status of water resources in areas around our sites,including factory premises.We analyzed them from the perspectives of preciousness and importance(identified sensitive locations and material locations).We also analyzed them by means of a Life Cycle Assessment for the purpose of assessing indirect impacts given via the value chain.For raw materials originating from agricultural products,which were identified as a factor with a significant impact,we converted the value of Corporate Initiatives on BiodiversityContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202340 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentClick here for Environmental Policy(Biodiversity/Forests)Click here for the details on the activities of the SHISEIDO BLUE PROJECTClick here for the news release regarding the nature conservation activities on Mt.Ibuki.(In Japanese only)ecosystem services by pollinators,such as honey bees,into monetary values and thus visualized the level of our dependence on biodiversity in procurement.We summarized and disclosed results of these analyses in a Shiseido Climate/Nature-related Financial Disclosure Report in 2023Based on the results of the analyses we conducted,going forward we will drive sustainable business activities which are in harmony with nature and biodiversity by working together with suppliers,external experts,and other stakeholders,with a strong awareness that recovering and regenerating biodiversity is essential.Shiseido Group Sustainable Raw Materials Procurement GuidelinesClick here for Shiseido Climate/Nature-related Financial Disclosure ReportShiseido engages in a wide range of biodiversity protection activities through many of its brands and business operations in regions.Since 2019,brand SHISEIDO has been implementing the SHISEIDO BLUE PROJECT,a global initiative to protect the oceans under the theme Respect for the Ocean.”As a Global Sustainability Partner for the global home of surfing World Surf League,the brand has worked together with local communities and NGOs to implement activities including beach clean-ups and dune planting to create even more beautiful oceans.In 2023,the fifth year of this partnership,WSLs official suncare partner SHISEIDO co-sponsored the Tahiti Pro held in Tahiti,French Polynesia as its title sponsor,while also continuing environmental conservation activities.BAUM was established to celebrate and honor our coexistence with trees.In October 2023,the brand planted seedlings at BAUM Oak Forest in Morioka City,Iwate Prefecture for the third time,in collaboration with Iwate-ken Shinrin Seibi Kyodo Kumiai(Iwate Prefecture Forest Development Cooperative)and Sumitomo Forestry Co.,Ltd.Since launching in 2020,the brand has carried out these plantings as a way to give back to nature rather than only receiving the blessings of trees.As part of its sustainability efforts,BAUM will continue to use wood from its forests in product packaging.In Japan in 2022,we began nature conservation activities on Mt.Ibuki*1,an area where medicinal herbs have been cultivated for centuries.In addition to opening our own medicinal herb garden and cultivating herbs,we are working alongside the Reiho Ibukiyama Associationwhich works to protect the nature around the mountainto restore vegetation and preserve the abundant nature in the mountains foothills.In 2023,to make full use of unused herbs from Mt.Ibuki,we developed SOYU,herb bath powder,jointly with Matsuda Chemical Industries.We used this product as a reciprocal gift in crowdfunding for nature conservation activities on Mt.Ibuki.Biodiversity Initiatives by Brands and Other Activities*1 A semi-independent peak among the Ibuki Mountains,which connect Maibara City in Shiga Prefecture and the Ibi/Fuwa districts in Gifu Prefecture.1,377 meters high and one of the 100 famous Japanese Mountains.ContentsTop MessageSocietyGovernanceDataSUSTAINABILITY REPORT 202341 Reducing Our Environmental Footprint Developing Sustainable Products Promoting Sustainable and Responsible ProcurementEnvironmentBees play an important role in the pollination of crops.There are concerns around the declining population of honeybees.So our Val de Loire and Gien factories in France have incorporated the protection of honeybees and the conservation of ecosystems into their sustainability plans.As well as setting up beehives onsite,both factories prohibit the use of agrochemicals on factory grounds.In 2023,the factories beehives produced around 179kg of honey.Palm oil is a highly versatile raw material used in a variety of products from food to cosmetics.However,its production has caused significant challenges,including deforestation and human rights issues.Therefore,it is essential for companies to ensure sustainable and responsible procurement of this raw material.In 2010,as part of our efforts in this area,we joined the Roundtable on Sustainable Palm Oil(RSPO),an international non-profit organization.In 2023,we purchased RSPO credits equivalent to 100%of the palm oil-derived raw materials we procure.In 2020,we disclosed our medium-to long-term target of reaching 100%sustainable palm oil in our products by 2026.The relevant teams in our global and regional headquarters have been working to achieve this target ever sin
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2024 REPORTROOTED IN PROGRESSBUILDING OUR SUSTAINABILITY AND SOCIAL IMPACTCONTENTSpage 01About this reportpage 02Introductionpage 04Our approach page 11Our associates page 24Our customerspage 26Our communities page 30Our planetpage 39Governance,ethics and compliance,data privacy and security page 43Appendix12024 SUSTAINABILITY AND SOCIALIMPACT REPORT About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix ABOUT THIS REPORT Dollar Tree,Inc.has been reporting on the sustainability and social impact issues that are most critical to our people and our business since 2011.Forward-Looking StatementsStatements within this Report and on DollarTree,Inc.s website regarding the Companys environmental and social sustainability initiatives and future operating results,outlook,growth,plans and business strategies,including statements regarding projected savings and anticipated improvements to the Companys business and sustainability metrics as a result of its initiatives and programs,such as our net-zero goals and commitments,as well as any other statements that are not related to present facts or current conditions or that are not purely historical,constitute forward-looking statements.These forward-looking statements are based on the Companys historical performance and its plans,estimates and expectations as of July 2024.Forward-looking statements are not guarantees that the future results,plans,intentions,or expectations expressed or implied by the Company will be achieved.Matters subject to forward-looking statements involve known and unknown risks and uncertainties,including economic,legislative,regulatory,competitive,and other factors which maycause actual financial or operating results,levelsof activity or the timing of events to be materially different from those expressed or implied by forward-looking statements.Important factors that could cause or contribute to such differences include execution of the Companys plans and its success in realizing the benefits expected to result from its initiatives and programs,including its sustainability initiatives,and the other factors set forth in PartI,“Item 1A.Risk Factors”in the Companys 2023 Annual Report on Form 10-K,as may be amended or updated in the Companys Quarterly Reports on Form 10-Q or other filings withthe SEC.Except as required by law,the Company specifically disclaims any obligation to update any forward-looking statements as a result ofdevelopments occurring after the date of this report,even if its estimates change,and you should not rely on statements contained herein as representing the Companys views as of any date subsequent to the date of thisreport.22024 SUSTAINABILITY AND SOCIALIMPACT REPORTDollar Tree and Family Dollar were founded on the belief that value and quality should be accessible to all.More than 60 years later,weve remained dedicated to creating value for our customers,associates,shareholders,and communities.Looking back on the previous year,I am proud of the strides we have made on our sustainability and social impact journey.The year 2023 was marked by meaningful progress and action,particularly in environmental stewardship,associate engagement and belonging,ethics and compliance,and community support.We have spent the past year developing our Rooted in Progress strategy,our enterprise-wide approach to sustainability and social impact that grounds the achievements outlined in the pages of this report.Rooted in Progress articulates our commitment and accountability to our associates,our customers,our communities,and our planet and the continuous improvement we have made in each of our focusareas.In 2023,we continued to improve our environmental impact and developed our first carbon reduction plan that paves the way for a more sustainable future.This plan encompasses a series of operational improvements to reduce our emissions,opportunities to transition to renewable energy sources and deeper engagement with our suppliers.Most notably,we refreshed our emissions reduction goals,which are now Science Based aligned with a commitment to net zero by 2050.This step underscores our dedication to moving toward a low-carbon future and caring for our planet for generations to come.Turning inward,we continue to invest in our most valuable asset our associates.We enhanced our benefits,delivered new training programs for career advancement,and strengthened essential aspects that contribute to the equitable well-being and development of our associates.Taking care of all our associates and creating a safe,inclusive place to work are crucial table stakes of any responsibleretailer.One area I am particularly proud of is our commitment to a Safety First,Safety Always culture that prioritizes the safety and well-being of our associates and customers above all else.We have made considerable progress by strengthening our oversight and capabilities to implement our proactive approach to store safety as well as undertaking food and product quality and safety improvements at our Distribution Centers.Lastly,we continue to invest the necessary resources,training and technologies in our Workplace Violence Prevention program.As we look ahead,I want to express my appreciation to our more than 211,000 associates for their unwavering commitment to our customers and the pillars of our Rooted in Progress strategy.The steadfast dedication of our team continues to inspire me as they work incredibly hard to push us to greater achievements and uphold our promise of delivering value to our people,our communities and the environment.Collectively,we have established a strong foundation for the future of our organization.Richard W.Dreiling Chairman and Chief Executive Officer Dollar Tree,Inc.INTRODUCTIONA message from Richard Dreiling,our Chairman and Chief Executive Officer,Dollar Tree,Inc.About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 32024 SUSTAINABILITY AND SOCIALIMPACT REPORTA message from Jennifer Silberman,ourChief Sustainability&Impact Officer,DollarTree,Inc.I am delighted to introduce our 2024 Sustainability and Social Impact Report,which highlights the progress we are making to advance our sustainability and social impact commitments.As one of Americas largest retailers,we have a unique opportunity to positively impact our people,the communities we serve and our planet.Over the past year,by gaining a deeper understanding of the expectations and needs of our associates,customers,and communities,we identified where and how to focus our efforts.We understand that our businesss success is closely tied to how we operate,the role we play in society,and our responsibility as stewards of the planet.Our most recent environmental,social and governance(ESG)priority assessment helped us organize our priorities into four areas of ambition:creating equitable opportunities for our people,delivering quality and value for our customers,strengthening resilience in our communities and taking action for a changing climate and planet.Our Rooted in Progress strategy represents a new chapter in our sustainability and social impact journey and lays the groundwork for future initiatives that will bolster our mission to provide exceptional value to all those we serve.Our Associates:Our people are at the core of everything we do.We continue to improve the professional and personal livelihoods of our associates with the following initiatives:Enhanced benefits to better support our associates and their familys needs.Introduction of the“Value of You”employer brand to drive our talent strategy focused on attraction,development,and retention.Leadership development including our first District Manager Leadership Academy.Ongoing dedication to Diversity,Equity,Inclusion,&Belonging(DEIB)as a critical business driver aligned with our evolving strategy.Our Customers:Delivering value to our customers lies at the heart of our mission,and we have consistently invested in enhancing the customer experience through product quality and storeimprovements.Our Communities:This past year we spent time learning how we can better serve our communities and neighbors,including:Twelve focus groups to learn about community needs including neighborhood safety,livability,and economic opportunity.Ongoing support for disaster recovery efforts including broadening the reach of our Associate Relief Fund.Our Planet:We recognize the health of our planet is our shared duty,and that we all must take action to protect it.Our progress includes:Decarbonization roadmap to inform the reduction of our carbon footprint in our operations and valuechain.Multi-year strategy to begin our shift to renewableenergy.Development of Scope 3 supplier engagementefforts.Steadfast commitment to transparent reporting by improving data management and accuracy,and refining greenhouse gas inventory methodologies for precise emissions tracking.The progress highlighted in this report not only supports our business but also serves as the building blocks toward a brighter,more sustainable future.We hope you will join us on this journey as we continue to invest in our associates,serve our customers,strengthen our communities,and protect our planet.Jennifer Silberman Chief Sustainability&Impact Officer Dollar Tree,Inc.About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 42024 SUSTAINABILITY AND SOCIALIMPACT REPORTOUR APPROACHOur ValuesOur Values guide our everyday actions and enable us to deliver value to our stakeholders and ourcommunities.Our MissionDollar Tree,Inc.is one of the largest value retailers in North America.Our mission is to provide amazing value and a great shopping experience to our customers in every store,every day.Our organization is made up of engaged,productive associates from diverse backgrounds and experiences who help us deliver on our mission and drive consistent,profitablegrowth.About UsDollar Tree,Inc.s two iconic brands Dollar Tree and Family Dollar are ranked 137th on the Fortune 500 list.Serving North America for more than 63 years,we are dedicated to making peoples lives better by delivering value andconvenience.16,000 storeswith 211,000 associates$30.6 billion in net sales Operating in 48 States&5 Canadian provinces 27 Distribution Centers including2 in CanadaHeadquarters in Chesapeake,Virginia87%of Americans live within 5 miles of a Dollar Tree or Family Dollar About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 52024 SUSTAINABILITY AND SOCIALIMPACT REPORTOur Approach to Sustainability and SocialImpactThrough this report,we are introducing our first sustainability and social impact strategy.This important body of work guides the decisions we make as we continue in our business transformation.We believe our long-term success is intrinsically linked to the well-being of our associates,customers,communities,and the planet.To inform our strategy,we listened to all stakeholders that are connected with Dollar Tree and Family Dollar,charting a clear path to where we need to accelerate our areas of focus.With the launch of our sustainability and social impact strategy,we are now committed to upholding our responsibilities,maintaining transparency,and ensuring open communication about our initiatives and the milestones we achieve along the way.Determining our Areas ofFocusAt the core of our strategy is a focus on the environmental,social and governance(ESG)topics that have the greatest impact on our business and our associates,customers,and communities.Our most recent ESG materiality assessment took place in 2023 and included input from internal and external stakeholders,reviews of the regulatory and retail landscape and emerging macro and sustainability trends.We engaged with an extensive network of stakeholders,capturing diverse perspectives from senior leaders in the Company,associates,sustainability subject matter experts,investors,suppliers,community members and non-governmental organizations(NGOs).The outcome of this process was our prioritization matrix,which details 20 environmental,social and governance issues ranked in relation to most important to our stakeholders and most impactful to our business performance.The results of our assessment reveal the following topics as most important:access to high-quality,safe products,associate well-being and safety,and climate risk and resilience.We continue to update our understanding and prioritization of sustainability topics through ongoing dialogue with stakeholders,regulatory compliance,and assessment of macroeconomic and sustainability issues.As we update our assessment in the coming years,we plan to draw on concepts from double materiality,including consideration of both the financial impact to our business as well as the impact to society and the environment resulting from our business operations and our value chain.About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 62024 SUSTAINABILITY AND SOCIALIMPACT REPORTLevel of priorityCriticalStrategicImportantLevel of impact*HighMediumLowTopic categoryEnvironmentalSocialGovernance2023 ESG Materiality TopicsImportance to stakeholdersCriticalImportantCriticalImportantImportance to business objectivesBiodiversitySustainable products and packagingWater stewardshipClimate impact and equityEngagement in public policyCorporate governanceResponsible marketing and labelingData privacy and cybersecurityEthics and complianceCommunity engagementResponsible sourcingWaste managementHealth and nutritionClimate risk and resilienceEnergy managementDiversity,equity and inclusionAssociate well-being,compensation and engagementSafe and healthy operationsAccess to affordable productsProduct safety and quality About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 72024 SUSTAINABILITY AND SOCIALIMPACT REPORTEngaging with StakeholdersAs one of Americas largest retailers,we recognize the role we play in serving a diverse set of stakeholders.In 2023,we embarked on a refreshed stakeholder engagement and outreach program that encompassed various initiatives designed to facilitate active listening and learning.This strategy ensures that we are not only guided by the insights and concerns of those invested in our operations and impact but also actively responsive to them.Through this collaborative exchange,we aim to align our actions closely with stakeholder expectations and enhance the overall effectiveness of our sustainability and social impact efforts.To better understand our associates perspectives,we launched our annual engagement VOICE and Pulse Surveys in 2023 to invite feedback from our associates on topics ranging from culture,engagement,leadership,work environment,career growth and diversity and inclusion.This survey tool offers our corporate associates,as well as store managers and above in the field and Distribution Centers,a confidential platform to share their perspectives with the organization.In 2024,we had an 80 percent completion rate for our annual survey.We also proactively manage relationships and engage in regular dialogue with a diverse group of external organizations including investors,nonprofits,and community groups to better understand their priorities and capture feedback on our progress.Over the last 18 months,we engaged with nearly 100 stakeholders through a series of interviews,dialogues,surveys,and focus groups on the following topics:Associate well-being and economic mobility Chemical management Climate action Community safety Diversity,Equity,Inclusion&Belonging Responsible supply chain Safety from workplace violence Sustainable products and packaging WasteIn addition to the engagement activities noted above,we continue to learn from our Board of Directors,management team,and internal business teams around all aspects of our sustainability and social impact approach to ensure alignment to and integration with our overall business strategy.Stakeholder PrioritiesAssociatesHow we engaged Leadership meetings and town halls Annual engagement surveys Social collaboration tool and Company intranet Associate Resource Groups Weekly Company news updates Store and Distribution Center communications Periodic associate listening and feedback sessions Integrity Matters Ethics HotlineEngagement outcomesInsights from our associate engagement and communication channels inform areas for investment,resources,and training to support associate well-being and professional growth.CommunitiesHow we engaged Positive relationships and engagement on topics of interest and to understand their priorities Community dialogue and focus groups Local community participation Associate engagement and volunteering Customer donations and cause marketingEngagement outcomesIn 2023,we,along with the support of our customers and associates,donated nearly$14 million to communities across the United States and Canada.We hosted 12 community focus groups in 2023 to understand how to better support communities on the topics of safety,store conditions and product access.About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 82024 SUSTAINABILITY AND SOCIALIMPACT REPORTCustomersHow we engaged In-store engagement Ongoing customer feedback from transactions Customer focus groups and insightsEngagement outcomesThrough our customer interactions and learnings,we continue to improve our assortment and value proposition for our customers.Government&Regulatory AgenciesHow we engaged Advocacy and relationship building on topics ofinterest Ongoing engagement with government institutions and regulatory agenciesEngagement outcomesWe continue to increase our proactive engagement with government and regulatory agencies to protect our license to operate and better serve our communities.Non-Governmental Organizations(NGOs)How we engaged Organizational memberships Collective action on priority topics Ongoing direct engagement and dialogue to understand issues of interest and NGO prioritiesEngagement outcomesWe participate in several sustainability and impact-focused organizations.Our ongoing engagement informed our issue prioritization and strategy development.Insights have helped with the development of our net zero roadmap,our Workplace Violence Prevention program and community investmentpriorities.Investors&ShareholdersHow we engaged Quarterly earnings reports,including conference calls and SEC filings Annual Report and Proxy Annual Sustainability and Social Impact Report Ongoing engagement,investor questionnaires and off-season outreach on environmental,social and governance topicsEngagement outcomesTo better understand our shareholders perspectives,we requested engagement meetings with our top 50 shareholders representing 80%of our outstanding shares and met with 20 shareholders representing 48%of our outstanding shares.Suppliers&VendorsHow we engaged Supplier engagement on sustainability topics(climate,packaging,product quality and stewardship)Identification and increased spend with unrepresented suppliersEngagement outcomesWe are expanding our engagement with suppliers on several sustainability priorities.We plan to work with suppliers on our Scope 3 supplier engagement commitment and in the development of a packagingbaseline.About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 92024 SUSTAINABILITY AND SOCIALIMPACT REPORTRooted in Progress With a long-term commitment to our people,communities and planetDefining Our ImpactAt Dollar Tree and Family Dollar,our roots ground us in our purpose to reach new heights.Just as the needs of our associates,customers,community,and planet are constantly changing,so are we.We are committed to fostering a workplace and culture that improves the livelihoods of our associates,where they feel cared for and a sense of belonging.We aim to meet the growing needs of our customers through dependable everyday quality and value.We also believe in uplifting the diverse communities our stores and Distribution Centers serve,while also making strides toward a healthier planet for all.With a commitment to continuous improvement,and the following long-term commitments to our people,communities and planet,we are Rooted in Progress.For our associatesFor our customersFor our communitiesFor our planetCreate equitable opportunities that promote economic well-being,inclusive experiences and safety for all our associatesWelcome our customers with an assortmentand store experience that delivers quality,value and safetyChannel our resources to support inclusiveand resilient communities where we live,work and shopAct now to reduce our impact for a healthier and restorative planet today andtomorrow Jobs,resources and benefits tailored to meet associate needs and promote financial and emotional well-being Equitable career pathing,development and mobility opportunities Diverse and inclusive workforce that fosters engagement and belonging Safety-first culture focused on workplace violence prevention and safe store standards Standards,practices and partnerships to support product safety and quality Increased access to healthier,inclusive and sustainable product choices that deliver value every day Positive customer experiences and store environments Improved product stewardship and packaging that adds value for our customers Philanthropy focused on essential needs,economic opportunity and community vitality Community resilience through associate engagement,local support,and disaster response and recovery Proactive relationships with community stakeholders,law enforcement and government Advocacy on issues that impact the economic stability,well-being and safety of our communities A commitment to climate action and net zero emissions to transition to a lower-carbon future Efficient energy use,sustainable packaging and enhanced waste management for a healthier planet Sourcing practices that contribute to resilient supplychains Support for improved access to community recycling and greening programsPolicies|Governance|Transparency Disclosure|Supplier Relationships|Communication Stakeholder Engagement|Community Investment ENABLERS About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 102024 SUSTAINABILITY AND SOCIALIMPACT REPORTPartnering for ImpactWe recognize that the environmental and social challenges facing the retail and consumer products industries require systemic change and collaborative efforts.To this end,we actively seek partnerships with non-governmental organizations(NGO),industry peers,multi-stakeholder networks,coalitions,and community-focused organizations.By aligning with these groups,we leverage their expertise,resources,and networks to amplify our impact and accelerate progress toward our sustainability and social impact objectives.Some of the organizations we work with and have identified opportunities for collaboration,include:ASSOCIATESCUSTOMERSCOMMUNITIESPLANET Emergency Assistance Foundation Hampton University Norfolk State University Worker Financial Wellness Initiative(JUST Capital)Sustainable Packaging Coalition The Sustainability Consortium Boys&Girls Clubs of America Operation Homefront Points of Light Red Cross Share our Strength Business for Social Responsibility(BSR)CEBA(Clean Energy Buyers Association)Closed Loop Beyond the Bag GreenBiz The Recycling Partnership RILA About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 1 12024 SUSTAINABILITY AND SOCIALIMPACT REPORTOUR ASSOCIATESOur team is more than 200,000 strong.We work in thousands ofneighborhoods throughout the United States andCanada in stores,Distribution Centers and our corporateStore SupportCenter.Our people strategy is centered on three areas of focus:culture and belonging,talent and career growth,and elevated associate experience.Our associates may come to us for a part-time job and find a lasting career.Our business model provides a range of opportunities for those seeking part-time retail jobs to supply chain management to corporate roles.We aim to attract,hire,and retain people who reflect the diverse communities we serve and are committed to creating a supportive,inclusive,and safe work environment where everyone has a chance to be successful.Culture and BelongingAssociate Engagement:OurVOICESurveyEngaging and listening to our associates is critical to our success and helps build a strong foundation for our culture.As we advance our business transformation,we are focused on continuously improving how we gather and respond to feedback,in turn creating a better workplace for all associates.In 2023,we introduced our first engagement survey reaching more than 23,000 associates.Our VOICE Survey is intended to provide an annual in-depth look at our associates engagement and satisfaction with Dollar Tree and Family Dollar,career growth opportunities,and their views on leadership within the Company.Additionally,we introduced the Pulse Survey in the fall of 2023.This shorter survey seeks feedback on specific timely topics allowing us to stay responsive and align in our approach to workplace improvements.Both surveys received strong participation and engagement numbers,and our first VOICE Survey received more than 63,000 comments.Our goal is to create an engaging and inclusive workplace,and our cultural survey and leader action plans address opportunities to continuously improve how we support our associates.One of the priorities identified from our engagement conversations and survey action planning was to improve Company-wide communication and collaboration.In 2023,we launched a social collaboration tool for our associates to facilitate communication and opportunities for connection.Store managers joined our platform in early 2024,marking our first connected communications channel reaching both corporate,field and Distribution Center associates.With more than 500 active communities,our platform serves as a central hub to share Company and brand news,celebrate inclusion and belonging through our Associate Resource Groups(ARGs),recognize associates for living our Values,and help reinforce our safety-first mindset among allassociates.47,500 Promotions across ourorganization76male store managers87%Completion rate of WorkplaceViolence Prevention De-escalation training150%Improvement in S.P.E.E.D.compliance since program initiation in 2022Launched our first District Manager Leadership Academy with a goal of training 450 District Managers by the end of 2024Recognized by Newsweek as one of Americas Greatest Workplaces for LGBTQ employees in 2023Key Highlights Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 122024 SUSTAINABILITY AND SOCIALIMPACT REPORT2023 Workforce OverviewOur data represents a fiscal year 2023 workforce population of 211,826 associates and is based on self-identification:NOTE:Dollar Tree published our latest EEO-1 data covering U.S.associates as of December 31,2022.The job categories reflected in the EEO-1 data do not reflect Dollar Trees workforce organization,therefore the data in our report is presented differently.43 43 28 28 22 22 3 3 2 2 1 1 11 MBlack/African American(AA)27%Hispanic/Latino 22%Undisclosed 2%Two or More Ethnicities 3%White 43%Asian 1%American Indian or Alaskan Native 1male 67%Male 33%Total Workforce 211,826ASSOCIATES Executives 27male73%Male68%White8%Other10%Black/AA6%Hispanic/Latino7%AsianNew Hires 64male36%Male38%White7%Other31%Black/AA22%Hispanic/LatinoStore Managers 76male24%Male56%White5%Other21%Black/AAPromotions 72male28%Male46%White7%Other26%Black/AAPeople Leaders 70male30%Male57%White5%Other20%Black/AA1%Asian17%Hispanic/Latino1%Asian1%Asian1%Asian20%Hispanic/Latino16%Hispanic/Latino Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 132024 SUSTAINABILITY AND SOCIALIMPACT REPORTOver the past year,we have made significant strides toward establishing a solid foundation for our DEIB initiatives.Our primary focus was establishing a roadmap to execute our multi year strategy and creating a structured framework within the DEIB team.With our dedicated team in place,we implemented the core elements of our strategy,including collaboration with the Associate Resource Group(ARG)community to support programming that promotes allyship,fosters a sense of belonging,and enhances cultural awareness across the enterprise.Through these efforts,weve aimed to create a more inclusive environment in which every associate feels valued and respected.Additionally,our team identified key external community partners and fostered strong relationships locally and nationally.These partnerships ensure our initiatives are aligned with our organizational DEIB goals and the broader needs of the diverse communities weserve.Our progress lays a robust groundwork for our continued DEIB journey.We remain committed to advancing these initiatives,building on the relationships we have established,and driving meaningful change within our organization andbeyond.Engagement through our AssociateResource GroupsThe expansion of our Associate Resource Groups(ARGs)is a testament to our commitment to creating a culture of belonging and advancing inclusion and equity within our Company and our communities.In 2023,we added three new ARGs,supporting our Veteran,Asian American Pacific Islander,and Hispanic associates,and now have six vibrant resource groups that are active throughout the year.These groups,led by associates and sponsored by executive leaders,provide associates with a community of support,mentorship from leaders,and opportunities to learn,share,and celebrate ourdifferences.Throughout 2023 and early 2024,we hosted ARG events that spanned the entire enterprise with attendance from our store and Distribution Center associates.The commitment to ensuring that our field associates are included speaks directly to our focus on inspiring belonging,raising cultural awareness,and fostering professional development and connection within our communities.Our ARGs are open to all associates,and we continue to expand outreach in the field to increase participation.1 Associate Engagement Promoting a culture of inclusion through associate engagement,professional development,career growth,and other strategic actions aligned with our DEIB multiyear goals andobjectives.2 Talent Ensuring that all talent practices are fair and equitable,and that associates feel they are included and belong.We aim to attract,hire,and develop diverse talent to meet our growth objectives.3 Marketplace Increasing representation of our supplier partners from underserved communities and product offerings.We are focusing on identifying and partnering with socially and economically underserved vendors within our supply chain network and providing an assortment of diverse products and brands that reflect the communities weserve.4 Community Cultivating collaborative partnerships by fostering a sense of goodwill among our associates,key stakeholders,and the diverse customers we engage with eachday.Fostering a Diverse and InclusiveWorkplaceAt the heart of Dollar Tree lies an unwavering commitment to fostering a culture where Diversity,Equity,Inclusion&Belonging(DEIB)are not just ideals,but lived experiences.Our journey toward a more inclusive workplace is centered around our core Value of Inspiring Belonging and creating opportunities for our associates to develop andthrive.In 2023,we introduced our multiyear DEIB strategy,focused on integrating diversity and inclusion programs and initiatives throughout our organization centered on four pillars:Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 142024 SUSTAINABILITY AND SOCIALIMPACT REPORTOur ARGs include the following communities and were active in the following ways in 20232024:Asian American Pacific Islander(AAPI)League is committed to supporting and advocating for all Asian American and Pacific Islander individuals and our allies.Our dedication extends to promoting allyship and fostering an inclusive workplace environment by investing in professional development,cultural engagement,and community involvement.HISPANICHispanic Heritage Network(HHN)helps the Company foster and celebrate the Hispanic/Latino culture and supports the recruitment,retention and development of our associates,communities,and allies.HHNs commitment is centered on cultivating and inspiring belonging and inclusion through strategic partnerships,associate engagement and initiatives that bolster our impact in the communities we serve.PRIDE is dedicated to championing the growth and development of LGBTQ associates,allies,and the communities we serve.We aim to foster a positive work environment by inspiring belonging.Our commitment to education and celebration reflects our unwavering dedication to the diverse LGBTQ community.Veterans Engaging Together in Service(VETS)is dedicated to honoring and supporting the veterans within our organization,along with their families.VETS mission is to foster a community that promotes camaraderie,growth,and success for those who have served our country.We aim to create an inclusive environment where veterans can share their unique experiences,skills,and perspectives.Through collaboration and mentorship,we seek to empower our members with professional development opportunities,networking,and a strong support system.Together,we strive to contribute to the overall success and well-being of our veteran associates as they continue their journey in both civilian life and their careers within our organization.The mission of the Black Advocate Alliance(BAA)is to provide a network of support for the advancement of Black associates together with our allies.We promote opportunities for leadership development and raise awareness and celebrate Black culture while fostering belonging and mutual respect.Champions for Women is dedicated to fostering a sense of belonging and,together with our allies,advancing the equality,development,and career progression of women within ourorganization.Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 152024 SUSTAINABILITY AND SOCIALIMPACT REPORTAsian American Pacific Islander(AAPI)LeagueIn collaboration with the DEIB team,our AAPI League held weekly Dim Sum Thursdays,offering insights into AAPI culture and history,enhancing associate appreciation and inclusivity.During AAPI Heritage Month,our team featured several events including“38 at the Garden”screening followed by a fireside chat with film director Frank Chi,dance workshops,and a cultural showcase,emphasizing community connection,innovation,and tradition.A Leading Voices series with AAPI leaders also promoted allyship and cultural understanding within Dollar Tree.Black Advocate AllianceThroughout the year,our DEIB team and BAA hosted several events in celebration of Dr.Martin Luther King Jr.s legacy and Black History Month.Dollar Tree stores highlighted Black culture through our merchandise,supported by a dedicated website landing page and social media campaigns to engage our customers.We also hosted the“Quest for Success”series,exploring Black excellence,which included a fireside chat on allyship with our CEO Rick Dreiling.BAA also organized voter registration,civil rights panels,financial health dialogues,and an Inclusion series in Atlanta,featuring a tour of the National Center for Civil and Human Rights.Throughout Black History Month,we also spotlighted Black-owned businesses and supported the Urban Leagues Project Ready focused on youth career preparation.Champions for WomenIn 2023,we joined the Making Strides Against Breast Cancer Walk with 50 teams,raising over$29,000.Champions for Women also led our participation in the Bra-ha-ha event,where our“Wonderland Bra”won the grand prize.During Womens History Month,associates from our field leadership and stores attended the Develop Her Womens Summit held at the Memphis Botanical Garden,engaging in sessions on health,financial wellness,and growth.Our Board,which is 45male,participated in a leadership panel at our corporate offices.Members Winnie Park,Diane Randolph,and Stephanie Stahl,discussed their experiences in leadership and shared insights for aspiring female leaders and allies.Hispanic Heritage NetworkDuring Hispanic Heritage Month,our DEIB team and Hispanic Heritage Network organized several events to recognize the contributions of Hispanic Americans.Our celebrations in Miami were marked by our partnership with the Hispanic Association on Corporate Responsibility(HACR),the leading nonprofit organization dedicated to Hispanic inclusion in corporate America,to honor the rich cultural contributions of the Hispanic community.The event was hosted in collaboration with URBE University and HACR,where a panel of Hispanic leaders from corporate America shared their inspiring journeys of overcoming obstacles to achieve success.This year,we were excited to extend our programming to Texas,broadening our reach and impact.PRIDEIn 2024,PRIDE participated in five Pride Parades throughout the United States and Canada,engaging ourDistribution Center associates and field leaders in the celebrations.Additionally,we hosted an Associate Resource Fair,bringing together 26 community partners at our Store Support Center where organizations shared valuable information about their programs and activities designed to support the LGBTQ community.Veterans Engaging Together in Service(VETS)On Veterans Day,we honored our veterans by creating commemorative coins under the Dollar Tree and Family Dollar brands.This gesture was a small token of our immense gratitude for the sacrifices made by our veteran associates.Coins were distributed to our Distribution Center and stores for presentation.During the Veterans Day tribute at the Store Support Center,the coins were ceremoniously presented to our veterans and the families of veterans during a flag-raising ceremony.This event symbolized our deep appreciation and respect for their dedication and service to our nation.Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 162024 SUSTAINABILITY AND SOCIALIMPACT REPORTAs one of the United States largest employers,we are committed to supporting our associates through career growth and opportunity.With our new Value of You employer brand,we aim to foster an environment that attracts,develops,and retains top talent and strive to create a values-based and people-centric culture.Our talent approach is structured around five key areas:Our continued investment in talent and career growth is a testament to our dedication to our associates professional development and enabling the future of our business.Recruiting and Retaining Top TalentOver the past year,our talent strategy has focused on providing associates with opportunities to transform their jobs into thriving careers.We are proud of the progress we continue to make in enhancing our associate career opportunities.Our commitment to upskilling and leadership development has led to a noticeable decrease in store manager vacancy gaps and improved retention rates,with a 20%reduction in field leadership and store manager vacanciesin2023.We have also continued our investment in our associates career advancement with a strong internal promotion program.In 2023,we celebrated over 47,500 promotions across stores,Distribution Centers and corporate offices.In addition to driving strong retention and advancement,weve continued our focus on recruiting top talent,as demonstrated by a 36%increase in applications for store roles,a 24%rise for Distribution Center roles,and a 20%increase for Store Support Center roles.These achievements underscore our continued dedication to our associates and affirm our belief that our people are central to our success.1 Developing robust talent pipelines to promote a high-performing and diverse workforce that meets our evolving business needs and reflects the communities we serve.2 Offering comprehensive training and leadership development programs to enhance skills and support career progression.3 Optimizing training effectiveness to achieve operational excellence and translate into tangible business results.4 Providing opportunities for progression,helping employees succeed in their current roles and prepare for future opportunities.5 Ensuring the quality and relevance of our training curriculum meets the needs of our associates at every level.These numbers reflect our investment in the professional growth of our associates and our efforts to strengthen our organizational capabilities to meet the challenges of a dynamic retail environment.We are proud of the progress we have made and remain committed to continuing our journey of fostering a culture of learning,development,and careeradvancement.Campus Internship PartnershipsOpportunities to develop talent begin early with our college internship program.To enhance our talent pipeline,we have forged strong partnerships with colleges and universities aimed at recruiting and developing emerging leaders.In 2023,we welcomed interns from numerous colleges and universities,including William&Mary,University of South Carolina,Liberty University,University of Lynchburg,Gonzaga University,Youngstown State University,and the University of Virginia.The students from this diverse group of institutions worked on projects ranging from developing a go-to-market plan for a sustainable cleaning product assortment,to creating a risk management program for gifts cards.Our internship programs are designed to cultivate skills aligned with each interns desired career path,offering one-on-one mentorship with Dollar Tree leaders to support their growth and development,and providing a well-rounded experience for the students.Our programs success has been highlighted by Dollar Tree being named one of the Top Virginia Employers for Interns for two consecutive years by the Virginia Talent and Opportunity Partnership.Additionally,we have actively engaged with the local community through events like Intern Night Out(2023)and Top 20 Under 20(2024),in collaboration with the Hampton Roads Workforce Council,to retain talent within the Southeastern Virginia region.Our partnership with Campus 757 has been instrumental in providing professional development training during the“Summer757”programming.Our community work also extends to educational outreach,as evidenced by our presentations on“Preparing for a College Fair”to the Access College Foundation and“Marketing Your Best Self”for CIVIC Scholars Day through the Civic Leadership Institute.These efforts underscore our commitment to contributing to the development of the next generation of professionals.Talent and Career GrowthRecipient of the 2024 Top Virginia Employers for Interns Award from the Virginia Talent and Opportunity Partnership.Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 172024 SUSTAINABILITY AND SOCIALIMPACT REPORTneed to thrive in their roles.Our Regional Training Managers are instrumental in this enhanced training process,with the responsibility of ensuring that each store manager completes the training fully prepared to meet the challenges of managing theirstore.Our investment in development extends to the district level with the District Manager-In-Training Program.This apprenticeship-style program is designed to impart the hard skills necessary for managerial success,from understanding how to run reports to fostering a positive Company culture.This hands-on approach ensures our future District Managers feel prepared and confident in their abilities to manage stores as they advance in their Dollar Tree careers.Cultivating Excellence Through Learning and DevelopmentIn the past year,we have made considerable advancements in our commitment to nurturing the talents of our associates.Recognizing the development of our people is inextricably linked to the growth and success of our organization,we have embarked on a journey to enrich our learning and development programs like never before.We initiated our efforts by bolstering our training resources in the field,adding more Regional Training Managers and Zone Training Directors to our team.These dedicated professionals are now specifically aligned with our two store brands,ensuring the training they deliver is highly relevant and customized to the unique requirements of eachbrand.A cornerstone of our enhanced training initiative is the Store Manager-In-Training Program.Here,we made strides to improve the quality of training by introducing new methodologies that are not only innovative but also designed to be more engaging and accessible.The training has been restructured to be more concise and digestible,incorporating a strong digital component that resonates with the modern learner.The experience of our store managers in training has also been elevated.By immersing them in the model store environment,we provide a consistent and realistic setting for learning,which equips them with the practical skills they Expanding our outreach,Dollar Tree also engaged with Hampton University on multiple occasions.Our Dollar Tree merchandising teams played a supportive role in the Hampton University Case Study,demonstrating a hands-on approach to student learning and practical application of business concepts.By attending both the Spring and Fall Career Fairs,we provided a consistent presence and support,ensuring students had access to career opportunities twice annually.We also hosted Information Sessions and Meet&Greets with business leaders to foster closer connections with students,generating a deeper understanding of our organizational culture and career pathways.Moreover,our sponsorship of a Faculty Ambassador allowed us to assist with programming on campus,including Hampton Universitys 5-year MBA Leadership Application Program(LAP)Day,showcasing our commitment to not only student development but also to the academic faculty and enhancing the educationalecosystem.Historically Black Colleges andUniversitiesWe are proud of our growing relationships with the Historically Black Colleges and Universities(HBCUs)in our headquarters hometowncommunity.Over the past year,we expanded our partnership with Norfolk State University(NSU)by sponsoring the Universitys Fall and Spring Career Fairs,providing students with opportunities to connect with potential employers and taking an active role in preparing them for these events.By participating as panelists in the“Get Ready for the Fair”sessions,we offered advice and insights to help students make the most of their career fair experience.Our involvement in the Student Pathways and Academic Formation(SPAF)Employer Panel Discussion contributed to the academic and professional development of NSU students as they seek intern and post-graduateopportunities.Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 182024 SUSTAINABILITY AND SOCIALIMPACT REPORTtraining at our Store Support Center and focused on enhancing leadership skills,fostering trust,and collaborating to drive better business outcomes.The program concluded with a virtual graduation,where participants shared insights and learnings from the 8-week program.The Academys success is bolstered by ongoing support through virtual coaching circles,online workshops,and on-the-job support from our Regional TrainingManagers.Since its launch,the program has already achieved notable milestones,with seven cohorts and 159 District Managers,including Regional Training Managers,having completed the program.We are progressing toward our goal of training 450 District Manager LeadershipAcademyIn January 2024,we launched the District Manager Leadership Academy,an eight-week program to hone the leadership abilities of our District Managers.Based on the Center for Creative Leaderships Lead 4 Success model,the program is centered on the four fundamental leadership skills needed by every leader:self-awareness,learning agility,influence,and communication.The inaugural Academy sessions brought together 37 District Managers from Dollar Tree,Dollar Tree Canada,and Family Dollar.Participants engaged in intensive District Managers by the end of 2024.This initiative will serve as a template for future development academies across various role levels,supporting our stores and nurturing thousands of leaders across ourorganization.Engagement Support TeamIn 2023,we developed an Engagement Support Team.This elite group of field leaders from across Retail,Supply Chain,and HR were nominated by their managers to participate in a training program that prepares them to become ambassadors for the Companys Positive Associate Relations strategy and play a key role in embedding our Values into theorganization.Over 270 leaders have gone through the multi-day training sessions,facilitated by experts in leadership,engagement,and communications.The Company will rely on this team to effectively identify and resolve associate concerns,develop their own teams to be stronger associate advocates,and support their peers in achieving positive people results.Enhanced Education OpportunitiesWe offer enhanced education opportunities,including GED and ESL programs,along with discounted tuition options to all associates.These programs are designed to support our associates in their pursuit of personal and professional development,further emphasizing our commitment to their growth.“The DM Leadership Academy provides a space for you to identify who you are as a leader and what type of leader you want to be in the future.You are provided with the tools and skills to help you develop and build a roadmap to deliver better business results.You will leave the Academy inspired,motivated,and engaged with a network of peers to support your continuedgrowth.”Kristin Strom,District Manager,Dollar Tree Canada Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 192024 SUSTAINABILITY AND SOCIALIMPACT REPORTElevated Associate ExperiencePay,Benefits,and Well-beingRecognizing that our associates are at various stages in their lives,we are committed to continuously evolving our pay and benefits packages to best support them and their familys needs.Supporting the three dimensions of associate well-being mental,physical,and financial we are investing in an array of pay,benefits,and wellness programs to meet the holistic needs of our full and part-time associates.Our aim is to equip every associate with the tools and resources necessary for their personal development,overall health,well-being,and financial security.We are committed to providing market-competitive pay for all positions,and we are a pay-for-performance organization,offering performance-based compensation opportunities at nearly all levels of the organization,including select hourly-paid positions.In 2023,we invested$175 million in annualized wages for our associates with 64%of wages directed to our hourly store associates,15%allocated for our Store and District Managers and 14%for our Distribution Center teams.We strive to ensure gender and racial pay equity for associates performing equal or substantially similar work.In 2024,we plan to conduct a pay equity assessment to assess individual roles and look at age,gender,race,and ethnicity to ensure our compensation is equitable across the organization.In 2023,we introduced several enhancements to our physical and mental well-being benefits including an updated Employee Assistance Program,Employee Well-being Solutions,with our partner UnitedHealthcare/Optum.All full-time associates are eligible to participate in our benefits and well-being program while part-time associates must average 30 hours a week to qualify.Our part-time associates have a wide range of resources and support available to them.Personal Growth and Well-being Mental Wellness Support:We provide a range of resources and programs to support our associates mental health,personal resilience,andgrowth.Family Planning and Parental Leave:To support our associates personal life journeys,we offer up to 12 paid weeks of leave for adoption,maternity,and parental leave after the first year of employment.Through our partnership with Maven,we also offer adoption,surrogacy,and fertility support to provide our associates access to inclusive family planning.Education and Development:Scholarship Program:We offer financial support for associates children pursuing higher education,with recipients receiving$1,000 for up to four years of college.Education Assistance:We are committed to our associates career advancement,offering up to$5,000 per year for degree programs and$2,000 per year for GED/languagecourses.Health and Wellness Healthcare Coverage:Our healthcare,dental,and vision plans are complemented by substantial wellness programs to ensure a holistic approach to associates health and well-being.Part-time associates are offered limited medical,dental and vision plans.The following additional benefits are available to full-time associates who are enrolled in our medical plan.Disease Management and Lifestyle Programs:We offer full-time associates programs for diabetes and weight loss management,nutritional guidance,back and joint pain support,tobacco cessation,addiction support,cancer support,and a healthy pregnancyprogram.Centers of Excellence Surgery Program:We provide access to high-quality surgical care for ourassociates.Virtual Care:Our associates have convenient access to virtual primary and urgent care visits.Medicare Transition Guidance:We offer assistance for those transitioning to Medicare.Financial Security Daily Pay:This benefit allows associates to access their earned pay on-demand,providing financial flexibility.Associates can track,save,and transfer earnings on their own schedule.Retirement Savings Plan:Full and part-time associates can save for their future with a dollar-for-dollar match on contributions,up to 5%of pay.Part-time associates,who average just under 20 hours a week,are eligible after one year with theCompany.Employee Stock Purchase Plan(ESPP):Both full-and part-time associates can purchase Company stock at a 15%discount four times ayear.Spending Accounts:We support financial planning with pre-tax reimbursement accounts for healthcare and dependent care expenses,including a Health Savings Account with wellness contributions of$400 for individuals and$800 for families,plus a match for dependent care up to$300.Associate Relief Fund:Our Associate Relief Fund is available to all associates who are facing financial hardship due to a personal crisis or naturaldisaster.In 2024,we plan to undergo an assessment to better understand the financial health of our part-time,hourly associates and determine opportunities to support their financial well-being.Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 202024 SUSTAINABILITY AND SOCIALIMPACT REPORTComprehensive Approach toSafetyWe recognize the safety and well-being of our associates and customers is a key component of our continued success.As such,we have taken decisive steps to improve our safety performance by investing in the training and technology required to enhance the overall safety of our people and our customers in our stores and Distribution Centers across the thousands of communities we serve.Management Commitment toSafetyCreating a safety-first culture is one of the highest priorities of our Executive Leadership Team,championed by our Chief Operating Officer and is embedded in all aspects of how we run our operations.Our expanded Asset Protection and Safety teams are led by our SVP for Asset Protection and Safety and include teams focused on Workplace Violence and Environmental,Health,and Safety.Their work is supported by a cross-functional team of leaders who address continuous improvement and root cause analysis of store-focused workplace safety and violenceissues.In 2022,we initiated our Comprehensive Approach to Store Safety(CASS)program recognizing the need for a holistic and proactive approach to address store safety and compliance.Our Safety First,Safety Always campaign exemplifies that safety is non-negotiable,and that together we all contribute to the safety of our associates andcustomers.Our Environmental,Health,and Safety(EH&S)team and our store leaders ensure that Dollar Tree and Family Dollar stores implement CASS and create a store environment that is safe and inviting to both associates and customers.These teams follow established policies and standards to ensure compliance with OSHA standards.Over the past year,we have expanded our approach to safety,integrating safety into the framework of how our stores operate.We incorporated safety into every field leader visit to stores and have developed industry leading data analytics to(1)proactively identify stores that may need additional support in safety;and(2)provide that support through administrative controls and additional training.We ensured maximum visibility to safety performance to all field leaders,so that leadership has the right information and tools to drive the Companys Safety First,Safety Always commitment.Backroom Store Safety S.P.E.E.D.Given associate safety incidents in the backroom of our stores,we are investing in training and technology to maintain safe back stockrooms.Protecting associates from injury is the objective behind our S.P.E.E.D.message.This program highlights five key safety actions our stores must maintain to effectively reduce incidents from occurring and achieve our Safety First,Safety Always commitment.We have set an expectation that all stores must be S.P.E.E.D.compliant and have initiated a robust auditing program to recognize outstanding performance that is further enhanced with key performance indicators to identify potential concerns.In 2023 for example,our Asset Protection and EH&S teams performed over 23,000 store audits(either in-person visits or via backroom camera).Starting in 2024,we put measures in place to increase direct associate engagement to improve awareness and feedback on our S.P.E.E.D.safety program with increased store visits by the safety team and the creation of the Safety Advisory Group comprised of all levels of field associates.S Stacking height no higher than 8feet and stableP Pathways clear toall exit doorsE Extinguishers unblockedE Electric panels unblockedD Doors unblocked,unlocked and clearMike Creedon,Chief Operating Officer,Dollar Tree,Inc.“Safety First,Safety Always is the guiding mantra for our store and Distribution Center teams.The safety of our associates and customers is our top priority,and we are passionate about providing training and support that aligns to our shared safety commitment.”Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 212024 SUSTAINABILITY AND SOCIALIMPACT REPORTTo further support our commitment to safety,we continuously enhance the safety policies,procedures,and training in our stores.These measures are designed to safeguard the well-being of our associates and customers.Through continuous education and adherence to these policies,we ensure that every member of our team is equipped to maintain and promote a safe shopping and working environment and nurture S.P.E.E.D.compliance.This year we are updating our store safety manual,which guides our associates on the key components of our health and safety program,along with the basic safety training that all associates receive.While we look to continually improve in safety,our CASS program has proven successful in driving safety performance.Since its initiation,we have seen more than150%improvement in S.P.E.E.D.compliance,as measured through our auditing program.In August 2023,we took a significant step forward in reinforcing our commitment to in-store safety by finalizing a comprehensive settlement agreement with the Occupational Safety and Health Administration(OSHA).This resolution addresses previous citations and inspections,marking a milestone in the Companys journey to enhance safety measures across all Dollar Tree and Family Dollar stores.The agreement underscores our dedication to creating a safe and healthy environment for our associates and customers.By proactively addressing safety concerns we are bolstering our robust safety programs that will benefit our expansive network of over 200,000 associates and millions of customers.Workplace Violence Prevention ProgramAs a responsible retailer,we are committed to an improved comprehensive workplace violence program focused on promoting the safety of our associates and customers from violence in and around our stores.Acknowledging workplace violence as an opportunity area,we have spent the last year building the team,programs,and resources to be more effective at preventing,mitigating,and responding to workplace violence incidents.The goals of our comprehensive approach include:Taking preventative steps to reduce the likelihood of workplace violence incidents by assessing risk and implementing protective control measures Identifying and addressing workplace violence incidents within the Company and with lawenforcement Providing support following a workplace violence incident,including,if needed,medical attention and mental health support services Providing training and communication to allassociates.This past year we hired our first Vice President of Investigations and Programs and Director of Workplace Violence Prevention,both of whom work closely with our Asset Protection(AP)Field Team and other key business partners.This team is responsible for developing,implementing,and overseeing our program and workplace violence prevention efforts.Our Code of Conduct explicitly states our expectation of a safe working and shopping environment for our associates and customers.We do not tolerate physical violence,verbal threats,verbal abuse,or other intimidating or threatening behavior,by associates or customers.We also do not allow associates to possess weapons in theworkplace.Our ApproachOur comprehensive efforts to keep our people and stores safe from violence include fiveareas of focus:TrainingInvestigationResponsePreventionCommunity Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 222024 SUSTAINABILITY AND SOCIALIMPACT REPORTTrainingOne of the most important preventative measures we can take is to train and support our associates on how to manage challenging situations and de-escalate wherever possible.Over the past year,we have rolled out comprehensive de-escalation training to help associates address disruptive behaviors.We developed our de-escalation training with third-party experts and tailored it to meet the specific needs and circumstances of ourassociates.Training occurs through several channels,including online training,monthly safety meetings,and on-the-job communication.Training is mandatory for all new associates,and on an annual basis we require refresher training and updates for all associates.Managers are responsible for ensuring that all safety policies and procedures involving workplace safety and violence prevention are clearly communicated and understood by all associates as well as responsible for ensuring their associates are current with their required workplace violence preventiontraining.We routinely examine our training programs and delivery methods and refine or develop new programs as appropriate to protect associates and customers.We also have placed a specific focus on supporting our District Managers in their roles of coaching our store leaders on how to positively impact customer behaviors and creating an environment where people feel safe.InvestigationInvestigating workplace violence incidents is a significant component to preventing re-occurrence.We perform after-incident reviews and analysis to identify patterns,threats,and potential responses.Additionally,a hotline is available to all associates and is answered 24/7 by a live third-party call-center,which then provides reports to our workplace violence team.We aim to investigate all concerns raised through the hotline and determine additional protective measures necessary to mitigate crime and promote safety from workplace violence.ResponseResponding quickly to associate needs when an incident occurs is critical.The safety of our associates and communities is a top priority,as is our ability to react quickly when we learn of a workplace violence incident.If determined appropriate,additional preventative measures are added to locations in response to a workplace violence incident.In addition,our Major Crimes Team supports the investigation of incidents and follows through on prosecution and restitution if needed.We work with and support local,state,and federal law enforcement to assist with the identification and prosecution of suspects who create unsafe situations in our stores.De-escalation TrainingThe following training programs are part of our core Workplace Violence Prevention Program curriculum:De-escalation Basics De-escalation Essentials Your Role in Workplace Violence Prevention Managing Troubling People Managing Troubling Situations Active Assailant Training Threat Assessment TrainingAfter Incident SupportWe recognize that a workplace violence threat and/or incident may be a traumatic situation for our associates.Offering after incident support is a critical part of our workplace violence prevention efforts,and one that we continuously assess to ensure we provide associates with the support they need.Some of the actions we take include:Notifications of our Emotional Well-being Solutions,our Employee Assistance Programresources Provision of additional benefits,support and/or leave to affected associates,including our Associate Relief Fund Referrals of community service resources Coordination with local law enforcement to enhance safety and security Further assessment of risk at store location Additional training or other resources to support Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 232024 SUSTAINABILITY AND SOCIALIMPACT REPORTPreventionWith more than 16,000 stores in the United States and Canada,we are present in different types of environments and communities.We aim to deploy a range of tools,techniques,and investments to prevent the occurrences of unsafe conditions in stores and improve the overall safety of our store and surrounding environments.In higher crime areas,we have made our stores more resilient by utilizing enhanced physical security protection standards,including active roll-down gates,enhanced lighting packages,smart safe technologies,and active alarm systems.For specific high-risk incidents,we create a multi-stakeholder threat assessment group to review and analyze high risk incidents to collectively determine how to manage and respond to individual situations.In response to some high-risk circumstances,third party guards are placed in stores to support asneeded.CommunityWe care deeply about the communities we serve,and we prioritize close partnerships with local authorities and law enforcement to establish best practices including enhanced safety policies,procedures,and training to protect our associates and customers.Over the past year,we have focused on strengthening our relationships with law enforcement and retail industry partners to support community safety.We are part of several industry collaborative groups focused on identifying and tackling issues that contribute to increased crime around retail environments,business districts and communities across the country.Enhancing community interactions has been a key priority as we evolve our workplace violence prevention program.Last year we participated in eight National Night Outs across the country and aim to engage in 50 cities in 2024.We also hosted 12 community focus groups in three cities to better understand how we can engage with communities on issues around community violence,positive community interactions,civic engagement,and partnership.These focus groups helped to inform our community impact strategy,which we highlight in the Community Section of this report.Culture and Belonging|Talent and Career Growth|Elevated Associate Experience|Comprehensive Approach toSafety About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 242024 SUSTAINABILITY AND SOCIALIMPACT REPORTOUR CUSTOMERS Food Safety,Quality,andSanitationWe maintain a food safety program to assist our associates and suppliers in meeting our food safety expectations.Beginning in 2024,our dedicated food safety team became part of our Ethics&Compliance organization and is now led by our Vice President of Food Safety,Quality&Sanitation,a newly created role.Among other duties,this team drives end-to-end compliance in food safety,quality,and sanitation,including in our DCs and stores and via our supplier food safety program.We are entering our third year using an independent and accredited certification body to carry out a comprehensive audit of each of our U.S.Distribution Centers.Each of our U.S.Distribution Centers has passed the audit and is Good Distribution Practices(or“GDP”)certified.We plan to maintain this distinguished certification at each of our U.S.Distribution Centers.Recognizing the importance of effective pest control to our business,this year we performed a detailed review of integrated pest management providers and consolidated our services with a single vendor across all network operations.This consolidation will enable an end-to-end approach to pest management,giving us the ability to pinpoint where issues arise and to identify root causes.It allows us to leverage the industry expertise of our provider.Food and Product Safety and QualityAt Dollar Tree,we are committed to food and product safety and quality.Indeed,we know that our customers rely upon us to provide safe,high quality,and affordable food and products.To do so,we have dedicated food and product safety and quality teams in our Ethics&Compliance organization that are focused on continuously enhancing our programs and practices around the safety and quality of our food and products.Over the past year,we continued to strengthen those programs and practices.With more than 16,000 stores across the United States and Canada,Dollar Tree and Family Dollar serve 100 million U.S.and Canadian households every year.Providing our customers with access to affordable,high quality,and safe products is central to the promise of our two brands.In 2023,we launched our“Grand Opening Look Daily”(G.O.L.D.)program,which has already resulted in more than 1,100 stores achieving the“Grand Opening Look Daily”certification,rewarding our stores that meet the highest standards every day.Product Safety and QualityOur suppliers have committed to taking steps to ensure the products they provide to us are safe,compliant,and meet technical requirements.In particular,private brand over-the-counter drug products,medical device products,cosmetics,and dietary supplements are subject to a rigorous internal quality management program.The requirements include that manufacturers hold an applicable Good Manufacturing Practices(“GMP”)certification and complete a detailed paper-based questionnaire to assess their quality systems.Additional programmatic requirements include merchant and store associate training to promote a culture of quality and to enable our customers receive the best possible products.Key HighlightsMore than 1,100 stores achieved our Grand Opening Look Daily(G.O.L.D.)certification in the first year ofimplementationReduced product packaging in select household cleaning items Introduced 12 new plant-based cleaning products growing to 24 by the end of 2024All 25 of our U.S.Distribution Centers are Good Distribution Practices(GDP)certified About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 252024 SUSTAINABILITY AND SOCIALIMPACT REPORTProduct AccessDollar Tree and Family Dollar stores provide millions of Americans convenient,affordable goods for both the everyday and lifes special moments.Our strategic transformation for both segments includes providing more choices,value and convenience for customers including:Expansion of multi-price of frozen and refrigerated items at Dollar Tree Launch of more than 250 private label brands at FamilyDollarThe majority of our stores feature both frozen and refrigerated foods as well as shelf stable options to support a balanced diet.Along with grocers,farmers markets and other fresh foods options,we help busy people meet their families needs for affordable,varied meals and snacks.Product Stewardship andPackagingWe recognize that chemicals are a key element in the materials,products and processes within our operations and supply chain.In response to the growing demand from customers and investors for safer chemicals,materials,and products,we issued our first chemical policy in 2016,which focuses on addressing chemicals of concern.This year we are beginning the work to update our chemical policy to a more comprehensive chemical management strategy including:Enhancing our corporate chemical policy by continuing our participation in the Chemical Footprint Project and other external stakeholder initiatives that promote the use of safer chemicals Improving our supplier data regarding chemicals,plastics and packaging Updating our Restricted Substance List(RSL)and ongoing reduction and elimination of high-priority chemicals beyond compliance Working to transition to safer chemicals andproductsReducing the environmental impact of our packaging is a new focus for the Company.In 2024,we plan to undergo the development of our first packaging baseline and footprint to assess the current state of our packaging environmental footprint to inform the development of product packaging goals and commitments and prepare us for current and future Extended Producer Responsibility(EPR)regulatoryobligations.Inclusive AssortmentWe are committed to providing our customers with more choices and value and have taken deliberate steps to reflect the diversity of the communities we serve in our product assortment.In the past year,we have expanded our product offerings to better align to our customers preferences,ensuring that they feel a connection with our product mix and marketing efforts.We align our product inventory with cultural celebratory and awareness months,stocking products that resonate with our customers values and traditions.Over the next year we plan to develop a supplier diversification strategy focused on providing diverse suppliers with the tools and support needed to access purchasing opportunities with Dollar Tree.Health in HandRecognizing the importance of helping our customers make informed choices for their health and well-being,Family Dollar has partnered with the Consumer Healthcare Products Association(CHPA)Educational Foundation to launch the“Health In Hand”program.This initiative is designed to empower Family Dollar shoppers with the knowledge they need to make educated decisions about over-the-counter(OTC)products and dietary supplements,particularly benefiting those in underserved or rural communities and individuals with lower health literacy.By integrating educational QR codes into our in-store OTC category wayfinding strips across all 8,000 stores,we guide customers to custom landing pages on HealthInHand.org.This resource provides invaluable information about self-care categories,active ingredients,and specific products,with a focus on ingredient-based knowledge to assist customers in identifying the most suitable self-care items for theirneeds.Cage-Free EggsIn 2023,we updated our original 2016 cage-free egg commitment responding to changes in available supply,affordability and customer demand.Currently our Family Dollar stores in California,Colorado and Massachusetts sell cage-free eggs per those states legal requirements.As part of our updated commitment,we tested the sale of cage-free eggs in 63 Family Dollar stores where we merchandised cage-free eggs alongside conventional eggs using clear signage to help identify which eggs were from caged hens.The results of our test were positive and encouraging,and in 2024,Family Dollar expanded its cage-free initiative to hundreds more locations.We are committed to providing ongoing value and choice for our customers,including moving toward a more cage-freeassortment.About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 262024 SUSTAINABILITY AND SOCIALIMPACT REPORTOur Strategy Philanthropy focused on essential needs,economic opportunity and community vitality Community resilience through associate engagement,local support,and disaster response and recovery Proactive relationships with community stakeholders,law enforcement and government Advocacy on issues that impact the economic stability,well-being and safety of our communitiesOUR COMMUNITIES We aim to make a positive and lasting impact in these communities by providing accesstoaffordable essentialproducts,investing in efforts thatsupport overall economic well-being and contributing tothelivability andsafetyof communities,Our community efforts are guided by our Values of Serving with Accountability,Inspiring Belonging and Acting with Integrity and are made possible by partnering with a diverse set of national and local community organizations.Our strategy outlines our refreshed approach to community and social impact.Over the past year,we have focused on learning more about the issues and challenges our communities face and opportunities to better serve them.We consolidated our previous community initiatives and determined a new approach to channel our resources to support and care for the well-being of the families in the communities where we live,work,and shop.Our strategy prioritizes partnership and collaboration with nonprofit partners and local communities,associate engagement,community events,and financial and in-kind donations.Our Dollar Tree and Family Dollar stores,Distribution Centers,and corporate Store Support Center have the privilege of serving thousands of neighborhoods in the United States andCanada.12 community focus groups hosted in 2023 to learn how to better support communities in safety,store conditions and productaccess.Key HighlightsNearly$14 million in total charitable donations in 2023 including associate,customer and vendor supportFamily Dollar/BGCA Doing More Platform was awarded the Golden Halo Award for Best Civic Engagement Initiative by Engage for Good and the Advocate for Americas Youth Award from Boys&Girls Clubs of AmericaExpanded our Associate Relief Fund impacting nearly 500 associates in 2023 and launching our Immediate Response ProgramIn 2023,nearly 8,000 Dollar Tree stores collected 3 million school supplies for Operation Homefront Back-to-School Brigade and 4.6 million toys for the Holiday Toy Drive.Our donation efforts reached more than 43,000 children of military families About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 272024 SUSTAINABILITY AND SOCIALIMPACT REPORTFocusing Our ImpactAs part of our strategy development work,we refreshed our community impact focus areas to support the well-being of communities and families in three ways:We aim to align our nonprofit partnerships,community grant program,in-kind donations,and other social impact initiatives across these three focus areas to drive greater impact and uplift the communities we serve.Nonprofit Partnerships inActionOur national nonprofit partnerships have served as a backbone for our community investment efforts and represent the diversity of our associates,customers,and communities.We prioritize support for organizations that align with our refreshed community impact focus areas,including those that contribute to the vibrancy of the communities where Dollar Tree and Family Dollar operate.Through corporate,customer and vendor support,we contributed nearly$14 million in monetary and in-kind support to our national nonprofit partners andcommunities.Boys&Girls Clubs of AmericaSince 2014,Family Dollar has supported the mission of Boys&Girls Clubs of America by investing in opportunities for Club youth.In 2023,Family Dollar launched Doing More,a platform created to amplify Boys&Girls Clubs of Americas Think,Learn,Create Change program.The goals for the Doing More are twofold:To empower young people by providing them with tools for advocacy that enable them to act on critical issues facing their communities and become the next generation of changemakers.To strengthen Family Dollars ties in local communities through meaningful partnerships with associates,customers and communitystakeholders.Doing More delivered significant impact in its firstyear Family Dollar supported the advocacy work of 17 Boys&Girls Club organizations,including projects combatting coastline erosion,raising awareness of teen mental health,and advocating for anti-violence education programs.400 Club youth and staff from 32 states attended the Summit for Americas Youth in Washington,D.C.3,100 Club youth were given access to the Think,Learn,Create Change program.Associates participated in more than 50 Clubevents.A donation campaign was activated in more than 8,000 stores across the country,encouraging support from ourshoppers.85.4 million people learned about our partnership through a brand commercial produced by Family DollarESSENTIAL NEEDS COMMUNITY VITALITY ECONOMIC OPPORTUNITYContributing to the livability of communities by investing in efforts that support overall stability,including safety,connectivity and resiliencyStriving for equitable and inclusive access by investing inefforts that address food andessentials insecurity,familystability and wraparoundservicesHelping people thrive by investing in efforts that support overall economic well-being,including financial health,youth development,and job skills training About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 282024 SUSTAINABILITY AND SOCIALIMPACT REPORTOperation HomefrontFor more than 18 years,our Dollar Tree banner has supported Operation Homefronts mission to build strong,stable,and secure military families so they can thrive in the communities they have worked so hard to protect.In 2023,Dollar Tree,along with its customers and associates,supported in-store collection drives and distribution events throughout the United States.Nearly 8,000 Dollar Tree stores collected three million school supplies in support of the Back-to-School Brigade and 4.6 million toys in support of the Holiday Toy Drive.School supplies and toys were provided to 43,105 children of military families across the country at more than 230distribution events.In 2024,Dollar Tree will launch the Live Your Values platform,combining forces with Operation Homefront for the greater good of military families.Through continued support of the collection drive programs,our customers will not only embrace value for themselves,but also leave a valued impact on military families through product donations.Our support will expand to offer grants to military families facing financial hardship through the Critical Financial Assistance program,and provide temporary,rent-free housing as well as financial education and support services to help families work toward self-sufficiency through the Transitional Homes for Veterans program.Growing Our ImpactAs part of our refreshed community impact strategy,we plan to expand our network of nonprofit partners to organizations that work in the areas of food access,financial well-being,and community resiliency,disaster response and safety.We invested nearly$1 million in nonprofit partners across the country in 2023 and plan to unveil a Community Impact Grant program in 2024 in select markets across the United States to address local needs in our focus areas.Associate Support&EngagementSupporting Our Associates:Associate Relief FundIn addition to investing in our communities,we support our associates in need of financial assistance due to a range of personal hardships,including illness,intimate partner violence,military deployment of a family member,and natural disasters.Administered by the Emergency Assistance Foundation,our Associate Relief Fund distributed more than$500,000 in grants to 418 associates in 2023.Throughout the year we provide associates with several opportunities to help fellow associates in need,with their donations matched by the Company.Over the past year,we took steps to improve the Associate Relief Fund applicant experience,including broadening qualified events,lowering the length of time associates must wait to apply for additional support,instituting the Immediate Response Program for FEMA-declared natural disasters,increasing the grant amount an associate may receive for a qualified event to$2,500,and removing the lifetime grant award limit.As a result of improvements to the Associate Relief Fund,we granted an incremental$38,000 in 2023 for Hurricane Idalia relief and$224,000 in 2024 for Oklahoma tornado relief by activating the Immediate Response Program.Caring for Communities:Associate EngagementThrough engagement and volunteerism,our associates are making a lasting impact and meaningful connections in the communities we serve.Our associates volunteer their time and talents for Boys&Girls Clubs programs,Operation Homefront distribution events,service projects,mentoring and board service throughout the year.In 2024,we will continue engagement with nonprofit partners,expand organized service projects in communities across the country,and support our associates in building and strengthening relationships in their communities.Community Engagement PlaybookTo enhance and transform the way Dollar Tree and Family Dollar are experienced in communities,we are developing a community engagement playbook for field and Distribution Center leaders with best practices for building community relationships,being empathetic leaders,and developing thoughtful and engagingpartnerships.About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 292024 SUSTAINABILITY AND SOCIALIMPACT REPORTBoys&Girls Clubs of America Keystone Teen Leadership ConferenceMore than 1,200 teens and their advisors attended the National Keystone Conference in Dallas,TX,bringing together Club youth ages 1418 to explore opportunities in academic success,career preparation and community service.Family Dollar hosted a booth at the College and Career Readiness Expo and sponsored a“mic drop”training session focused on tools and approaches for local community advocacy.Youth of the YearThe Youth of the Year program recognizes young people for outstanding leadership,service,academic performance and dedication to health and well-being.In support of regional and national honorees,Family Dollar and its vendor partners provided event sponsorship and scholarships.Family Dollar leadership served on the Southeast Youth of the Year selection committee and Southeast Youth of the Year event committee,while local Family Dollar associates attended the celebratoryevents.Workforce ReadinessIn Houston,TX,Tampa,FL,and Jacksonville,FL,Family Dollar leadership offered Club teens insights into working with Family Dollar at merchandising and store levels.Back-to-School CelebrationOver 200 Club youth in Jacksonville,FL,helped celebrate store openings and the start of the school year with an event that included more than 12,000 product donations,monetary donations,entertainment,food trucks and more.Family Dollar corporate and local associates organized and worked on theevent.Holiday CelebrationIn Chicago,Family Dollar sponsored Union League Boys&Girls Clubs holiday events,providing gifts to more than 15,000 families.During the events,local associates supportedcrafting,games,food stations and gift distribution.Operation Homefront Family EventsWhether handing out school supplies and toys or giving meals to families,Operation Homefront hosts many events for service members and their families around the United States that Dollar Tree associatessupported.Military Child of the YearOperation Homefronts Military Child of the Year Award reflects the positive impact that young people have made on their military families,schools,and communities.Dollar Tree associates honored the nominees by attending the awards gala.Other Events Community EventsOur associates also supported various local events including National Night Out,Shop with a Cop,Breast Cancer Awareness Walks,American Diabetes Association Tour de Cure,Bowl-A-Thons,and many others.Community Listening SessionsWe partnered with Boys&Girls Clubs of Metro Baltimore and Philadelphia to coordinate six listening sessions with more than60 community advocates to learn how to better collaborate with the communities the stores serve on issues related to community safety and engagement.Community EventsOur associates actively engaged with our nonprofit partners in communities across the country.Disaster ReliefWe strive to make a difference in how our communities respond to natural disasters.From proactive support through the American Red Cross Disaster Responders Program to reactive support in the form of product and supply donations,we are committed to helping communities recover during their greatest times of need.About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 302024 SUSTAINABILITY AND SOCIALIMPACT REPORTOUR PLANETAddressing our climate impacts is an integral part of our Rooted in Progress strategy.Our approach encompasses the commitments we establish,the roadmap and actions we take to achieve our commitments,and an ongoing assessment of climate-related risks and opportunities.Over the past year,our efforts have focused on the following areas:Finalizing our decarbonization strategy across both operational(Scope 1 and 2)and value chain(Scope3)emissions Refreshing and communicating our emissions reduction goals Building a renewable energy strategy that supports our net zero roadmap Laying the foundation to measure these emissions more accurately overtime by improving emissions calculations methodologies and investing intechnologiesTo advance our commitment to climate action,we are excited to announce our ambition to achieve net zero by 2050.In addition to this long-term objective,we have established interim targets that align to the Science Based Targets Initiatives near-term target guidelines.The investments weve made in our decarbonization efforts over the past year lay the groundwork for the achievement of this ambitious target in the future.At Dollar Tree,we recognize the impact our business has on the environment.From the products we source to the energy used in our stores and supply chain to the products and packaging we distribute and sell,we are committed to minimizing our footprint and contributing to a healthy and resilient planet.Through our efforts,we are focused on addressing our climate impact,managing waste,and conserving natural resources to minimize our environmental footprint and fostering a more sustainable future.Our climate targets Commit to reduce Scope 1 and 2 absolute emissions by 50%by FY2032 based on a FY2023 base year(aligned with a 1.5-degree climatescenario)Commit to have 67%of suppliers by emissions set or commit to science-based aligned targets by FY2029 Continue to advance the transition to renewable energy sources for our stores,Distribution Centers,and Store Support Center Achieve net zero emissionsby2050 About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 312024 SUSTAINABILITY AND SOCIALIMPACT REPORTKey Highlights55,203MWh of renewable energyprocured(2.2%)50%completion of LED transition inDistribution Centers$113.1minvested in energy efficiency upgrades631stores opened aligned withIn-Store Energy Efficiency Standard873HVAC upgrades 9999 Sof stores equipped with Energy Management System technology and LED lighting99%Sustainability Governance and Management ApproachOur Chief Sustainability&Impact Officer is responsible for our sustainability and climate strategy and oversees its implementation across our business.Cross-functional teams,including property management,operations,finance,merchandising,sourcing,supply chain,procurement,environmental,health and safety,and compliance collaborate with our CSIO to set our sustainability goals and roadmap.Climate risk management is a part of our broader climate and sustainability strategy and is integrated into our overall Enterprise Risk Management(ERM)process.We have identified near and long-term actions to address environmental risk and regularly disclose them in our CDP Climate Disclosure and Task Force on Climate-related Financial Disclosure(TCFD)disclosure.We initiated our first TCFD assessment in 20222023 and plan to update it 20242025.We also plan to update our environmental policies which govern how we manage environmental risk to align with our updated Code and Vendor Code ofConducts.About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 322024 SUSTAINABILITY AND SOCIALIMPACT REPORTKey Highlights10,055stores that recycle Old Corrugated Cardboard(OCC)11%increase in recycled waste1,526Family Dollar stores that backhauled their OCC15,520stores that have deployed CERP program410,652tons of waste recycled in 2023 1,228tons of waste diverted in 2023(DT and FD)6%reduction in waste About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 332024 SUSTAINABILITY AND SOCIALIMPACT REPORTEnhanced Data Readiness for Climate ActionRecognizing the importance of accurate and comprehensive data in driving effective climate action,we have focused on strengthening our foundational emissions data infrastructure,processes,and reporting.In collaboration with Watershed,we have markedly enhanced the availability and quality of our Greenhouse Gas(GHG)inventory data,thereby enhancing the precision of our climate reporting and decision-making.Our data enhancements will also support our preparation for climate reporting regulation as mandated by the Security and Exchange Commission and the State of California,and our continued disclosure to CDPs Climate Questionnaire.We will continue to invest in better data,because we understand that effective action is contingent on accurate measurement as we know we cant act on what we dont measure.GHG Emissions DataScope 1 1 direct emissionsScope 2 2 purchased electricity,steam,heat,and cooling3.1 purchased goods and services3.2 capital goods3.3 fuel and energy related activities3.4 upstream transportation and distribution3.5 waste generated in operations3.6 business travel3.7 employee commuting3.11 use of sold products3.12 end-of-life treatment of sold productsScope 3 Scope 3 1.45%3.70.8580,687968,58424,834,046Emissions:market-based(tCO2e)95 95 11 44 M12,713,503529,183369,6661,091,993152,10018,754513,2771,646,7637,798,8072023 GHG Emissions Data About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 342024 SUSTAINABILITY AND SOCIALIMPACT REPORTOur Path to 2032:Strategic Focus Areas for Emissions ReductionOur Value ChainTransportation and LogisticsOptimizationBy streamlining our transportation and delivery routes,adopting fuel-efficient vehicles,and consolidating shipments toreduce the number of trips required,we are decreasing fuelconsumption and associated Scope 3 emissions.Supplier EngagementBy collaborating with suppliers to setsustainability and emissions reduction goals and adopt more sustainable practices,we are contributing to industry-wide change and reducing emissions throughout the entire value chain.Our OperationsEnergy Efficiency By investing in energy efficiency upgrades across our operations,stores,and Distribution Centers,we are reducing our Scope 1 and 2 emissions and our energy costs by reducing the amount of energy needed to run ourbusiness.Renewable EnergyBy integrating renewable energy supply to our existing electric and natural gasprocurement efforts,wecontribute to the continued“greening of the grid”efforts and to decarbonize our existing deregulated supply.Waste Reduction andRecyclingBy investing in reuse and recycling efforts in our stores and Distribution Centers,we continue to reduce operational waste,increase our diversion rates,and address our Scope 3 impact inthiscategory.About this Report|Introduction|Our approach|Our associates|Our customers|Our communities|Our planet|Ethics,compliance and privacy|Appendix 352024 SUSTAINABI
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2023 Environmental,Social,and Governance ReportAbout This ReportSynopsys empowers technology innovators with the industrys most comprehensive and trusted silicon to systems design solutions,helping transform the way we live and work.At the same time,we take responsibility for making our operations,products,and ecosystem more sustainable,driving strategies for efficiency and resiliency that benefit our business,stakeholders,communities,and the world.This Synopsys 2023 Environmental,Social,and Governance Report covers our ESG performance for our fiscal year 2023,which began November 1,2022,and ended October 31,2023.The exception includes our social impact data(calendar year 2023)and other instances as noted.We considered the recommended disclosures in the Software&Information Technology(IT)Services Sustainability Accounting Standard published by the Sustainability Accounting Standards Board(SASB)when determining the content of this report.Our reporting is intended to align with the Task Force on Climate-related Financial Disclosures(TCFD)and the United Nations Sustainable Development Goals(UN SDGs),and has been prepared with reference to the 2021 Global Reporting Initiative(GRI)Standards.Synopsys also reports separately to CDP as a part of our disclosure efforts.Synopsys employees around the world submitted photographs for potential inclusion in this years report.Photos included in the report are credited to the corresponding Synopsys employee.Thank you to our multitalented employees for submitting these fantastic photos.Distributing This Report We promote our report through:XProminent disclosure on our website XTargeted employee communications XOutreach to current and potential stockholders XOutreach to other stakeholders with whom we have built relationships XOur social channelsWe welcome feedback on this report and our performance.Please send comments andsuggestions to Photo Credit:Gayane Markosyan,Synopsys Employee,ArmeniaThis 2023 Environmental,Social,and Governance Report contains forward-looking statements pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 and other federal securities laws,and actual results could differ significantly.These statements are based on managements current opinions,expectations,beliefs,plans,objectives,assumptions,or projections regarding future events or results,including,but not limited to,our environmental,social,and governance(ESG)strategies,initiatives,goals,and commitments;our business plans and strategy;our technology,products,and services;ESG risks and opportunities;and our stakeholder engagement efforts.Risk factors that could cause actual results to differ are set forth in the“Risk Factors”section in our most recent Annual Report on Form 10-K and subsequent 10-Q filings.Any references to“material”in this report do not correspond to the concept of materiality used by the U.S.Securities and Exchange Commission(SEC).We currently do not believe that Synopsys goals,initiatives,or risks are material for SEC disclosure purposes,except to the extent referenced in our Annual Report on Form 10-K and subsequent 10-Q filings.This report also contains human capital measures or objectives that may be different from or are in addition to the human capital measures or objectives that Synopsys is required to disclose in our SEC filings.For a discussion on human capital measures or objectives that Synopsys focuses on in managing our business,please see the“Human Capital Resources”section in our most recent Annual Report on Form10-K.2Table of ContentsPhoto Credit:Tharindu Lakkhana,Synopsys Employee,Sri LankaCEO Letter4About Synopsys6Living Our Values,Leading with Vision7Our SMART FUTURE ESG Strategy9Product Portfolio and Innovation10ESG at Synopsys12How We Manage ESG132023 ESG Highlights15ESG Ambitions16Environment17Our Influence Through Innovation19Our Impact Through Operations21Social25Our People26Workforce Development forthe Future31Social Impact33Governance38Corporate Governance39Integrity,Ethics,and Business Conduct41Business Continuity and Resiliency42Cybersecurity and Privacy43Supply Chain Engagement45Political Activities and Contributions46Appendices47GHG Emissions Data Table48Diversity Metrics Data Table49TCFD Index51SASB,GRI,UN SDGs Data Table583CEO Letter Taking the helm as CEO in January 2024 after more than two decades at Synopsys has been a profound honor.Synopsys has long been a catalyst for semiconductor innovation,developing the mission critical engineering software and solutions our customers need to design their products.Icant begin to express my gratitude for the faith shown in me to steer this remarkable company into thefuture.Working alongside Executive Chair and Founder Aart de Geus for all these years has been transformative.His tireless dedication to Synopsys and vision for a better world have left an indelible impression on me.Since its founding in 1986,Synopsys has been a company that cares deeply about its people,the environment,and the communities in which we operate.I am particularly proud of the diverse backgrounds and viewpoints that our more than 20,000 employees across 30-plus countries bring to the company.These are exciting times as semiconductors revolutionize industries,changing how we work,communicate,and live.The semiconductor industry is expected to double in market value to one trillion dollars or more by the end of the decade,driven by the rise of artificial intelligence(AI),silicon proliferation,and software-defined systems.These trends fuel a new era of pervasive intelligence,where technology is seamlessly integrated into our lives.With it comes mounting complexity and cost,and greater compute,energy,and design challenges for the technology industry.Synopsys is uniquely positioned to address these challenges for our customers,which increasingly include new-to-silicon systems companies like hyperscalers and automotive companies.With more than 90%of advanced chip development using Synopsys design automation and IP solutions,our products maximize the research and development(R&D)capability and productivity of companies designing silicon chips and systems across a wide range of industries from mobile to data centers,to automotive and more.At Synopsys,our mission is to empower technology innovators everywhere with the industrys most comprehensive and trusted silicon to systems solutions that make pervasive intelligence possible.The potential and the need is enormous.Pervasive intelligence can unlock solutions to societal challenges like improving healthcare outcomes,tackling climate change,and reducing vehicle accidents.We know that with great potential comes great responsibility.In an age where AI increasingly permeates every facet of our lives,the pace of innovation and change risks outstripping certain segments of society being able to adapt.Governments and civil society are grappling to keep pace,leaving a void for industry leaders like Synopsys to fill.Its not just about progress;its about ensuring that progress is guided by principles of ethics and sustainability.42023 ESG ReportCEO letterAbout SynopsysESG at SynopsysEnvironmentSocialGovernanceAppendicesPhoto Credit:Mike Achtelik,SynopsysEmployee,GermanyThat is why I am incredibly proud of our commitment to positive change,as outlined in our Smart Future strategy and in this report.Our strategy is clear and simple:optimize our own operational impact on the world and positively influence others to do the same.In 2023 we made important progress toward reaching our ESG goals,including:Validation of our greenhouse gas(GHG)emissions reduction targets by the Science Based Targets initiative(SBTi).Synopsys committed to four near-term,science-based targets aligned with limiting global warming to 1.5C above preindustrial levels.We will report annually on our progress.Recognition by CDP for our performance on climate action,with an A-leadership score for demonstrating best practices in strategy,governance,and oversight of climate issues.Strengthened our workplace culture of innovation and inclusion that offers robust opportunities for engagement,learning,and growth,as affirmed by 89%of employees recommending Synopsys as a great place to work.Synopsys also ranked 13th on Comparablys annual Best Global Company Culture list.Our work is far from done.In 2024,our ESG ambitions must build on our progress.We remain steadfast in enabling our customers to innovate for a greener,more sustainable world,and we continue to act in alignment with climate science to reduce our carbon footprint.Empowerment of our global talent remains a top priority as we continue to foster a culture of innovation,inclusion,and integrity.As we continue this journey together to create a smarter future,we remember our whythe reason we do what we do.Synopsys exists to power innovation today that ignites the ingenuity of tomorrow.We will continue to innovate,to push boundaries,and to lead with purpose and integrity.Together with our customers and partners,we have the power to create a brighter future for generations to come.Sincerely,Sassine Ghazi,President and Chief Executive Officer 52023 ESG ReportCEO letterAbout SynopsysESG at SynopsysEnvironmentSocialGovernanceAppendicesAbout Synopsys A new era of pervasive intelligence is upon us,driven by three major technology trends:artificial intelligence,silicon proliferation,and software-defined systems.Synopsys has laid the foundations for these trends through our silicon to systems design solutions,becoming a trusted partner of technology innovators worldwide.We partner closely with semiconductor and systems customers across a wide range of vertical markets to maximize their R&D capability and productivity,powering innovation today that ignites the ingenuity of tomorrow.Building on our leading technologies,companies around the world are delivering innovations with wide-reaching benefits.Photo Credit:Nancy Wall,Synopsys Employee,United States6CEO letterAbout SynopsysLiving Our Values,Leading with VisionOur SMART FUTURE ESG StrategyProduct Portfolio and InnovationESG at SynopsysEnvironmentSocialGovernanceAppendices2023 ESG ReportLiving Our Values,Leading with VisionFor more than 35 years,Synopsys culture has grown from the foundation of our core valuesintegrity,execution excellence,leadership,and passionto our innovation mindset,which spurs us to continually reach higher.We catalyze the impossible by giving innovators the tools to overcome their challenges and deliver their solutions.We deliver to our customers an end-to-end solution for energy-efficient system-on-chips(SoCs)across design,verification,and IP products,as well as yield-management software that helps integrated circuit(IC)manufacturers achieve and maintain high semiconductor yields,and helps reduce environmental impact of the manufacturing process.Click here for an in-depth look at Synopsys brand vision and portfolio of products and services.Photo Credit:Bella Park,Synopsys Employee,South Korea7CEO letterAbout SynopsysLiving Our Values,Leading with VisionOur SMART FUTURE ESG StrategyProduct Portfolio and InnovationESG at SynopsysEnvironmentSocialGovernanceAppendices2023 ESG ReportPhoto Credit:Kiran Maddhula,Synopsys Employee,India2023 by the Numbers Synopsys is the leading silicon to systems design solutions company,delivering solutions and services that enable the era of pervasive intelligenceAI that accelerates everythingIndustry leading AI-driven electronic design automation(EDA)workflow optimization and data analytics solutions along with breakthrough generative AI capabilities boost engineering productivity and accelerate innovation across all stages of chip development.Solutions to enable silicon proliferation As the world becomes more connected,we offer world-leading EDA and IP solutions for designing and verifying advanced silicon chips.Software-defined systems that drive differentiationHardware assisted verification and virtual prototyping solutions enable a holistic approach to complex systems design and validation that starts with system needs and then builds the software and silicon to meet them.122 global offices3,339 active patents20,300 employees globally$5.32B annual revenue33%of revenue devoted to R&D80%of employees are engineers1In May 2024,Synopsys entered into an agreement to sell its Software Integrity business.This business has been presented as a discontinued operation in Synopsys consolidated financial statements beginning in the second quarter of fiscal year 2024,and fiscal year 2023 revenue presented herein is on a continuing operations basis only.8CEO letterAbout SynopsysLiving Our Values,Leading with VisionOur SMART FUTURE ESG StrategyProduct Portfolio and InnovationESG at SynopsysEnvironmentSocialGovernanceAppendices2023 ESG ReportOur SMART FUTURE ESG StrategySynopsys is at the forefront of a revolution.Our design automation tools and intellectual property(IP)are the backbone of billions of smart and connected devices that are ushering in a new era of pervasive intelligence.This exciting new world comes with immense opportunities,but also significant responsibilities.Our Smart Future strategy provides a focus and structure for how we manage our own operational impact and influence others around us to create a better world.Were not only reducing our own environmental footprint,but also leveraging our expertise,resources,and problem-solving skills to inspire positive change throughout our ecosystemworking with our communities,customers,partners,and suppliers to create a more sustainable future.Our technology is enabling innovations that shape a smarter world,from low-power computing to enhancing human health and well-being,to bringing safety and security to autonomous vehicles.Our approach prioritizes both the needs of our business and those of its stakeholders,which include our stockholders,customers,employees,partners,and local communities.This contributes to Synopsys success while simultaneously driving meaningful progress on environmental and social issues.The positive impact extends beyond our company,reaching into the communities where we operate and fostering strong,lasting partnerships.9CEO letterAbout SynopsysLiving Our Values,Leading with VisionOur SMART FUTURE ESG StrategyProduct Portfolio and InnovationESG at SynopsysEnvironmentSocialGovernanceAppendices2023 ESG ReportSoftware thats powering the digital transformationVirtually all companies differentiate via softwareAnalytics that are uncovering new insightsAnalytics point the way,including toward building and maintaining products more effectivelyChips that are differentiating the experienceAdvanced chips massive processing power is bringing new software inventions to lifeAI thats accelerating everythingAI enables faster and more efficient chip designsProduct Portfolio and InnovationIn todays era of pervasive intelligence,innovation is ignited by chip and software advances driven by a fusion of AI,analytics,and massive compute resources.To enable that ecosystem,the semiconductor industry is combining the traditional Moores law focus on dimensional scale with a new focus on systemic optimizationusing AI and machine learning to drive performance by optimizing chip architecture and construction at the silicon level.At the same time,designers are leveraging software to improve energy efficiency and address security vulnerabilities at each stage of chip design.As the worlds leading silicon to systems design solutions company,weve become a trusted partner for technology innovators everywhere,offering comprehensive and trusted solutions for chip design,verification,and IP integration that empower our customers to drive advancements across industries.We are constantly investing in the future:securing the worlds best talent,devoting 33%of annual revenue to research and development,and collaborating with academic research partners to bring new technologies to light.From AI,multi-die designs,and electronics digital twin technologies to energy-efficient SoCs and beyond,were pioneering technologies with the potential to drive positive impact in our world.Photo Credit:Ramya B K,Synopsys Employee,IndiaSynopsys is an innovator in technologies shaping our world10CEO letterAbout SynopsysLiving Our Values,Leading with VisionOur SMART FUTURE ESG StrategyProduct Portfolio and InnovationESG at SynopsysEnvironmentSocialGovernanceAppendices2023 ESG Report2023 Product Innovation Highlights In 2023,we followed our innovation imperative in all of our key product introductions and in our continued commitments to assuring trust and security.We remain deeply committed to helping our customers design more sustainable products,minimizing power consumption while meeting their growth needs.Exponential Productivity and Efficiency Gains Synopsys.ai Copilot is the result of a strategic collaboration with Microsoft Azure OpenAI Service that brings the power of GenAI to help engineering teams accelerate time to market and address systemic complexity through the power of conversational intelligence.Accelerating Systems Innovation Synopsys expanding portfolio of hardware-assisted verification including the newest ZeBu Server5 system and virtual prototyping solutions provide systems companies with the performance and capacity required to verify and validate highly efficient,customized silicon.Enabling Innovative Chip Design Our broad portfolio of semiconductor IP provides the building blocks for chips with specific design requirements,from secure chiplets in energy-efficient multi-die designs to safety-certified devices in automotive and industrial applications.Safe and Responsible AI-Assisted DesignUnderpinning our investments,research,and collaborations is a persistent focus on building AI systems that are safe and trustworthy.Our intention is to promote the responsible deployment of AI technologies in the creation of new silicon-based applications.For additional product information,see the Our Influence Through Innovation section of this report and our website.11CEO letterAbout SynopsysLiving Our Values,Leading with VisionOur SMART FUTURE ESG StrategyProduct Portfolio and InnovationESG at SynopsysEnvironmentSocialGovernanceAppendices2023 ESG ReportESG at Synopsys Synopsys recognizes that as we drive innovation and business success in the era of pervasive intelligence,we are simultaneously responsible for the sustainability of our operations,products,and ecosystem.We maintain a robust governance structure for our ESG efforts,gauging and acting on our highest priority ESG impacts,business risks,and opportunities to create positive impact for our stockholders,customers,employees,partners,and local communities.Photo Credit:Sona Chachan,Synopsys Employee,India12CEO letterAbout SynopsysESG at SynopsysHow We Manage ESG2023 ESG HighlightsESG AmbitionsEnvironmentSocialGovernanceAppendices2023 ESG ReportHow We Manage ESGOur Smart Future strategy is overseen by our ESG Management Team,with support from the ESG Leadership Committee.The ESG Leadership Committee includes executives from across our business who are tasked with driving Synopsys ESG performance.The committee ensures implementation of our environmental,social,and governance priorities in their respective areas of responsibility.Except to the extent delegated to other committees,the Synopsys Boards Corporate Governance and Nominating(CGN)Committee reviews,assesses,and recommends to the Board as necessary ESG policies and practices,priority and risk assessments,risk management measures,and public disclosures,as well as related initiatives,goals,and progress toward goals.The ESG Management Team provides updates to the CGN Committee as well as the full Board of Directors.These updates inform and educate the Board on topics such as Synopsys GHG emissions reduction strategy and targets and ESG-focused regulatory requirements and proposals worldwide.We work continually to build greater connection between stakeholders across the business and integrate ESG more strategically into our corporate programs and processes.ESG Governance StructureBoard of DirectorsCorporate Governance and Nominating CommitteeESG Management Team ESG Leadership CommitteeInformation TechnologyPeople Finance Global Marketing and CommunicationsInvestor Relations Places Hardware OperationsLegal Product Marketing Safety and Resiliency Social Impact 13CEO letterAbout SynopsysESG at SynopsysHow We Manage ESG2023 ESG HighlightsESG AmbitionsEnvironmentSocialGovernanceAppendices2023 ESG ReportMateriality Assessment andPriority Topic Areas Synopsys conducted our first materiality assessment in 2018 to:X Identify key ESG impacts throughout our value chain X Evaluate the significance of individual ESG impacts on our company,stakeholders,and planet X Prioritize key impacts to inform mitigation strategies and reportingThrough this process,we identified six priority areas to provide a framework for operationalizing our response:human capital management,innovation,cybersecurity and data privacy,corporate governance and ethics,climate change and GHG emissions,and supply chain management.For a full list of priorities,see GRI 3-2:List of material topics.We review our priorities annually,and made our last adjustments in 2021.In fall 2023,we began an exercise to refresh our materiality assessment using a double-materiality lens,gauging two types of sustainability-related impacts:our business activities impacts on people and/or the environment and the financial impacts of sustainability-related risks and opportunities on our business performance.We will provide an update on this process in our 2024 ESG Report.Engaging Key StakeholdersSynopsys engages with our key stakeholders on an ongoing basis to gather their perspectives on our ESG strategy,policies,and programs,and help guide our Smart Future priorities and practices.Stockholders We proactively communicate with stockholders to provide regular updates on our programs and progress,understand their ESG interests and expectations,and respond to their questions.Suppliers We drive responsible business practices by expecting all our suppliers to operate in a manner consistent with our Code of Ethics and Business Conduct,and for direct suppliers to follow our Supplier Code of Conduct.Industry Partners Our collaborations and industry partnerships help drive sustainability solutions across our value chain.Employees We empower our employees to innovate,collaborate,and explore ways to continuously learn and grow,including leading initiatives aimed at advancing our ESG strategy.We support this journey with an inclusive workplace where everyone can speak up and be heard,no matter where they sit in the organization.Customers We partner with our customers to advance shared ESG priorities and best practices in creating silicon to systems design solutions.1414CEO letterAbout SynopsysESG at SynopsysHow We Manage ESG2023 ESG HighlightsESG AmbitionsEnvironmentSocialGovernanceAppendices2023 ESG Report25.4%of our global workforce is women1.5C GHG emissions targets validated by SBTi 5.8%of our U.S.workforce identifies as Black,Hispanic and Latinx,or IndigenousA-CDP Climate Change score received94%of our employees participated in annual engagement survey43office locations in 20 countries participated in Season of Service86%of managers completed Inclusive Leader training2023 ESG HighlightsPhoto Credit:Lianna Balayan,Synopsys Employee,Armenia15CEO letterAbout SynopsysESG at SynopsysHow We Manage ESG2023 ESG HighlightsESG AmbitionsEnvironmentSocialGovernanceAppendices2023 ESG ReportEnable customers to innovate for a greener worldReduce our GHG emissions in line withour SBTi validated targetsEmpower global talent by fostering a culture ofinnovation,inclusion,and respectEnsure security across our enterprise and help our customers design trusted siliconBuild a resilient and responsible supply chainGenerate positive impact in the communities where we workESG AmbitionsPhoto Credit:Mary Ann White,Synopsys Employee,United States1616CEO letterAbout SynopsysESG at SynopsysHow We Manage ESG2023 ESG HighlightsESG AmbitionsEnvironmentSocialGovernanceAppendices2023 ESG ReportEnvironment Synopsys recognizes the need for transformative action to protect our environment and is working to drive positive change both within our operations and through influence with our customers,industry,and suppliers.Through our technologies,were empowering our customers to develop more innovative and energy-efficient chips.In our industry and supply chain,were working to promote greener practices.Also,through a continual focus on efficiency and optimization,were reducing our operational impactsdoing our part for people,communities,and the planet while supporting business success.Photo Credit:Annaraja Lakshmanan,Synopsys Employee,India17CEO letterAbout SynopsysESG at SynopsysOur Influence Through InnovationOur Impact Through OperationsEnvironmentSocialGovernanceAppendices2023 ESG ReportEnvironmental Strategy and Management ApproachOur ESG Management Team propels Synopsys environmental strategy and guides its execution,with input and direction from the C-Suite-led Climate Action Steering Committee and cross-functional ESG Leadership Committee,and in alignment with the expectations of our key stakeholders.The team reviews performance against Synopsys goals and adjusts our approach as needed.Across Synopsys operations,we focus on continuously improving data management,enhancing our energy use reporting,and taking specific decarbonization actions to meet our emissions reduction targets.Examples of how we are mitigating the climate impacts of our operations and supply chain:X Prioritize environmental performance certifications in all new building construction X Incorporate sustainability features into the operation of our facilities X Pursue renewable energy sourcing opportunities for our offices and data centers X Prioritize data center vendors that can support clean and renewable energy X Work to mitigate global electronic waste(e-waste)X Drive emissions reductions in science-based target areas such as use of sold products,employee commuting,and business travel X Leverage our contracting and procurement processes to seek vendors that demonstrate a strong commitment to sustainability X Engage with industry collaborations such as CEBA,the Sustainability Roundtable,and the Semiconductor Climate ConsortiumExamples of how we are extending our sustainability impact to our customers:X Enable low power design in SoC architectures X Optimize energy efficiency and cooling of high-performance computing and data center applications X Help AI chip designers meet or exceed performance and energy goals and accelerate time to market X Continue to innovate for our next generation hardware-assisted verification products to enable higher verification task efficiencyIn 2023,Synopsys received SBTi validation of our GHG emissions reduction targets.Photo Credit:Sam Kurutz,Synopsys Employee,United States 18CEO letterAbout SynopsysESG at SynopsysOur Influence Through InnovationOur Impact Through OperationsEnvironmentSocialGovernanceAppendices2023 ESG ReportOur Influence Through InnovationWe live in a time of unprecedented acceleration in advanced digital technologies.Explosive growth of AI and machine learning is increasing computational power demands.Hyper-scale computing,automotive,mobile,medical,and other specialized applications are driving a shift toward chip architectures tailored to their unique performance needs.Electronics digital twin technology provides virtual models to explore,analyze,and optimize chip designs before physical prototypes become available.From silicon to systems,Synopsys is enabling these shifts with the most advanced design solutions to enable greater speed,power,reliability,and security.At the same time,we recognize that as the technology industry pursues a thousandfold improvement in computational power,we must also pursue a thousandfold improvement in energy efficiency.Exponential consumption trends are currently far outpacing growth in the worlds energy generating capacity.Synopsys drives maximum energy savings in the semiconductor ecosystem through solutions that optimize energy efficiency in the design and use of chips,systems,and software,along with solutions that cut energy use,water use,and waste in semiconductor manufacturing.Photo Credit:Li Liu,Synopsys Employee,ChinaDriving Energy Efficiency Through System DesignEnergy-efficient SoCs are a critical need in all major markets,from applications for high-performance computing(HPC),AI,data centers,networking,and storage to devices for mobile,wearables,IoT,aerospace,and automotive applications.Synopsys solutions drive significant improvements in compute power per watt across every phase of the SoC design process.Software:Our solutions enable profiling the software workload for power consumption to enable energy-efficient SoCs.Architecture:Our solutions drive efficiency via user-driven exploration of power management strategies,as well as macro-architectural tradeoffs for power-performance and intelligent IP integration.Logic Design:Our solutions achieve power savings through micro-architectural tradeoffs and by using various tool-guided techniques for operation efficiency improvements.Implementation:Our solutions apply automatic optimization in various power-related areas,helping designers maximize power,performance,and area(PPA)results for their chips.Signoff:Our solutions center on highly accurate signoff analysis for power consumption,along with dynamic and leakage power recovery that employs precise engineering change order(ECO)changes.Verification:Our solutions enable comprehensive functional verification of complex SOCs using advanced power management techniques by leveraging the Unified Power Format(UPF).19CEO letterAbout SynopsysESG at SynopsysOur Influence Through InnovationOur Impact Through OperationsEnvironmentSocialGovernanceAppendices2023 ESG ReportImproving Efficiency for Chip ManufacturersProcessing a single wafer in a semiconductor fab can require hundreds of process steps and take more than a month,after which another month is consumed in the assembly,testing,and packaging steps necessary to deliver a finalized chip to market.These processes generate petabytes of data that need to be analyzed quickly and accurately to optimally control high-volume manufacturing,minimize process excursions,and produce the best possible yield using the minimum of energy and water resources.Synopsys addresses these challenges for our customers with software solutions spanning chip design,verification,mask synthesis,process modeling,on-chip testing and monitoring,and AI/ML-based data analytics.Learn more about Synopsys industry-leading end-to-end solutions for energy-efficient SoC design.2020CEO letterAbout SynopsysESG at SynopsysOur Influence Through InnovationOur Impact Through OperationsEnvironmentSocialGovernanceAppendices2023 ESG ReportOur Impact Through OperationsSynopsys is a growing company,and we are continually working to reduce our own operational impact by looking for efficiencies and optimization across the company.We have set ambitious science-based GHG emissions reduction targets,prioritize the use of renewable energy,form partnerships to help reduce our carbon footprint,and implement office location strategies that advance our sustainability and cost initiatives.These efforts not only help us attract and retain talent and serve our customers better,but also demonstrate our commitment to environmental responsibility.Climate Resilience:Mitigating Risks,Identifying OpportunitiesSynopsys undertakes periodic assessments to review climate risks and opportunities relevant to our business.To date,these assessments have identified no material climate risks to our business,strategy,or financial planning related to either the transitional impacts of climate change(carbon pricing,reputation,legislation)or physical risks from climate-related events(e.g.,wildfires,storms,floods).Nevertheless,we are committed to taking responsibility for our carbon footprint.We understand the carbon intensity of our operations and supply chain,and we work to mitigate associated impacts via new strategies and technologies.We report on our climate-related practices using three leading assessment frameworks:X The CDP Climate Change questionnaire,where we annually disclose our potential climate impacts,risks,and opportunities X EcoVadis assessments,to evaluate our sustainability practices and make data accessible to our customers X The Task Force on Climate-related Financial Disclosures(TCFD),to provide investors with information on climate-related risks pertaining to our products,operations,and supply chain Following a multi-step review process,our near-term targets for reducing GHG emissions received SBTi validation in 2023,confirming Synopsys is following best practices in our emissions reduction targeting,in line with climate science.Additionally,we are preparing for compliance with new climate disclosure requirements applicable to Synopsys.In 2023,we undertook a value chain exercise to assess our impacts,risks,and opportunities;reviewed our GHG emissions processes and controls;built out our response to Californias Voluntary Carbon Market Disclosure;and conducted a mapping of our compliance strategy for the EUs Corporate Sustainability Reporting Directive(CSRD).See our TCFD Index for more details on Synopsys climate-related risks,opportunities,and strategies.Material risks are also reported in our Annual Report on Form 10-K.Photo Credit:Nicole Chmura,Synopsys Employee,United States2121CEO letterAbout SynopsysESG at SynopsysOur Influence Through InnovationOur Impact Through OperationsEnvironmentSocialGovernanceAppendices2023 ESG ReportPhoto Credit:Priyanka Patil,Synopsys Employee,IndiaBaseline year:2019 This represents suppliers with validated SBTi targets.Science-Based GHG Emissions Reduction In 2023,Synopsys achieved validation of our GHG emissions reduction targets from the Science Based Targets initiative(SBTi),the foremost certifying body in GHG reduction target setting and validation.SBTi considers targets science-based if they align with climate science and the goal of limiting global warming to 1.5C above pre-industrial levels.Meeting SBTi criteria,Synopsys is now committed to four near-term science-based targets and has developed a management structure and initiatives to enable our teams,drive improvements,and report on progress toward our targets.Beginning with this report,we are reporting that progress annually.We plan to review our targets in 2027 based on the latest SBTi criteria and guidance.If a significant change to our business occurs before 2027,we will review our targets accordingly.Progress Toward Science-Based Targets See our GHG Emissions Data Table for details.55%reduction in absolute Scope 1 and2 GHG emissions by 203262%reduction in Scope 3 GHG emissions from employee commuting andbusiness travel,per employee,by 203262%reduction in Scope 3 GHG emissions from use of sold products,per lifetime verification task,by 203245%of our suppliers for purchased goods and services and capital goods,based on spend,will maintain their own science-based targets,by 2027SBTi Target506%Progress Toward GoalGoal55bbE%2%Our progress towards meeting Synopsys SBTi targets is generally measured against our 2019 GHG emissions.Since 2019,Synopsys has experienced significant operational growth,with a 58%increase in revenue,a 46%increase in our employee base,and a 20%overall increase in electricity consumption.Despite this significant growth,our Scope 1 and Scope 2 emissions are 1%lower than our 2019 base year and we are making meaningful progress towards our SBTi emissions reduction targets,as shown in the chart below.We expect that our progress will vary from year by year until the target date.For example,due to a combination of business growth and the increasing power demands of advanced computing,progress towards our Scope 1 and Scope 2 emissions reduction targets may be minimal or even negative over the next few years until renewable power facilities associated with our power purchase agreements come online.We will continue to take specific decarbonization actions until and after our target date.22CEO letterAbout SynopsysESG at SynopsysOur Influence Through InnovationOur Impact Through OperationsEnvironmentSocialGovernanceAppendices2023 ESG ReportCarbonNeutral Company CertificationIn 2023,we achieved CarbonNeutral company certification across our global operations for the fifth consecutive year through a portfolio of high-quality,verifiable energy attribute certificates(EACs)and offsets.The purchase of EACs and offsets specifically for the CarbonNeutral company certification are not accounted for in our emissions inventory,including progress toward our emissions reduction target.For more information,see our California Voluntary Carbon Market Disclosure.E-waste We contract with an IT asset disposition(ITAD)vendor certified to the Responsible Recycling(R2)standard to dispose of all non-functional and unrepairable electronics responsibly and provide us with an annual impact summary.In 2023,91,451 pounds of Synopsys e-waste was refurbished and reused or recycled.Renewable EnergyBoosting our use of renewable energy is an integral part of Synopsys science-based emissions reduction strategy,and we continued making gains in 2023.In Texas,our virtual power purchase agreement(VPPA)with Azure Sky Wind generated approximately 49,000 MWhs of clean energy,mitigating 50%of energy demand in our North American operations for the year.In Bangalore,India,a power purchase agreement(PPA)provides our offices an annual 3,100 MWhs of wind capacity.In California,our headquarters offices source clean,renewable energy through a Community Choice Aggregation(CCA)program.In addition to our offices,several of our global data center locations are supported with clean renewable energy.In 2023,Synopsys joined the Green Power Partnership,a project of the U.S.Environmental Protection Agency(EPA),which recognized Synopsys as a leader in green power development and consumption for our participation in the Azure Sky Wind VPPA and other U.S.renewable energy programs.As markets allow,we plan to continue to explore new procurement opportunities across our operating regions,considering CCAs,PPAs,VPPAs,and utility programs that meet our standard of being as local as possible to the source of consumption.Prioritizing Data Center EfficiencyIn 2023,we made significant progress on a multi-year strategy to improve Synopsys data center sustainability through partnerships with sustainability-focused colocation providers and optimization of our on-premise data center infrastructure.By year-end 2024,our optimization strategy aims to have transitioned 1.58 MW of data processing capacity to more efficient data centers,with the ultimate aim of consolidating our footprint from 53 data centers(baseline 2021)to 13,both colocated and on-premise.During 2023,we launched three major projects as part of our renewable energy strategy.In Quebec,we established a new data center powered nearly 100%by hydropower,supporting growth in both Canada and the U.S.In India,we relocated to a new data center colocation project that can source up to 85%of its energy from renewable sources.In partnership with NorthC,we established a 100%renewables-powered engineering-focused data center in the Netherlands that went live in early 2024,supporting our European growth.Concurrently,we closed seven older,less efficient on-premise data centers,with an additional ten closures planned for2024.23CEO letterAbout SynopsysESG at SynopsysOur Influence Through InnovationOur Impact Through OperationsEnvironmentSocialGovernanceAppendices2023 ESG Report23Sustainable Facilities Through our long-term strategy of centralizing operations in global growth hubs,we aim to locate our facilities in vibrant,walkable locations with access to efficient public transportation,advancing both sustainability and our ability to attract and retain talent.In 2023,we launched several new facilities management initiatives and aligned with new strategic partners who will help us further improve day-to-day operational efficiency at our facilities and reduce facility risks and operating costs worldwide.Our goals are to focus on the following areas:X Secure more comprehensive data on our operational energy use,water use,and waste X Benchmark our current capabilities against our industry and peers X Identify mitigation projects and green construction certification opportunities(LEED,BREEAM,etc.)X Partner with vendors whose environmental commitments align with our environmental goalsSynopsys operates both owned and leased facilities,which together account for 79%of our annual Scope 1 and 2 GHG emissions.For new building construction and renovation,we seek certification from the U.S.Green Building Councils Leadership in Energy and Environmental Design(LEED)program or comparable construction standards in the facilitys region.Where feasible,we also work with our vendors and consultants to achieve these criteria at existing facilities.Currently,Synopsys occupies approximately 1.4 million square feet of green-certified office space around the world.Since leased facilities account for the majority of our footprint,they are pivotal to achieving our renewable energy and climate goals.As part of the selection and leasing process,we pay close attention to candidate sites emissions levels,energy efficiency,water efficiency,and waste recycling capabilities.As a signatory to the Clean Energy Buyers Association(CEBA)Commercial Real Estate Principles,we seek to build partnership and transparency between tenants and landlords around energy use reduction,efficiency,and use of renewables.Our new facilities management programs will improve our ability to capture and track utility data for energy,water,and waste,and deliver local expertise to plan and execute on-site performance improvement opportunities and waste-mitigation projects.Water and Waste For new facility leasing arrangements,we require landlords to define their environmental initiatives with the goal of achieving certification to the applicable standard(LEED,BREEAM,etc.).Due to the nature of leasing structures,particularly in multi-tenant buildings,tracking our total water and waste impacts has proved a challenge.Across our footprint,local teams identify and implement impact-reduction strategies for water use and waste.For instance,our headquarters in Sunnyvale,CA,donates an average of 1,400 pounds of food scraps weekly to the citys FoodCycle program,which recycles the waste into nutrient-rich fertilizer,animal feed,and feedstocks for anaerobic digestion systems that create biogas.24CEO letterAbout SynopsysESG at SynopsysOur Influence Through InnovationOur Impact Through OperationsEnvironmentSocialGovernanceAppendices2023 ESG ReportSocial To help shape a Smart Future,Synopsys must remain at the forefront of innovationday after day,year after year.To do so,we focus on our people,ensuring our ability to recruit,support,and retain the most talented,diverse teams.From there,our circle of impact expands outward.We cultivate research,innovation,and our industrys future talent pipeline through university partnerships and we support K-12 science,technology,engineering and math(STEM)education to instill a science mindset in students.Additionally,we address critical needs in communities worldwide through grantmaking and employee community engagement.25CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportOur People At Synopsys,we empower our talent to create the tools required to keep us on the cutting edge,both today and well into the future.We are proud to have the best and brightest talent working together to forge a culture of inclusion,diversity,support,and respect.Further,we enable all voices,backgrounds,and experiences to contribute to achieving our business objectives and delivering positive impacts worldwide.We know that employees can only bring their best to work each day if they are engaged,challenged,and supported professionally and personally.Through our ecosystem of learning and growth opportunities,collaboration and innovation tools,creative work environments,and robust total rewards,we help our employees thrive and do great work.Our People Strategy and Management ApproachOur People and Places Team,led by our Chief People Officer,is focused on building a workforce of both early career and experienced talentcreating a vibrant,engaging workplace culture that offers robust opportunities for learning and growth.Our people strategy rests on our values of integrity,execution excellence,leadership,and passion,and our leaders and managers feel accountable for delivering a positive employee experience.Synopsys People Leadership Team provides quarterly human capital performance reports to our Boards Compensation and Organizational Development Committee.The Committee reviews workforce metrics to assess the vibrancy of our culture.Learn more about our people-related policies and commitments,our training and development strategy,and how we regularly listen and engage with employees through formal and informal channels.Synopsys Pitch FestSynopsys Pitch Fest is a new annual event introduced in 2023 to shine a spotlight on our shared spirit of innovation.Open to all employees globally,Pitch Fests inaugural year saw more than 1,000 individuals pitch more than 850 ideas.26CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportInclusion and DiversityAt Synopsys,we know that our success depends on having diverse teams of extraordinary professionals who are empowered to innovate.We also know that true empowerment requires true inclusiona promise and practice that ensures all employees feel seen and respected.With more than 20,000 employees across 30-plus countries,Synopsys is a tapestry of backgrounds,traditions,viewpoints,and attributes.By building a culture of inclusion,fairness,and trust,we enable a workplace where all our people can enthusiastically be and bring their bestspeaking up,sparking ideas,listening,collaborating,working through challenges,and developing solutions that drive innovation.Our work creating an inclusive and diverse Synopsys spans throughout the employee experience,even before a new hire comes in the door.Since our leaders and managers play a key part in creating this experience,we want them to have the mindset and skills to lead inclusively,and are committed to upholding this important part of our culture.Demonstrating our pledge to removing barriers to success and ensuring fairness for all,we regularly review and improve talent management processes that impact the employee experience at Synopsys,including processes for hiring,compensation,talent development,and promotions.Fostering an Inclusive CultureCreating an inclusive culture requires actively listening to people of different backgrounds and demonstrating real interest,curiosity,and attention.With the goal of elevating each persons individual worth to benefit all,we offer programs and events globally through which our employees can learn about each other,foster connections,and demonstrate inclusivity every day.X Taking Action on Pay Equity:Since our first pay equity initiative in 2016,Synopsys has remained committed to our employees being compensated fairly for their skills and expertise.In 2023,we conducted another comprehensive pay equity review for all positions globally to ensure equitable pay levels among employees performing similar work in similar locations.Women at Synopsys earned an average of$0.99 for every$1 men earned in the same position and location,and U.S.Black,Hispanic and Latinx,and Indigenous employees earned an average of$1.01 for every$1 earned by white employees.X Creating Community and Connection:Synopsys Employee Resource Groups(ERGs)create space for our employees to brainstorm,share experiences and ideas,and build welcoming communities that positively impact our business,culture,and the world beyond our walls.We also facilitate forums,discussions,and other activations around regional and global heritage months such as Black History Month and Global Diversity Awareness Month,highlighting the fact that diversity is about all of us.Comparably Best Places to Work Awards In 2023,we were named among the best companies for corporate culture,diversity,women,andCEO.27CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportWhy ERGs Matter to Me“I know that Synopsys is deeply committed to inclusion and diversity,and being part of HOLA!ERG helps me support strategic and business goals while advocating for the Latinx community.”Maria Layrisse,Executive Director,Financial Planning&Analysis,Finance Women Impact Network(WIN)Developing womens engagement and leadership and inspiring girls and women to become techs next generation of innovatorsNEX-GENEngaging early-career hires to build connections,expand their networks,and build careers ofinnovation and leadership at SynopsysPRIDEFostering an inclusive and affirming space for LGBTQIA people within Synopsys,the tech industry,and the communities where we workThe Very Inclusive Black Employee Network(VIBE)Cultivating a business environment that attracts,mentors,develops,and encourages Black employees to reach their full potentialHOLA!Increasing awareness,leadership opportunities,and representation for Synopsys Hispanic and Latinx employees and supporting Hispanic and Latinx culture and identity28CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportTraining and DevelopmentSynopsys is a destination for innovators at all levels,from early career to more experienced talent.We offer an“always learning”culture that supports our employees in achieving their personal and professional objectives and enriching their lives.We know that our commitment to ensuring that everyone can thrive no matter where they are in their professional journey is a strategic advantage.By encouraging our people to seek greater knowledge and skills,we help them achieve satisfaction throughout their careers and we help Synopsys be a trusted,creative,and resilient partner.Across the company,our“Learn,Lead,Grow”strategy puts those aspirations into practice,delivering relevant and outcomes-oriented training.Our learning and development opportunities are designed to ensure our managers have the skills to nurture and motivate their people and teams,and promote a vibrant,engaged work environment for all.X Learn:Through our Degreed digital learning platform,instructor-led sessions,and other support for training,mentoring,and listening,we make it easy for our employees to curate,share,and discuss their knowledge,cascading future-focused capabilities throughout the organization.X Lead:Aimed at all executive and management levels,our leadership training teaches and reinforces the skills to attract,retain,and develop talent in todays competitive environment.Our Compass Leadership Essentials Course coaches managers on their role,the business,and how to inspire,direct,and recognize their team members,and our Inclusive Leader series elevates managers inclusion and diversity mindset through practical examples and experiences.X Grow:As Synopsys employees advance in their careers,our training framework builds new competencies on established foundational skills,equipping people for challenges and promoting advancement and retention.Connection and EngagementOur employees shape Synopsys,working together to achieve our mission and bring our values to life.Thats why were committed to listening to their needs,priorities,and opinions and then taking action to drive transformation at all levels of the company.Our semi-annual SHAPE Synopsys surveys give our employees the opportunity to share feedback with leadership and their direct managers,adding their voices to help make Synopsys a better place to work.Our May 2023 SHAPE survey garnered participation from 94%of Synopsys employees.We received above average engagement scores(82/100)and 89%of our employees recommend Synopsys as a great place to work.In response to survey feedback about communication,we instituted new mechanisms for connecting and sharing updates,including Listen and Learn sessions and town halls.We also improved our efforts to identify and support lower-scoring teams.Leveraging historical survey data,we identified key engagement drivers and used them to design a campaign that provides managers and teams with the learning opportunities and resources they need to improve engagement.By the end of 2023,86%of Synopsys people managers had completed our live Inclusive Leader training.Photo Credit:Nicole Chmura,Synopsys Employee,United States29CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportTotal Rewards Synopsys provides competitive pay and benefits calibrated to attract,retain,and recognize talent at all levels of the organization.Our pay-for-performance philosophy ensures that we are rewarding employees based on their contributions to the company and motivating all employees to help us deliver on and surpass our goals.Our approach is also structured to ensure we are rewarding our talent competitively based on job and location.While specific benefits are determined by country,Synopsys is committed to ensuring that all our employees and their families can achieve and maintain proactive health and wellbeing.Were committed to tailoring our benefits to cover key needs at all stages of life,providing comfort,financial assistance,and security through benefits such as mental health support,student loan remediation,elder care,oncology care,gender-affirming care,and parental resources that extend to the costs of surrogacy and adoption.Click here for more information on Synopsys benefits.“As a dedicated(and busy)executive,I wholeheartedly endorse our employee care platform for integrating employee benefits,insurance services,and well-being into our daily lives.”Jamarie Milkovic,Senior Director,Global Brand&Creative,Global Marketing andCommunicationsOccupational Health and SafetySynopsys Occupational Health&Safety Management System helps to ensure safe and healthy workplaces globally.We are committed to the health and safety of Synopsys employees,contractors,and visitors,and maintain policies and standards that support proactive hazard recognition and control,comprehensive safety training,robust emergency response,tabletop exercises,and global health and safety regulatory compliance.Our resilience as a company is directly related to the investment we make in our people.In 2023,Synopsys Emergency Response Teams were comprised of over 700 members who have been trained to respond to life-threatening situations and other emergencies that may impact our people or operations.During the year,we introduced a new contractor safety onboarding program to ensure our contingent workforce around the world is informed of workplace safety and health risks.To protect our people from emerging risks including climate and geopolitical issues,we invest in global emergency response and preparedness programs.Our SynopsysALERT system is designed to notify employees and their families in emergency situations and connect them with resources as needed.We test SynopsysALERT on a quarterly basis,and achieved an over 85%response rate in recent testing.Additionally,at most of our global locations,we have worked with Cardio Partners to assure the presence and functionality of defibrillators.Health and safety programs at our global sites evolve continuously to keep abreast of workplace safety and health risks and changing regulations.Photo Credit:Mimi Chang,Synopsys Employee,Taiwan30CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportWorkforce Development forthe FutureSemiconductors form the backbone of key technologies driving global innovation and growth.While investments spurred by the U.S.CHIPS Act and other initiatives around the world guarantee massive increases in manufacturing over the coming decade,technology companies must match those efforts with investments in new talent that will help drive the industry forward.At Synopsys,were meeting that challenge with programs that engage and support todays students to become tomorrows engineers.Workforce Development for the Future Strategy and Management ApproachSynopsys Academic&Research Alliances(SARA)collaborates closely with universities on workforce development activities in communities across the world.With an emphasis on cultivating research,innovation,and talent,the program seeks to deepen Synopsys role as a preferred technology partner-of-choice and empower the workforce of tomorrow.Our efforts touch a spectrum of academic stakeholders:X Students:Empower and educate the next generation of engineers to be ready to tackle tomorrows challenges X Educators:Provide learning opportunities and training materials while lowering access barriers to Synopsys technology for education and research X Researchers:Address evolving challenges in the semiconductor industry,uncover new solutions,and pave the path toward future technologies X Entrepreneurs:Collaborate to discover new technologies and turn fresh ideas into market-ready products31CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportSARA ProgramsThe Synopsys University Software Program is the foundation of SARA,offering universities access to cutting-edge,commercial-grade Synopsys technology in the classroom and for research projects.Other programs offer academic stakeholders access to curriculums and tools for IC design and EDA development,customizable scripts for student design environments,and a comprehensive online training hub and resource repository.SARAs curriculum currently includes more than 150 full-semester courses for bachelors and masters degrees,with fully developed collateral materials including slides,syllabi,labs,homework,exams,and projects.Passionate employees spearhead each program and partnership to educate professors and students and drive the industry forward.Through all these initiatives,we aim to accelerate classroom learning and help highly skilled graduates gain hands-on experience with real-world challenges,preparing them for future careers.To date,Synopsys SARA program has empowered more than 230 universities and colleges across the United States and more than 1,000 universities globally.SARA PartnershipsIn addition to our direct engagement with academic stakeholders,Synopsys developed partnerships around the world in 2023 to fuel the development of future semiconductor talent.In August,we joined with other industry,academic,and government partners to create the Semiconductor Education Alliance,an effort to build and support future talent by developing frameworks tailored to the industry needs of specific geographies and providing accelerated educational and training pathways,resources,and services.In September,Synopsys announced an effort to advance semiconductor development in Vietnam,partnering with the Authority of Information and Communication Technologies Industry(AICTI)of Vietnam to promote research and development in the local semiconductor design industry.In October,Synopsys and the Indian Institute of Science(IISc)in Bengaluru collaborated to launch the India Semiconductor Workforce Development Programme(ISWDP),which aims to ensure that Indian engineers are equipped with the fundamental and advanced skills needed to meet the nations semiconductor growth objectives.32CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportSocial Impact Synopsys translates our values into action by showing up and bringing about real,meaningful change in and for our communities,which we believe contributes to our strong culture and employee engagement.Our Synopsys for Good program acts as a catalyst for change across three focus pillars:supporting science,technology,engineering,and math(STEM)education to prepare students for the future;addressing essential needs and inequities in the community;and helping create a sustainable environment.In all three areas,we center the needs,perspectives,and lived experiences of the diverse communities we aim to serve,working to alleviate historic and ongoing discrepancies in access to opportunity,treatment,and outcomes.This equity lens drives our social impact process,from project development and nonprofit partnerships to resource allocation.In 2023,we met our social impact goals by increasing environment-focused grants and further aligning employee community engagement to how and where our people work.Our Social Impact Strategy and Management ApproachSynopsys for Good facilitates every aspect of our social mobilization,including corporate-led efforts,grants through the Synopsys Foundation,and employee giving and volunteerism.Synopsys for Good is managed by our Social Impact team and executed in partnership with employee Community Leads and Community Involvement Teams around the world.We take a regional management approach to philanthropy and employee community engagement and utilize a globally accessible online portal to manage volunteer projects,monetary and volunteer-time matching gifts,and employee giving campaigns.Synopsys for Good generates positive impact in the community by mobilizing our employees and resources to help solve social challenges around the world and create access to opportunity.33CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleSocial ImpactGovernanceAppendices2023 ESG ReportCEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG Report2023:Social Impact by the NumbersSynopsys Foundation giving$4.5MSynopsys India CSR 2%giving$910KEmployee giving reported$1.4MVolunteer hours reported13,844Social Impact Focus AreasSynopsys for Good aims to create positive impact across three focus areas:Education Focusing on K12(primary and secondary)education,we aim to prepare students for the future of work and innovation with STEM education experiences.We partner with organizations that work to close equity and achievement gaps;inspire and engage students to build problem-solving,design-thinking,and digital skills;and increase diversity in STEM education and career pathways.Community Focusing on the communities where we operate,we aim to improve quality of life and address essential needs and inequities.We partner with organizations combating food insecurity and hunger,supporting inclusion efforts,and leveraging technology to address social challenges.Environment Focusing on climate change,we aim to mitigate its effects on people and the plant.We partner with organizations that help protect ecosystems,improve access to and use of clean energy in rural and low-income communities,and create experiences that shape the next generation of environmental stewards.34CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportEngaging Employees withOurCommunities 2023 Season of Service73 projects20 countries43 office locations globallySeason of Service Season of Service is our annual one-month global volunteer program,through which Synopsys employees worldwide can support projects aligned with Synopsys for Goods three focus areas.For optimum flexibility,employees may participate in person at Synopsys offices,at nonprofit locations or project sites,or virtually.In 2023,we nearly doubled the number of countries in which we supported projects,engaged more Synopsys locations,and grew the total number of projects over the previous year.Running throughout November,projects supported the communities in which we work and live while we also encouraged employee community engagement company-wide.Click here for an overview of our 2023 Season of Service projects.Matching Gift Program Synopsys global Matching Gift Program amplifies our employees social impact by doubling their monetary donations and volunteer hours up to$1,000 USD per employee,per year.In 2023,combined employee giving and Synopsys Foundation match delivered$2.6M to nearly 2,000 eligible charities and nonprofits worldwide.35CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportBuilding Partnerships Through Philanthropy The Synopsys Foundation The Synopsys Foundation makes grants to eligible organizations in the communities where we operate,supporting programs and services that prepare students for the future through STEM education,address essential needs and inequities in the community,and work to mitigate climate change.In 2023,the Foundation supported 40 nonprofits,including:X Sunnyvale Community Services(United States),which provides financial assistance to low-income residents for housing,nutrition,medical care,and other needs X Apps for Good(Portugal),which provides schools with free tech innovation courses and empowers students with essential STEM skills X Guandu Nature Park(Taiwan),which protects 140acres of wetlands and vital bird habitat in northernTaiwanSynopsys Outreach Foundation Celebrating its 25th year,the Synopsys Outreach Foundation focuses on project-based STEM education,working to ignite interest,nurture potential,and empower students at the K12 level.Collaborating with San Francisco Greater Bay Area education stakeholders and community partners,the Outreach Foundation aims to provide equitable and inclusive opportunities in areas including building STEM classrooms,supporting and fostering STEM experiences,and training STEM teachers.In 2023,projects supported by the Outreach Foundation included:X Building STEM Classrooms,which provided over 760 local educators with classroom STEM supplies X STEM Shops,which served five counties and over 600 new and career educators by providing foundational STEM supplies X STEM Opportunity Fund grants,which provided$350,000 to local STEM fairs,family education nights,maker spaces,field trips,classroom curriculum,and intervention programs X Sciencepalooza!,which hosted more than 350 community members and partners at San Jose State University for free,fun,hands-on activities that explored facets of STEM and pathways to STEM futures36CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportCorporate Social Responsibility at Synopsys India Synopsys India creates positive social impact by partnering with organizations that provide STEM education and infrastructure support,address essential needs and inequities in struggling communities,and help protect ecosystems.During the India 202324 financial year(April 1,2023 to March 31,2024),Synopsys India partnered with 20 nonprofit organizations to implement 27 projects,impacting 59,000 beneficiaries.These impactful projects also fulfilled the obligatory requirements under Section 135 of the Companies Act 2013,which requires large companies to dedicate at least 2%of their average net profits to corporate social responsibility(CSR)activities.These activities strengthen our Synopsys for Good mission to help solve social challenges around the world and create access to opportunity.Disaster Relief Synopsys has a long history of providing support when disasters and conflicts affect our communities,families,and friends.In addition to support for our own workforce,the Synopsys Foundation makes grants and matches employee donations to help with immediate relief needs and long-term rebuilding.Synopsys India CSR 2%GivingNonprofit partners20Projects27Beneficiaries59,000Photo Credit:Ankita Bhatnagar,Synopsys Employee,India37CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialOur PeopleWorkforce Development for the FutureSocial ImpactGovernanceAppendices2023 ESG ReportGovernance To build and maintain trust among our stockholders and other stakeholders,we are committed to utilizing best practices in our operations,governance,reporting,and disclosures.Throughout 2023,our many efforts in support of this commitment included,among other things,further developing our resilience against cyberthreats and other potential business disruptions,engaging proactively with stockholders on ESG issues,and updating our governance policies based on evolving corporate best practices and stockholder feedback.Photo Credit:Nakul Jain,Synopsys Employee,India38CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialIntegrity,Ethics,and Business ConductBusiness Continuity and ResiliencyCybersecurity and PrivacySupply Chain EngagementCorporate GovernancePolitical Activities and ContributionsGovernanceAppendices2023 ESG ReportPolicies and StatementsSynopsys Affirmative Action PolicySynopsys Board Committee ChartersSynopsys Bylaws Synopsys Business Partner Code of ConductSynopsys Code of Ethics and Business ConductSynopsys Conflict Minerals PolicySynopsys Corporate Governance GuidelinesSynopsys Data Privacy and Protection StatementSynopsys Political Activities PolicySynopsys Privacy PolicySynopsys Statement on UK Modern Slavery ActSynopsys Supplier Code of ConductSynopsys Voluntary Carbon Market DisclosureCorporate Governance Our Board oversees the management of Synopsys business operations and ensures that the interests of Synopsys stockholders are served.The Board recognizes that advancing the interests of stockholders requires giving attention to the interests of other Synopsys stakeholders,including customers,employees,business partners,local communities,and more.A framework of bylaws,corporate governance guidelines,committee charters,and other policies and practices enables the Board to fulfill its duties to our stockholders,and provides them oversight of key issues,including,among other things,human capital management,ESG,and cybersecurity.The Board executes its oversight duties directly and through its committees,which regularly report back to the Board.For detailed descriptions of Synopsys corporate governance practices,please refer to our most recent Proxy Statement and Annual Report on Form 10-K,or visit the Corporate Governance page of our website.For details on our ESG governance,see How We Manage ESG.Photo Credit:Ankita Bhatnagar,Synopsys Employee,India39CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialIntegrity,Ethics,and Business ConductBusiness Continuity and ResiliencyCybersecurity and PrivacySupply Chain EngagementCorporate GovernancePolitical Activities and ContributionsGovernanceAppendices2023 ESG ReportSkills and ExperienceBusiness Strategy-9/11Executive Leadership-11/11Financial Expertise-8/11 Global Expertise-10/11Public Company Board-10/11Risk Management-11/11Sales&Marketing-8/11Semiconductor Industry Experience-5/11 Software Industry Experience-8/11 Strategic Transactions-11/11Board Composition Three standing committeesour Audit Committee,Compensation and Organizational Development Committee,and Corporate Governance and Nominating(CGN)Committeeassist Synopsys Board of Directors in its oversight of Synopsys business strategy and strategic planning,including,among other things,strategic transactions,senior management development,succession planning,and talent management.Continuous oversight enables our Board of Directors to focus on Synopsys performance over the short,intermediate,and long term.In addition to financial and operational performance,non-financial measures such as goals for cybersecurity,sustainability,and other areas related to our ESG efforts are discussed regularly by our committees and reported to the Board of Directors.The CGN Committee works to ensure that the Board is comprised of directors that bring diverse viewpoints and perspectives and exhibit a variety of skills,professional experiences,and backgrounds to effectively represent the interests of our stockholders.To achieve this,the CGN Committee works with our Board to determine the appropriate skills,experience,qualifications,and attributes we seek in our Board members in light of our business environment,strategic priorities,and existing Board composition.Our Board is comprised of eleven members,three of whom are female and eight male.With the exception of our President and CEO,Sassine Ghazi,and our Boards Executive Chair,Aart de Geus,all Board members are independent.Board SnapshotGender Diversity8Male3FemaleTenure410 years505 years2610 yearsEthnic Diversity8White2Hispanic or Latinx1Did Not DiscloseIndepen-dence2Non-Independent9Independent40CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialIntegrity,Ethics,and Business ConductBusiness Continuity and ResiliencyCybersecurity and PrivacySupply Chain EngagementCorporate GovernancePolitical Activities and ContributionsGovernanceAppendices2023 ESG ReportIntegrity,Ethics,and Business Conduct In 2023,we introduced a completely new Code of Ethics and Business Conduct to better guide the behaviors and actions of our global workforce in accordance with our core values,high ethical standards,and legal obligations.Released simultaneously in twelve languages,the refreshed code is streamlined and more visually engaging for ease of use and contains links to underlying policies and procedures in areas such as inclusion and diversity,protecting privacy and intellectual property,avoiding conflicts of interest and insider trading,anti-bribery and anti-corruption compliance,environmental stewardship,and social impact.Our Business Partner Code of Conduct and Supplier Code of Conduct communicate our high ethical and legal standards throughout our business ecosystem.Our Ethics&Compliance(E&C)program is led by our Chief Ethics and Compliance Officer,who provides regular reports to the Audit Committee of the Board of Directors.Anti-Bribery and Anti-CorruptionSynopsys maintains a zero-tolerance policy for bribery and corruption.We promote high standards of ethical business conduct and are committed to compliance with global anti-bribery laws in countries where we do business.Our Code of Ethics and Business Conduct outlines these commitments,and employees can access additional support via our internal Synopsys Anti-Corruption Compliance Policy.Our E&C team performs an annual anti-corruption risk assessment and collaborates with Internal Audit to assess Synopsys operations for corruption risks,evaluate our anti-bribery and anti-corruption compliance programs design and implementation,and test program effectiveness.In certain targeted locations,we deploy culture surveys focused on E&C issues to learn what our employees are experiencing,where they may need additional support,and to whom they are reporting concerns.Ethics and Integrity TrainingAll Synopsys employees are required to read,understand,and abide by our Code of Ethics and Business Conduct.Employees complete this requirement at hiring and every year thereafter during Integrity Awareness Month.In 2023,we created a new Code of Conduct training module custom-tailored to the specific business risks Synopsys employees encounter on a day-to-day basis.Additional trainings are offered to employees in certain roles and geographies,on topics including anti-corruption,import/export compliance,and antitrust.Reporting ConcernsSynopsys expects our people to report suspected violations of laws,rules,regulations,and company policies by other employees or any of our suppliers,vendors,resellers,or distributors.Employees may raise these issues at any time without fear of retaliation,by reporting to a manager,People and Places team,Legal or E&C,or via our third-party-managed Integrity Helpline.Following a report,our E&C team oversees an appropriate investigation,the results of which are communicated to the Audit Committee.Click here for more information on our Code of Ethics and Business Conduct,Business Partner Code of Conduct,and Supplier Code of Conduct.Photo Credit:Megha Mittal,Synopsys Employee,India41CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialIntegrity,Ethics,and Business ConductBusiness Continuity and ResiliencyCybersecurity and PrivacySupply Chain EngagementCorporate GovernancePolitical Activities and ContributionsGovernanceAppendices2023 ESG ReportBusiness Continuity and ResiliencyPreparedness and resiliency are essential to Synopsys continuing ability to serve our employees,customers,and stockholders.In 2023,global conflicts and other tensions confirmed our operating resiliency and ability to respond to geopolitical events and shifting legal and trade compliance requirements.To maintain Synopsys resiliency,we refresh our business continuity plans annually,maturing and testing their ability to perform during scenario-based events such as economic or geopolitical crises,public health emergencies,and extreme climate events that threaten our people,offices,operations,and assets.We invest in people,technology,processes,and controls to strengthen our ability to meet evolving threats.In 2023,we demonstrated our continuing commitment to enterprise resiliency by:X Completing a control assessment as part of our ISO 22301 certification,proving the resilience of our business continuity management systems X Deploying SynopsysALERT,our internal mass-notification system,and achieving over 85%employee participation in our most recent quarterly test X Integrating outcomes of our annual climate risk assessments into business continuity plans X Conducting a tabletop exercise with our Regional Crisis Management Team and Corporate Crisis Management Team to test our response and recovery capabilities in AsiaTo meet the pace of disruption and help us manage multiple overlapping events,we are combining technology,analytics,and AI to elevate Synopsys resilience program.These improvements will improve our ability to scan and monitor the horizon for emerging risks,identify potential disruptions,and plan mitigation scenarios.In 2024,we plan to continue refining our business continuity model to meet evolving challenges.Learn more about our climate risk assessment work in this reports TCFD Index.Photo Credit:Nilanjan Gogoi,Synopsys Employee,India42CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialIntegrity,Ethics,and Business ConductBusiness Continuity and ResiliencyCybersecurity and PrivacySupply Chain EngagementCorporate GovernancePolitical Activities and ContributionsGovernanceAppendices2023 ESG ReportCybersecurity and Privacy Synopsys works 24-7 to manage evolving cyberthreats across our value chainprotecting our IP,helping our customers design protections into their systems and software,and maintaining the security and privacy of our partners and employees data.We recruit to deliver top cybersecurity talent and innovation to each challenge,across areas including threat monitoring,incident response,forensics,and investigations.Our approach includes:X An enterprise risk management program that considers cybersecurity risks in the context of our business strategy X Security and privacy reviews designed to identify risks from new features,software,suppliers,and vendors X A vulnerability management program designed to identify hardware and software vulnerabilities X A variety of tools designed to monitor our networks,systems,and data for suspicious activity X An internal red team program that simulates cyber threats,informing our ability to fix vulnerabilities before theyre exploited by threat actors X A threat intelligence program designed to model and research our adversaries X A variety of privacy,cybersecurity,and incident response trainings and simulationsWe conduct regular controlled penetration testing and annual cyber incident exercises to test the robustness of our data security protections and incident response readiness.Additionally,we leverage industry leading products and services to structure,test,and assess the rigor of our software security practices.Our Chief Information Security Officer(CISO)oversees our cybersecurity program and chairs a cross-functional committee that spans information security,IT,product security,physical security,and legal.Our CISO has 30 years of experience in security,including for large public companies.Our CISO reports to the Boards CGN Committee Photo Credit:Megha Mittal,Synopsys Employee,India43CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialIntegrity,Ethics,and Business ConductBusiness Continuity and ResiliencyCybersecurity and PrivacySupply Chain EngagementCorporate GovernancePolitical Activities and ContributionsGovernanceAppendices2023 ESG ReportPhoto Credit:Ritika Hans,Synopsys Employee,Indiabiannually and the full Board at least annually on our cybersecurity performance and risk profile.These reports include updates to our data security posture,results from third-party assessments,progress towards pre-determined risk-mitigation-related goals,updates on our incident response exercises,and steps management has taken and/or proposes to take to respond to cyber risks,incidents and developments.The CGN Committee has individuals with significant experience in cybersecurity and related matters.Synopsys cybersecurity policies and procedures are designed to align with multiple industry-recognized frameworks including the National Institute of Standards and Technology Cyber Security Framework(NIST CSF)and the ISO/IEC 27001 Information Security Management Framework,and are assessed regularly by our internal audit department.We track our NIST CSF implementation through regular third-party maturity assessments that provide the basis for establishing performance goals for the coming period.To address the SECs recently adopted disclosure rules around cybersecurity risk management,strategy,and governance,we have updated our Cybersecurity Incident Analysis Disclosure Controls Policy.Synopsys maintains cyber liability insurance that covers certain liabilities related to data breaches and related incidents.Since 2015,Synopsys has experienced no material information security breaches or associated penalties/settlements,and the expenses we have incurred from cybersecurity incidents were immaterial.Our Data Privacy CommitmentAs a business-to-business company,our access to personal information is limited.Nevertheless,we are committed to strong privacy principles and transparency about our use of personal data,and we never sell personal data to third parties.Synopsys has a program in place to support compliance with privacy laws and protect the company from brand and reputational damage,and throughout 2023 we monitored the evolving global legal landscape and updated our program to account for new privacy obligations.Our document retention policies specify the periods of time after which data is to be deleted,based on country-specific rules.Our Chief Privacy Officer is responsible for reviewing policies,procedures,contracts,services,and technology platforms designed to address evolving data privacy regulations in Europe,the U.S.,Asia,and around the globe.Our Data Privacy and Protection Statement covers our entire global business enterprise,enumerates our complete data privacy principles,and is regularly reviewed and updated for compliance with relevant laws and regulations.44CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialIntegrity,Ethics,and Business ConductBusiness Continuity and ResiliencyCybersecurity and PrivacySupply Chain EngagementCorporate GovernancePolitical Activities and ContributionsGovernanceAppendices2023 ESG ReportOur supply chain program is underpinned by our membership in the Responsible Business Alliance,the worlds largest industry coalition dedicated to responsible business conduct in global supply chains.Supply Chain EngagementAcross our business ecosystem,we follow strategies,policies,and initiatives that build supply chain resiliency and reliability,mitigate risk,promote responsible supplier and partner behavior,and advance international norms and standards.All direct suppliers of inputs for our hardware products must comply with applicable laws and regulations and our Supplier Code of Conduct,which mirrors the Responsible Business Alliance(RBA)Code of Conduct standards for labor,governance,health and safety,and environmental and ethical practices.In 2023,a facility audit through the RBA Validated Assessment Program(VAP)was conducted at Synopsys hardware assembly and testing site in France,resulting in the implementation of minor program improvements to ensure adherence to the RBA Code.Synopsys made our annual conflict minerals filing with the U.S.Securities and Exchange Commission(SEC)for the 2023 reporting year.We sought to survey all of our suppliers and identify high-priority suppliers.We received Conflict Minerals Reporting Template(CMRT)responses from approximately 91%of our suppliers,which account for 99%of our total spend on hardware products for this reporting year.See our website for more information.Software Supply Chain Risk ManagementSoftware supply chain risk management is receiving significantly increased attention from public-and private-sector organizations globally.In the U.S.,new federal procurement rules require that all software developers that sell to the federal government provide formal attestation that their software is developed in accordance with the Secure Software Development Framework(SSDF).SSDF contains specific practices covering all aspects of the software development lifecycle,including the provision of a Software Bill of Materials(SBOM)with all software deliveries.Synopsys is in the process of conducting internal assessments of our software development practices and will ensure all of our software products are compliant with the new rules when they become effective.45CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialIntegrity,Ethics,and Business ConductBusiness Continuity and ResiliencyCybersecurity and PrivacySupply Chain EngagementCorporate GovernancePolitical Activities and ContributionsGovernanceAppendices2023 ESG ReportPolitical Activities and ContributionsSynopsys is committed to compliance with applicable laws,rules,and regulations,including lobbying registration and disclosure laws,ethics rules,provisions of the Foreign Corrupt Practices Act,and anti-bribery laws worldwide.In 2023,Synopsys engaged in direct advocacy with government officials on public policies relevant to the company,following applicable law and relevant internal procedures and approvals as stipulated in our Political Activities Policy.In the U.S.and abroad,we also engaged with trade and industry associations that may undertake advocacy on behalf of their members.Synopsys may contribute periodically to local ballot initiatives in California that are consistent with our quality-of-life goals.All such contributions are disclosed on our website.Photo Credit:Harshal Dhande,Synopsys Employee,India46CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialIntegrity,Ethics,and Business ConductBusiness Continuity and ResiliencyCybersecurity and PrivacySupply Chain EngagementCorporate GovernancePolitical Activities and ContributionsGovernanceAppendices2023 ESG ReportAppendicesPhoto Credit:Nilanjan Gogoi,Synopsys Employee,India47CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialGovernanceAppendicesGHG Emissions Data TableDiversity Metrics Data TableSASB,GRI,UN SDGs Data TableTCFD Index2023 ESG ReportGHG Emissions Data Table1 FY2019 data is in reference to Synopsys SBTi baseline year.2 The categories of Processing of Sold Product and Franchises are not applicable to our business and are not included in our Scope 3 inventory.FY2019 MTCO2e1FY2022 MTCO2eFY2023 MTCO2eSCOPE 1 EMISSIONSFugitive Emissions(Refrigerants)1,1511,3571,414Natural Gas Combustion1,8862,0372,119Diesel Fuel Combustion14240Mobile Emissions694182164TOTAL SCOPE 13,7453,6003,697SCOPE 2 EMISSIONS(PURCHASED ELECTRICITY)Offices18,29613,80310,136Colocated Data Centers11,71516,92219,700TOTAL SCOPE 2(MARKET)30,01130,72529,836 SCOPE 3 EMISSIONS2Purchased Goods and Services59,667102,33989,560Capital Goods58,71019,03651,975Fuel and Energy Related Activities 8,6398,08212,259Upstream Transportation&Distribution1,7423,3023,376Operational Waste5383,0602,831Business Travel19,17613,78920,441Employee Commute28,10217,25627,329Upstream Leased Assets Not calculated232,142Use of Sold Products25,69828,43037,757End-of-Life of Sold Products61114Downstream Leased Assets1,1354,7761,478InvestmentsNot calculated2,850315TOTAL REPORTED SCOPE 3203,413202,954249,477TOTAL REPORTED EMISSIONS237,169237,279283,010The data used in calculating GHG emissions are subject to measurement uncertainties due to inherent limitations based on the nature and methods used.The GHG Protocol allows for multiple measurement methodologies which could result in materially different emission values.For more information see our FY 2023 Statement of Greenhouse Gas Emissions.We will continue to update our methodologies for calculating GHG emissions based on emerging best practices.48CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialGovernanceAppendicesGHG Emissions Data TableDiversity Metrics Data TableSASB,GRI,UN SDGs Data TableTCFD Index2023 ESG ReportDiversity Metrics Data TableDiversity Metrics1“Other”is defined as American Indian or Alaska Native,Native Hawaiian or Other Pacific Islander,Two or More Races.2Senior level positions include employees designated in the human resource management system as grade 69 and above,these positions include professionals with deep expertise in their functional areas with titles of senior staff,senior managers and above.Race and Ethnicity Representation(U.S.)AsianWhiteHispanic or LatinoBlack or African AmericanOther1UndisclosedOverall202151A%3%1%2%2 2250%4%2%1%3 23528%4%2%1%3%Technical2021586%2%1%1%2 22575%3%1%1%3 23593%3%1%1%3%Non-technical202125a%7%3%2%2 2226X%7%3%2%4 2327U%8%3%3%4%People managers202150D%3%1%1%2 2250B%3%1%1%3 2350A%3%1%1%4%Senior level positions2 202151B%2%1%1%3 2252%3%1%1%3 23539%2%1%1%4ICEO letterAbout SynopsysESG at SynopsysEnvironmentSocialGovernanceAppendicesGHG Emissions Data TableDiversity Metrics Data TableSASB,GRI,UN SDGs Data TableTCFD Index2023 ESG ReportDiversity Metrics1Senior level positions include employees designated in the human resource management system as grade 69 and above,these positions include professionals with deep expertise in their functional areas with titles of senior staff,senior managers and above.Gender Representation(Global)MenWomenUndisclosedOverall202176$%1 2275%1 2375%1%Technical202179!%1 2278%1 2377#%1%Non-technical202154F%1 2252H%0 2355E%1%People managers202183%1 2282%1 2381%1%Senior level positions1 202188%1 2288%1 2387%1PCEO letterAbout SynopsysESG at SynopsysEnvironmentSocialGovernanceAppendicesGHG Emissions Data TableDiversity Metrics Data TableSASB,GRI,UN SDGs Data TableTCFD Index2023 ESG ReportTCFD Index The table below addresses the recommendations of the Task Force on Climate-related Financial Disclosures.Synopsys maintains that the climate risks outlined below do not have a material impact on our financial performance and operational results.GovernanceRecommendationsDisclosure/Links to More Information2023 CDP Reference Describe the boards oversight of climate-related risks and opportunitiesThe Synopsys Board of Directors oversees risk management at Synopsys and executes its oversight responsibility directly and through its committees.The Corporate Governance and Nominating(CGN)Committee of the Synopsys Board of Directors has direct oversight of Environment,Social,and Governance(“ESG Matters”),the scope of which includes climate-related issues.As stated in its publicly available charter,the CGN Committee is responsible for reviewing,assessing,reporting,and recommending to the Board as necessary,policies,practices,priority and risk assessments,risk management,initiatives,goals,progress toward goals,and public disclosures relating to ESG Matters,except to the extent delegated to other committees of the Board.The CGN Committee coordinates with other committees of the Board to oversee ESG Matters,including Synopsys reporting,legal,and regulatory requirements with respect to ESG Matters as and when appropriate.The CGN Committee receives updates from the ESG Leadership Committee,led by Synopsys SVP and Deputy General Counsel.CDP Report (C1.1b)Describe managements role in assessing and managing climate-related risks and opportunitiesThe Synopsys Environment,Social,and Governance(ESG)Management Team is responsible for our ESG strategy and goals,which includes assessing,monitoring,and managing climate-related risks and opportunities.The ESG Management Team is made up of senior leaders in Legal and Corporate Affairs.The ESG Leadership Committee includes executives from across our business who are tasked with driving Synopsys ESG performance and ensuring the implementation of our Smart Future strategy in their respective areas of responsibility.Members of the ESG Leadership Committee participate in the climate-related risk and opportunity assessment of business activities and strategies.They also help inform the climate-related aspects of our ESG strategy and roadmap,including stakeholder engagement,metrics and disclosures,and special projects.CDP Report (C1.2,C1.2a)v51CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialGovernanceAppendicesGHG Emissions Data TableDiversity Metrics Data TableSASB,GRI,UN SDGs Data TableTCFD Index2023 ESG ReportStrategyRecommendationsDisclosure/Links to More Information2023 CDP Reference Describe the climate-related risks and opportunities the organization has identified over the short,medium,and long termIn 2022,we completed a climate-related risk and opportunity assessment of the potential relevance and significance of the following climate-related risk and opportunity drivers applicable to our business over short(02 years),medium(25 years),and long(5 years)time horizons.In 2023,we completed a refresh to the climate-related risk and opportunity assessment by updating the language to be more tailored to our company and by reassessing risks and opportunities as necessary.Risk CategoryDescriptionTimeframeAcute PhysicalIncreasing frequency/severity of climate-driven events(e.g.,floods,wildfires,heatwaves,power interruptions)and potential disruption of operational and supply chain activities.Shortlong termChronic PhysicalWhile our direct operations are not water intensive,chronic physical changes including changing precipitation patterns and water scarcity could impact our supply chain,potentially leading to increased costs to secure key materials and/or manufacture our hardware products.Mediumlong termTransitional Regulatory/Legal Regulatory:Failure to meet regulatory and investor reporting and disclosure requirements leads to fines and negative investor ratings.Legal:While we are not in a highly carbon intensive sector,we could potentially face legal riskfor example,associated with inaccurate GHG emissions reporting and/or other climate related expenses and disclosures.Further,statements about our climate initiatives and goals,and progress against those goals,may be based on standards for measuring progress that are still developing,internal controls and processes that continue to evolve,and assumptions that are subject to change.Shortlong termTransitional PolicyEscalating energy and carbon costs increase supply chain costs and impair profitability.Mediumlong termTransitional ReputationalPotential implications for attracting and retaining talent,customers,and investment;lack of comprehensive climate strategies could impact our attractiveness to customers,investors,and talent,reflecting on our commitment to climate risk management.Shortlong termCDP Report (C2.1a,C2.3,C2.3a,C2.4,C2.4a)52CEO letterAbout SynopsysESG at SynopsysEnvironmentSocialGovernanceAppendicesGHG Emissions Data TableDiversity Metrics Data TableSASB,GRI,UN SDGs Data TableTCFD Index2023 ESG ReportRecommendationsDisclosure/Links to More Information2023 CDP Reference Describe the climate-related risks and opportunities the organization has identified over the short,medium,and long term(continued)Opportunity CategoryDescriptionTimeframeResiliencePotential to increase resilience through incorporation of climate scenarios into business resiliency planning.Shortlong termProducts/Services/MarketDrivers for the low-carbon economy transition to stimulate increased demand for Synopsys products.Mediumlong termResource EfficiencyOpportunities to hedge against future increases in fossil fuel costs driven by carbon pricing and other factors through investments in energy efficiency.Mediumlong termCDP Report (C2.1a,C2.3,C2.3a,C2.4,C2.4a)(continued)Describe the impact of climate-related risks and opportunities on the organizations business,strategy,and financial planningIn 2023 we had our science-based targets validated by the Science Based Targets initiative(SBTi),supporting our customers mission for a low carbon supply chain.Also,in 2022 we began to realize the economic and carbon free benefits of our VPPA,a 12 year commitment to a windfarm in west Texas.Annually,we assess our risks and opportunities against the TCFD framework.As such,we have not identified any physical or transitional climate risks as having a high risk or material impact on our business,strategy,or financial planning.However,acute physical risks such as severe storms may cause business disruptions,impacting our hardware and digital supply chain operations.These disruptions are factored into our financial planning as well as our business continuity and disaster recovery programs.This includes related measures such as the maintenance of buffer stock for component parts and finished goods.Synopsys relies on third-party contract manufacturers to assemble our hardware products,such as the ZeBu Emulation system.Several of these manufacturers as well as their component and raw material suppliers are in regions,such as Southeast Asia and Northern Europe,that are vulnerable to increasing extreme weather events which can result in flooding and other impacts.Disruption to supplier operations can result in delays to production lasting from several days to several months depending on the severity of the event.For our hardware supply chain function,we maintain a buffer stock of product and key components to support six months of supplier disruption.Additionally,where possible,we maintain two sources for parts and contract manufacturers in different geographies in an effort to not be impacted by the same disruption event.These strategies have helped us to avoid significant product supply disruption due to severe weather events.Additionally,as a technology company,we see great opportunity related to the development of low power products and solutions for chip design that optimize performance per watt.Future applications from AI to smart devices depend on silicon chips running faster,scaling down to smaller node sizes,integrating more capabilities,and pr
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2 0 2 3 E S G R E P O R TThis archived information is provided solely for historical information and reference purposes.This information does not constitute an active representation of The Bank of Nova Scotia.The Bank of Nova Scotia fully disclaims any liability for the use of such information and undertakes no obligation to update such information except as required by applicable law.2INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTable of Contents 3 A Message from Our President and CEO 4 Awards and Recognition 5 2023 Highlights 6 About This Report 7 About Scotiabank 8 How We Create Value 9 A Message from Our CSO 10 Our ESG Approach 13 Supporting the SDGs 14 Key ESG Targets and Performance 15 G OV ER N A N C E 16 Trust at the Top of Our Business 22 Keeping Our Bank Safe and Protecting Clients 25 Advancing Human Rights 26 Responsible Procurement and Supply Chain Management 28 Leadership:Supporting Our Team 35 EN V I RO N M EN T 36 Financing for a Sustainable Future 47 Our Climate Goals 50 Managing Environmental and Climate Risk 51 Addressing Our Operations Environmental Impact 54 Partnering on Other Environmental Initiatives 56 S O C I A L 57 Embedding a Culture of Diversity,Equity and Inclusion 72 Supporting Resilient Communities 73 Enabling Economic Resilience Through ScotiaRISE 78 Empowering Our Clients 87 A PPEN D I X 88 Public Accountability Statement 89 Additional Scotiabank Disclosures 90 Sustainable Bonds Allocation of Proceeds and Impact 93 Forward-looking Statements 94 Data Tables ESG Data Pack and Indices KPMG Limited Assurance StatementA B O U T S COT I A BA N KScotiabanks vision is to be our clients most trusted financial partner,to deliver sustainable,profitable growth and maximize total shareholder return.Guided by our purpose:for every future,we help our clients,their families and their communities achieve success through a broad range of advice,products and services,including personal and commercial banking,wealth management and private banking,corporate and investment banking,and capital markets.With assets of approximately$1.4 trillion(as at October 31,2023),Scotiabank trades on the Toronto Stock Exchange(TSX:BNS)and New York Stock Exchange(NYSE:BNS).For more information,please visit and follow us on X Scotiabank.Scotiabanks executive offices are in Toronto,Canada.“We,”“our”and“the Bank”refer to The Bank of Nova Scotia,operating as Scotiabank.C AU T I O N A RY S TAT E M E N TThis document is not required to be prepared or filed by the Bank(as defined in this document)under Canadian or U.S.securities laws.The information contained herein should not be read as necessarily rising to the level of materiality of disclosure required in our securities law filings,and such information should not be considered to be incorporated by reference into any such filings.This document should not be used as a basis for trading in securities of the Bank or for any other investment decision,and it is not intended to constitute financial,legal,tax,investment,professional or expert advice.S COT I A BA N K I N D I G E N O U S N E T WO R K E M PLOY E E R E S O U RC E G RO U P L A N D AC K N OW LE D G E M E N T We are privileged to stand on the ancestral and unceded territory of First Nations,Inuit and Mtis people.We offer our gratitude to the First Peoples for their care for,and teachings about,our earth and our relations.We acknowledge the effect of residential schools and colonialism on Indigenous families and Communities.Considering this history,we dedicate ourselves to moving forward in the spirit of partnership,collaboration and reconciliation.Stewardship with Indigenous Peoples,Cultures and Communities is all of our responsibility.We reflect on the actions and the steps that must be made towards the advancement of Truth and Reconciliation.1 1 This Land Acknowledgement applies to the land on which Scotiabank has its executive offices(Toronto,Canada)and its Canadian operations,and does not represent the historical and personal experiences of Indigenous Peoples across our international operations.2023 ESG REPORT 3INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCEA Message from Our President and CEO I am proud to share Scotiabanks 2023 ESG Report with you,which reflects our efforts throughout the year to create value for our clients,our colleagues,and the communities in which we live and work.Around the globe,2023 was a year marked by geopolitical conflict and ongoing economic uncertainty that was broadly felt across many corners of our communities.In times like these,it is incumbent for organizations such as ours to deliver with a sense of purpose and a clear vision for our stakeholders one that is forward-looking and enables their success while ensuring that our communities are resilient for whatever the future may hold.This year we unveiled our new all-bank strategy to drive sustainable and profitable growth.Our vision is to be the most trusted bank wherever we operate,and along with our purpose for every future that aspiration to build trust guides our ESG efforts.It shapes how we utilize our advice,expertise,and capital to address significant environmental and social challenges.We are embedding key ESG priorities within our strategy,including supporting our clients in navigating the risks and complexities of a changing climate,and fostering inclusion and engagement for the wellbeing of our employees and communities.Against this backdrop of change,our ongoing commitment to ESG priorities remained steadfast throughout the year.We were honoured to place in the top 5%of banks globally as rated by MSCI.We also achieved the highest score for banks in North America in the S&P Global Corporate Sustainability Assessment and were included in the Dow Jones Sustainability Index for the sixth consecutive year.This report demonstrates how our Bank is embedding ESG throughout our operations and with our stakeholders,to help build resilience and enable success in a rapidly changing world.In the face of both challenges and opportunities,we are focusing our efforts where we believe we can drive the greatest impact.We have provided$132 billion since November 1,2018,towards our goal of$350 billion in climate-related finance by 2030.Our 2023 Climate Report lays out our plan,along with the risks,difficulties and opportunities we will face on the road ahead to mitigate the worst impacts of climate change.We recognize that the transition to a low-carbon economy is complex and will take time,and in this regard,we will continue to work with our clients,governments and with actors in every sector of our economy to achieve it.The Scotiabank Women Initiative has deployed$8 billion in capital for women-owned and women-led businesses in Canada since it launched,and it has engaged over 25,000 women leaders across the Banks footprint.We have also linked ESG metrics with all-Bank performance pay,reflecting our shared responsibility to meet our objectives.This period of transformation facing the Bank and society more broadly has allowed us to reflect on and reinforce what matters most to us an institution.As we embark on our new strategy,guided by our vision,Scotiabankers will remain deliberate,consistent,and focused in our ESG efforts.I am deeply appreciative of our teams across the Bank that manage and support Scotiabanks action on ESG opportunities,and all of our people who are working together to deliver for every future.Scott Thomson(he/him)President and Chief Executive Officer2023 ESG REPORT 4INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCEAwards and Recognition1 As at December 8,2023.2 This award has an associated fee for entry.3 As at December 31,2023.Scotiabank ranked first among banks in North America in the S&P Global CSA and was included in the DJSI North America for the sixth consecutive year.1 Recognized with five gold awards by The Brandon Hall Group Excellence Awards,including Global Mandatory Learning program,Human Resources Business Partner Development program and A11yBoost.2Scotiabank received the Canadian 2023 Occupational Safetys 5-Star Psychological Safety award for helping employees feel psychologically safe in the workplace.Recognized as one of the Best WorkplacesTM in Canada by Great Place To Work.2 Named Best WorkplacesTM in Financial Services&Insurance in Canada by Great Place To Work.Recognized as one of the Best WorkplacesTM with Most Trusted Executive Teams by Great Place To Work.Recognized as one of Canadas Best Diversity Employers by Mediacorp.2 Recognized for executive gender diversity on The Globe and Mails Women Lead Here list for the third consecutive year.Scotiabank was recognized as Bank of the Year for the fifth year by The Banker,for delivering best-in-class banking experience.Named top 10 of the Best Places to Work for women in Colombia by Great Place To Work.Received five awards at the 2023 Sustainable Finance Awards by Global Finance,including Best Bank for Sustainable Finance(Canada)and recognitions for Outstanding Leadership in the Sustainability Transparency(Global and North America),Sustainable Bonds and Transition/Sustainability-Linked Bonds categories.Scotiabank was involved in several award-winning transactions from our clients in 2023,recognized through five Bond Awards from Environmental Finance,including Social Bond of the Year Sovereign;Green Bond of the Year Sovereign;Sustainability Bond of the Year Supranational;Sustainability Bond of the Year Sovereign;and Sustainability Bond of the Year Corporate.Scotia iTRADE won the Best Personalized Experience award and was a runner-up for Best ESG Investing award in Trading Centrals Digital Wealth Awards 2023.Scotiabank named Best Specialist ESG Research at the 2023 ESG Investing Awards by ESG Investing.Scotiabank also earned a place for the sixth consecutive year in the Bloomberg Gender-Equality Index.See more awards received by Scotiabank,Global Banking and Markets and as a leading place to work.E SG R ATI N GS A N D R A N KI N GS2023 S&P Corporate Sustainability Assessment:73/1001ISS ESG:C,Prime3MSCI ESG Rating:AAA,Top 5DP Grade:BSustainalytics:17.7 Low RiskI N DE X I N CLUS I O NBloomberg Gender-Equality IndexDJSI North America IndexFTSE4GOOD IndexRefinitiv Global Diversity and Inclusion Index2023 ESG REPORT 5INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCE2023 ESG REPORT 2023 Highlights1 As at December 8,2023.2 As at December 31,2023.3 The$350 billion target,which involves the provision of$350 billion in climate-related finance by 2030,represents a small portion of the Banks overall lending and advisory services.4 As used for this report,climate-related finance consists of those products and services(such as lending and advisory services)as well as the types of transactions(such as sustainability-linked loans,or dedicated purpose loans)which support,among other things,climate change mitigation,adaptation,pollution prevention,sustainable management of natural resources,biodiversity conservation,and circular economy.See Scotiabanks Climate-related Finance Framework for further details on climate-related products,services,as well as eligible transactions.G OV E RN A N CE Ranked first among banks in North America in the S&P Global Corporate Sustainability Assessment and included in the Dow Jones Sustainability Index(DJSI)North America for the sixth consecutive year.1 Received a“AAA”ESG rating from MSCI for the third consecutive year the highest score possible held by only 5%of global industry peers and recognized as a leader in corporate governance.2 Employee engagement reached 87%,above financial sector industry averages.Announced Global Inclusive Standards of Care for employee benefits,with an initial focus on health gaps for LGBT and women.Linked ESG metrics with pay,including our progress towards our climate goals in all-Bank performance pay and incentivized climate performance in executive variable compensation.E N V I RO N M E NTA L Provided$36 billion towards our target of$350 billion3 in climate-related finance4 by 2030,reflecting a cumulative$132 billion since the beginning of fiscal 2019.Established a new interim emissions intensity reduction target in the Automotive Manufacturing sector by 36%by 2030,on a science-based 1.5 degree-aligned pathway.Published a Climate-related Finance Framework that defines those products and services that are eligible for inclusion in the Banks target to provide$350 billion by 2030 in climate-related finance.Distributed$1 million through the Net-Zero Research Fund and a cumulative$3 million since fiscal year 2021 to 31 research projects and leading initiatives.Achieved 34%reduction of Scope 1 and 2 greenhouse gas(GHG)emissions in our own operations(from 2016 levels)against our target of 40%reduction by 2030.SOCI A L Invested$42.2 million through ScotiaRISE,reflecting a cumulative$102 million in the last three years across 200 organizations,progressing towards the goal of$500 million over 10 years.Released inaugural three-year Accessibility Plan supported by an Enterprise Accessibility Steering Committee to ensure the implementation of the Banks commitment to identifying,preventing and removing barriers for persons with disabilities.Since fiscal 2019,The Scotiabank Women Initiative has engaged over 25,000 women entrepreneurs and in Canada has deployed$8.05 billion in capital for women-led and women-owned businesses nearing our commitment to deploy$10 billion in capital by 2025.Welcomed the first cohort of Indigenous students through SOAR,a year-long rotational development program designed for Indigenous students completing post-secondary education.Scotiabank included in 2023 Bloomberg Gender-Equality Index for sixth consecutive year.Added allyship-focused learning content to Scotia Academy to help employees understand what it means to be an ally and the skills necessary to be effective.62023 ESG REPORT INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCEAbout This ReportRE P O RT SCO PE A N D PE RI O DScotiabanks ESG Report presents our activity and performance on environment,social and governance(ESG)topics for the Bank that matter to our stakeholders.We aim to enhance our reporting in alignment with emerging trends and best practices,and continue to review how we manage,measure and report on ESG topics that are important to our business and our stakeholders.Our ESG report is reviewed by Scotiabanks Operating Committee,which recommends approval to the Banks Board of Directors.To produce this report,we collect data from subject matter experts across Scotiabanks global business operations and corporate functions.Some data is obtained indirectly from clients and other third-party sources.Scotiabank believes this data is reliable but has not in every case independently verified such data or the assumptions underlying such data and cannot therefore guarantee its accuracy or completeness.Changes in data or data collection methodologies may impact the targets described in this ESG Report and other Scotiabank publications,and Scotiabanks ability to achieve those targets.Data is provided by the relevant subject matter experts and approved by their respective executive leaders prior to inclusion in the ESG Report.It is then presented to the Banks Disclosure Committee for review and approval.Data is presented in ways that align with the reporting frameworks and standards identified herein.1 The Task Force on Climate-related Financial Disclosures(TCFD)was established in 2017 to provide a voluntary reporting framework to help organizations disclose climate-related risks and opportunities,support market transparency and inform capital decisions.IFRS S1 and IFRS S2 include all TCFD recommendations,and when both International Financial Reporting Standards(IFRS)standards were released in June 2023,the Financial Stability Board asked the IFRS Foundation to assume the TCFDs mandate beginning in 2024.The TCFD was formally disbanded in November 2023.Scotiabank monitors changes in standards and expectations relating to climate reporting,including IFRS S2,CSRD and OSFI B-15,and will adapt our reporting to meet new requirements over time.This report covers ESG activities for the fiscal year 2023(November 1,2022,through October 31,2023)and global operations,unless otherwise stated.Previous reports are available on our ESG Publications&Policies page.RE P O RTI N G FR A M E WO RK SWe use several reporting frameworks,indicators and standards to guide our reporting on relevant topics.Please refer to the ESG Data Pack and Indices for:Task Force on Climate-related Financial Disclosures(TCFD)1 Sustainability Accounting Standards Board(SASB)Standards Global Reporting Initiative(GRI)Universal Standards UN Global Compact(UNGC)Principles UN Sustainable Development Goals(SDGs)Public Accountability Statement(PAS,Canadian regulation)CU RRE N C YAll currency is stated in Canadian dollars unless otherwise noted and may be subject to currency exchange rate fluctuations.E X TE RNAL A SSU R A N CEKPMG has performed an independent,limited assurance engagement for selected performance indicators marked with this symbol in the report.Community Investment figures(for fiscal years 20202023)are independently verified by LBG Canada using the London Benchmarking Group model,a recognized global standard for managing,measuring and reporting community investment.Our goal is to remain in step with ESG-related disclosure standards or rules within our operating jurisdiction.We recognize and value the benefits of third-party assurance and intend to evolve our reporting practice for greater transparency and accuracy.With that comes a desire to better understand the relationship between financial and non-financial information reported,and a continuation of the Banks efforts towards reasonable assurance in the future.See:2023 KPMG Limited Assurance Report 2023 Community Investment LBG Canada Verification StatementM A J O R CHA N G E S S I N CE OU R 202 2 RE P O RTThis year,we have launched our inaugural Climate Report,which will include climate-related disclosures previously found in our ESG Report.This 2023 ESG Report also incorporates the previously separate annual Sustainable Bonds Report disclosure.Any restatements or changes to methodology in data since last year will be included within the footnotes of the Data Tables where applicable.KPMG was engaged to provide a limited assurance conclusion over indicators identified with this symbol.Refer to KPMGs Independent Limited Assurance Report.7INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCEAbout ScotiabankAt the core of our business is our focus on our millions of clients who regularly rely on our service and advice.We serve these clients through our four business lines:C A N A DIA N BA N KI N G (CB)Canadian Banking provides a full suite of financial advice and banking solutions,supported by an excellent client experience,to over 11 million clients.Retail,Small Business and Commercial Banking clients are served through its network of 947 branches and 3,703 automated banking machines(ABMs),as well as online,mobile and telephone banking,and specialized sales teams.CB also provides an alternative self-directed banking solution to Tangerine clients.I NTE RN ATI O N A L BA N KI N G(I B)International Banking is a diverse franchise offering financial advice and solutions to over 12 million Retail,Corporate and Commercial clients.The geographic footprint encompasses 15 countries,including Mexico,Chile,Peru,Colombia,Brazil,Uruguay,and certain markets across Central America and the Caribbean.The Bank is well positioned with a unique geographical footprint,providing digital leadership and connectivity with Canada and the U.S.markets.IB countries continue to demonstrate attractive demographics and opportunities to grow banking penetration.G LO BA L WE A LTH MA N AG E M E NT (GWM)Global Wealth Management is focused on delivering comprehensive wealth management advice and solutions to clients across Scotiabanks footprint.GWM serves over 2 million investment fund and advisory clients across 13 countries administering over$600 billion in assets.G LO BA L BA N KI N G A N D MARKE T S(G B M)Global Banking and Markets provides corporate clients with lending and transaction services,investment banking advice and access to capital markets.GBM is a full-service wholesale bank in the Americas,with operations in 20 countries,serving clients across Canada,the United States,Latin America,Europe and Asia-Pacific.For more information,see Scotiabanks corporate profile.WE ARE HERE FOR EVERY FUTUREGrow and scale in priority markets Invest through disciplined capital allocation Deliver a common approach across markets Support our clients in the transition to net-zero Create connectivity across our markets for multinational clientsEarn primary client relationships Deliver theentire bank Lead with advice,follow with solutions Create consistently high-quality experiencesacross all channelsMake it easy to do business with us Simplify and digitize end-to-end Streamline and improve efficiency across our Bank Ensure our Bank is resilient,safe and secure Ensure data-driven decision-makingWin as one team Be the employerof choice Invest in developing skills for the future Create an environment where we all belong Create positive impact in our communitiesBe our clients most trusted financial partner.to drive sustainable,profitable growth and maximize total shareholder returnOur values are:Respect|Integrity|Accountability|Passion 2023 ESG REPORT 8INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCEHow We Create Value Guided by our ESG priorities and aligned with our purpose to deliver for every future,we work to create value for our business and our stakeholders.SUPPLIERS$6.0 billion in procured goods and services from third-party suppliers1 15,000 suppliers globally1COMMUNITIES$87.2 million invested in communities through donations,community sponsorships,employee volunteering and other types of community investment$3.8 billion total taxes2$24.2 billion economic value distributed3SHAREHOLDERS$5.4 billion in dividends distributed 5GR in dividends over the last five years 10.4%reported return on equity1 Supplier spend excludes transactions with non-vendors such as government agencies and non-governmental organizations,corporate card transactions,taxes and spending not managed by global procurement (non-procurement managed vendors).2 Includes income and other taxes such as payroll,business,capital,and goods and services taxes.3 Economic value distributed is a sustainability metric and was calculated per GRI methodology 201-1 Direct economic value generated and distributed(2016)as an indicator of how the Bank is creating value for its various stakeholders.Please refer to the metric reported in the Data Tables for more information.4 On a full-time equivalent(FTE)basis per Scotiabanks 2023 Annual Report(p.134).5 Either physically or virtually.Emission-free sources includes renewable(hydro,solar,wind,geothermal,tidal)and nuclear sources,and may include the use of renewable energy certificates(RECs).Electricity from emission-free sources in Canada is based on provincial electricity mix sourced from Natural Resources Canada Energy Fact Book 2023-2024,pp.62 and 63.Electricity from emission-free sources internationally is based on reports from the International Energy Agency(IEA)electricity generation by country,by source.EMPLOYEES 89,483 employees4$9.6 billion paid in salaries and employee benefits$77.8 million invested in training and developmentCLIENTS$8.05 billion invested since 2018 in women-led and-owned businesses in Canada$751 billion in loans outstanding$13.1 billion in green,social,sustainability and sustainability-linked bonds underwrittenENVIRONMENT$132 billion in climate-related finance provided since November 1,2018 34%reduction in Scope 1 and 2 GHG emissions in our own operations from 2016 levels 66%electricity purchased from emission-free sources5 in our operationsAll figures on this page are presented for fiscal year ended October 31,2023.R EP O RT ED E A R N I N G S BY M A R K E TNet income attributable to equity holdersCanada49%Pacific Alliance28%U.S.11ribbean&Central America9%Other International 3%$7.4billionECO N O M I C VA LU E D I S T R I B U T ED$32.3 billion in revenueSalaries and benefits$9.6 billionCash dividends$5.4 billionTaxes$4.7 billionNet operating expenses$4.4 billionCommunity giving$0.1 billionEconomic value retained$8.1 billion$24.2billion economicvalue distributed“The Bank is making meaningful progress in addressing important issues across our footprint,including diversity,equity and inclusion,climate change and supporting community economic resilience.Oversight of ESG matters continues to be an important focus area for the Banks Board of Directors.The Directors are committed to ongoing engagement on the Banks broader ESG strategy,including through our board meetings and stakeholder process.”AARON REGENT(HE/HIM),CHAIR OF SCOTIABANKS BOARD OF DIRECTORS2023 ESG REPORT 9INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCEA Message from Our CSO Across Scotiabank we understand creating long-term value for our Bank goes hand-in-hand with creating long-term value for our employees,clients,communities and shareholders.We focus on developing trust with our stakeholders through ongoing engagement and by reporting transparently on key ESG topics.It is reflected in the way we balance our Banks important responsibilities today with the needs of future generations.Trust is embedded in our Banks purpose,to be here for every future.It guides how we develop and invest in initiatives that minimize risks to our business and contribute to important sustainability outcomes including supporting our clients,removing barriers to economic inclusion,and adapting our operations to mitigate our greenhouse gas emissions.OU R 202 3 E SG H I G H LI G HT SThanks to the contributions of Scotiabankers across our business lines,corporate functions and markets,our Bank is on a path for effecting important change to advance a more sustainable future.Within the 2023 ESG Report,we share the progress our Bank has made against our key ESG priorities.Since launching ScotiaRISE in 2021,we have invested more than$100 million in over 200 organizations that are removing barriers for disadvantaged groups.We distributed a cumulative$3 million since 2021 through our Net-Zero Research Fund to advance leading research and technology to support decarbonization.We have also furthered allyship through the introduction of new Global Inclusive Standards of Care for our employee benefits,with an initial focus on closing health gaps for the LGBT community and women.This year,for the first time,we are providing an additional 2023 Climate Report.It shares greater detail on our progress,including the Banks provision of climate financing,our latest financed emissions target for the automotive sector,and a reinforcement of our ambition which we increased this year to reduce the Banks own Scope 1 and 2 emissions by 40%by 2030 relative to 2016 levels.The transition to a low-carbon economy will be a challenging journey and will require partnership and collaboration across all segments of society.I encourage you to read the Climate Report for greater detail on our Banks role in addressing climate change.LOO KI N G A H E A DWe continue to assess and prioritize the ESG topics that align with our purpose,business strategy,and those areas that matter most to our stakeholders.We recently conducted a review of priority sustainability issues,which provides valuable insights as we update our ESG approach in 2024.One thing is certain:the number of ESG topics our stakeholders have identified as important to our Bank continues to grow.Prioritizing our efforts will be key moving forward,particularly as we evaluate further opportunities to support our clients in advancing their own sustainability goals.While the challenges faced across our society remain significant,it is energizing to think about the role that our Bank can have in helping to address them,as we continue to hold ourselves accountable for the long term and engage collaboratively with stakeholders across our entire value chain to shape a more sustainable world,together.Meigan Terry(she/her)Senior Vice President&Chief Sustainability,Social Impact and Communications Officer 2023 ESG REPORT 10INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCEOur ESG Approach1 Internal stakeholder groups included employees and senior leaders from across the organization.2 External stakeholder groups included non-governmental organizations,academia,community and sustainability organizations,shareholders and investors,ESG rating agencies,suppliers and industry associations.DE TE RM I N I N G OU R PRI O RIT Y SUS TA I NA B I LIT Y I SSU E S We regularly engage with stakeholders to listen,learn about and discuss ways we can address issues important to them and our business.This engagement also helps us better understand our impact and where we have the greatest ability to drive change and create value.The table on the following page summarizes our ongoing efforts and engagement with stakeholder groups in 2023 and how we address the topics most concerning to each group.Scotiabank also engages and collaborates with organizations highlighted throughout this report.Scotiabank partnered with an external sustainability consultancy to help us understand which topics are most important to Scotiabank and our stakeholders.This assessment will help to inform Scotiabanks future ESG approach and reporting.The assessment followed a common methodology to identify,prioritize and validate ESG topics.For each topic we explored the potential for impact on our business and society,and the level of importance to key stakeholders.We reviewed industry peers,pertinent SASB standards and information requests from rating agencies.ESG topics were prioritized based on insights gained from internal1 and external2 stakeholder surveys,more than a dozen interviews with senior leaders and subject matter experts within and outside of the Bank,and two employee focus groups.Our assessment outcomes were presented to Scotiabanks Operating Committee and shared with the Banks Board in early 2024.Operational Environmental FootprintPublic Policy and LobbyingSustainable ProcurementCommunity ImpactConsumer ProtectionCorporate GovernanceCustomer ExperienceEmployee Health and WellbeingHuman RightsIndigenous Relations Innovation and DigitizationNature and Biodiversity Talent Recruitment,Development and RetentionTransparent Reporting and DisclosuresHIGHBusiness Ethics Climate ChangeData Privacy and Security Diversity,Equity and InclusionFinancial Access and InclusionResponsible Investment and FinanceVERY HIGHImpact on the economy,environment and peopleImportance to stakeholdersMOD ERATE2023 ESG REPORT 11INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCEE N G AG I N G WITH S TAKE H O LDE R S We regularly engage with our stakeholders and actively work to meet their evolving needs.Here we summarize engagement with stakeholder groups in 2023.Other examples are highlighted throughout this report.E M P L OY E E SC L I E N T SS H A R E H O L D E R S,I N V E S T O R S,R AT I N G AG E N C I E S A N D R E S E A R C H A N A LYS T SG OV E R N M E N T A N D R E G U L AT O R SS U P P L I E R SN G O s,AC A D E M I A,A N D CO M M U N I T Y A N D S U S TA I N A B I L I T Y O R G A N I Z AT I O N SHow we engaged in 2023 Internal communication(i.e.,social network platforms,email,intranet and newsletters)In-person and virtual town halls and team meetings Employee Resource Groups ScotiaPulse employee engagement survey People leader communication The Pulse survey and follow-up calls Roundtable discussions Events and reports based on ESG equities research Interactions through our branch network Digital banking Contact centres Social media Annual general meeting and quarterly earnings calls Annual and quarterly reports,management proxy circular,annual information form,annual ESG report,news releases and website Investor conferences Interaction with ESG rating agencies,rankers,and data and disclosure providers Meetings with ESG investors and Second Party Opinion providers on ESG-labelled bond criteria and trends Shareholder proposals and inquiries 1:1 and small group meetings Public policy discussions and dialogue with policymakers,regulators and government Submissions to government and regulators bilaterally and through industry associations Participation in Canadas Sustainable Finance Action Council Procurement procedures Sustainability assessments of prospective suppliers Third-party risk management program Formal Request for Proposal process Participation in organizations focused on supplier diversity Community investments and partnerships Employee volunteerism Memberships including the UN Environment Programme Finance Initiative and the UN-convened Net-Zero Banking Alliance Engagement with organizations such as the UN Global Compact,UN Womens Empowerment Principles,the UN LGBTI Standards of Conduct for Business and the BlackNorth Initiative Participated in a UN High Commissioner for Human Rights event Engaged with human rights-related organizations,including BSR and The Mekong Club Part of the consortium that supported the establishment of the ISSB office in Canada Key topics raised Wellness,health and safety Accessibility and accommodation Allyship and DEI Learning and development Human rights and Indigenous reconciliation Community investment Climate change Client experience ESG practices and sustainable finance Net-Zero Banking Commitment Financial inclusion and access Community investment with a focus on economic resilience Consumer protection Cybersecurity and data privacy Geopolitical issues ESG disclosures,standards harmonization and reporting Housing and consumer indebtedness Climate and net-zero initiatives Financial instruments to support sustainability Guidelines for sustainable finance structuring and eligibility criteria Digital transformation and AI DEI Human rights and Indigenous relations Executive compensation Auditor tenure CEO succession Cybersecurity and financial crime Digital finance,data privacy and AI International trade DEI Sustainable finance and climate policy Affordable housing Transition finance taxonomies Regulations and emerging ESG disclosure standards(e.g.,ISSB,Bill S211,OFSI-B15)ESG risk management Global Procurement Policy Modern Slavery Act and human rights Supplier Code of Conduct Supplier diversity Climate change,carbon pricing and net-zero DEI Economic inclusion and resilience Financial literacy and education Modern slavery and human rights Immigration and settlement of newcomers Respect for Indigenous reconciliation Supplier diversity Transparency on ESG risks UN SDGs2023 ESG REPORT 12INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCEG LO BA L DE V E LO PM E NT S S HAPI N G O U R I N DUS TRY 1 For the purpose of this report,carbon intensive sectors are understood as those listed by the NZBA as aluminum,agriculture,cement,coal,commercial and residential real estate,iron and steel,oil and gas,power generation and transport.2 Emissions intensity reduction targets are distinct from targets to reduce absolute emissions.Scotiabanks emissions intensity reduction targets are based on a physical intensity metric.See our Climate Report(p.24)for more information.Many factors are shaping our global economy,with some already impacting the financial sector,while others are emerging.Below are some key ESG trends we believe are most significant to Scotiabank and our global economy more generally and the actions we are taking to address them.CLI M ATE-RE L ATE D RI S K SThe impacts of climate change are being felt around the world.The threat of severe weather poses a risk to the Banks properties and disruption of our operations and those of our clients.In addition,exposure to high emitters of GHG emissions within our portfolio could pose financial and reputational risks to the Bank.OUR ACTIONS:Our climate goals comprise three pillars:(1)financing climate solutions,by providing climate-related financing to clients in all sectors,including certain carbon intensive sectors;1(2)advancing to net-zero,by working with clients to reduce emissions associated with our lending portfolio and setting 2030 sectoral emissions intensity reduction targets2 to keep us on course to meet our goal of achieving net-zero financed emissions by 2050;and(3)reducing our own emissions,by introducing solutions to minimize the Banks direct impact on climate change.See Environment ANTI-D I SCRI M I NATI O N AN D I N CLUS I O NDiscrimination against equity-deserving groups is a threat to the future of thriving,healthy societies,organizations and economies.It also limits the ability of individuals treated unfairly or lacking equal access to opportunities to flourish in their professional careers.OUR ACTIONS:We work to overcome barriers that prevent equity-deserving groups from accessing financial services,higher education and meaningful employment.Within our workplace,we are committed to advancing our diverse,inclusive culture where employees are empowered to reach their full potential and bring their authentic selves to work.See Supporting Resilient Communities,Enabling Economic Resilience Through ScotiaRISE,Embedding a Culture of Diversity,Equity and Inclusion and Empowering Our Clients C Y B E R S ECU RIT Y,A RTI FI CI A L I NTE LLI G E N CE A N D I N FO RM ATI O N TECH N O LO GY RI S KThe rapid emergence of new technologies,including artificial intelligence(AI)and the rise of the metaverse,is transforming financial services as we know it.At the same time,these tools present unique risks,including unethical or inappropriate use of employee or client data,harmful bias,accuracy limitations and augmented security and privacy concerns.Cyber-attacks also continue to increase in sophistication,severity and prevalence.OUR ACTIONS:In response to increased client demands,needs and expectations,the Bank has embarked on a multi-year digital transformation with the aspiration to be a digital leader in the financial services industry.To support this strategy,the Bank continues to invest in its digital capabilities to contribute to financial innovation,while monitoring for evolving risks in new technology tools.See Keeping Our Bank Safe and Protecting Clients I N CRE A S I N G REG U L ATO NS A N D E XPEC TATI O NS FO R D I SCLOSU RE The regulatory landscape for ESG reporting is evolving rapidly.Regulators,investors and other stakeholders are increasingly calling on companies to disclose and describe the social,environmental and economic challenges,opportunities and risks facing their businesses,as well as impacts and risks to their value chain.Companies also must continue to monitor and prepare for forthcoming voluntary international disclosure standards,which may influence future regulations.OUR ACTIONS:The Bank continues to monitor changes in regulatory guidance and assess the impact of new regulations across our operating footprint.In addition,we participate in industry associations to lend our experience and expertise and to encourage development of reporting standards to focus on decision-useful,consistent information across the sector.We continuously review risks through our robust risk management processes.See About This Report,Governance2023 ESG REPORT 13INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCESupporting the SDGs The finance and banking sector can play a significant role in global efforts to make progress on the United Nations Sustainable Development Goals(SDGs).Below are the SDGs and sub-targets where we believe Scotiabank can have the most strategic impact through our core business activities and investments.Further details on these and other SDGs where we believe we can have meaningful impacts are available in our ESG Data Pack and Indices.S D G G OA L S&TA RG E T SO U R AC T I O N S1No PovertyScotiabank provides financial education,tools and advice to help our clients make knowledgeable and responsible financial decisions.We develop and provide essential financial products,low-and no-fee bank accounts and services to meet the unique needs of underserved and underbanked communities.2Zero HungerWe provide innovative farming-specific banking and lending services for small farms,large-scale producers and processors to support their ability to evolve,grow and feed our world sustainably.3Good Health and Well-being We offer benefits and resources to help our employees and their families lead healthy,balanced lives and promote their long-term mental and physical health.4Quality Education We work to promote financial literacy across our international footprint.5Gender Equality We support the advancement of women in business and the economy by,among other things,identifying and helping to remove gender barriers and working to close gender gaps.Within the Bank,we support programs to help women advance into leadership roles and conduct an annual pay equity assessment.6Clean Water and SanitationWe provide financing towards eligible green projects,which may include sustainable water and wastewater management.7Affordable and Clean Energy We facilitate the development of reliable,sustainable energy for a lower-carbon future by financing and investing in more efficient energy,renewable energy and clean power solutions.Within our operations,we are working to source,either physically or virtually,100%electricity from emission-free sources.We also support non-profit and charitable partnerships that enable climate-related systems change and sector decarbonization.8Decent Work and Economic Growth We support customers and small businesses with essential products and services.We contribute significantly to economic growth through competitive salaries,generous benefits and tax payments.Through our banking services and community investments,we seek to address the root causes of economic exclusion and close opportunity gaps for underserved groups.We have zero tolerance for modern slavery or human trafficking.9Industry,Innovation and Infrastructure We provide finance to build resilient infrastructure,foster innovation and finance the development of more efficient,sustainable industrial technologies in the Americas.10Reduced InequalitiesWe remove barriers to achieving financial and social equality through specialized banking services and advice.We invest in programs to empower the underserved and equity-deserving people within our communities and workforce.11Sustainable Cities and Communities We provide lending,investing and underwriting solutions for the development of affordable housing.12Responsible Consumption and Production Scotiabank is a member of a network of organizations working to connect Canadas circular economy community.We have initiatives to reduce our operational carbon footprint through efficient energy consumption.13Climate Action In 2023,we increased our target to reduce operational Scope 1 and 2 GHG emissions from 35%to 40%by 2030 against a 2016 base year.16Peace,Justice and Strong Institutions We combat financial crimes,protect human rights and fight exploitation through innovative financial products and services,global and national multi-stakeholder partnerships,and technology.We have no appetite for unethical conduct by employees and zero tolerance for bribery and corruption.17Partnerships for the Goals We support and participate in the work of national and international research institutions and non-governmental organizations to provide collaboration and spur dialogue,research and information sharing to advance global action toward the SDGs.2023 ESG REPORT 14INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESA MESSAGE FROM OUR PRESIDENT AND CEO|AWARDS AND RECOGNITION|2023 HIGHLIGHTS|ABOUT THIS REPORT|ABOUT SCOTIABANK HOW WE CREATE VALUE|A MESSAGE FROM OUR CSO|OUR ESG APPROACH|SUPPORTING THE SDGs|KEY ESG TARGETS AND PERFORMANCEKey ESG Targets and Performance STRATEGIC ESG PILLARDESCRIPTIONTARGETPRIMARY KPI2023 PERFORMANCEYEAR-OVER-YEAR CHANGETRENDLINKED TO EXECUTIVE PAYEnvironmental Action1 Provide the climate-related finance our clients need to address their own climate-related projects and objectives$350 billion by 20302 Climate-related finance since fiscal 2019$132 billion(cumulative)2 $36 billion38%of targetDecarbonize our operations 40crease in Scope 1 and 2 greenhouse gas(GHG)3 emissions by 2030(2016 base year)crease GHG emissions Scope 14 Scope 2(Location-Based)4 34crease27,402 tCO2e 64,777 tCO2e 5crease85%of targetSecure 100%emission-free electricity in Canada by 20255%emission-free electricity83%of targetEconomic Resilience,Inclusive Society6 Empower women in our workplace to succeed and reach their fullest potential40%of women in VP roles by 2025 globally%women in VP roles Global4 women VP roles Canada4 women VP roles International4 39D% 1%of targetScotiaRISE:Community investment in support of economic resilience$500 million by 2030 through ScotiaRISE$of community investment since 2021$102 million (cumulative) $42 million20%of targetIncrease economic and professional opportunities for women-led businesses$10 billion by 2025 in Canada$of capital deployed through The Scotiabank Women Initiative in Canada since 2021$8.05 billion(cumulative) $2.45 billion81%of targetLeadership&Governance Aim to have gender parity on the BoardMinimum 30%representation of women on the Board%women on Board7 36hieving targetValuing employee feedback and cultivating an environment of trust Above three-year rolling average for financial institutionsEmployee Engagement Index score4 87ove target1 Please refer to the Climate Report(p.59)for information relating to financed emissions.2 The$350 billion target,which involves the provision of$350 billion in climate-related finance by 2030,represents a small portion of the Banks lending and advisory services.3 Greenhouse gas,or GHG,is defined in the Greenhouse Gas Protocol as including the six gases included in the Kyoto Protocol:carbon dioxide(CO2),methane(CH4),nitrous oxide(N2O),hydrofluorocarbons(HFCs),perfluorocarbons(PFCs)and sulphur hexafluoride(SF6).The Bank currently measures CO2,CH4 and N2O for our operational emissions.4 Definitions for assured metrics are provided in the Data Tables(p.94)within this report.See relevant data tables for“Employee Engagement”(p.100),“GHG Emissions from Our Own Operations”(p.104)and“Women in Leadership and Workforce”(p.117).5 Either physically or virtually.Emission-free sources includes renewable(hydro,solar,wind,geothermal,tidal)and nuclear sources,and may include the use of renewable energy certificates(RECs).Electricity from emission-free sources in Canada is based on provincial electricity mix sourced from Natural Resources Canada Energy Fact Book 20232024,pp.62 and 63.Electricity from emission-free sources internationally is based on reports from the International Energy Agency(IEA)electricity generation by country,by source.6 Performance indicators related to diversity,equity and inclusion targets for Canada are presented on p.59.7 Figures may differ from the Management Proxy Circular,which highlights the slate of directors proposed for election in the spring.Integral to our ESG approach is our performance against our ESG goals and targets.We have identified several key performance indicators(KPIs)that are designed to help us meet these goals and are externally verified.As expectations from stakeholders evolve related to these topics,we will update the scope of indicators covered.Our 2023 progress towards key targets is summarized in the table below.Please refer to the related Data Tables(p.94)for comprehensive year-over-year performance data associated with this report.KPMG was engaged to provide a limited assurance conclusion over indicators identified with this symbol.Refer to KPMGs Independent Limited Assurance Report.Independent verification of Scotiabanks total community investment spend is provided by LBG Canada according to the LBG model.LBG Canada did not independently verify community spending attributed specifically to ScotiaRISE.2023 ESG REPORT INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESGovernanceOur business is built on trust.We work every day to earn and maintain the trust of our stakeholders by acting with integrity and prioritizing oversight in the markets where we operate.Our governance structures are designed to promote accountability,transparency and ethical behaviour consistent with our corporate standards and values worldwide.This trust has allowed us to develop long-standing,deep relationships.IN THIS SECTION:16 TRUST AT THE TOP OF OUR BUSINESS 22 KEEPING OUR BANK SAFE AND PROTECTING CLIENTS25 ADVANCING HUMAN RIGHTS26 RESPONSIBLE PROCUREMENT AND SUPPLY CHANGE MANAGEMENT28 LEADERSHIP:SUPPORTING OUR TEAM 152023 ESG REPORT 16INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMTrust at the Top of Our Business1 In fiscal 2024,a Climate Transition Steering Committee will assume the Corporate ESG Committees mandate on climate-related matters,with accountability for compliance climate-related regulations,and design and execution of the Banks Climate Transition Plan.WH Y IT MAT TE R S We view trust as foundational to the relationships we have built with our clients,our shareholders,our fellow Scotiabankers and the communities in which we have operated in for more than 190 years.Trust means acting with integrity and championing a culture where every employee takes ownership of their actions and understands that transparency and accountability are vital to Scotiabanks success.We seek to act pursuant to best practices,embed a robust risk culture and encourage the highest ethical standards and conduct.BOA RD A N D S E N I O R MA NAG E M E NT G OV E RN A N CEThe Banks Board of Directors oversees the management of the Banks business and sets the tone at the top,promoting trust and confidence with our shareholders,clients,employees,regulators and communities.Its duties and responsibilities are set out in the Boards mandate and committees charters.Our Board of Directors brings diverse skills,experience and expertise to managing our business,with the majority having ESG expertise,including experience in sustainability matters,climate-related issues,and other ESG issues,familiarity with standards for climate change reporting and community involvement.Several committees and councils composed of senior leaders from across the Bank provide oversight of regular ESG-related updates to our senior leadership,Board and Board committees.This includes recommendations,strategic guidance and regular briefings from:The Asset&Liability Committee(ALCO)provides oversight of the Banks Sustainable Bond Framework.In 2023,a new ALCO ESG Sub-Committee was established to support ALCO members in their review and oversight of the Framework.Climate-related risks and opportunities are overseen by a Climate Transition Steering Committee.1 The Climate Transition Committees mandate will include accountability for compliance with OSFI B-15 and other regulatory initiatives relating to climate,as well as the execution of the Banks Climate Transition Plan.The Community Investment Committee,responsible for the execution of the Banks Community Investment Strategy,as well as reviewing and approving community investments,such as ScotiaRISE.The Disclosure Committee acts in an advisory capacity to the President and CEO and the Board to ensure that all public disclosure of information made by the Bank in whatever form is timely,accurate and balanced and that appropriate controls are in place and working effectively.The Scotiabank Global Inclusion Council on the Banks Diversity,Equity and Inclusion(DEI)strategy.The Operational Risk Committee(ORC)provides effective oversight and challenge of the Banks management of environmental and social risks.Its responsibilities include monitoring of the ESG risk profile,recommending approval of relevant risk frameworks,policies,risk appetite statements and limits to the ORC.2 In Q2 2024,the position of Senior Vice President and Head,Corporate and Commercial Credit Risk is replaced with Senior Vice President and Head,Enterprise Risk.G OV E RN A N CE O F E SG AT SCOTI A BA N KOVERSIGHTMANAGEMENTOVERSIGHTBoard of DirectorsCEO&Operating CommitteeOversight of ESG Issues Related to MandateESG OversightAudit&Conduct Review Committee Human Capital&Compensation CommitteeRisk CommitteeCorporate Governance Committee ESG LeadershipExecutive Vice President and General CounselSenior Vice President and Chief Sustainability,Social Impact and Communications OfficerGlobal Risk ManagementGroup Head and Chief Risk OfficerSenior Vice President and Head,Corporate and Commercial Credit Risk2Related Management CommitteesAsset&LiabilityCommitteeClimate TransitionSteeringCommitteeDisclosureCommitteeGlobalInclusionCouncilCommunityInvestmentCommitteeOperationalRiskCommitteeRE LE VANT LI N K SCorporate Governance Policies Board of Directors Scotiabank Annual Reports,Proxy and AGM Materials See annual Management Proxy Circular for:Board structure and composition Executive compensation and ESG metrics ESG-related responsibilities and activities2023 ESG REPORT 17INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMMA I NTA I N I N G A S TRO N G RIS K CU LTU RE Effective risk management is essential for good governance and requires a strong risk culture that promotes responsible conduct.We have invested in developing a strong risk culture where managing risk is a responsibility shared by all Bank employees.Our risk culture is built on underlying norms,attitudes and beliefs that positively influence risk management behaviour across the Bank.Our Board of Directors is responsible for oversight and governance of the Banks risk management program.The Audit&Conduct Review Committee is responsible for risk culture,conduct risk and monitoring our ethical standards and has dedicated considerable time to its oversight of these risks.Together with our senior management teams oversight,the Audit&Conduct Review Committee helps ensure that our program reflects the Banks values and maintains our strong risk culture,where everyone has ownership and responsibility for managing risk and doing the right thing for our clients,shareholders,employees and the communities we serve.Our Scotiabank Code of Conduct(our“Code”)reinforces our values and promotes a strong risk culture.Adherence to both the letter and spirit of our Code is a condition of employment at Scotiabank.Risk Culture Our actions,words and behaviours align with the Banks values.We identify risk-taking activities that are beyond the established risk appetite in order to keep our Bank safe.RI S K CU LTU RE SU RV E YOur third enterprise-wide Risk Culture Survey in 2023 showed positive sentiment across our four enterprise risk culture indicators:Tone from the Top,Accountability,Risk Management and People Management.Our results were above global benchmarks,1 demonstrating the Banks strong risk culture and commitment to trust.1 Benchmarks provided by Qualtrics,a leading experience management company providing survey,reporting and action planning tools and benchmarks for several industries.Our risk culture is built on underlying norms,attitudes and beliefs that positively influence risk management behaviour across the Bank.“Being the most trusted financial partner for our clients starts with a strong risk culture.Our commitment to ethical and responsible business conduct and continued enhancement of our compliance program supports us to operate with integrity while keeping the Bank and our clients safe.”NICOLE FREW(SHE/HER),EXECUTIVE VICE PRESIDENT&CHIEF COMPLIANCE OFFICER2023 ESG REPORT 18INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMMA N AG I N G E N V I RO N M E NTAL AN D SO CIAL RI S K SESG risks are complex and there is often an interplay with other risk types(see Risk Identification and Assessment in the 2023 Annual Report,pp.7786).We integrate ESG risks into the Banks existing risk management frameworks to manage them consistently with applicable laws and regulations,industry standards and practices,and the Banks risk appetite.Our business lines are responsible for day-to-day risk management activities,while our Global Risk Management team and Board of Directors oversee our risk management program.Our risk management processes and control structures enable the Board,executive management and employees to identify,assess,measure,monitor and report ESG risks.Our enterprise-wide Risk Appetite Framework includes an ESG performance metric that serves as a risk appetite metric.We base our composite measure of ESG risk in our framework on sub-metrics,which inform reputational,credit and operational risk categories.Our ESG performance metric helps ensure alignment with the Banks overall business and financial strategies,and the Banks risk appetite operates within acceptable ESG risk tolerance levels.Examples included in the metric are portfolio-level high-transition risk exposure and operational risk events attributed to environmental events.We internally report against this metric quarterly to the Risk Committee of the Board similarly to other risk appetite metrics.For more information on how we oversee and manage risk,see our 2024 Management Proxy Circular(pp.3132,4347)and our 2023 Annual Report(pp.7375,109111).For information on how we manage environmental risk,including climate risk,see p.50.Considering Human Rights Risks As part of our Human Rights Strategy,we regularly assess our corporate,commercial and international banking policies,processes and practices.In 2023,we identified best practices and completed a gap assessment for human rights due diligence.We are evaluating ways to strengthen human rights considerations in due diligence processes.LI N KI N G PAY WITH E SG A N D CLI M ATE PE RFO RM A N CE We recognize the importance of ESG factors in evaluating the Banks performance and determining executive variable incentive awards.Several key ESG-related metrics formed a discrete section of the Banks strategic and operational scorecard,to allow for more explicit evaluation of the Banks progress against critical ESG objectives.Beginning in 2023,Scotiabank added further core ESG metrics,with a focus on climate-related financing,decarbonization of the Banks operations and representation of equity-deserving groups,combined with customer experience in determining the all-Bank business performance factor,with an overall weighting of 20%.Results are discussed in our 2024 Management Proxy Circular,pp.67,69,9394.“Building and sustaining trust with our stakeholders requires robust oversight,transparency and good governance practices.This is how we continue to build confidence in the Bank and drive a sustainable,effective and inclusive organization.”JULIE WALSH(SHE/HER),SVP CORPORATE SECRETARY&CHIEF CORPORATE GOVERNANCE OFFICER2023 ESG REPORT 19INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMPRO M OTI N G RE S P O NS I B LE AN D E TH I C A L CO N DU C TScotiabank Code of Conduct and Whistleblower Program Our Code reflects our commitment to the highest ethical standards,in alignment with our shared beliefs and guiding values.1 All Bank employees,directors,officers and partners who conduct business on our behalf are accountable for acting according to the behaviours described in our Code.Based on six principles aligned with our values,our Code promotes and encourages a speak-up culture and makes resources and support available for employees to raise concerns.Annual review and attestation of our Code is mandatory for all employees,directors and officers.Raising concerns:Scotiabank employees are encouraged to speak up and raise concerns without fear of retaliation.When a concern is raised,employees can expect to be treated with fairness,dignity and respect.We take concerns seriously and respond to them with sensitivity,consistency and in a timely manner.Employees can raise a concern of actual,suspected or potential breaches of our Code through several channels,including:A manager or business area leader Human Resources Our Staff Ombuds Office,which provides advice on how to resolve or escalate an issue Our Whistleblower Program with the option of remaining anonymousRegardless of how an employee raises their concerns,our Code affirms that Scotiabank will not tolerate retaliatory action against individuals who raise a concern in good faith.1 Scotiabanks Anti-Bribery&Anti-Corruption Policy provides guidance on the obligations contained in our Code related to bribes,payoffs and corrupt practices.The Bank has zero tolerance for any form of corruption and prohibits practices such as bribery,facilitation payments,fraud,extortion,collusion and money laundering.Facilitation payments include unofficial payments made to expedite(but not to change or alter a public officials decision about)routine administrative activities to which the payor is already entitled and a public official is obligated to do(for example,speeding up the processing of a visa application or drivers license).The Whistleblower Program is a formal reporting channel for raising concerns of actual,suspected or potential breaches of our Code,or violations of law,regulations or internal policies by employees,contingent workers,directors,officers or service providers of the Bank.This channel may also be used to report problems or deficiencies with Scotiabanks policies,procedures,guidelines,processes or controls.Operated by an independent third party,the Whistleblower Program Portal is available in English,Spanish and French and enables employees to raise their concerns through a website or by telephone.Our Whistleblower Policy governs how concerns raised through this channel are reviewed,investigated and addressed.Employee misconduct identified through the Whistleblower Program is addressed in accordance with Bank policy,which includes remediation and disciplinary actions ranging from coaching to termination for cause.Open risks identified through the Whistleblower Program are addressed through policy or process reviews or audits.RE LE VANT LI N K SScotiabank Overview of ESG Risk Framework and PolicyScotiabank Code of Conduct Scotiabank Whistleblower PolicyWhistleblower PortalOU R CO DE PRI N CI PLE S1Follow the law wherever Scotiabank does business.2Avoid putting yourself or Scotiabank in a conflict of interest position.3Conduct yourself honestly and with integrity.4Respect privacy,confidentiality and protect the integrity and security of assets,communications,information and transactions.5Treat everyone fairly,equitably and professionally.6Honour our commitments to the communities in which we operate.We conduct business ethically,with integrity and in compliance with the laws and regulations governing our business and industry everywhere we operate.2023 ESG REPORT 20INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMSU PP O RTI N G PRO D U C T AN D S E RV I CE RE S P O NS I B I LIT Y Putting Our Clients FirstOur clients place their trust in us to deliver financial solutions and advice to help them meet their goals.We do not take that trust for granted.Our employees are committed to protecting our clients and continually working to provide exceptional advice and banking experiences.Scotiabank designs our products,services and investment offerings to align to and comply with consumer protection laws,regulations and Voluntary Codes of Conduct and Public Commitments for the fair design and sale of financial products and services.Our management committees meet regularly to discuss and review matters relevant to our clients.Scotiabanks product groups,functional areas and distribution channels work together to help ensure the Bank adheres to all consumer protection regulations where we operate.The Audit&Conduct Review Committee of our Board oversees consumer protection across the Bank.1 In accordance with regulatory requirements.We train employees on our consumer protection policies and procedures and provide tools to reinforce them daily.We require employees to report suspected compliance violations of any kind(see p.19).In 2023,we conducted mandatory training and education for existing and new employees in client-facing roles on Canadas Financial Consumer Protection Framework.Ways in which we protect clients include:1 Prohibiting the use of coercion,undue pressure or any actions that take advantage of a client when offering financial products and services.Embedding tools and controls within the Banks systems to help employees recommend appropriate client offerings.Developing marketing and product materials in clear,simple language,with transparent descriptions of consumer rights and obligations,associated fees,charges or penalties,limitations,risk tolerance and related exclusions(see also Accessibility Services).Supporting client confidence in online banking through step-by-step instructions within our Digital Banking Guide.Outlining how clients can refuse or withdraw consent through our Privacy Agreement.Providing free tools to help clients stay on top of their finances,including electronic balance alerts advising them when their personal accounts fall below$100 and/or available credit for a personal credit card or line of credit drops below$100 or a custom amount they select.In addition,our clients can receive real-time,24/7 fraud alerts.We regularly assess client experience through client surveys(such as the Net Promoter Score),client complaints and client retention rates(see p.86 for more information).PROTEC TI N G CLI E NT SOur employees are dedicated to building and maintaining long-lasting client relationships by consistently doing the right thing.We hold all employees accountable to the standards in our Code,Compensation Policy and Employee Misconduct&Consequence Management Policy.Our Global Sales Principles and Sales Conduct Management Policy apply to all employees in sales and support roles.We monitor adherence and strive to detect improper sales conduct by evaluating the performance of sales and support employees using balanced,financial and non-financial,operational and compliance KPIs.Employees who violate laws,regulations,our Code or internal policies and procedures are subject to remedial action,up to and including termination.Scotiabank is a signatory to several Voluntary Codes of Conduct and Public Commitments.For information about how we support the client experience for seniors and other client groups,see Empowering Our Clients.RE LE VA NT LI N K SCodes of Conduct and Public CommitmentsCustomer Care ResourcesCustomer Complaint Resolution ProcessCustomer Complaints Appeals Office2023 ESG REPORT 21INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMRE SO LV I N G CLI E NT CO M PL AI NT S Our complaint-handling process offers an accessible and convenient way for clients to contact us.Our Complaints Management Framework tracks complaints from submission through analysis,root cause identification and remediation.Throughout this process,the Bank ensures communication with clients by acknowledging their complaint,providing status updates and working to settle the matter.The Customer Complaints Appeals Office(CCAO)is the final step in our internal complaint handling process and annually compiles a report on complaints received and actioned by their office,including the number and nature of concerns escalated to them.The report is provided to the Board of Directors and also posted to the Banks website.MAI NTAI N I N G A RE S P O NS I B LE CO RP O R ATE TA X P O LI C Y As a multinational bank,Scotiabank has established clear accountability,strong governance mechanisms and a robust risk management culture across our global operations.We strive to maintain strong tax risk management practices that ensure the Bank fully complies with all filing obligations and tax disclosure requirements in all jurisdictions in which we operate.The Bank monitors proposed changes in tax law,jurisprudence and government pronouncements to identify any potential impact on our business.Scotiabanks tax risk management process is governed by our global Tax Risk Management Framework,which applies to all Bank branches and to our direct and indirect subsidiaries.The framework is aligned with the Banks enterprise-wide Risk Management Framework.It covers the Banks approach to tax risk governance,tax risk appetite and tax risk identification,mitigation and reporting.We commit:To complying with all tax filing obligations and tax disclosure requirements in all of the jurisdictions in which the Bank operates.To paying the amount of tax legally due within the stipulated timeframes and to observe both the spirit and the letter of all applicable tax laws in all jurisdictions in which the Bank operates.To apply recognized transfer pricing methodologies and approaches to all intra-group transactions.To fostering good relationships with tax authorities and governments by undertaking all such dealings in a professional,courteous and timely manner in all the jurisdictions in which the Bank operates.A DVA N CI N G PU B LI C P O LI C Y A N D A DVOC AC Y Financial services is a highly regulated industry,and our policies are developed to support compliance with the law in every jurisdiction where we operate.We participate responsibly in public policy discussions affecting our sector directly and through trade associations in which we are members.Our Policy for Communicating with Government Officials is included in our Code and applies to all employees,directors and officers of the Bank.We review our advocacy and political engagement activities for consistency with Bank policy positions,including our revised enterprise-wide climate goals.Scotiabank does not make political contributions and is firmly against“pay-to-play”access to elected officials and decision-makers.Scotiabank reports lobbying activities in jurisdictions with this requirement.Scotiabanks public policy activities and many of the issues on which we engage are disclosed on our Public Policy web page.Our employees are dedicated to building and maintaining long-lasting client relationships by consistently doing the right thing.We strive to maintain strong tax risk management practices.RE LE VANT LI N K SPublic Policy Activities2023 ESG REPORT 22INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMKeeping Our Bank Safe and Protecting ClientsWH Y IT MAT TE R S Our ability to provide secure,efficient banking services and protect personal information is fundamental to maintaining trust with our clients.It is core to why clients choose us to fulfil their banking needs and why our partners view Scotiabank as a leader in the fight against fraud and money laundering.E NSU RI N G DATA PRI VAC Y AN D S ECU RIT Y We recognize the importance of ensuring the privacy and security of client data.To that end,Scotiabank has established strong measures and safeguards to protect the confidentiality,integrity and resilience of our systems that process and maintain personal information.Based on industry practices,our enterprise-wide Privacy Risk Management Framework aligns with the expectations of the Organisation for Economic Cooperation and Development.It is our primary governance system for overseeing and managing privacy risks and data protection.As a function of our Code,our Privacy Commitment helps ensure all employees comply with privacy laws,regulations,standards and the reasonable expectations of the individuals with whom they interact.Principle 4 of our Code outlines employee responsibilities for respecting privacy and confidentiality and protecting the integrity and security of assets,communications,information and transactions.1 The following transactions are not covered by our Global Procurement Policy:intermediaries who refer customers to the Bank,construction projects(except in some instances in our international footprint),real estate leasing for the Banks own account,counterparty activities in relation to(a)our own funding,liquidity management,hedging and(b)hedging on our clients account,and(c)commodities transactions,charitable contributions,and one-time sponsorships.Led by our Executive Vice President and Chief Compliance Officer,the Banks Global Compliance department oversees the Banks compliance with established privacy standards and requirements.Our Global Privacy Officer leads the Banks Enterprise Privacy Office,which establishes and maintains Scotiabanks privacy program.Key components of our approach include:An enterprise-wide Employee Privacy Policy that describes how we treat employee personal information,including the types of personal information we collect,when and why we collect and use personal information,and the circumstances in which we share and disclose it.Privacy policies or agreements,available online in all countries in which Scotiabank operates,that formalize how we responsibly manage client information and keep personal data safe.Mandatory privacy training for all new employees to mitigate privacy risks and promote awareness.It covers data privacy practices,data retention and destruction obligations,privacy impact assessments,and how to report and manage privacy breaches.Management of individual privacy rights as outlined in our privacy policies or agreements,which explain how individuals can request access to their personal information,correct inaccurate personal information and withdraw consent.Scotiabank Privacy Incident and Breach Management Procedures to proactively escalate incidents,including those involving third parties,to senior management and our Board of Directors.Privacy and transfer impact assessments for all new initiatives and services that use personal information to examine potential risks and help ensure compliance with relevant regulatory requirements.Internal and external privacy trends and emerging issues monitoring,evaluation and,as necessary,escalation of potential impacts to our business to senior management and our Board of Directors;and the development of compliance and/or mitigation strategies.Privacy risk reporting to senior management,our Board of Directors and its committees,including independent testing results of our privacy controls.With certain exceptions,1 we ask suppliers to acknowledge our updated Supplier Code of Conduct(“Supplier Code”)which requires suppliers to have written policies or governance or oversight mechanisms which aim to help ensure they,and those within their supply chains,operate lawfully and in accordance with Scotiabanks core values and the principles outlined in the Supplier Code.Our ability to provide secure,efficient banking services and protect personal information is fundamental to maintaining trust with our clients.RE LE VANT LI N K SScotiabanks Privacy Commitment Scotiabanks Privacy Agreement Scotiabanks Digital Privacy and Interest-Based Advertising PolicySupplier Code of Conduct2023 ESG REPORT 23INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMS TRE N GTH E N I N G C Y B E R S ECU RIT Y Our global Cybersecurity Policy formalizes Scotiabanks commitment to effectively managing cybersecurity risks,helps ensure compliance with applicable regulations wherever we operate and protects the Bank and our clients against emerging security threats.It informs our Information Security Governance Framework and cybersecurity programs aligned with the National Institute of Standards and Technology standards and the foundational pillars of confidentiality,integrity and availability.Our policy and framework are integral to Scotiabanks risk management and control structure.Scotiabanks Chief Information Security Officer is accountable for the Banks global cybersecurity strategy and provides quarterly updates to the Risk Committee of the Board of Directors regarding our cybersecurity programs,risks and trends.The Board reviews and approves the strategy annually.Our cybersecurity team is comprised of accredited subject matter experts.It routinely executes comprehensive end-to-end programs to review,test and simulate the Banks cybersecurity program,systems,products and practices.This includes conducting vulnerability assessments such as penetration testing and red team exercises with internal and independent external parties.Based on the results,the team carries out remediation efforts and activities to further mitigate threats from malware,and to strengthen data protection and access management controls.Our Information Security&Control team monitors cyber risk through an established measurement and reporting mechanism against pre-defined targets.We have fully integrated these risk processes into the overall risk management framework of the Bank.If cyber incidents occur,Scotiabank complies with the applicable global notification regulations.We require all employees to participate in annual cybersecurity training and conduct cybersecurity awareness events throughout the year.We also conduct regular phishing tests to create awareness and learning for employees regarding suspicious emails.Supporting Safe Banking Through our redesigned Cybersecurity and Fraud Hub,Scotiabank was the first Canadian bank to offer interactive fraud simulations to help clients identify cybercrime.The Hub also contains several best practices to help owners of small-and medium-sized businesses protect themselves from cyber risk.In 2023,we implemented a new vulnerability identification and management solution.“We are committed to continually strengthening our cybersecurity controls to protect the Bank and our clients through monitoring emerging cybersecurity threats and consistent upgrades to our tooling and processes.”STEVE SPARKES(HE/HIM),EXECUTIVE VICE PRESIDENT,CHIEF INFORMATION SECURITY OFFICER&ENTERPRISE PLATFORMSSTRENGTHENING SECURITY GLOBALLYIn Chile,we collaborated with the Universidad Tcnica Federico Santa Mara in 2023 to establish the Network and Cybersecurity Laboratory.The partnership is focused on developing hardware and software for the implementation of both offensive and defensive cybersecurity solutions.In addition,all Technology and Automation Scotiabank employees in Costa Rica and Panama participated in a specially designed two-month IT Risk Defense program.RE LE VANT LI N K SSafe Computing PracticesCybersecurity and Fraud Hub2023 ESG REPORT 24INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAME M B E DD I N G DATA E TH I C SScotiabanks Data Ethics and Data and AI Risk teams promote responsible data and AI use across the Bank through education,guidelines,tools and processes,including our AI Risk Management Guidelines.Our approach is guided by our Code and our Data Ethics Principles,and is governed by our Data Risk Management Framework and Policy(see 2023 Annual Report,p.111).Scotiabanks Ethics Assistant program,which includes the Trusted AI and Trusted Data Use tools,helps reduce the risk of potential ethical concerns,such as bias and discrimination,when working with client data and developing AI models and machine learning solutions.In 2023,Scotiabank made data ethics training available to all employees and a requirement for those working in advanced analytics.Managing the Risk of New Initiatives As Scotiabank explores new markets and leverages advanced technologies,our enterprise-wide New Initiatives Risk Assessment(NIRA)process helps us manage potential risks.It covers seven financial and 26 non-financial risks,including those related to data privacy and ethical regulatory requirements.We require our product developers to follow the NIRA process when creating new or significantly changing existing Bank products,services or supporting technology.New Initiative Risk Review committees in our business lines and control functions oversee the NIRA process and compliance with it.A NTI-M O N E Y L AU N DE RI N G (A M L)Scotiabank has no appetite to allow its products or services to be used to facilitate money laundering,terrorist financing or sanctions evasion.Scotiabanks Enterprise AML Program is designed to comply with applicable laws and regulations in the jurisdictions in which we operate and all employees receive mandatory AML and sanctions training.Our program is guided by policies and controls and supported through technology solutions to mitigate the Banks potential risk exposure.For more information and to read our AML Statement,please visit our website.Combatting Money Laundering Through Public-Private Partnerships Scotiabank,alongside the Financial Transactions and Reports Analysis Centre of Canada(FINTRAC),co-lead public-private partnerships aimed at disrupting financial transactions associated with online child exploitation(Project Shadow)and wildlife trafficking(Project Anton).More information on other partnerships,aimed at combatting money laundering,that the Bank supports can be found here.“Data is at the heart of our business and,as such,must be applied with deliberate care.We have designed and operationalized tools,processes and governance to ensure we can be both proactive and responsive to the evolving needs of our clients while safeguarding their data.”GRACE LEE(SHE/HER),SVP,CHIEF DATA&ANALYTICS OFFICEROur Data Ethics Principles guide how we collect,manage,use and share client data in a responsible and accountable manner.RE LE VANT LI N K SScotiabanks Data Ethics CommitmentRE LE VANT LI N K SStatement on Scotiabanks Anti-Money Laundering/Anti-Terrorist Financing ProgramStatement on Scotiabanks Sanctions Policy2023 ESG REPORT 25INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMAdvancing Human RightsWH Y IT MAT TE R SSafeguarding human rights is intrinsically connected to our commitment to high ethical standards,client protection and our vision for an equitable and inclusive society for every future.We respect,protect and promote universal human rights in our operations and business relationships.O U R CO M M ITM E NT TO H U MAN RI G HT S Our commitment to human rights applies across our global footprint as outlined in our Human Rights Statement and Principle 5 of our Code.Our statement describes the Banks commitments and approach to respecting human rights as an employer,financial services provider,business partner and member of the communities in which we operate.The Board of Directors reviews and approves key human rights disclosures and is kept up to date on key projects.The Chief Sustainability,Social Impact and Communications Officer oversees the global Human Rights Strategy,which is led by the Social Impact team.This team is responsible for guiding the implementation of the Human Rights Statement,training employees on the Banks human rights commitments and responsibilities,embedding the Human Rights Statement throughout the Banks policies,programs,products and services,and updating human rights disclosures.The Social Impact team collaborates with teams across the enterprise,whose senior leaders are responsible for integrating human rights into their respective mandates.These teams include but are not limited to Legal,Global Sustainability,Global Procurement Services,Third-Party Risk Management,Global Compliance&AML,Global Wealth Management,Global Human Resources,Internal Controls and ESG Risk.1 Refer to the“Attestations and Training”data table on p.95.Several courses in the employee Global Mandatory Learning program include content about human rights.This includes training related to our Code;Advancing Diversity,Inclusion and Belonging;Your Health and Safety;and Rethinking Accessibility at Scotiabank.1 We conduct human rights assessments every four years,with our next planned for 2025.During an assessment,we commission a third party to map,analyze and prioritize potential and actual human rights impacts related to the Banks operations and business relationships based on criteria in the UN Guiding Principles.The result is a priority list of human rights issues we monitor and manage.See our website for a list of key impact areas and our corresponding management approach.Beyond formal assessments,we monitor salient and emerging risks through stakeholder engagement(see p.11)and act to strengthen our approach.In 2023,we began implementing priority action plans as part of our refreshed Human Rights Strategy.Some of these action plans included:Identifying opportunities to improve public access to remedy.Assessing ways to strengthen our human rights due diligence when evaluating and approving credit requests.Piloted an ESG scorecard of top strategic suppliers which included a review of human rights and modern slavery.Initiating the development of a Truth&Reconciliation Action Plan to formalize Scotiabanks commitments to Indigenous reconciliation (see p.68).Scotiabank is also a member of the BSR Human Rights Working Group and The Mekong Club,through which we gain access to strategic insights,expertise and guidance on topics such as modern slavery and human rights.We seek to align our actions with the UN Guiding Principles on Business and Human Rights(UN Guiding Principles).E M PLOY E E E N G AG E M E NT O N H U M A N RI G HT SIn 2023 We hosted an“ESG Talk”for Scotiabank employees on the UN Guiding Principles on Business and Human Rights,featuring a panel of external experts.We leveraged our Mekong Club partnership to offer three modern slavery online training sessions in Spanish and English to targeted teams across the Bank.We marked international Human Rights Day with a Q&A in our internal communications portal to raise awareness of Scotiabanks human rights commitments and initiatives.RE LE VANT LI N K SHuman Rights StatementEnterprise Statement on Modern Slavery2023 ESG REPORT 26INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMResponsible Procurement and Supply Chain ManagementOur Global Procurement Services team,led by our Chief Procurement Officer,is responsible for Scotiabanks strategic acquisition of products and services worldwide.Our Supplier Code outlines Scotiabanks expectations of third-party suppliers and service providers who conduct business with,provide goods and services to and/or act on behalf of Scotiabank.1 The following transactions are not covered by our Global Procurement Policy:intermediaries who refer customers to the Bank,construction projects(except in some instances in our international footprint),real estate leasing for the Banks own account,counterparty activities in relation to(a)our own funding,liquidity management,hedging and(b)hedging on our clients account,and(c)commodities transactions,charitable contributions,and one-time sponsorships.2 Supplier spend excludes transactions with non-vendors such as government agencies and non-governmental organizations,corporate card transactions,taxes and spending not managed by global procurement(non-procurement managed vendors).Every two years,we refresh our Supplier Code to align with the Banks strategic objectives and priorities.Our Supplier Code was updated during 2023 and published on our website in November 2023.With certain exceptions,1 we ask suppliers to acknowledge our updated Supplier Code every two years.Our Supplier Code requires suppliers to have written policies or governance or oversight mechanisms which aim to help ensure they,and those within their supply chains,operate lawfully and in accordance with Scotiabanks core values and the principles outlined in the Supplier Code.Our Global Procurement Policy sets required procurement practices and standards,which includes ESG considerations,for all Bank employees in the selection of suppliers.Those suppliers invited by the Banks Global Procurement Services team to participate in formal Requests for Proposals(RFPs)must review and acknowledge our Supplier Code.In Canada,we evaluate each RFP response on a set of quantitative and qualitative criteria,which includes ESG factors where relevant.MANAG I N G TH I RD-PA RT Y RI S KOur third-party risk management program helps reduce the risk of the Bank doing business with third parties associated with money laundering,terrorism financing,sanctions violations or human rights violations.Aligned with regulatory expectations,our third-party risk management program assesses potential and current suppliers for inherent risks,and the criticality of the product or service to the Banks operations.It also evaluates the quality of the suppliers operational risk controls.Identified risk(s)may require additional due diligence and review by internal subject matter experts.Mandatory third-party risk management training is also provided to all Bank departments responsible for third-party contracts worldwide.S COT I A B A N K S SU PPL I ER S PEN D2 BY C AT EG O RYIT&Telecommunications36nking Operations33%Professional Services11%Real Estate7%Human Resources6%Marketing6%Travel&Entertainment0.5%$6.0billion2In 2023,we worked with approximately15,000 suppliers globally.RE LE VANT LI N K SSupplier Code of Conduct2023 ESG REPORT 27INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMSU PPLI E R D I V E R S IT Y We strive to remove barriers and increase access to procurement opportunities for diverse suppliers where applicable,including Indigenous Peoples,LGBT People,People of Colour,People with Disabilities,and veteran-and women-owned businesses.Supporting and expanding our work with diverse suppliers helps to strengthen the economic base of the communities we serve and to build a supply chain that more accurately reflects the diversity of our clients and employees.Scotiabank is a corporate member of all five Canadian supplier diversity councils.Our membership with each council provides access to certified diverse suppliers and helps us connect with those suppliers that match our procurement needs.It also provides us with mentorship opportunities to support growth of diverse suppliers.Our Partners“It is exciting to work on how we can better embed social,environmental and human rights imperatives into how we both select suppliers and manage our supply chain.I am proud of the important role procurement plays in advancing Scotiabanks efforts to become more sustainable and responsible.”JACKIE WANG(SHE/HER),SENIOR VICE PRESIDENT&CHIEF PROCUREMENT OFFICER2023 ESG REPORT 28INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMLeadership:Supporting Our Team WH Y IT MAT TE R SGood leaders are integral to the success and wellbeing of our employees.At Scotiabank,leaders inspire others to achieve our purpose and ambitions.They lead with inclusivity and integrity,and create a work environment where teammates feel safe,valued and respected.Leaders also hold themselves and their teams accountable to our Code,standards and policies and do the right thing for our clients and one another.DE V E LO PI N G FUTU RE-RE A DY LE A DE R S To keep pace with our rapidly changing world,we are developing resilient,inspiring and inclusive leaders at every level.This helps ensure we have the best team in our industry and empowers our employees to thrive and grow their careers with Scotiabank.We provide the tools,programs and guidance to help our people own their development pathways.Our global Performance Development Policy sets out expectations for ongoing engagement between employees and their managers to plan,develop and assess individual objectives that support our business and employee development goals.Working with their managers,employees develop an annual plan to enhance the skills,competencies and behaviours required in their current roles and to prepare for future roles.During the year,managers provide transparent feedback and coaching to build high-performing individuals and teams while employees continue to set,align,track and report progress against their goals.Employees are expected to be proactive and solicit feedback from a variety of sources,including their manager,colleagues and clients to identify blind spots,improve performance and enhance their development.Learning and Development Programs The Scotia Academy global learning platform provides a single source for employee training and development.Our Global Mandatory Learning Policy and training program communicates employee responsibilities in meeting regulatory and/or Bank policy requirements.Courses available through the Scotia Academy cover discrimination and harassment in the workplace,ethics,inclusion,privacy and other subjects.In 2023,we updated our Global Mandatory Learning program by embedding real-life scenarios in our training relevant to our business.The Scotia Academy also allows employees to grow their skills through courses and explore new areas at any level or career stage.In 2023,we redesigned the platform based on user feedback,added new content(in English,French and Spanish)and expanded access beyond Canada to employees in Chile,Colombia,Peru and Mexico.In 2023,top-trending courses in Scotia Academy(excluding Global Mandatory Learning)focused on risk culture and escalation,social engineering,preventing discrimination and harassment in the workplace,client-first experiences,data protection and building Indigenous cultural competency.2023 ESG REPORT 29INTRODUCTION GOVERNANCE ENVIRONMENT SOCIAL APPENDIX DATA TABLESTRUST AT THE TOP OF OUR BUSINESS|KEEPING OUR BANK SAFE AND PROTECTING CLIENTS|ADVANCING HUMAN RIGHTS RESPONSIBLE PROCUREMENT AND SUPPLY CHAIN MANAGEMENT|LEADERSHIP:SUPPORTING OUR TEAMTR A I N I N G S E SS I O NS FO R E M PLOY E E S WH O S E RV E O R DE S I RE TO S E RV E O N BOARDSIn 2023,in partnership with Capacity Canada,we hosted training sessions for our employees(VP and above)about serving on a board of directors for not-for-profit organizations.The opportunities were attended by over 40 VP employees from across the Bank.Sessions provided resources and insights on successful board governance,strategic planning,effective board collaboration,the landscape of non-profits and expectations of board members.Participants also reflected on their personal experiences of board service.Within Scotia Academy,iLEAD is our flagship leadership development experience.To date,11,586 employees have completed the iLEAD People Manager Essentials program.In 2023,we continued to survey managers to understand if they were attending and applying what they learned from leadership training and if they believed they had improved their overall leadership performance.We exceeded our goal of 76%by achieving a score of 90%,indicating high participation in leadership training that resulted in positive improvements.In addition,employees can take virtual,on-demand training through LinkedIn Learning,Pluralsight and Get Abstract through Scotia Academy.Beyond Scotia Academy,we provide employees opportunities to build leadership skills through external programs such as McKinseys Leadershi
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2 0 2 3 C L I M A T E R E P O R T 2INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXTable of Contents 1 The Task Force on Climate-related Financial Disclosures(TCFD)was established in 2017 to provide a voluntary reporting framework to help organizations disclose climate-related risks and opportunities,support market transparency and inform capital decisions.IFRS S1 and IFRS S2 include all TCFD recommendations,and when both International Financial Reporting Standards(IFRS)standards were released in June 2023,the Financial Stability Board asked the IFRS Foundation to assume the TCFDs mandate beginning in 2024.The TCFD was formally disbanded in November 2023.Scotiabank monitors changes in standards and expectations relating to climate reporting,including IFRS S2,CSRD and OSFI B-15,and will adapt our reporting to meet new requirements over time.2 This Land Acknowledgement applies to the land on which Scotiabank has its executive offices(Toronto,Canada)and its Canadian operations,and does not represent the historical and personal experiences of Indigenous Peoples across our international operations.3MessagefromOurChiefSustainabilityOfficer 4AboutScotiabank 5IntroductiontoOurFirstClimateReport 72023PerformanceHighlights 8TCFDRecommendations 11 G OV ER N A N CE 12Introduction 12OurClimateGovernance13 Board Oversight16 Management Oversight 20 S T R AT EGY 21Introduction24 Our Refreshed Climate Goals 25FinancingClimateSolutions27AdvancingtoNet-Zero32ReducingOurOwnEmissions34 Culture,SkillsandCompetenciestoSupportClimateTransition 43 R I S K M A N AG EM EN T 44 Introduction45 IntegratingClimateRiskintoScotiabanks RiskManagementFramework47 Identifying,AssessingandManagingClimateRisks 50ExposuretoCarbon-relatedAssets51ScenarioAnalysis 54 M E T R I C S A N D TA RG E T S 55 Introduction 56OurClimate-relatedMetricsandTargets58OurClimate-relatedFinanceTarget59FinancedEmissions64OurApproachtoTargetSetting66EmissionsfromOperations 69 A PPEN D I X70Forward-lookingStatementsI N T H I S R EP O RT“We”,“us”,“our”,the“Bank”and“Scotiabank”meanTheBankofNovaScotiaanditssubsidiaries.R EP O RT I N G FR A M E WO R KThisisScotiabanksfirststandalonereportonitsprogressimplementingtherecommendationsoftheTaskForceonClimate-relatedFinancialDisclosures.1 ScotiabankhasbeenreportinginlinewiththeTCFDrecommendationssincefiscal2018;suchdisclosureswereincludedthroughitsannualandsustainabilityreports.R EP O RT I N G PER I O DUnlessotherwisestated,informationanddatainthisreportrelatestothe2023fiscalyearendingOctober31,2023(“fiscal2023”).Climate-relateddisclosureswerelastmade inour2022ESGReport.Seeourwebsiteforpastreports.CU R R EN C YAllcurrencyisstatedinCanadiandollarsunlessotherwisenotedandmaybesubjecttocurrencyexchangeratefluctuations.E X T ER N A L A SSU R A N C EKPMGhasperformedanindependent,limitedassuranceengagementforselectedperformanceindicatorsmarkedwiththissymbolinthereport.See:2023 KPMG Limited Assurance ReportR E P O R T I N G S U I T EFor more information,please see documents in our reporting suite:2023 ESG Report 2023 ESG Data Pack and Indices 2023 Annual ReportS COT I A BA N K I N D I G E N O U S N E T WO R K E M PLOY E E R E S O U RC E G RO U P L A N D AC K N OW LE D G E M E N T We are privileged to stand on the ancestral and unceded territory of First Nations,Inuit and Mtis people.We offer our gratitude to the First Peoples for their care for,and teachings about,our earth and our relations.We acknowledge the effect of residential schools and colonialism on Indigenous families and Communities.Considering this history,we dedicate ourselves to moving forward in the spirit of partnership,collaboration and reconciliation.Stewardship with Indigenous Peoples,Cultures and Communities is all of our responsibility.We reflect on the actions and the steps that must be made towards the advancement of Truth and Reconciliation.2 C AU T I O N A RY S TAT E M E N TThisdocumentisnotrequiredtobepreparedorfiledbytheBank(asdefinedinthisdocument)underCanadianorU.S.securitieslaws.Theinformationcontainedhereinshouldnotbereadasnecessarilyrisingtothelevelofmaterialityofdisclosurerequiredinoursecuritieslawfilings,andsuchinformationshouldnotbeconsideredtobeincorporatedbyreferenceintoanysuchfilings.ThisdocumentshouldnotbeusedasabasisfortradinginsecuritiesoftheBankorforanyotherinvestmentdecision,anditisnotintendedtoconstitutefinancial,legal,tax,investment,professionalorexpertadvice.2023 CLIMATE REPORT 3INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXMESSAGEFROMOURCHIEFSUSTAINABILITYOFFICER|ABOUT SCOTIABANK|INTRODUCTIONTOOURFIRSTCLIMATEREPORT 2023PERFORMANCEHIGHLIGHTS|TCFDRECOMMENDATIONS Message from Our Chief Sustainability OfficerClimate change is one of the most important issues of our time.According to the European Unions Copernicus Climate Change Service(C3S),2023 was 1.48C warmer than the pre-industrial average from 18501900.1 Still,structural changes in policy,investment,and clean energy investments foundational to an orderly transition to net-zero are taking shape.Thetransitiontoalow-carboneconomyisacomplexprocessthatwilltaketime,andwillrequirecollaborationamongindustry,thefinancialsector,andgovernment.Further,progressislikelytovaryfromyeartoyearandwillrequireaflexibleresponsetoexternalfactors,suchasimprovementsintechnologiesthatsupportthetransition,andgovernmentpolicy.Thecorefocusofourapproachistoworkwithourclients,includinglarge,corporateclientsinhigh-emitting,hard-to-abatesectors,aswellassmallercompaniesinthecleanenergyandtechnologysectorstoaddresstheirneedsthroughouttheenergytransition.Bothplayavitalroleintransitioningtoalowercarboneconomy,anddecarbonizationovertime.ItiswithinthiscontextthatweshareourClimateReportwithyou,whichoutlineshowScotiabankisprogressingonitsambitionstoaddressclimatechange,consideringtherisksandchallengesweexpecttofacealongtheway.OurreportrefreshestheBanksarticulationofitsclimategoals,focusingonthreepillars:FinancingClimateSolutions,AdvancingtoNet-ZeroandReducingOurOwnEmissions.Wehavesetagoalofproviding$350billioninclimate-relatedfinance2by2030.SinceNovember1,2018,wehaveprovided$132billiontowardsthatgoal.In2023,wealsopublishedaClimate-RelatedFinanceFramework,anupdatedversionofwhichisreleasedalongwiththisreport,3definingthoseproductsandservicesthatareeligibleunderthetarget.1 The 2023 Annual Climate Summary,Global Climate Highlights 2023.2 Please see p.6 of this Climate Report for a definition of climate-related finance.3 Please see our Climate-related Finance Framework on Scotiabanks Climate Centre of Excellence,here.Weareadvancingournet-zeroeffortsbyworkingtoenhanceourunderstandingofourclientstransitionplanningactivities,especiallyintheindustrieswherewehaveset2030interimtargets,andbyproducinginsightfulresearchtoinformourapproachtoemissionsreductioninourlendingportfolio.In2023,weenhancedourfinancedemissionsreportingandraisedourambitiontoreducetheBanksowngreenhousegasemissionsto40%by2030relativeto2016levels.ThroughourClimateChangeCentreofExcellenceand$10million Net-ZeroResearchFund,wearecontributingtoinsightsaboutclimatepolicyleversandinnovativeresearchaimedatmovingtheneedleonclimatechange.WewillcontinuetoleveragetheestablishedanddevelopingregulatoryandglobalreportingrecommendationsandstandardsforclimatereportingtoprovideaclearunderstandingaboutScotiabanksapproachtoaddressingclimatechange.Thereisnoquestionthatthereremainschallenging,urgent,andcomplexworkaheadofusinaddressingclimatechange.Ourbankisproudtocontributetothisglobalimperativebysupportingclientsintheireffortsandhelpingtobringforwardamoreresilientplanetforourpeople,clients,andcommunities.Inallthiswork,wearegratefulforthesupportofthebroadandmulti-disciplinaryteamsacrosstheBankworkingtogether,asonewinningteam,onoursharedjourneytoactfortheclimateandeveryfuture.Meigan Terry ChiefSustainability,SocialImpactandCommunicationsOfficer2023 CLIMATE REPORT 4About ScotiabankAtthecoreofourbusinessisourfocusonourmillionsofclientswhoregularlyrelyonourserviceandadvice.Weservetheseclientsthroughourfourbusinesslines:C A N A DIA N BA N KI N G (CB)CanadianBankingprovidesafullsuiteoffinancialadviceandbankingsolutions,supportedbyanexcellentclientexperience,toover11millionclients.Retail,SmallBusinessandCommercialBankingclientsareservedthroughitsnetworkof947branchesand3,703automatedbankingmachines(ABMs),aswellasonline,mobileandtelephonebanking,andspecializedsalesteams.CBalsoprovidesanalternativeself-directedbankingsolutiontoTangerineclients.I NTE RN ATI O N A L BA N KI N G(I B)InternationalBankingisadiversefranchiseofferingfinancialadviceandsolutionstoover12millionRetail,CorporateandCommercialclients.Thegeographicfootprintencompasses15 countries,includingMexico,Chile,Peru,Colombia,Brazil,Uruguay,andcertainmarketsacrossCentralAmericaandtheCaribbean.TheBankiswellpositionedwithauniquegeographicalfootprint,providingdigitalleadershipandconnectivitywithCanadaandtheU.S.markets.IBcountriescontinuetodemonstrateattractivedemographicsandopportunitiestogrowbankingpenetration.G LO BA L WE A LTH MA N AG E M E NT (GWM)GlobalWealthManagementisfocusedondeliveringcomprehensivewealthmanagementadviceandsolutionstoclientsacrossScotiabanksfootprint.GWMservesover2millioninvestmentfundandadvisoryclientsacross13countriesadministeringover$600billioninassets.G LO BA L BA N KI N G A N D MARKE T S(G B M)GlobalBankingandMarketsprovidescorporateclientswithlendingandtransactionservices,investmentbankingadviceandaccesstocapitalmarkets.GBMisafull-servicewholesalebankintheAmericas,withoperationsin20 countries,servingclientsacrossCanada,theUnitedStates,LatinAmerica,EuropeandAsia-Pacific.Formoreinformation,seeScotiabankscorporate profile.WE ARE HERE FOR EVERY FUTUREGrow and scale in priority markets Invest through disciplined capital allocation Deliver a common approach across markets Support our clients in the transition to net-zero Create connectivity across our markets for multinational clientsEarn primary client relationships Deliver theentire bank Lead with advice,follow with solutions Create consistently high-quality experiencesacross all channelsMake it easy to do business with us Simplify and digitize end-to-end Streamline and improve efficiency across our Bank Ensure our Bank is resilient,safe and secure Ensure data-driven decision-makingWin as one team Be the employerof choice Invest in developing skills for the future Create an environment where we all belong Create positive impact in our communitiesBe our clients most trusted financial partner.to drive sustainable,profitable growth and maximize total shareholder returnOur values are:Respect|Integrity|Accountability|Passion 2023 CLIMATE REPORT INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXMESSAGEFROMOURCHIEFSUSTAINABILITYOFFICER|ABOUT SCOTIABANK|INTRODUCTIONTOOURFIRSTCLIMATEREPORT 2023PERFORMANCEHIGHLIGHTS|TCFDRECOMMENDATIONS 5INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXMESSAGEFROMOURCHIEFSUSTAINABILITYOFFICER|ABOUT SCOTIABANK|INTRODUCTIONTOOURFIRSTCLIMATEREPORT 2023PERFORMANCEHIGHLIGHTS|TCFDRECOMMENDATIONS Introduction to Our First Climate Report 1 Intergovernmental Panel on Climate Change,2023:Summary for Policymakers.In:Climate Change 2023:Synthesis Report.Contribution of Working Groups I,II and III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change Core Writing Team,H.Lee and J.Romero(eds.).IPCC,Geneva,Switzerland,pp.1-34.2 Basel Committee on Banking Supervision,2022:Principles for the Effective Management and Supervision of Climate-Related Financial Risks.Bank for International Settlements.3 Guideline B-15(“B-15”),effective fiscal year-end 2024 for Domestic Systemically Important Banks,including Scotiabank,outlines OSFIs expectations related to the management and disclosure of climate-related risks by federally regulated financial institutions.4 Scotiabank has been reporting in line with TCFD recommendations since fiscal 2018.For more information,see our archived ESG reports.5 For more information on the Banks Climate Commitments,see our Net-Zero Pathways Report.Our Climate Commitments are voluntarily undertaken by Scotiabank in accordance with relevant standards,methodologies and guidance published for the financial sector.For further information,please see the Cautionary Statement,p.2.6 The Net-Zero Banking Alliance is a UN-convened and industry-led group of global banks that have agreed to net-zero financed emissions by 2050.Scotiabank became a member in October 2021.7 For the purpose of this report,carbon intensive sectors are understood as those listed by the NZBA as aluminum,agriculture,cement,coal,commercial and residential real estate,iron and steel,oil and gas,power generation and transport.8 Emissions intensity reduction targets are distinct from targets to reduce absolute emissions.Scotiabanks emissions intensity reduction targets are based on a physical intensity metric(see our Metrics and Targets section for more information).Astheimpactsofclimatechangeontheglobaleconomybecomeincreasinglypronounced,1financialinstitutionsmustmaintainsoundclimate-riskmanagementpractices.2Inrecognitionofthisgrowingimperative,theOfficeoftheSuperintendentofFinancialInstitutionsinCanada(OSFI)finalizedGuidelineB-15ClimateRiskManagementin2023,creatingaframeworkfortheintegrationanddisclosureofclimate-relatedrisksintheCanadianfinancialsystem.3 Atthesametime,climatechange,andtheneedforaglobalenergytransition,presentsfinancialinstitutionsandtheirclientswithuniquebusinessopportunities.Scotiabankrecognizesthatthesemountingclimate-relatedrisksandeconomicopportunitiescallonustotakestockoftherolewecanplayandtotakeactiontosupportourclientsandourcommunitiesintheclimatetransition.Aspartofthisinaugural2023ClimateReport,4wearepleasedtopresentourclimategoalsinanewway.BuiltontheBanksvoluntary Climate Commitments,5aswellasourcommitmentsasamemberoftheNet-ZeroBankingAlliance6(NZBA),ourrefreshedvisionofthesegoalsfocusesourattentiononthreepillars:1.Financing Climate Solutions,byprovidingclimate-relatedfinancingasdefinedbelowinthissection,toclientsinallsectorsincludingcertaincarbonintensivesectors.7 2.Advancing to Net-Zero,byworkingwithclientstoachievenet-zeroemissionsassociatedwithourlendingportfolioandsetting2030sectoralemissionsintensityreductiontargets8tokeepusoncoursetomeetourgoalofachievingnet-zerofinancedemissionsby2050(see the Metrics and Targetssectionofthisreportfordetailsregardingthemetricswehavechosen,andourapproachtotargetsetting).3.Reducing Our Own Emissions,byintroducingsolutionstominimizetheBanksoperationalemissions.2023 CLIMATE REPORT 6INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXMESSAGEFROMOURCHIEFSUSTAINABILITYOFFICER|ABOUT SCOTIABANK|INTRODUCTIONTOOURFIRSTCLIMATEREPORT 2023PERFORMANCEHIGHLIGHTS|TCFDRECOMMENDATIONS Wearealsopleasedtodescribethevariouswayswehaveadvancedkeyclimateinitiatives.Insupportofourfirstpillar,FinancingClimateSolutions,theBankreleasedaClimate-related Finance Framework,whichdefinesthoseproductsandservicesthatcounttowardsourgoalofproviding$350billioninclimate-relatedfinanceby2030(“$350BTarget”).1Asusedinthisreport,climate-relatedfinanceconsistsofthoseproductsandservices(suchaslendingandadvisoryservices)aswellasthetypesoftransactions(suchassustainability-linkedloansordedicatedpurposeloans)whichsupport,amongotherthings,climatechangemitigation,adaptation,pollutionprevention,sustainablemanagementofnaturalresources,biodiversityconservationandcirculareconomy.2Intheabsenceofastandardizedsustainableorclimate-relatedtaxonomyapplicabletoourbusiness,wehavedevelopedthisframeworktoenhanceclarityofourclimate-relatedfinanceactivities.Wemayrevisitandmayupdatetheframeworkfromtimetotime,includingifandwhenanapplicabletaxonomyorotherguidanceapplicabletoclimate-relatedfinancebecomesavailable.Toadvancetonet-zero,wetookstepstoenhancethedataqualityofourfinancedemissionsintheOilandGassectorandannouncedanemissionsintensityreductiontargetforautomotivemanufacturers.1 The$350B Target,which involves the provision of$350 billion in climate-related finance by 2030,represents a small portion of the Banks overall lending and advisory services.2 See Scotiabanks Climate-related Finance Framework here for further details on climate-related products,services,as well as eligible transactions.When referenced throughout this Climate Report,climate-related finance will be understood as above.The Climate-related Finance Framework came into effect as of November 1,2023 and replaces the Banks previous internal taxonomy.3 Greenhouse gas,or GHG,is defined in the Greenhouse Gas Protocol as including the six gases included in the Kyoto Protocol:carbon dioxide(CO2),methane(CH4),nitrous oxide(N2O),hydrofluorocarbons(HFCs),perfluorocarbons(PFCs)and sulphur hexafluoride(SF6).The Bank currently measures CO2,CH4 and N2O for our operational emissions.4 The Climate Transition Steering Committee will be established in fiscal 2024.Alsoin2023,aspartofourgoaltoreduceourownemissions,weincreasedourtargettolowerabsoluteoperationalgreenhousegas3 emissionsfrom35%to40%by2030againsta2016baselineandincreasedourinternalcarbonpriceto$65/tCO2efrom$60/tCO2ein2022.Weintendtoincreaseourinternalcarbonpriceto$80/tCO2ein2024.Tofurthersupportourclimategoals,we:ReviewedourenvironmentalriskgovernancestructureandplantoestablishaspecificClimateTransitionSteeringCommittee,4creatingclearaccountabilityforourclimategoals,andpromotingtransparencyinthefulfilmentofthosegoalsacrosstheorganization.Advancedthoughtleadershiprelatingtooursectoralstrategies,publishingonsubjectsrangingfromelectricvehicles(EV)todecarbonizingtheagriculturalsector.Tookimportantstepstodevelopournet-zeroclientpreparednessmodelsforthosesectorsinwhichwehaveemissionsreductiontargets.AllofthisprogresswillbereflectedinourfirstiterationofaClimateTransitionPlan,whichwillbepublishedbyendofthe2024fiscalyear.2023 CLIMATE REPORT 7INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXMESSAGEFROMOURCHIEFSUSTAINABILITYOFFICER|ABOUT SCOTIABANK|INTRODUCTIONTOOURFIRSTCLIMATEREPORT 2023PERFORMANCEHIGHLIGHTS|TCFDRECOMMENDATIONS 2023 Performance HighlightsIncreasedourinternal carbonpriceto$65/tCO2eSpent$16.4 millionondecarbonization andenergyefficiencyprojectsTowardsacumulative$76.3 millionspendsince2018Measuredfinancedemissionsacross 5 carbonintensivesectorsIncreasedourScope1and2emissionsintensityreductiontarget from 35%to 40%by2030againsta2016baseyearAnnouncedanother10grantrecipientsoftheBanks Net-ZeroResearchFundSetanemissionsintensityreductiontarget for the Automotive ManufacturingsectorPublished at least 4thoughtleadershippapersonvarioustopicsrelatingtoAgriculture,AutomotiveManufacturing,CementManufacturing,OilandGas,and Residential MortgagesReleasedtheClimate-related FinanceFrameworkReached$132 billion ofourgoaltoprovide$350billioninclimate-related financeby20302023 CLIMATE REPORT 8INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXMESSAGEFROMOURCHIEFSUSTAINABILITYOFFICER|ABOUT SCOTIABANK|INTRODUCTIONTOOURFIRSTCLIMATEREPORT 2023PERFORMANCEHIGHLIGHTS|TCFDRECOMMENDATIONS TCFD Recommendations1 Upon establishment of the Climate Transition Steering Committee in fiscal 2024,the Corporate ESG Committees mandate,as it relates to climate-related matters,transfers to the Climate Transition Steering Committee.2 The Climate-related Finance Framework applies as of November 1,2023.Thetablebelowprovidesanoverviewofourprogressduringfiscal2023againstthespecificcategoriesoftheTCFDframework,aswellasreferencestooursuiteofsustainability-relatedreporting.PILLARRECOMMENDED DISCLOSURESDISCLOSURE LOCATIONSUMMARY OF 2023 PROGRESSGovernancea)DescribetheBoardsoversightofclimate-relatedrisksandopportunities.2023ClimateReport,pp.12152023 ESG Report,p.162023 Annual Report,pp.74,110 TheBoardofDirectorsoverseestheBanksEnvironmental,SocialandGovernance(ESG)strategy,monitorsmanagementsexecutionagainstthisstrategyand,throughtheBoardcommittees,reviewstherelatedimpacts,risks,initiativesandreporting.Amongotherthings,theBoardofDirectorsreviewedthe2030emissionsintensityreductiontargetforautomotivemanufacturers.b)Describemanagementsroleinassessingandmanagingclimate-relatedrisksandopportunities.2023ClimateReport,pp.16192023 ESG Report,p.162023 Annual Report,pp.7475,110 TheBoardengageswiththePresidentandCEOandtheGroupHeadandChiefRiskOfficer(CRO),receivingreportsandupdateson climate-relatedmatters.TheBanksfourmanagementcommitteesdrivetheday-to-dayimplementationofourclimategoals,includingtheOperationalRiskCommittee,CorporateESGCommittee,1DisclosureCommittee,andCommunityInvestmentCommittee.Strategya)Describetheclimate-relatedrisksandopportunitiestheorganizationhasidentifiedovertheshort,medium andlongterm.2023ClimateReport,p.242023 ESG Report,p.502023 Annual Report,p.110 TheBanksupdatedenterprise-wideclimategoalsaimtoaddressclimaterisksandopportunitiesintheshort,mediumandlongterm.TheBankmeasures,assessesandcontinuestointegrateourclimate-relatedrisksinourlendingportfoliosandwill,intheprocessofestablishingaClimateTransitionPlan,embedtheserisksintoourcorporatestrategy,internalprocessesandenterprise-widedecisionmaking.b)Describetheimpactofclimate-relatedrisksandopportunitiesontheorganizationsbusiness,strategyandfinancialplanning.2023ClimateReport,pp.24422023 ESG Report,p.502023 Annual Report,p.110 Aspartofourrefreshedclimategoals,specificallythepillarFinancingClimateSolutions,theBanksSustainableFinanceteamandCleanTechEnergyInitiativearesupportingourclientstoaddresstheirownclimate-relatedprojectsandobjectives.TheBankfinalizeditsClimate-relatedFinanceFramework,whichdefinestheproductsandservicesincludedinour$350BTarget2andbecameapplicableonNovember1,2023.Infiscal2023,theBankcontinuedtodevelopandpilotadetailedinternalscore,aspartofourunderwritingprocess,withaviewtogeneratingastandardizedmeansofassessingourclientsnet-zerogoalsandtransitionplans(the“Net-ZeroPreparednessScore”).Aspartofthepilotingprocess,theBankisconsideringanumberofrecommendationstoimprovethefunctionalityandscopeoftheNet-ZeroPreparednessScore(formoreinformation,see p.28ofthisreport).ScotiabankexpectstopublishthefirstiterationofourClimateTransitionPlanbytheendofthe2024fiscalyear,whichwilldescribehownet-zeroandotherclimate-relatedobjectivesareintegratedintorelevantdecision-makingenterprise-wide.2023 CLIMATE REPORT 9INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXMESSAGEFROMOURCHIEFSUSTAINABILITYOFFICER|ABOUT SCOTIABANK|INTRODUCTIONTOOURFIRSTCLIMATEREPORT 2023PERFORMANCEHIGHLIGHTS|TCFDRECOMMENDATIONS PILLARRECOMMENDED DISCLOSURESDISCLOSURE LOCATIONSUMMARY OF 2023 PROGRESSStrategy(continued)c)Describetheresilienceoftheorganizationsstrategy,takingintoconsiderationdifferentclimate-relatedscenarios,includinga2Corlowerscenario.2023ClimateReport,pp.51532023 Annual Report,p.110 Infiscal2023,ourclimatescenarioanalysisfocusedonevaluatingcreditrisksinournon-retailandretailcreditportfolios.Ournon-retailanalysisconsidersexposuretotransitionrisks,andbothchronicandacutephysicalhazards;methodologiescontinuetoevolveandhavefocusedonpredictingcreditriskinshort-term(2025),medium-term(2030)andlong-term(2050)horizons,enterprise-wide,usingfourscenariosfromtheNetworkofCentralBanksandSupervisorsforGreeningtheFinancialSystem:1 Nationally Determined Contributions,2 Current Policies,3 Delayed Transition4andNetZero2050.5 Climatescenarioanalysisforourretaillendingportfoliofocusedonphysicalrisk.InitialanalysisofourCanadianretaillendingportfoliofocusedonexaminingchangesinfluvialfloodingrisk;weareworkingtoexpandourfocustoincludeamoreextensivesetofacuteandchronicphysicalrisks,suchaswildfirerisk,cyclonerisk,risksfromsealevelrise,andtransitionrisk.TheBankhasparticipatedintheUnitedNationsEnvironmentProgrammeFinanceInitiativesClimateRiskandTCFDProgramme,6enhancingourabilitytoevaluateclimate-relatedtransitionandphysicalrisksinourlendingportfolio.Risk Managementa)Describetheorganizationsprocessesforidentifyingandassessingclimate-relatedrisks.2023ClimateReport,pp.47502023 ESG Report,pp.18,502023 Annual Report,pp.7779,81,109111 TheBankhasorisintheprocessofdevelopingtoolstoassessclimateconsiderationsintootherrisktypes:-Forcreditrisk,thereisamandatoryClimateChangeRiskAssessment(CCRA),whichisusedtoassessclimate-relatedcreditriskacrossournon-retaillendingportfolio.Weareworkingtowardsusingclimatescenarioanalysistoprojectcreditimpactstoourbusinesslendingportfolioatshort-term,medium-termandlong-termhorizonsundervariousclimatescenarios.-Formarketandliquidityrisk,wearedevelopingaprojectplantoassessimpactsduetophysicalandtransitionclimatestressscenarios.-Forlegalandregulatoryrisk,aprocesswascreatedtoassessthesustainabilityfeaturesofcredittransactionstomitigategreenwashingrisk.-Foroperationalrisk,thereareprocessestoassesstheimpactsofphysicalrisksandweareembeddingextremeweathereventsonouroperationalresilienceprogram.TheBankhasupdateditsheatmapthatsupportsourunderstandingofeachindustryssensitivitytophysicalandtransitionriskacrossournon-retaillendingportfolio.b)Describetheorganizationsprocessesformanagingclimate-relatedrisks.2023ClimateReport,pp.47502023 ESG Report,pp.18,502023 Annual Report,pp.7779,81,109111c)Describehowprocessesforidentifying,assessing and managing climate-relatedrisksareintegratedintotheorganizationsoverallriskmanagement2023ClimateReport,pp.45462023 ESG Report,pp.18,502023 Annual Report,pp.7479,81,109111 ESGriskisaprincipalriskintheBanksenterprise-wideRiskManagementFramework;climateriskisasubcategoryofESGrisk.ESGrisksaremanagedinalignmentwiththefivekeyelementsoftheRiskManagementFramework:riskgovernance,riskappetite,riskmanagementtools,riskidentificationandassessment,andriskculture.ThisincludesacompositeESGriskappetitemetricthatembedsclimate-relatedsub-metricsandisinternallyreportedonaquarterlybasistotheRiskCommitteeoftheBoardofDirectors.1 The purpose of the Network of Central Banks and Supervisors for Greening the Financial System(NGFS)is to help strengthen the global response required to meet the goals of the Paris Agreement,enhance the role of the financial system to manage risks,and mobilize capital for green and low-carbon investments in the broader context of environmentally sustainable development.2 Countries that are signatories to the Paris Agreement are expected to establish Nationally Determined Contributions(NDCs)which reflect efforts made by each country to reduce national emissions and adapt to the impacts of climate change.In the context of NGFS scenarios,NDCs scenario assumes currently pledged conditional NDCs are implemented fully,and respective targets on energy and emissions in 2025 and 2030 are fulfilled in all countries.For more information,see the NGFS Scenarios Portal,as well as the Risk Management section of this report(pp.51-52).3 Current Policies assumes that only currently implemented policies are preserved,leading to high physical risks.For more information,see the NGFS Scenarios Portal,as well as the Risk Management section of this report(pp.51-52).4 Delayed Transition assumes annual emissions do not decrease until 2030,strong policies are needed to limit warming below 2C,and negative emissions are limited.For more information,see the NGFS Scenarios Portal,as well as the Risk Management section of this report(pp.51-52).5 Net Zero 2050 assumes global warming to 1.5C through stringent climate policies and innovation,reaching global net-zero CO2 emissions around 2050.For more information,see the NGFS Scenarios Portal,as well as the Risk Management section of this report(pp.51-52).6 Since 2017,the United Nations Environment Programme Finance Initiative(UNEP FI)Climate Risk and TCFD Programme has worked to develop practices to identify,measure,disclose and manage climate risk in the financial sector.2023 CLIMATE REPORT 10INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXMESSAGEFROMOURCHIEFSUSTAINABILITYOFFICER|ABOUT SCOTIABANK|INTRODUCTIONTOOURFIRSTCLIMATEREPORT 2023PERFORMANCEHIGHLIGHTS|TCFDRECOMMENDATIONS PILLARRECOMMENDED DISCLOSURESDISCLOSURE LOCATIONSUMMARY OF 2023 PROGRESSMetrics and Targetsa)Disclosethemetricsusedbytheorganizationtoassessclimate-relatedrisksandopportunitiesinlinewithitsstrategyandriskmanagementprocess.2023ClimateReport,pp.56572023 ESG Report,pp.51,1031052023 Annual Report,pp.12,111 TheBankusesaseriesofmetricstomonitorourperformanceagainstthethreepillarsofourrefreshedclimategoals,providingyear-over-yearperformanceastheyrelatetoFinancingClimateSolutions,AdvancingtoNet-ZeroandReducingOurOwnEmissions.Financing Climate Solutions$350billioninclimate-relatedfinanceby2030Advancing to Net-Zero Financedemissions Physicalintensityemissions Creditexposuretocarbon-relatedassets Heatmap(accountsforbothphysicalandtransitionrisks)Reducing Our Own Emissions AbsoluteScope1and2,andsomecategoriesofScope3(Category3,6fuel-andenergy-relatedactivities,businessairtravel)Internalcarbonprice GHGintensityperemployeeb)DiscloseScope1,Scope2and,ifappropriate,Scope3greenhousegas(GHG)emissions,andtherelatedrisks.2023ClimateReport,pp.5963,66682023 ESG Report,pp.51,105106 Foroperationalemissions,wediscloseourScope1and2emissions,andselectcategoriesofScope3emissions.Wecontinuetodiscloseourfinancedemissionsforourinitialprioritysectorsfor2021:OilandGas,PowerandUtilities,Agriculture,andResidentialMortgages.TheBankhasintroducedanumberofupdatestoourfinancedemissionsmethodologies,inpreparationforfuturelimitedassurance,and,asameansofensuringyear-over-yearcomparability,restatedourfinancedemissionsforthefollowingsectors:OilandGas,PowerandUtilities,andAgriculture.c)Describethetargetsusedbytheorganizationtomanageclimate-relatedrisksandopportunitiesandperformanceagainsttargets.2023ClimateReport,pp.64682023 ESG Reportpp.4752,1051062023 Annual Report,p.111 Infiscal2023,weestablishedaninterimemissionsintensityreductiontargetintheAutomotiveManufacturingsector(36%reductionby 2030comparedtoour2019baseline).In2023,weincreasedourglobaltargettoreduceabsoluteScope1andScope2GHGemissionsfrom35%to40%by2030againstour2016baseyear.WecontinuetoreportourexistinginterimemissionsintensityreductiontargetsforourOilandGasandPowerandUtilitiessectors.2023 CLIMATE REPORT INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXGovernanceIN THIS SECTION:12 INTRODUCTION12 OUR CLIMATE GOVERNANCE13 BOARD OVERSIGHT16 MANAGEMENT OVERSIGHT 112023 CLIMATE REPORT 12INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURCLIMATEGOVERNANCE|BOARDOVERSIGHT|MANAGEMENTOVERSIGHTIntroductionTheBanksapproachtoclimategovernanceandmanagementprovidesoversightandaccountabilityofclimate-relatedrisksandopportunitiesacrosstheenterprise.Ourclimategovernancemodelprovidesthefoundationforourclimategoals,whilealsoallowingustoberesponsivetoemergingclimate-relatedissues,suchasclimatetransitionplanningandupcomingregulatoryrequirementsandpolicydevelopments,includingOSFIGuidelineB-15ClimateRiskManagement,theCorporateSustainabilityReportingDirective1andIFRSS2 Climate-relatedDisclosures.2 Thisyear,were-evaluatedourexistingapproachtoourclimategovernancetoensureaccountabilityoverexecutionofkeydeliverablesonclimate-relatedpriorities.Notably,theBankcreatedaclimate-focusedcommitteetheClimateTransitionSteeringCommittee,totakeeffectinfiscal2024whichwillensureseniormanagementaccountabilityoverclimate-relatedinitiatives,bothvoluntaryandregulatory.202 3 H I G H LI G HT S TheBoardwasbriefedonarangeofclimate-relatedmatters,suchasOSFIB-15,IFRSS1andS2.TheBoardreviewedthe2022ESGReportandouremissionsintensityreductiontargetfortheAutomotiveManufacturingsector.WebolsteredgovernanceofourSustainableBondFrameworkthroughthecreationofanESGSub-CommitteeoftheBanksAsset&LiabilityCommittee,whichoverseestheimplementationoftheFramework.Weheld29meetingswithourstakeholdersincludingproxyadvisorsandcoalitionsofinvestorsandactivistgroupstodiscussrelevantESGissuesandtrends.TheBankdecidedtocreateasenior-levelClimateTransitionSteeringCommitteeinfiscal2024.1 The Corporate Sustainability Reporting Directive(CSRD)entered into force in January 2023,amending the Non-Financial Reporting Directive and strengthening the rules regarding the social and environmental information companies are required to report,and including a broader set of large companies and listed small and medium sized entities that fall into the scope of the regulation.2 IFRS S2 requires disclosure of climate-related risks and opportunities that could reasonably be expected to affect the entitys cash flows,its access to finance or cost of capital over the short-,medium-or long-term.IFRS S2 was issued in June 2023 and applies to annual reporting periods beginning on or after January 1,2024.Our Climate GovernanceRobust,responsivegovernanceovertheBanksclimate-relatedgoalsandobjectivesisessentialtooursuccess.ClimaterisksandopportunitiesthatarenecessarytofulfilourclimategoalshavebeenembeddedintoprocessesacrosstheBank.Thefollowingfiguredetailsourcurrentclimategovernanceframework,whichconsistsofexistingandrecentlyestablishedcommittees.Scotiabanks Climate Governance Framework BOARD OF DIRECTORS AND ITS COMMITTEESEXECUTIVEMANAGEMENTMANAGEMENTCOMMITTEESFUNCTIONALGROUPSAudit&ConductReview Committee Human Capital&Compensation CommitteeRisk CommitteeCorporate Governance Committee Executive Vice President and General CounselSenior Vice President and Chief Sustainability,Social Impact and Communications Officer Group Head and Chief Risk OfficerSenior Vice President and Head,Corporate and Commercial Credit Risk3 Board of DirectorsChief Executive Officer(CEO)and Operating CommitteeDisclosureCommitteeClimate TransitionSteeringCommittee4CommunityInvestmentCommitteeOperationalRiskCommitteeLegal and CorporateAffairs(GlobalSustainability Team)Asset&LiabilityCommitteeGlobal RiskManagement(ESG Risk Team)Business Banking Data&Analytics(ESG DataAnalytics Team)Net-Zero FinancedEmissions Working Group(cross-functional)3 In Q2 2024,the position of Senior Vice President and Head,Corporate and Commercial Credit Risk is replaced with Senior Vice President,Enterprise Risk.4 In fiscal 2024,a Climate Transition Steering Committee assumes the Corporate ESG Committees mandate on climate-related matters,with accountability for compliance with climate-related regulations,and design and execution of the Banks Climate Transition Plan.2023 CLIMATE REPORT 13INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURCLIMATEGOVERNANCE|BOARDOVERSIGHT|MANAGEMENTOVERSIGHTBoard Oversight 1 2023 Public Accountability Statement can be found within the 2023 ESG Report(p.88).ScotiabanksclimategoalsandtheachievementofthosegoalscontinuetobeoverseenbytheBoard.CommitteesoftheBoard,includingtheRisk,CorporateGovernance,Audit&ConductReview,andHumanCapital&CompensationCommittees,areaccountableforclimate-relatedrisksandopportunitiesrelatingtotheirspecificmandates.Climate-relateddutiesandresponsibilitiesaresetoutintheBoards mandate and committees charters aswellasinthissection.Thefollowingsummarizesresponsibilitiesof,andactivitiesundertakenby,theBoardandeachofitscommitteeswithrespecttoclimate-relatedmatters.Board Oversight of Climate-related Risks and OpportunitiesBOARD AND BOARD COMMITTEESCLIMATE-RELATED AGENDA FREQUENCYELEMENTS OF MANDATE PERTAINING TO CLIMATE-RELATED MATTERS 2023 ACTIVITIES RELATING TO CLIMATE-RELATED MATTERS Board of DirectorsQuarterly,at minimum OverseeingtheBanksESGstrategy(includingclimate-relatedmatters),monitoringmanagementsexecutionagainstthisstrategyand,throughtheBoardcommittees,reviewingtherelatedimpacts,risks,initiativesandreporting.ApprovingandoverseeingtheimplementationoftheBanksoverallriskstrategy,includingtheBanksEnterpriseRiskAppetiteFramework,inwhichESGriskisrecognizedasoneoftheBanksprincipalrisks.Overseeingthatprocessesareinplacetoidentifysignificantfinancialandnon-financialrisks,includingESGandclimate-relatedrisks,andreviewingandapprovingsignificantriskmanagementframeworksandpolicies.Ensuringtheimplementationofappropriateprocessesbymanagementtomanageclimate-relatedrisks.ReceivedregularupdatesontheBanksclimatepriorities,disclosures,highlightsandlandscape,includingupdatesonthefollowing:-globalnet-zerodevelopments,theBanks2023net-zeroreportingrequirementsandtimelinesandtheBanks2023net-zerofocusareas.-acomparativereviewoftheBanks2022climatedisclosurescomparedtoitsCanadianpeers.-theBanksESGstrategyandprogressfor2023,includingupdatesontheESGregulatoryandreportinglandscapeandsustainabilityinitiativesimportanttotheBanksnet-zerostrategy.-theBanksprogressinreachingnet-zeroinfinancedemissionsby2050andareviewofaninterimemissionsintensityreductiontargetfortheAutomotiveManufacturingsector.ReviewedtheBanks2022ESGReportandPublicAccountabilityStatement,1includingclimate-relateddisclosuresasrequiredasasignatorytotheNZBA,anet-zerotransitionplanandanupdatetotheBanks2022Net-ZeroPathwaysReport,withassurancebyKPMGforseveralESGmetrics.OversawBank-levelstrategicplanningsessions,includingtheESGstrategy.Receivedquarterlyenterpriseriskmanagementreports,whichhighlightvariousrisks,includingESGrisks.ApprovedtheBanksEnterpriseRiskAppetiteFramework(whichrequiresconsiderationofESGrisks)andtheESGRiskSummaryFramework.ReviewedtheBanksstakeholderengagementprogram,includingdiscussionsabouttheBanksnet-zeroplansandclimatetransitionplans,alongwiththeshareholderproposalsrelatedtoclimatechange.Briefedregularlyaspartoftheirongoingtrainingontopicsrelatedtoclimatereporting,net-zeroandclimate-relatedfinance.2023 CLIMATE REPORT 14INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURCLIMATEGOVERNANCE|BOARDOVERSIGHT|MANAGEMENTOVERSIGHTBOARD AND BOARD COMMITTEESCLIMATE-RELATED AGENDA FREQUENCYELEMENTS OF MANDATE PERTAINING TO CLIMATE-RELATED MATTERS 2023 ACTIVITIES RELATING TO CLIMATE-RELATED MATTERS Audit&Conduct Review CommitteeAd-hoc Overseeingclimate-relateddisclosure,aspartoftheBanksfinancialreportingofESGmatters,asrequiredbyregulatorsorthatmayberequiredbylaw.1 AssistingtheBoardinfulfillingitsoversightresponsibilitiesforthesystemofinternalcontrol,includinginternalcontroloverfinancialreportinganddisclosurecontrolsandprocedures.ProvidedsupportonESGdisclosure,includingclimate-relateddisclosure,tobeincludedinfinancialreportingandundersustainabilityandclimaterisk-regulationsandstandardscomingintoeffectin2024(forexample,theOSFIB-15).Corporate Governance CommitteeRegularly ReviewingtheBanksESGstrategy,prioritiesandreporting,includingreportsontheBanksESGperformance(specifically,theBanksESGReportandPublicAccountabilityStatement)andbenchmarkingoftheBanksESGperformanceandpractices.2 OverseeingappropriateallocationofESG-relatedresponsibilitiesacrossthecommitteesoftheBoardandupdatingtheBoardonESGmatters,asnecessary.Reviewingglobaltrendsandpracticesincorporatedisclosureofnon-financialperformance,includingcurrentandemergingESGmatters.ReviewingandrecommendingtotheBoardtheBanksapproachtoshareholderengagementandglobalemergingareasoffocusfortheBanksstakeholders.Maintainingthedirectorsskillsmatrix,whichincludesESGmattersasakeyareaofexperience.ActinginanadvisorycapacitythroughacontinuingassessmentoftheBanksapproachtocorporategovernanceandmakingpolicyrecommendations,includingontopicssuchastheBanksESGstrategy.ReviewedtheBanks2022ESGReportandPublicAccountabilityStatement,includingupdatesonclimate-relateddisclosures,net-zerogoals,plansandtargets.MonitoredtheBanksESGprioritiesthroughouttheyearandreceivedupdatesonrelevantESGinitiatives,includingtheBanksenhancedESGRiskSummaryFramework,anemissionsintensityreductiontargetandupdatestotheBankstransitionplans,andupdatedtheBoardonsuchESGmatters.OversawthepromotionandmaintenanceoftheBanksriskcultureandrisk-drivenvalues,includingtheBanksfocusonidentifyingandmanagementofrisks,includingESGandclimate-related,legalandcompliance,macroeconomicuncertainty,technology,andgeopoliticalrisks.Recommendedforapprovalthe2023ManagementProxyCircular,includingdisclosureontheBanksresponsestoshareholderproposalsonESGmatterswithafocusonclimate-relatedissues.Human Capital&Compensation Committee Ad-hoc Overseeinghumancapitalandcompensationstrategiesrelatedtodiversity,equityandinclusion;employeehealth,safety,andwell-being;andotherESGpoliciesandpractices.3 AssistingtheBoardinitsoversightoftheBankshumancapitalmanagementpracticesandstrategies,includingconsideringotherESGpracticesrelatedtothecommitteesmandate.Reviewedregulatory,governance,andexecutivecompensationtrends,includingtheselectionofappropriatefinancialandnon-financialperformancemetricsincorporatingESGmeasures,suchasmetricsrelatingtoclimate-relatedfinancinganddecarbonizingoftheBanksoperations.Jointlyreviewed,recommendedorapprovedwiththeRiskCommittee,changestotheannualincentiveplan,linkingESGinitiativestocompensation.1 See Audit&Conduct Review Committee charter.2 See Corporate Governance Committee charter.3 See Human Capital&Compensation Committee charter.2023 CLIMATE REPORT 15INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURCLIMATEGOVERNANCE|BOARDOVERSIGHT|MANAGEMENTOVERSIGHTBOARD AND BOARD COMMITTEESCLIMATE-RELATED AGENDA FREQUENCYELEMENTS OF MANDATE PERTAINING TO CLIMATE-RELATED MATTERS 2023 ACTIVITIES RELATING TO CLIMATE-RELATED MATTERS Risk CommitteeQuarterly RetainingoversightofESGrisks,includingclimate-relatedrisks,andperiodicallyreviewingandapprovingtheBankskeyriskmanagementpolicies,frameworks,andlimitstoensurethatmanagementisoperatingwithintheBanksEnterpriseRiskAppetiteFramework.1 ReviewedtheBanksenterpriseriskmanagementreportswhichincludenon-financialrisks,suchasESGrisksand climate-relatedrisks.ReviewedandapprovedtheBankskeyriskmanagementpolicies,frameworksandlimitstoensurethatmanagementisoperatingwithintheBanksEnterpriseRiskAppetiteFramework(whichrequiresconsiderationofESGrisks).Focusedonregulatorytrendsrelatingtonon-financialrisks,includingESGandclimate-relatedrisks.OversawthepromotionandmaintenanceoftheBanksriskcultureandrisk-drivenvalues,includingtheBanksfocusonidentifyingandmanagementofrisks,includingESGandclimate-related,legalandcompliance,macroeconomicuncertainty,technologyandgeopoliticalrisks.Jointlyreviewed,recommended,orapprovedwiththeHumanCapital&CompensationCommitteechangestotheannualincentiveplan,linkingESGinitiativestocompensation.1 See Risk Committee charter.S KI LL S A N D CO M PE TE N CI E STheBoardmaintainsamatrixtomonitortheskillsandexperiencenecessaryfortheoversightoftheBanktoday,andinthefuture.TenmembersoftheBoardconsider“ESGMatters”asoneofthekeyareasofexperiencetheybringtotheBoard.WedefineexperienceinESGmattersasexperienceinsustainabilitymatters,environmentalissues(includingclimate-relatedissues),socialissuesand/orcorporategovernanceprinciplesandpracticesinanorganizationofsignificantsizeandcomplexity.DirectorsoftheBoardwithclimate-relatedskillshaveexperienceinsustainabilitymattersandclimate-relatedissuesincomplexorganizations,alongwithastrongtrackrecordofinvolvementwithadvisorycommitteesdrivingstandardsforclimatechangereporting.TheBoardsskillsmatrixisreportedinour2024 Management Proxy Circular(p.23).2023 CLIMATE REPORT 16INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURCLIMATEGOVERNANCE|BOARDOVERSIGHT|MANAGEMENTOVERSIGHTManagement Oversight E XECUTI V E MA N AG E M E NTOurclimategoalsareembeddedinactivitiesacrossalldivisionsoftheBank,andourcommitmenttosupportourclientsisenterprise-wide,drivenbyseniormanagementandourPresidentandCEO.TheBanksseniormanagementprovidesregularESGupdatestotheBoardanditsBoardcommittees.1 In Q2,the position of SVP and Head,Corporate and Commercial Credit Risk is replaced with SVP and Head,Enterprise Risk.Summary Table of How Our Executive Management Supports Climate GovernanceFUNCTIONEXECUTIVE MANAGEMENTCLIMATE-RELATED ROLES AND RESPONSIBILITIESEnterpriseCEOTheCEOreportstotheBoarddirectlyonanannualbasisandhasresponsibilityfortheBankscurrentclimategoals,includingsettingclimate-relatedemissionsintensityreductiontargets.Sustainability ExecutiveVicePresident(EVP)andGeneralCounselTheEVPandGeneralCounselreportsdirectlytotheCEOandisresponsibleformanagingandoverseeingtheBankslegalaffairs,theactivitiesoftheCorporateGovernanceOfficer,theCorporateSecretarysDepartment,CorporateSecurityandtheOfficeoftheOmbudsman.SeniorVicePresident(SVP)andChiefSustainability,SocialImpactandCommunicationsOfficerTheSVPandChiefSustainability,SocialImpactandCommunicationsOfficeroverseestheactivitiesoftheGlobalSustainabilityteam,includingexecutingnet-zeroprograms,settingemissionsintensityreductiontargets,measuringandtrackingfinancedemissions,andpublishingclimate-relateddisclosures.RiskGroupHeadandCROTheGroupHeadandCROisresponsibleforassessingESGrisksandopportunitiesasitrelatestoourlending,investingandunderwritingactivities.TheyhavedelegatedtheirauthorityovertheoversightofESGrisktotheOperationalRiskCommittee.SVPandHead,CorporateandCommercialCreditRisk1 TheSVPandHead,CorporateandCommercialCreditRiskleadstheESGoversightonbehalfofGlobalRiskManagement.2023 CLIMATE REPORT 17INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURCLIMATEGOVERNANCE|BOARDOVERSIGHT|MANAGEMENTOVERSIGHTMA N AG E M E NT CO M M IT TE E STheBankhasestablishedfourmanagementcommitteestodrivetheday-to-dayimplementationofourclimategoals.Thesecommitteestakeanenterprise-wideapproach,conveningseniorleaderswithaccountability fortheBankstransitiontonet-zero,managementofclimate-relatedrisks,climateriskreportingandcommunityinvestments.COMMITTEESCLIMATE-RELATED AGENDA FREQUENCYCHAIRMEMBERSHIPCLIMATE-RELATED ROLES AND RESPONSIBILITIESOperational Risk Committee(ORC)QuarterlySVPandHead,EnterpriseRiskSeniorleadershipfromacrossbusinesslinesandcorporatefunctionsTheORCprovideseffectiveoversightandchallengeoftheBanksmanagementofenvironmentalandsocialrisks.ItsresponsibilitiesincludemonitoringoftheESGriskprofile,andrecommendingapprovalofrelevantriskframeworks,policies,riskappetitestatementsandlimitstotheORC.Corporate ESG CommitteeMonthlySVPandChiefSustainability,SocialImpactandCommunicationsOfficerSeniorleadershipfromacrossbusinesslinesandcorporatefunctionsTheCorporateESGCommitteeassiststheBankinachievingitsESGobjectivesbyprovidingstrategicguidanceandadviceonthemanagementandreportingofScotiabanksESGprioritiesandapprovingenterprise-widepoliciesandpositionstatementsthataddresstheenvironment.Infiscal2024,ScotiabanksCorporateESGCommitteewasreplacedwithrespecttoclimate-relatedmatters.Climate Transition Steering CommitteeQuarterlySVPandChiefSustainability,SocialImpactandCommunicationsOfficerCEOandGroupHead,GlobalBankingandMarketsSeniorleadershipfromacrossallbusinesslinesandcorporatefunctionsClimate-relatedrisksandopportunitiesarebeingoverseenbyaClimateTransitionSteeringCommittee,whichreplacestheCorporateESGCommitteeonclimate-relatedmattersinfiscal2024.TheClimateTransitionSteeringCommitteesmandateincludesaccountabilityforcompliancewithOSFIB-15andotherregulatoryinitiativesrelatingtoclimate,aswellastheexecutionoftheBanksClimateTransitionPlan.Disclosure CommitteeQuarterly,at minimumEVP and General CounselSeniorleadershipacrosstheBankscorporatefunctionsToactinanadvisorycapacitytothePresidentandCEOandtheBoardtoensurethatallpublicdisclosureofinformationmadebytheBankinwhateverformistimely,accurateandbalancedandthatappropriatecontrolsareinplaceandworkingeffectively.2023 CLIMATE REPORT 18INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURCLIMATEGOVERNANCE|BOARDOVERSIGHT|MANAGEMENTOVERSIGHTCOMMITTEESCLIMATE-RELATED AGENDA FREQUENCYCHAIRMEMBERSHIPCLIMATE-RELATED ROLES AND RESPONSIBILITIESAsset&Liability Committee(ALCO)As neededEVPandGroupTreasurerGroupHeadandChiefFinancialOfficer(AlternateChair)PresidentandCEO,CROandseniorleadersfromtheBanksbusinesslinesOversightoftheBanksSustainableBondFramework.In2023,anALCOESGSub-CommitteewasestablishedtosupportALCOmembersintheirreviewandoversightoftheFramework.Community Investment CommitteeAs needed1 SVPandChiefSustainability,SocialImpactandCommunicationsOfficerSeniorleadershipfromacrosssomebusinesslinesandcorporatefunctionsResponsiblefortheoversightandapprovalofgiftsexceeding$500,000forScotiabanks10-year,$25millionclimatecommunityinvestmentinitiative,aswellasScotiabanksNet-ZeroResearchFund.Formoreinformation,seetheStrategysectionofthisreport(p.39).1 The Community Investment Committee(CIC)convenes every two months on climate-related matters;the CIC meets on an as-needed basis to consider grant proposals.2023 CLIMATE REPORT 19INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURCLIMATEGOVERNANCE|BOARDOVERSIGHT|MANAGEMENTOVERSIGHTLI N KI N G E SG A N D CLI MATE PE RFO RMAN CE TO E XECUTI V E PAYWerecognizetheimportanceofESGfactorsinevaluatingtheBanksperformanceanddeterminingexecutivevariableincentiveawards.SeveralkeyESG-relatedmetricsformedadiscretesectionoftheBanksstrategicandoperationalscorecard,toallowformoreexplicitevaluationoftheBanksprogressagainstcriticalESGobjectives.Beginningin2023,ScotiabankaddedfurthercoreESGmetrics,withafocusonclimate-relatedfinancing,decarbonizationoftheBanksoperationsandrepresentationofequity-deservinggroups,combinedwithcustomerexperienceindeterminingtheall-Bankbusinessperformancefactor,withanoverallweightingof20%.Resultsarediscussedinour2024 Management Proxy Circular,pp.67,69,9394.2023 CLIMATE REPORT INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXStrategyIN THIS SECTION:21 INTRODUCTION24 OUR REFRESHED CLIMATE GOALS25 FINANCING CLIMATE SOLUTIONS27 ADVANCING TO NET-ZERO32 REDUCING OUR OWN EMISSIONS34 CULTURE,SKILLS AND COMPETENCIES TO SUPPORT CLIMATE TRANSITION 202023 CLIMATE REPORT 21INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION Introduction Theissuescreatedbyclimatechange,andthewaysofaddressingthoseissues,arebothchallengingandquicklyevolving.Moreover,climate-relatedchallengescannotbeaddressedbyScotiabank,orbyourclients,aloneaneffectiveresponsetoclimatechangerequiresreal,tangibleactionfromboththepublicandprivatesectors,includingfinancialinstitutions,acrosseconomiesworldwide.Withtheseconsiderationsinmind,wearepleasedtointroduceanew,refreshedarticulationofourclimategoals:Buildingontheexistingpillarsofourapproachtoclimaterisksandopportunities,includingourvoluntaryClimateCommitments,andourmembershiptotheNZBA,wehaveanchoredourclimategoalsinaction.Thissectionoutlinesthisrefreshedviewofourclimategoals,andtheworkwevedonethroughoutfiscal2023insupportofthosegoals.202 3 H I G H LI G HT S Revisedourenterprise-wideclimategoalsbasedonleadingpractices,emergingregulatoryrequirementsandevolvingscience-basedapproaches.Published a Climate-related Finance Frameworkthatdefinesthoseproductsandservicesthatareeligibleforinclusioninthe$350BTarget.Wecontinuedtodevelopandpilotadetailedinternalscoreaspartofourunderwritingprocess,withaviewtogeneratingastandardizedmeansofassessingofourclientsnet-zerogoalsandtransitionplans(“Net-ZeroPreparednessScore”).Publishedthoughtleadershipasitrelatestoadoptionofelectricvehiclesanddecarbonizingtheagriculturalsector.2023 CLIMATE REPORT 22INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION Roadmap to Our Climate Goals20182019202020212022Financing Climate SolutionsAnnounced our Climate Commitments,including aim to provide$100 billion of climate-related finance by 2025Published Green Bond Framework and issued a USD$500 million Green BondEstablished Sustainable Finance group in Global Banking and MarketsPartnered with Institute for Sustainable Finance at Queens UniversityIncreased aim to provide climate-related finance to$350 billion by 2030Issued USD$1 billion Sustainable Bond and updated Sustainable Bond FrameworkJoined Sustainable Finance Action Council(SFAC)Grew Sustainable Finance team and added expertise in sustainable finance to Canadian Banking divisionEstablished Clean Tech Energy InitiativeAdvancing to Net-ZeroPublished Statement on Financing in the ArcticBecame member of the Net-Zero Banking Alliance(NZBA)Published Statement on Financing CoalPublished Net-Zero Pathways Report,setting financed emissions targets for Oil and Gas,Power and Utilities sectorsConducted pilot project to assess preparedness between targets and client net-zero plans and objectivesReducing Our Own EmissionsSet internal carbon price and established schedule for annual increasesSet 100%non-emitting electricity targets for our own operationsReduced our own GHG emissions by 25%four years ahead of our target(2025)Set new global target for 35%GHG emissions reduction in our own operations by 2030 relative to 2016 levelsEnterprise-wide tools and initiatives (e.g.,culture,competencies,managing climate risks and promoting resilience)Integrated TCFD recommendations in annual and sustainability reports in fiscal 2018Included climate-related risks and opportunities in all industry reviews relating to lending activities Incorporated climate change risk module in mandatory environmental risk training for banking officers and credit adjudicatorsDeveloped and implemented Climate Change Risk Assessment to inform credit decisionsEstablished Corporate ESG Committee Announced Net-Zero Research Fund($10 million to 2030)Launched Climate Change Centre of ExcellenceIntroduced an environmental performance metric as a risk appetite metricPublished Banks credit risk exposure to carbon-related assets Enhanced climate scenario analysis capabilitiesLinked ESG metrics,including progress on our Climate Commitments,to all-Bank performance payIncentivized climate performance in executive variable compensation implemented for 2023Expanded environmental performance metric to ESG performance metric;reported quarterly to the Risk Committee of the Board2023 CLIMATE REPORT 23INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION 2023 Immediate20242025 Short-term2030 Medium-term2050 Long-termFinancing Climate SolutionsReleased a Climate-related Finance FrameworkEstablished Asset&Liability Committee(ALCO)ESG Sub-Committee to enhance the Banks sustainable products issuance,governance and oversightSupport renewable energy and transition financing,and grow advisory services Release one to two additional climate-related productsContinue to digitize tracking our$350B TargetExplore opportunities to partner with government and intergovernmental organizations to provide blended financeTarget year for meeting our goal to provide$350 billion in climate-related finance by 2030Advancing to Net-ZeroPublished first standalone Climate ReportSet net-zero interim emissions intensity reduction target for the Automotive Manufacturing sectorPublished thought leadership on electric vehicles,critical minerals,and sustainability in the Agriculture sectorEmbed Net-Zero Preparedness pilot into business-as-usual and tie to client engagement strategyImplement quarterly financial exposure Management Information Systems tool for sectors in which net-zero interim targets have been setExpand financed emissions reporting to additional sectors,where data is available Incorporate facilitated emissions into financed emissions reportingEnhance climate-related financial disclosures in line with OSFI Guideline B-15 and IFRS S2 Work towards obtaining limited assurance on financed emissions reportingWork with RMI and peers on whitepaper to assess target-setting methodology for the Agriculture sector in CanadaFinalize climate data architectureDefine role of offsets in net-zero strategyContinue to contribute to thought leadership on net-zeroTarget year for meeting our goals to:Reduce physical emissions intensity within our Oil and Gas portfolio by 30%(Scope 1 and 2)and 15%(Scope 3)Reduce Scope 1 and 2 physical emissions intensity within our Power and Utilities portfolio by 55%Reduce Scope 1,2 and 3 downstream1 physical emissions intensity in our Automotive Manufacturing portfolio by 36%Set additional interim net-zero targets for 2035 and beyond Provide$25 million in funding to charitable organizations and think tanks focused on climate and net-zero,including$10 million via Scotiabanks Net-Zero Research FundTarget year for meeting our goal to achieve net-zero financed emissions Reducing Our Own EmissionsIncreased our global target to reduce operational Scope 1 and 2 GHG emissions from 35%to 40%by 2030 relative to 2016 base yearMeasure GHG emissions in supply chain,and set a baseline and a GHG reduction targetLaunch Live Net-Zero Employee Campaign to encourage emissions reductions at work and in the home Meeting our goal to achieve carbon neutrality2 in the Banks Canadian operations by 2025Increase internal price of carbonTarget year for meeting our goals to:Reduce own Scope 1 and 2 emissions by 40%by 2030 relative to 2016 base year Achieve carbon neutrality in the Banks international operations by 2030Enterprise-wide tools and initiatives(e.g.,culture,competencies,managing climate risks and promoting resilience)Refreshed enterprise-wide climate strategyStood up enterprise-wide project to embed OSFI B-15 Climate Risk Management GuidelineConducted initial projections of climate risk to 2050 for Scotiabanks corporate lending portfolioEstimated physical risk impacts of climate change on Canadian mortgage portfolioEstablished a Climate Transition Steering Committee,which assumed the Corporate ESG Committees mandate on climate-related matters,with accountability for compliance climate-related regulations,and design and execution of the Banks Climate Transition PlanEstablish Climate and Social Impact Committee for International Banking division Release inaugural Climate Transition PlanParticipate in OSFIs 2024 climate scenario analysis exercisesDevelop roles and responsibilities interaction model across three lines of defence as it relates to climateEstablish a learning platform to enhance banking and credit officers approach to clients climate transition activities and to net-zero pathways by sector 1 In connection with the physical emissions intensity target related to our Automotive Manufacturing portfolio,Scope 3 downstream emissions covers tank-to-wheel emissions,often referred to as tail pipe emissions.2 For a definition of carbon neutrality,see p.67.2023 CLIMATE REPORT 24INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION Our Refreshed Climate Goals1 Climate-related finance is defined in the Introduction of this report as consisting of those products and services(such as lending and advisory services)as well as the types of transactions(such as sustainability-linked loans or dedicated purpose loans)which support,among other things,climate change mitigation,adaptation,pollution prevention,sustainable management of natural resources,biodiversity conservation and circular economy.For further details,see Scotiabanks Climate-related Finance Framework.TheBankhassetanumberofenterprise-widegoalsthataddressclimate-relatedrisksandopportunitiesintheshort,mediumandlongterm.Thisyear,wehaverefreshedhowwearticulatethesegoalsand,accordingly,howwewilltakeactiontofulfilthem.Ourclimategoalscomprisethreepillars:Financing Climate Solutions,byprovidingclimate-relatedfinancing1 toclientsincertaincarbonintensivesectors.Advancing to Net-Zero,byworkingwithclientstoreduceemissionsandsetting2030sectoralemissionsintensityreductiontargetstokeepusoncoursetomeetourgoalofachievingnet-zerofinancedemissionsby2050.Reducing Our Own Emissions,byintroducingsolutionstominimizetheBanksdirectimpactonclimatechange.Inthefollowingsection,weoutlinethestepstakeninfiscal2023toadvanceourworkundereachpillar.Keytoourworkhasbeenengagement:withourclientsontheirclimate-relatedgoalsandobjectives,withourstakeholderstounderstandtheirconcerns,andwithourpeopletoenhancetheirclimate-relatedknowledgeandtogivethemtheopportunitytoactivelyparticipateinimplementingsolutions.Witheachstep,weimproveourunderstandingofthetasksathand,wefurtherimplementandembedclimaterisksandopportunitiesintotheBanksactivities,andweenhanceourabilitytoserveourclients.FINANCING CL IMATE SO LUTIO NSO BJ E C T I V E S&A MB I T I O N SKE Y TO O LS&LE V E RSProvide climate-related f inancing both to emerging low-carbon industries and to accelerate the transition of the rest ofthe economy,with a focus on carbon intensivesectors.Expanding climate-related f inancial products and services Climate-related f inance taxonomy andframeworkR EDUCING O UR OW N EMISSIO N SDecarbonizing our own operations and introducing solutions to reduce the Banks direct impact on climate change.Working towards interim targets for Scope 1 and 2emissions Increasing the Banks internal carbon price Developing a carbon offset strategy Undertaking initiatives to reduce energy consumption and improve energy ef f iciency Securing emissions-free electricity globally and inCanadaADVANCING TO NET-ZERODecarbonize our portfolio in line with the Paris Agreement,our 2030 sectoral targets and pathways,and our goal of achieving net-zero f inanced emissions by 2050.Measure and assess our f inanced emissions in our lending portfolios,which,in turn,inf luences our corporate strategy,internal processes and enterprise-wide decision making.Net-zero interim emissions intensity reduction targets in certain carbon intensive sectors(e.g.,oil and gas,power and utilities,transport)Reviewing policies related to thresholds in certain sectors(e.g.,Statement on Financing the Arctic and Statement on Financing Coal)Conducting environmental due diligence Net-zero preparedness scoring for clients that form part of emissions intensity reduction targetsC ULT UR E,S K I L L S&CO M P E T E N C I E S TO SUP P O RT T H E T R A N S I T I O NClimate Transition Plan,climate-related training for employees,Net-Zero Research Fund,Climate Change Centre of ExcellenceM A N AGI N G C L I M AT E R I S KS A N D P RO M OT I N G R E S I L I E N C EClimate change risk assessments,climate scenario analysis2023 CLIMATE REPORT 25INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION Financing Climate SolutionsAchievingnet-zerogloballyby2050isestimatedtorequiretrillionsininvestmentsannuallytoreshapeentiresectors.Currenthigh-emittingsectorssuchastransportation,power,realestate,andoilandgaswill,inthecomingdecades,requirebothsignificantshiftsandsubstantialincreasesincapitaltodecarbonizeoperationsandproducts.AsaleadingCanadianfinancialinstitution,weplayakeyrole,bothdomesticallyandacrossourfootprint,tohelpourclientsinallsectors,includingcarbonintensivesectors,meettheirownclimate-focusedobjectives.WhilesomeofourclientsarepartoflendingportfoliosforwhichScotiabankhassetemissionsintensityreductiontargets,the pathtonet-zerofortheseclientswillnotbelinear.Clientsincertaincarbonintensivesectorsplayacriticalroleintheglobalenergytransition,anditisvitalthatScotiabankcontinuestoworkwiththeseclientstoprovidethemwiththefinancingtheymayneedtomakenecessaryinvestmentsoracquisitionstosupportthatobjective.Throughcontinualengagementwithclientsinthesesectors,weunderstandthatmanyhaveorareproducingclimatetransitionplans,anditisthroughcontinuedengagementwithclientsincarbonintensivesectorsthatwecanbetterunderstandthesupporttheyneedtomeetemissionsreductiongoals.FinancingClimateSolutionsispartlysupportedthroughtwobusinessplatforms:ourSustainableFinanceteamandaCleanTechEnergyInitiative,bothofwhichaimtohelpclientsmeettheirclimate-relatedgoalsanddeliverpositiveenvironmentaloutcomes.TheSustainableFinancegroupworkswithcorporate,financial,publicsectorandinstitutionalclients,assistingthemtoincorporatesustainabilityandclimate-relatedfactorsintotheirfinancingactivities,andtoaligntheircapitalmarketactivitieswithcorporatesustainabilitystrategyandgoals.Thisincludeshelpingclientsidentifyeligibleenvironmentalprojectsandprovidingfinancingsolutionsthathelpcompaniescontributetosustainabilityobjectives.FormoreinformationonSustainableFinancehighlightsforfiscal2023,seeour2023 ESG Report(pp.3646).In2022,ScotiabankestablishedaCleanTechEnergyInitiativewithinCorporateandInvestmentBanking.IntegratedwithproductspecialistsacrosstheBank,thisteamofinvestmentbankersisdedicatedtoadvisingandsupportingourclientscleantechnology,energytransitionanddecarbonizationgoals.Theteamcoordinatesacrossvariousgeographiesandbusinesssectors(suchasenergy,metalsandmining,aswellasconsumer,industrialandretailsectors)andfocusesonbattery,electricvehicle(EV)chargingandinfrastructure/electrification,carboncapture,solartech,hydrogenandrenewablefuels,andrenewablenaturalgas.InOctober2023,theBankfinalizeditsClimate-related Finance FrameworkeffectiveasofNovember1,2023whichdefinestheproductsandservicesthatareincludedinthe$350BTarget.Asoutlined intheframework,productsandservicesincludedinthe$350BTarget areintendedtoaddressarangeofclimate-relatedprojectsthatfallinto thecategoriesoutlinedinthetableonthefollowingpage,andwhich mayormaynotleadtoreductionsinoverallemissions.Currently,thereisnostandardizedmethodologyormeansofcalculatingtheimpactofclimate-relatedfinancingonallbusinessesthatreceivefinancingeligibleforinclusioninthe$350BTarget.Infiscal2023,ScotiabankestablishedannualtargetsforeachbusinesslinethatoffersproductsandservicesundertheFrameworkandhasincludedprogressinthe$350BTargetinthebank-widebusinessperformancefactor,asdefinedonp.19ofthisreport,aswellasinvariablecompensationrelatingtoindividualperformance.2023 CLIMATE REPORT 26INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION$350B TARGET ELIGIBLE CATEGORIESLow-carbonenergyEnergyefficiencyPollutionpreventionandcontrolEnvironmentallysustainablemanagementoflivingnaturalresourcesandlanduseSustainable food systems Low-carbontransportationTerrestrialandaquaticbiodiversityconservationSustainablewaterandwastewatermanagementGreen buildings Circulareconomyadaptedproducts,productiontechnologiesandprocessesClimateadaptationandresilienceFuel-switchingLow-carbonintensityfuelsIndustrialsandelectrificationCarboncaptureScotiabank and Nutrien Ag Solutions are collaborating to support Canadian growers in adopting more sustainable and productive agricultural products and practices.Launched in the beginning of December 2023,this program aims to bolster the financial resilience of farmers and advance Canadas agriculture sustainability goals for the broader value chain.Growers who meet certain eligibility requirements and are enrolled in Nutrien Ag Solutions Sustainable Nitrogen Outcomes program,an initiative targeting improved nitrogen management to reduce nitrous oxide emissions,can take advantage of a special financing offer on products and services required to advance through the program.2023 CLIMATE REPORT 27INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION Advancing to Net-Zero1 The Partnership for Carbon Accounting Financials is a global initiative aimed at developing a global GHG accounting standard to increase the number of financial institutions applying this standard and to make GHG accounting common practice within the financial industry.2 Facilitated emissions are those emissions associated with the primary issuance of capital markets instruments and loan syndication.A primary issuance refers to new securities to provide debt-based or equity-based financing,including new issuance of various types of bonds issued for general purposes,common stock,equity and debt investments in private companies,preferred shares and syndicated loans.AsasignatorytotheNZBA,Scotiabankvoluntarilycommittedtoreducingfinancedemissionsfromourlendingandinvestmentportfoliosovertimetoalignwithpathwaystonet-zeroby2050.Wemeasureandassessourfinancedemissionsinourlendingportfolio,which,inturn,influencesourcorporatestrategy,internalprocessesandenterprise-widedecision-making.Ourabilitytocalculatefinancedemissionsacrossourlendingportfolioisthefoundationofdeterminingwhereemissionsreductiontargetsshouldbeset.GuidedbytheNZBAprinciplethatbanksshouldsetemissionsreductiontargetsinthosecarbonintensivesectorsthatcomprisethesignificantmajorityoftheirfinancedemissionswheredataandmethodologiesareavailable,weundertookanenterprise-wideanalysisin2022,whichrevealedthatourOilandGas,PowerandUtilities,AgricultureandResidentialMortgagesportfoliosaccountedforasignificantportionoftheBanksfinancedemissions.Onthebasisofthatanalysis,wesetemissionsintensityreductiontargetsintheOilandGasandPowerandUtilitiessectors.WhiledatalimitationshavenotallowedforthesettingofemissionsreductiontargetsintheAgricultureandResidentialMortgagessectors,wecontinueworkingonwaystosupportimprovementsindataavailabilityinAgricultureandResidentialMortgages.Infiscal2023,westartedtheprocessofresettingouranalysisoffinancedemissionsacrosstheBanksentireportfolio,theresultsofwhichwillbereportedinour2024ClimateReport.TheTransportsector,comprisedofseveralcomponentsub-sectors,andwhichformsasignificantpartoftheBanksfinancedemissionsfootprint,isthebasisofourlatestemissionsintensityreductiontargetfortheAutomotiveManufacturingsector.Weunderstandthateachsectorsprogresstowardnet-zerowillnotbelinear,butwilldependonavarietyofeconomic,technological,regulatoryandothertrendsthatarebeyondthecontrolofanyoneparty.Wethereforeacknowledgethattheremaybecircumstanceswheresectoralemissions(andthereforeourfinancedemissionsinthesector)increaseforaperiodoftime.Nonetheless,webelievethatouremissionsintensityreductiontargetscanhelpfacilitatethelonger-termtransitiontowardnet-zeroemissionsinthecoveredsectorsby2050.Weintendtocontinuereportingfinancedemissions,separateandapartfromemissionsintensityrelatingtooursectoralemissionsreductiontargets,forthosesectorsidentifiedascomprisingthesignificantmajorityofouroverallfinancedemissions.Ourapproachinadvancingtonet-zeroisinformedbytheNZBA,supportedbythePartnershipforCarbonAccountingFinancials1(PCAF).InDecember2023,PCAFpublishedamethodologyforfacilitatedemissionsforcertainsectors,2creatingafoundationforcalculatingandreportingmetricsforbusinessactivitiescoveredbythenewmethodology.Wewillcontinuetorevisit,andmayberequiredtoupdate,ourfinancedemissionsestimatestoreflectanyfuturechangesoradditionstotheexistingPCAFguidance.For more detailed information about our financed emissions footprint,and our emissions intensity reduction targets,please see the Metrics and Targets section of this report.In 2023,in an effort to improve data quality and availability,we continued our partnership with the software company Lightspark by sponsoring the pilot of Lightspark Engage in Calgary and Edmonton.Engage is an innovative technology platform that provides homeowners with information about home energy and carbon savings and a digital home energy audit.Over 40,000 homeowners learned about their home energy usage and retrofit options through the pilot.2023 CLIMATE REPORT 28INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION E N G AG E M E NT WITH CLI E NT SWebelieveournet-zeroandinterimemissionsintensityreductiontargetshelpfacilitatetheorderlytransitiontoalow-carboneconomyovertime,and,atpresent,donotprecludeusfromdoingbusinessacrossallsectors.Therefore,weplantocontinuetoincreasinglyengagewithclientsinrelativelycarbonintensivesectorstohelpthemidentifyand,wherepossible,implementeffortstowardstheirownclimate-relatedgoals.Inthisregard,animportantpartofreducingourfinancedemissionsandmeetingemissionsreductiontargetsisenhancingourunderstandingofthetransitionplanningactivitiesofourclients.Throughengagement,wehavetheopportunitytocommunicatetoclientstheBanksownemissionsreductiontargets,providebenchmarkingondecarbonizationpracticesintherelevantmarket,andintroduceclientstofinancialproductsandservicesthatmaysupporttheirdecarbonizationgoals.Infiscal2023,wecontinuedtodevelopandpilotadetailedinternalscoreaspartofourunderwritingprocess,withaviewtogeneratingastandardizedmeansofassessingofourclientsnet-zerogoalsandtransitionplans(“Net-ZeroPreparednessScore”).TheNet-ZeroPreparednessScoreisbasedonareviewofsixcriteria:Long-termemissionsreductioncommitment Interimemissionsreductiontargetsandwhethertheymateriallyaligntoourtargets(Scope1,2and3)Performanceagainsttargets Emissionsdisclosures Capitalallocationagainstemissionsreductiontargets DecarbonizationstrategyOnthebasisofinformationcollectedduringthepilotproject,severalrecommendationsweremadetoimprovethefunctionalityandscopeoftheNet-ZeroPreparednessScore,including:1.Movingfromadescriptivescaletoamoredetailed,numericscale,allowingforamorenuancedassessmentofprogress.2.ForsectorsinwhichtheBankhaspublishedemissionsreductiontargets,embeddingthefunctionalityintotheClimateChangeRiskAssessmentprocess(seetheRiskManagementsection,p.49,for a descriptionoftheseassessments).3.ExpandingthescopeofclientscoveredbytheNet-ZeroPreparednessScore.4.Leveragingresultstofurtherinformourclientengagementapproach.5.BuildingatrainingprogramtofacilitateadoptionoftheNet-ZeroPreparednessScore.In2024,wewillworktoimplementtheserecommendationsandcommittodisclosingfurtherdetailsonenhancementstoourclientengagementframeworkoncetheyareformalized.2023 CLIMATE REPORT 29INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION S EC TO R A L A PPROACH I N A DVA N CI N G TO N E T-ZE ROClientsinthesectorsinwhichwehavesetemissionsreductiontargetsareallatdifferentstagesoftheirtransitiontonet-zero.Moreover,decarbonizationinanyoneindustryorsectorcannotbeachievedbyourclientsalone;decarbonizationrequirescoordinatedeffortsofgovernmentalandnon-governmentalactors,andfinancialinstitutionsalsohaveanimportantroletoplayinsupportingourclientsthroughthetransitiontoalow-carboneconomy.Indeed,aneffectiveresponsetoclimatechangerequiresrealandtangibleactionsfromthepublicandprivatesectoractorsincludingfinancialinstitutionsacrosseconomiesworldwide.Changesinconsumerpreferencesandregulatoryrequirementsareinfluencingthestrategicandinvestmentdecisionsofourclientsinsectorswherewehavesetemissionsreductiontargets,andimpactthewayinwhich,andthespeedatwhich,wemeetourownnet-zeroobjectives.Below,weoutlinehowsomeofourclientsarepositionedforchange,theindustryandpolicycontextthatisneededtosupportthatchange,andthewayswecanhelpourclientsachievetheirnet-zerogoalsandobjectives.O I L A N D G A STheOilandGassectorislargeandmulti-faceted,consistingofupstreamactivities(explorationandproduction),midstreamactivities(storage,transportationandprocessing)anddownstreamactivities(refininganddistribution).ForcalculatingfinancedemissionsandsettinganemissionsintensityreductiontargetfortheOilandGas1 Established in 2018,the federal Greenhouse Gas Pollution Pricing Act sets a federally managed backstop system,or minimum national standards,applicable to Canadas provincial and territorial governments;the pricing standards are organized in two parts:a regulatory charge on fossil fuels(“federal fuel charge”)that applies to the distribution of fossil fuels and an Output-Based Pricing System for certain large emitters that are not subject to the federal fuel charge.At the time of writing,Albertas carbon pricing and emissions trading system through its Technology Innovation and Emissions Reduction(TIER)Regulation may exempt regulated facilities from the federal fuel charge,provided that the TIER Regulation maintains minimum national standards under the Greenhouse Gas Pollution Pricing Act.sector,wefocusonexplorationandproduction(E&P).Scotiabankhassetanemissionsintensityreductiontargetof30%inScope1andScope2emissionsby2030,anda15%to25%reductioninScope3emissionsby2030,relativetoa2019baseline.AsfurtheroutlinedintheMetrics and Targetssectionofthisreport,ourOilandGasemissionsintensityreductiontargetismeasuredintermsofphysicalintensity.ScotiabankssupportofourOilandGasclientsacrossE&P,midstreamanddownstream,willcontinueintothefuture.TheBankhasbeenengagingwithcustomersregardingemissions,andotherrelatedtopics,forseveralyearsandwillcontinuetodosoaswecollectivelyworkonseekingwaystoloweremissions.Potentialpathwaystoachievereducedemissions:1.Reducetotalenergyusebythesector.2.Seekopportunitiestoelectrifyindustrialactivities;successwillbedrivenprimarilybypowergeneratorsmorebroadly.3.Utilizeelectricitygeneratedfromnon-coalrelatedgenerationasispractical.4.Deploycarboncapture,utilizationandstorage(CCUS)technology.5.Reducefugitivemethaneemissionsutilizingappropriatetechnology.6.Supplylow-carbonfuelsandgases(biofuelsandhydrogengas);potentiallyreducingemissionsasanalternativefuelsourceforthetransportationsector.7.Pursueopportunitiestotheextentpossibletoutilizecleanersourcesofenergy(naturalgasandliquefiednaturalgas)todisplacelessemissionsfriendlysources.TheCanadiangovernmenthasimposedcarbonpricingonoilandgasfirmsthroughthenationalbenchmarkcarbonpriceestablishedunderthe Greenhouse Gas Pollution Pricing Act.1 Additionally,the Canadian governmentrecentlyproposedanemissionscapontheupstreamoilandgassectorof35%to38low2019levels,atleast20%to23%ofwhichmustbeachievedthroughemissionsreductionsatcoveredfacilities,andtheremainderthroughflexibilityinstruments,potentiallyincludingverifiedcarbonoffsetsand/orpaymentsintoadecarbonizationfund.Ifimplementedasproposed,thiscapwouldthenbeincrementallyloweredtowardnet-zerobetween2030and2050.GovernmentsinCanadaandtheU.S.areprovidingincentivesaimedatencouragingCCUSprojects.AlthoughgovernmentincentivesarelessprevalentinSouthandCentralAmerica,somecompaniesintheseregionsarebeginningtopilotCCUSprojects.TheColombiangovernmentnowprovidesfinancialincentivestoproducegreenandbluehydrogen,thelatterproducedmainlyfromnaturalgas,utilizingCCUS.Asourclientsorientthemselveswithinthecontextofachangingconsumerandregulatoryenvironment,ScotiabanksclientengagementstrategywilladapttoaddressthechangesandpotentialimpactinvestmentdecisionswillhaveontheirbusinessandtheBankslendingportfolioinanattempttoalignouremissionsreductiontargets.2023 CLIMATE REPORT 30INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION P OWE R AN D UTI LITI E S1 Scope 3 emissions from this sector are deemed to be insignificant relative to its Scope 1 and Scope 2 emissions and were therefore not included in our calculations of baseline financed emissions or decarbonization targets.2 Clean Energy Canada.(2023).A Renewables Powerhouse report.Retrieved from:https:/cleanenergycanada.org/report/a-renewables-powerhouse.3 International Energy Agency(IEA).2021.Net Zero by 2050 A Roadmap for the Global Energy Sector.4 Smart grids use digital technologies,sensors and software to improve grid stability,reliability,and cost reductions in periods of fluctuating electricity supply and demand.Source:IEA,Smart Grids webpage.Retrieved from:https:/www.iea.org/energy-system/electricity/smart-grids.5 IESO.(2022).Pathways to Decarbonization report.Retrieved from:https:/www.ieso.ca/en/Learn/The-Evolving-Grid/Pathways-to-Decarbonization.6 IEA.Smart Grids webpage.Retrieved from:https:/www.iea.org/energy-system/electricity/smart-grids.7 Government of Canada.(2023).Proposed Clean Electricity Regulations(CER).August 25 2023.8 Government of Canada.Canadas coal power phase-out reaches another milestone webpage.Retrieved from:https:/www.canada.ca/en/environment-climate-change/news/2018/12/canadas-coal-power-phase-out-reaches-another-milestone.html.9 Senate of the United States 117th congress(2021-2022)H.R.5376-Inflation Reduction Act of 2022.Public law No:117-169;August 16,2022.ThePowerandUtilitiessectorismadeupofcompaniesinvolvedinelectricitygeneration,transmissionanddistributiontoresidential,commercialandindustrialcustomers.ScotiabanklendstoclientsacrossallpartsofthevaluechaininCanada,theU.S.,Mexico,andothercountriesinwhichweoperate.ForthepurposeofcalculatingfinancedemissionsforthePowerandUtilitiesportfolio,weincludeallelementsofthevaluechain:electricitygeneration,transmissionanddistribution.Tocalculateouremissionsreductiontarget,however,wefocusonpowergenerationactivitiesgiventhatgeneration(relativetotransmissionanddistribution)istheprimarysourceofthesectorscarbonemissions.TheNZBAsuggestspowergenerationasoneofthemostcarbonintensivesectors.TheBanksemissionsintensityreductiontargetisthereforeagoaltoreduceScope1and2emissionsintensityofourpowergenerationportfolioby55%to60%by20301againsta2019baseline.WhilefossilfuelscontinuetoplayaroleinpowergenerationinNorthAmericaandglobally,thepowerandutilitiessectorisinastateoftransition.Clientsinthissectorrangefromstart-upstoFortune500companiesworkingtodevelopcleantechnologyenergybusinessesandlookingfortoolsandsolutionstosupporttheirclimate-relatedobjectives.ReducingScope1and2emissionsinthepowerandutilitiessectorwillrequire:Anincreaseinrenewablepowergenerationinstalledcapacity,spurredbydecreasingcostsinsolarandwindpowercomparedtogaspower;2 Anincreaseinnuclearpowergenerationinstalledcapacity;3 Improvementsinbatterystorageefficacy,coupledwithdecliningcostsforincreaseddeployment,toenableon-demandelectricitysourcesfromrenewablepower;2 and Enhancedsmart-gridtransmissionanddistributioninfrastructuretosupportanincreaseininstalledpowergenerationcapacity.4,5,6 GovernmentsinmanyofthecountrieswhereScotiabankoperatesareencouragingthedevelopmentanduseofrenewableenergysupplythroughincentivesandregulations.InCanada,84%ofelectricitycomesfromsourcessuchashydroelectricity,solar,windandnuclear,whicharefarlesspollutingthanelectricitygeneratedfromunabated(thatis,nocarboncaptureandstorage)fossilfuels.7In2018,theGovernmentofCanadaannouncedregulationstophaseoutcoal-firedelectricityby 2030,8withvariousprovinceshavingalreadycompletelyphasedoutcoalfiredelectricitygeneration.TheGovernmentofCanadahasalsoproposedcleanelectricityregulationswhicharedesignedtohelpachievenet-zeroemissionsfromtheelectricitygridby2035andisallocatingresourcestosupportthetransitiontotallingover$40billionoverthenext10years.In2023,theU.S.governmenttookadecisivesteptosupportthedecarbonizationofthepowerandutilitiessector,passingtheInflation Reduction Act(IRA),9whichdirectsnearlyUSD$400billioninfundingtocleanenergy,withthelargestshareallocatedtocleanelectricityandtransmission.2023 CLIMATE REPORT 31INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION TherenewableenergysectorisgrowinginmanyregionsinwhichScotiabankhasasignificantpresence.Forexample,Chileistargeting70%renewableenergygenerationby2030andhasrapidlygrownto37%ofcapacityand4.2GWunderconstruction,asofMay2023.1 Scotiabankhasdevelopedexpertisethatcanassistclientsinthissectorthroughtheenergytransition.WithexpertiseinrenewableenergymergersandacquisitionsinCanada,theU.S.,andinothercountriesinwhichweoperate,theBankfocusesonselectopportunities,includingprojectfinancerelatingtorenewableenergy.ThroughourCleanTechEnergyInitiative,wecontinuetoservethissectorwithafocusontechnologiesandbusinesseswithemissionsreductionobjectives,includingsolartechnology,carboncapture,renewablefuels,cleanhydrogen,solarpowerandwindpower.AccordingtoourStatementonFinancingCoal,Scotiabankdoesnotfinancestandalonethermalcoalminingorcoalpowergeneration.Infiscal2023,webeganreviewingourapproachtocoalfinancing,andintendtoupdateScotiabanksStatementonFinancingCoalinfiscal2024.1 BNamericas.(2023).Chiles Energy Growing Pains report.2 International Energy Agency(IEA).2021.Net Zero by 2050 A Roadmap for the Global Energy Sector.3 IEA(2022),World Energy Outlook 2022,IEA,Paris,License:CC BY 4.0(report);CC BY NC SA 4.0(Annex A).4 IEA(2023),Global EV Outlook 2023,IEA,Paris,License:CC BY 4.0.5 Although global demand for EVs is recently reported to have slowed,this trend is not expected to influence automotive manufacturers long-term goals.See Industry pain abounds as electric car demand hits slowdown.AUTO M OTI V E M A N U FAC TU RI N GThetransportationsectorisresponsibleformorethan20%ofglobalemissions,with50%ofthoseemissionsareattributabletolight-dutyvehicles.2AccordingtotheIEANZEPathway,electriclight-dutyvehicleswillmakeup75%ofallnewvehiclessoldindevelopedmarkets,andapproximately50%ofnewvehiclessoldinemergingmarkets,by2030.2 TheIEANZEhasstatedthat80%ofalllight-dutyvehiclesontheroadin2030willbebasedoninternalcombustion.2Fornewlight-dutyvehiclessoldglobally,50%willbelow-emissionvehiclesincludingbatteryelectric,plug-inandhybridelectric,andfuelcellelectric.2Whileourfinancedemissionsaccountforanumberofsub-sectorswithinthebroadertransportationindustry,ouremissionsintensityreductiontargetisfocusedonautomotivemanufacturersoflight-dutyvehiclesand/orthewhollyownedsubsidiaryoftheautomotivemanufacturerthatprovidesfinancingtowholesaleandretailcustomers.Inchoosingthissub-sectortosetanemissionsintensityreductiontarget,weconsideredanumberoffactors,includingbutnotlimitedtothesignificanceofemissionsrelatingtolight-dutyvehiclesrelativetoemissionsassociatedwiththeentiresectors(asnotedabove),theavailabilityofclient-levelemissionsandproductiondataand,asfurtheroutlinedbelow,nationalpolicyenvironmentsthatcouldsupportemissionsreductioninthissub-sector.Infiscal2023,theBanksetatargetforourAutomotiveManufacturingclientstoreduceemissionsbyameasureofgramsofCO2epervehiclekilometerdrivento93gCO2e/km,a36%emissionsintensityreductionby2030ascomparedtoabaselineof147gCO2e/kmin2019.EmissionsreductionsintheAutomotiveManufacturingsector,throughtheadoptionoflow-emissionlight-dutyvehicles,maybebolsteredbythefollowing:3,4 Expansionanddecarbonizationofelectricitygridstoreduce Scope1,2and3emissions;Increasedpublicelectriccharginginfrastructuretosupportcommercialandconsumerdecisionstopurchaselow-emission light-dutyvehicles;Fuelefficiencystandardsandregulationstoreduceemissionsof non-batteryelectricvehicles;IncreasedconsumerdemandforEVs;5 EstablishmentofastablepolicyenvironmentthatservestoanchorstrategicdecisionsofOEMsrelatingtoEVproduction;and Investmentsinresearchanddevelopmenttoimprovebatterycapacityandcharginginfrastructure.2023 CLIMATE REPORT 32INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION WhileourAutomotiveManufacturingclientssellvehiclesglobally,andwhilemostwillcontinuetosellinternalcombustionenginevehiclesinallmarketsforatleastthenearfuture,themajorityofvehiclessoldbyourclientsaresoldinCanada,theU.S.andMexico.ThesethreecountrieseachhavepolicyframeworksorregulationsthatbroadlyaligntotheobjectivesofouremissionsintensityreductiontargetandsupporttheglobaltransitiontoEVs.Forexample,theGovernmentofCanadahascommittedtoamandatory100%zero-emissionvehiclesalestargetby2035forallnewlight-dutyvehicles,1 the United States Environmental ProtectionAgencyreleasedafinalizedruleforfueleconomystandardstoreduceGHGemissionsbetween8%and10%forlight-dutyvehiclesinmodelyears202420262andMexicohasagoalofproducing50%zero-emissionlight-dutyvehiclesby2030.3 Insettingouremissionsintensityreductiontargetforautomotivemanufacturers,theBankisundertakingthefollowing:Portfoliomanagementtoincreasefinancingtocompanieswell-alignedwithournet-zerogoals;and Providingfinancingthatwillsupportourclientsnet-zeroobjectives.ThismayinvolveconnectingfinancingsolutionsandexpertiseacrosstheBanktonewareasofexpansionclientsinthissector,suchasfinancingEVbatteryoperationsandbuildingcharginginfrastructure.1 Canadas Zero-Emission Vehicle(ZEV)sales targets.2 Corporate Average Fuel Economy Standards for Model Years 2024-2026 Passenger Cars and Light Trucks.3 Government of Mexico on Energy and Climate Action.Scotiabank is proud to be an“Electrifying Sponsor”for Plug n Drive,a non-profit organization that is committed to accelerate EV adoption.Scotiabanks investment supports Plug n Drives Electric Vehicle Discovery Centre(EVDC)and the Mobile EV Education Trailer(MEET),educational and experiential learning facilities designed to engage consumers about the benefits of driving electric vehicles.For more information on how the Bank supports adoption of hybrid-electric and electric vehicles,please see the 2023 ESG Report,p.55.Reducing Our Own EmissionsOneoftheprimarywaysforbankstoreduceemissionsisthroughchangestotheirrealestateoperations.Weownandleaseover1.9millionsquaremetresofrealestateforourofficesandbranchesglobally.Responsibleuseoftheresourcesrequiredtoconstruct,maintainandoperatethesefacilitiesnotonlyhelpsprotectlocalcommunitiesandourplanet,butcanalsoreduceoperatingcostsandriskstoourbusiness.Ourapproachtoreducingemissionsacrossourrealestatefootprintisto:1.Decarbonizeourrealestateoperationsthroughenergyefficiencyimprovementsandincreaseduseofemission-freeelectricity;2.Setandincrease aninternalcarbonprice,amechanismusedtosupportthedecarbonizationofouroperationsandimproveouroperatingefficiency;and3.Exploreopportunitiestoloweremissionsinthedesignandconstructionofbuildings,includingselectingmaterialswithlower embodiedcarbon.2023 CLIMATE REPORT 33INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION E N E RGY E FFI CI E N C Y I N ITIATI V E SScotiabankhassetagoalofsecuring100%ofourelectricity(eitherphysicallyorvirtually)fromemissions-free1sourcesinCanadaby2025andgloballyby2030.In2023,Scotiabankinvested$16.4millionintoinitiativesthatsupportdecarbonizationandimproveenergyefficiencyacrosstheBanksrealestatefootprint.Belowisasnapshotofprogressmadein2023onspecificemissionsreductioninitiatives.INITIATIVEWORK COMPLETED IN 2023Green Globes CertificationCompletedrenovationsattwobranchestoreachatotalof62branchesinCanadarenovated to meet Green Globes Certification,acomprehensive,science-based,three-in-onecertificationsystemthatevaluatestheenvironmentalsustainability,healthandwellness,andresilienceofalltypesofcommercialrealestate.Lighting retrofitInCanada,completedLEDsignageretrofitprojectsatselectedbranches,resultinginannualsavingsof655MWh,andareductioninGHGemissionsof107tCO2e.InMexico,implementedLEDlightingretrofitprojectinonelocation,resultinginannualsavingsof360MWhandaGHGreductionof281tCO2e.Heating,ventilation and air conditioning(HVAC)retrofitsInChile,Columbia,MexicoandPeru,replacedHVACsystemsin314locationswithhigherefficiencyequipment,resultinginannualenergysavingsofover660MWh,equallingover410tCO2einGHGemissionsreductions.Solar panel installationsIntheDominicanRepublic,installedsolarpanelsatZonaFrancaLasAmericas,generatinganestimated528MWhofenergyandreducingCO2e by an estimated 302tonnes.Building envelope windows replacementInTrinidadandTobago,investedinwaterproofinga20,000squarefootroof,resultinginincreasingroofreflectivityandheattransferresistancetoreduceenergyconsumption.Electric vehicle charging stations in CanadaInOntario,addedthreemorevehiclechargingstationsinOntario,reachingatotalof46stationsacross42branches.Thesestationsareavailabletothepublic24hoursaday,sevendaysaweek.1 Emissions-free sources include renewable(hydro,solar,wind,geothermal,tidal)and nuclear sources.Virtual power purchase involves the purchase of renewable energy certificates(RECs)or other environmental attributes reflecting the environmental benefit of emissions-free power production which,according to current carbon accounting methodologies such as the Greenhouse Gas Protocol,are a generally acceptable means of reducing Scope 2 emissions from electricity use.I N CRE A S I N G OU R I NTE RN A L C A RBO N PRI CEIn2018,ScotiabanksetaninternalcarbonpriceofCAD$15/tCO2epertonneofemissionsassociatedwiththeBanksglobalScope1and2emissions.Settinganinternalcarbonpriceservesacriticalfunctioninreducingemissionsfromourownoperationsbyembeddingaprocessthatallowsforearmarkingoffundsfordecarbonizationprojectsandenergyefficiencyinitiatives.In2023,weincreasedourinternalcarbonpriceto$65/tCO2e,leading toa$16.4millionspendondecarbonizationandenergyefficiencyprojects,andacumulative$76.3millionspendsince2018.Weintend toraiseourinternalcarbonpriceto$80/tCO2ein2024.WealsocontinuetoassesscurrentandfuturephysicalclimatevulnerabilitiestoScotiabankspropertyassets,integrateclimateresilienceandconsideropportunitiestofurtherreduceouroverallcarbonfootprintthroughvarioussustainabilityandenergyefficiencymeasures.Formoreinformation,seeour2023 ESG Report(pp.5153).CLI M ATE TR A NS ITI O N PL A NScotiabankiscurrentlyintheprocessofdevelopingaClimateTransitionPlanthatwilladvanceourthreeclimatepillarsthroughembeddingournet-zeroandotherclimateobjectivesintorelevantdecision-makingenterprise-wide,inlinewithguidancefromtheTaskForceonClimate-relatedFinancialDisclosures,theGlasgowFinancialAllianceforNetZeroandtheUnitedKingdomsTransitionPlanTaskforce.WeexpecttopublishourinauguralClimateTransitionPlanbeforetheendofthe2024fiscalyear.PleaseseeourRoadmaponp.23forahigh-levelsummaryoftransitionplanningactivities.2023 CLIMATE REPORT 34INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION Culture,Skills and Competencies to Support Climate Transition1 Scotiabanks Climate Change Centre of Excellence.Ensuringwemeetourclimategoalsrequiresinternaleducation,thoughtleadership,research,outreachandengagementwithourclients,investors,industryandregulators.Anareaofstrategicimportanceinitsownright,culture,skillsandcompetenciesrelatingtoclimatecreatethefoundationforourclimategoals.TheBankstransitiontonet-zeroisamulti-yeareffort,requiringcommitmenttoenterprise-wideinnovation,aclearunderstandingofthetaskathand,andtrainingforemployeesthatisrelevantandpractical.ArmedwithawarenessandknowledgeoftheBanksclimategoals,ouremployeescanbecometheagentsofinnovationandchangerequiredtosuccessfullyreachthosegoals.Infiscal2023,theBankfocusedondrivingculture,skillsandcompetenciesthrougheducationandtraining,thoughtleadershipandresearch,partnershipsandprogramswithtangibleclimate-relatedoutcomes.Theseeffortsaresummarizedonthefollowingpages.CLI MATE-RE L ATE D I N FO RM ATI O N A N D TR A I N I N GInformationandtrainingonclimate-relatedmattershasbecomeincreasinglyimportantincertainpartsofourbusiness,asameansofsupportingprogramsimpactingrolesandresponsibilitiesacrosstheBank.Examplesoftrainingandinformationprovidedin2023include:In-personandvirtualESG-trainingforrelevantemployeestodevelopandimproveknowledgeandtoolstoenhanceclimateriskmanagementthroughduediligenceanddatacapture.ThisincludestrainingontheBanksnewsustainability-linkedcreditfacilityprocedure,aswellastrainingtosupporttrackingandmonitoringofourclimate-relatedgoals,includingour$350BTarget.Amoduleonclimatechangerisk,whichformspartofannualmandatoryenvironmentalrisktrainingforallbankingofficersandcreditadjudicators,providesareviewofenvironmentalandclimatechangeriskduediligencepoliciesandprocessesforbusinessbankingcredits,aswellasanoverviewoftheEquatorPrinciplesFrameworkandprocessesforverifyingcompliance.Deliveryof“Climate101”trainingtoover1,500employeesrelatingtoclimatechange,includingseniormanagementacrossbusinesslines,branchpersonnel,andtheBoard,focusingonthescientificbasesofclimatechange,typesofphysicalandtransitionrisksassociatedwithclimatechange,andhowvariousareasoftheBankcantakeactiontosupportourclimategoals.AttendancebytheCanadianBankingleadershipteamofafulldayclimateworkshop,includingareviewofhowfinancialinstitutionscancreateclimateopportunitiesintheretail,smallbusinessandcommercialbankingsectors,andaseriesofworkshopsleadingtothecreationoffocusgroupsdevotedtodefininghowtheCanadianBankingdivisioncanaddressclimateopportunitiesgoingforward.MorespecializedtrainingonPartnershipforCarbonAccountingFundamentals(PCAF)standardsandpracticeswasdeliveredtotheBanksGlobalSustainability,Data&Analytics,ESGRiskandCorporateCreditRiskteamsbythePresidentofPCAFCanada.InformationrelatingtoclimatechangeandtheBanksresponsetotheissueisalsoinhighdemand.Aspartofa2023EarthDayeducationwebcast,ScotiabankinvitedDr.ThomasWagner,aleadingplanetaryandclimatescientistwhohasworkedwithNASAandtheU.S.NationalScienceFoundation,toprovidehisuniqueinsights,todiscusstheroadtoaglobalnet-zero,andtoofferideasforcollectivesolutions.Morethan1,550Scotiabankemployeesattendedthiswebcast.TofurtherencourageinterestintheBanksclimateprograms,wemaintainaClimateChangeCentreofExcellence,availableinternallyandtothepublic,1housinginformationandresourcesrelatingtoourclimate-basedinitiativesandallowingfortransparencyintoouractivities.2023 CLIMATE REPORT 35INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION MA N AG I N G CLI MATE RI S K S A N D PRO M OTI N G RE S I LI E N CETheBankidentifies,assessesandmonitorspotentialclimate-relatedriskstoourbusinesssothatwecanmitigateitsimpacttoouroperations,customersandcommunities,aswellaspromoteresiliency.ScotiabankhasputinplaceaglobalprogramtocomplywithcurrentandupcomingESGregulations,includingOSFIB-15.Please see the Risk ManagementsectionofthisreportforadiscussionofhowweintegrateclimateriskintoourRiskManagementFramework;howweidentify,assessandmanageclimaterisks;ourexposuretocarbon-relatedassets;andourworkonclimate-relatedscenarioanalysis.Climate Adaptation and ResilienceTheimpactsofclimatechangeonourplanet,thehealthofecosystemsandourwayoflifearesystemicandtransformativefoundationalrisksfacingtheworldtoday.Nocountry,sectororcommunityisimmunetothesocial,environmentalandeconomicchallengesitposes.Scotiabankisimplementinganoperationalpreparednessandresilienceprogram,whichtakesintoconsiderationextremeclimate-relatedweatherevents.AswedevelopourClimateTransitionPlan,wewillreviewwhatfurtherroletheBankcanplayinpromotingsocietalclimateadaptationandresilience.2023 CLIMATE REPORT 36INTRODUCTION GOVERNANCE STRATEGY RISK MANAGEMENT METRICS AND TARGETS APPENDIXINTRODUCTION|OURREFRESHEDCLIMATEGOALS|FINANCINGCLIMATESOLUTIONS|ADVANCINGTONET-ZERO|REDUCING OUR OWN EMISSIONS CULTURE,SKILLSANDCOMPETENCIESTOSUPPORTCLIMATETRANSITION E N G AG E M E NTThought Leadership Thoughtleadershipintheformofresearch,engagementwithindustryandclients,andhostingofconferencesinareasofstrategicimportanceintheclimate-changearenaisacriticaltoolinthefulfilmentoftheBanksclimategoals,creatingconditionsformeaningfulandinsightfulexchangeofideasandinformationwithinournetworks.In2023,wepublishedaseriesofpapersandarticles,organizedthematicallybysector,ontopicsofinteresttoourclientsinAgriculture,AutomotiveManufacturing,CementManufacturing,OilandGas,andResidential Mortgages:1.Cultivating Resilience:Supporting Canadas Agriculture Industry to Achieve Sustainable Growth2.30 Thoughts:EV Adoption Speed
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Hitachi Sustainability Report 2024Fiscal 2023 ResultsCONTENTSCONTENTS Report GuideReport Guide Report Editorial Policy .2 Hitachi at a glance .4 Assurance .6 ManagementManagement CEOs Message .8 Chief Sustainability Officers Message.10 Hitachi Group Identity .13 Mid-term Management Plan 2024 and Sustainability .14 Materiality .16 Framework for Promoting Sustainability Strategy .24 Engagement and Leadership .27 External Assessments and Awards .32 Social Innovation BusinessSocial Innovation Business Social Innovation Business.36 EnvironmentalEnvironmental Advancing Our Environmental Vision and Long-term Environmental Targets .43 Environmental Governance .48 Achieving a Decarbonized Society .53 Climate-related Financial Information Disclosure(Based on TCFD Recommendations).69 Achieving a Resource-Efficient Society .79 Achieving a Harmonized Society with Nature .85 Environmental Data .93 SocialSocial Global Human Capital Management .104 Diversity,Equity and Inclusion .115 Occupational Health and Safety .127 Work-Life Management .138 Freedom of Association and Collective Bargaining .143 Respect for Human Rights Throughout the Value Chain .145 Responsible Procurement.152 Quality and Product Safety Management .161 Customer Satisfaction .164 Social Contribution Activities .166 Social Data .171 GovernanceGovernance Corporate Governance .183 Business Ethics and Compliance .195Risk Management .202Business Continuity Initiatives .207Information Security .209Governance Data .215Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 41Report GuideReport Editorial PolicyBasic ConceptThe Hitachi Sustainability Report 2024 presents our stance on sustainability management,social innovation business,and ESG(environment,society,and governance),as well as initiatives conducted in fiscal 2023(including initiatives addressing materialities).This report is intended as an engagement tool for all stakeholders to disclose information in accordance with international guidelines,including thedisclosure requirements of the GRI Standards and the industry disclosure standards relevant to Hitachi as defined by the Sustainable IndustryClassification System(SICS)of the Sustainability Accounting Standards Board(SASB).Our information disclosures related to climate change arebased on the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD).Starting with the Sustainability Report 2024,we have decided to publish the Sustainability Report in HTML format on our website for effective andtimely information disclosure.Additionally,for the convenience of stakeholders,we convert the HTML content into PDF format.We hope youbenefit from either of these formats.Report OverviewPeriodThis report mainly covers fiscal 2023(April 1,2023,to March 31,2024)Note:Some information on activities in April 2024 and after is also included.CompaniesHitachi,Ltd.and its consolidated subsidiariesReporting BoundaryFinancial data:943 companies,namely Hitachi,Ltd.and 942 consolidated subsidiaries and equity-method associatesand joint venturesEnvironmental data:574 companies,namely Hitachi,Ltd.and 573 consolidated subsidiaries.Data covers Category A business sites*1 which have large environmental loads.Some data coverssites in Categories A,B,and C(excluding non-manufacturing sites for category C),and this isindicated in the notes for each section.Other data related information is provided in the notes toeach section.Social and governance data:Boundary of individual data indicatedReporting CyclePublishes every year as an annual reportPublication DateSeptember 2024(Previous report:September 2023)*1 All group business sites are classified as A,B,or C(A:Major environmental risk,B:Medium environmental risk,C:Minor environmental risk)based on theCriteria for Classification of Environmental Management established by Hitachi.We engage in the most suitable management for each location inaccordance with the respective level of environmental risk.About Subject NotationHitachi,Ltd.:Only refers to Hitachi,Ltd.(non-consolidated)Hitachi:Refers to the Hitachi Group including Hitachi,Ltd.Key GuidelinesGRI Standards,Global Reporting InitiativeSustainability Accounting Standards,IFRS FoundationEnvironmental Reporting Guidelines(2012/2018 version),Ministry of the Environment,JapanTask Force on Climate-related Financial Disclosures(TCFD)Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 42Our Reporting UniverseHitachi publishes three corporate reports:the Integrated Report,the Sustainability Report,and the Annual Securities Report.We define eachreports roles by content(from quantitative information to Value Creation Strategy)and time horizon(from results to the mid-to long-termperspective).In particular,the Integrated Report and the Sustainability Report,which are released on the same day,can be read together to confirm ESGinitiative progress and data in addition to management strategies.We also invite you to visit our websites for additional information.Our Reporting UniverseAbout the Hitachi GroupSustainabilityInvestor RelationsSocial InnovationIndependent AssuranceTo enhance the credibility of the disclosed sustainability data,the Hitachi Sustainability Report 2024(Posted in PDF format on the website at theend of September 2024)received third-party assurance for environmental,social,and governance performance indicators by KPMG AZSASustainability Co.,Ltd.in accordance with the International Standard on Assurance Engagements(ISAE)3000 and 3410.The indicators that wereassured are marked with a.AssuranceHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 43Revenues for FY2023Target CAGR of 5-7%from FY2021 to FY2024Financial InformationAdj.EBITA ratio for FY 2023FY2024 target of 12%Financial InformationLumada business revenues for FY2023FY2024 target of 2.7 trillion yenLearn More About LumadaCore FCF3-year cumulative target(FY2022-FY2024)Progress of the Mid-term Management Plan 2024Achieve carbon neutrality by FY2050 throughout the value chainSustainabilityDigital talents for FY 2024FY2024 target of 97KProgress of the Mid-term Management Plan 2024*Revenues,Adj.EBITA ratio are for the three sectors*Three sectors：Consolidated Total less the consolidated figures of Hitachi Astemo prior to be accounted by an equity-method affiliate,includes Others and Corporate items&Eliminations*Lumada business revenues are for FY2023(excluding Hitachi Astemo)*Number of employees is as of March 31,2024*Adjusted EBITA=Adjusted operating income acquisition-related amortization equity in earnings(losses)of affiliates*Core FCF=Cash flows from operating activities CAPEXKey numbers8.6 trillion yen10.12.3 trillion yen1.5 trillion yen97K Report GaideHitachi at a glanceHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 44In April 2022,Hitachi formulated the Mid-term Management Plan 2024 targeting further global advances and growth in the Social Innovation Business based on three pillars of growth:digital,green and innovation.To increase management efficiency and speed,we simplified our structure,grouping together businesses with similar characteristics organized into three sectors:Digital Systems&Services(DSS),Green Energy&Mobility(GEM)and Connective Industries(CI).Revenues by Market(FY2023)Hitachi Group businessesHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 45Report GuideAssuranceAssuranceTo enhance the credibility of the disclosed sustainability data,the Hitachi Sustainability Report 2024(Posted in PDF format on the website at theend of September 2024)received third-party assurance for environmental and social performance indicators by KPMG AZSA Sustainability Co.,Ltd.in accordance with the International Standard on Assurance Engagements(ISAE)3000 and 3410.The indicators that were assured aremarked with a.Performance Indicators Assured(Reporting Boundary:Hitachi Group)The standards,guidelines,and calculation methods used in collecting environmental data are posted on our website.Calculation Methods for Environmental Load DataEnergy inputsGreenhouse gas emissions Scope 1(Energy-related CO2 emissions,and GHG emissions other than energy-related CO2)Greenhouse gas emission Scope 2(Energy-related CO2 emissions)*Calculated based on the market-based method.Greenhouse gas emission Scope 3 Category 11(Use of sold products)Total water withdrawal,Total water effluents discharged,Water quality(Biochemical Oxygen Demand(BOD)and Chemical Oxygen Demand(COD)Number and ratio of women managersHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 46Notes to the Reader of Independent Assurance Report:This is a copy of the Independent Assurance Report and the original copies are kept separately by theCompany and KPMG AZSA Sustainability Co.,Ltd.Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 47ManagementCEOs MessageHitachis Transformation JourneyOver the past decade,Hitachi has embarked on a transformation journey to become aglobal leader in Social Innovation Business.The Social Innovation Business leverages Hitachis IT,OT(Operational Technology),andproducts to solve social issues in collaboration with customers.Through the Lumada co-creation framework,we support the digital and green transformation(DX and GX)of societyand industry with our diverse business portfolio aligned with the three technological trends:Digital,Green,and Connective.In our current Mid-term Management Plan 2024,we are making a significant shift towardorganic growth,expanding our Social Innovation Business globally with Lumada at thecore.Our goal is to realize a sustainable society supported by data and technology,enhancing peoples well-being.Moving forward,Hitachi will continue to evolve its SocialInnovation Business and promote sustainability management to protect the planet,maintainsociety,and realize the well-being of every individual.The Driving Force of Our Sustainability Management“Contribute to society through the development of superior,original technology and products.”This strong belief of Hitachis founder,NamiheiOdaira,has been passed down as our corporate philosophy throughout our history of over 110 years.Hitachis founding spirit of Harmony,Sincerity,and Pioneering Spirit expresses our core values that we uphold as we strive to solve social issues,by focusing on society and people.Hitachi has created the slogan“Hitachi Social Innovation is POWERING GOOD”for the Social Innovation Business.Protecting the earths healthyenvironment while fostering economic growth and supporting the well-being of people around the world,in other words,realizing“GOOD”forsociety,is the guiding principle for our Social Innovation Business.To expand the Social Innovation Business,it is important to have individuals who resonate with our corporate philosophy and have a strong will todrive social innovation.These talented individuals become the driving force of our sustainability management.Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 48One Hitachi Teamwork that Evolves Sustainability ManagementWith the advent of generative AI,the demand for digitalization is rapidly increasing.Meanwhile,the global economy is pursuing the path to stable growth despite itsvulnerabilities,due to complex geopolitical situations,and shortages of resources,energy,and labor.We believe it is crucial to identify new growth opportunities that are unlocked bythe impact of generative AI on society,and the social issues that emerge from shifts suchas climate change and demographics,and further advance our efforts toward realizing asustainable society.To tackle the increasingly diverse,severe,and complex social issues,it is important tostrengthen our problem-solving capabilities using Lumadas customer co-creationframework.The Hitachi Group has welcomed new members with global and diversebackgrounds and expertise through business portfolio reforms and M&As.Thesecolleagues are our indispensable human capital for collaborating with customers across theglobe to solve social issues.Hitachis diverse businesses in Digital,Green,and Connective play a significant role in creating solutions to address complex social challenges.Toleverage this diversity as a strength,it is important to embrace the One Hitachi mindset.In April 2024,we launched a new business structure to accelerate digital growth and strengthen global competitiveness by appointing leaders withdiverse backgrounds.Lorena Dellagiovanna,Chief Sustainability Officer and CDEIO,also took on the role of CHRO to reinforce sustainabilitywithin the organization.In order to deepen sustainability management,Inclusive Leadership that embraces diverse and conflicting opinions,creates integrated ideas,andprovides guidance to demonstrate One Hitachi teamwork is crucial.By increasing the number of inclusive leaders,we can strengthen teamworkwith various stakeholders,such as our customers and partners,who work with us to solve social issues,thereby driving further growth of the SocialInnovation Business.Hitachi will deepen sustainability management and accelerate the growth of our Social Innovation Business and continue our transformationjourney towards enhancing our corporate value.Please look forward to Hitachis future.Keiji KojimaPresident&Chief Executive Officer Hitachi,Ltd.Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 49ManagementChief Sustainability Officers MessageMy Mission as a Chief Sustainability Officer,CHRO,and CDEIOAt Hitachi,sustainability and strategy are inseparable.Sustainability is stronglyintegrated into our strategy and is at the core of Hitachi Group Identity,rooted in the sincerebelief of our founder,Namihei Odaira.He firmly believed that through the development ofsuperior,original technology and products,we could contribute to society.This sincerebelief has been at the heart of Hitachi for over a century.Our more than 110-year history is a testament to this belief.From the beginning,Hitachihas supported the development of society and the improvement of peoples lives throughunique and innovative technologies.While Hitachi contributed to these broader goals,thecompany itself flourished.In essence,Hitachi embodies the philosophy that societalcontribution through technology and a companys sustainable growth are fundamentallyinterconnected and mutually reinforcing.Today,Hitachis sustainability management focuses on addressing Planetary Boundariesand Wellbeing.Grounded in our universal management philosophy,we are dedicated tocreating a sustainable society,looking both at the present and the future.As a member of Hitachis management team,I strive to make decisions based on acomprehensive understanding of what society and the world need today and in the future.This holistic approach defines my sustainability leadership.As a leader of Hitachis sustainability efforts,I have always valued looking at issues frommultiple perspectives.What benefits one group might be a disadvantage to another,andactions that benefit the current generation in the short term can pose challenges for futuregenerations.With my appointment as CHRO,in addition to my roles as Chief Sustainability Officer and CDEIO since fiscal 2024,my responsibilities haveexpanded to include human resources.Todays social issues are so complex that they cannot be solved with a conventional way of thinking.Solving them requires a new,agile,andholistic approach while also being creative.The source of such innovative thinking and creativity is our people from all over the world with variousbackgrounds.This is why Hitachi is committed to integrating sustainability,human capital management,and diversity,equity,and inclusion(DEI)atthe most senior level.Moving away from conventional thinking and leveraging peoples creativity in sustainability efforts helps us address socialissues more effectively and elevates employee engagement as they contribute to solving these issues through their daily work.Moreover,at Hitachi,we believe that non-financial considerations underpin financial success,and enhancing peoples uniqueness will foster long-term financial growth.Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 410Our Progress in SustainabilityHitachi has identified six material topics and 15 sub-material topics under our sustainability management framework,and various initiatives are wellunderway.Looking back on fiscal 2023,we successfully met most of our sustainability goals and KPIs.We will continue to accelerate our evolutionand enhance our practices to achieve more advanced sustainability management.Advancing Environmental GoalsSome of the notable progress we made in the area of environment relates todecarbonization and circular economy.Regarding our decarbonization efforts,we are making good progress with our internalinitiatives,achieving a 74%reduction in CO2 emissions at our business sites compared tothe base year of fiscal 2010.We are also working with our customers to reduce societysCO2 emissions through our Social Innovation Business.As of fiscal 2023,we areforecasting to contribute to approximately 153 million metric tons(Mid-term ManagementPlan 2024 three-year average)of avoided emissions.Significant contributions came fromHitachi Energy,which specializes in electric power transmission and distribution.The total grid-connected capacity of Hitachi Energys HVDC technology now stands at 150GW,equaling Japans peak demand.This milestone reflects the increasing global shifttoward clean energy.To support this growing demand,Hitachi Energy has hired over 8,000new employees globally and has invested$3 billion in manufacturing,engineering,and R&D since 2020.These efforts underscore ourcommitment to supporting our customers as long-term strategic partners and highlight the impact of our sustainability initiatives.In circular economy,our reduction rate in water use per unit compared to fiscal 2010 was 30%,and 75%of our sites achieved zero waste tolandfill.To reduce environmental impact,we are transforming our business model,shifting toward using fewer raw materials,water,and other resourcesmore efficiently and sustainably.As a company with a long history in manufacturing,we recognize the need to approach production with a newmindset.We are also moving from a sell-only business to a service-type business model,where we focus on the use of products rather than just theirownership.This shift not only aligns with our sustainability goals but also ensures we remain relevant and competitive in the evolving market.Our DEI InitiativesAs a global company,Hitachi boasts a rich and diverse workforce,and we believe that incorporating the perspectives of diverse individuals into ourmanagement and business operations fosters innovation and drives our growth.DEI is truly the engine behind Hitachis success and is a corebusiness driver that supports us in reaching our MISSION.Creating an inclusive environment for all people,regardless of their diverse backgrounds,age,gender,sexuality,family structure,disability,race,nationality,ethnicity,or religion,is essential to unlock the full capability of our approximately 270,000 employees worldwide.At the core of our DEI strategy,we focus on three topics:gender diversity,cultural diversity,and multi-generation.In fiscal 2023,we revised ourDEI Policy to more comprehensively respect invisible human diversities,including LGBTQIA ,disabilities,and neurodiversity,and we areimplementing specific measures.As a result of our efforts,the ratio of women and non-Japanese nationals appointed to the senior managementlayer,reached around 12%and 25%respectively,making headway toward our targets of 30%by fiscal 2030.We also made an important stepforward in embedding DEI in our daily work by including DEI KPIs in employees performance reviews.This will drive behavior change and a shiftin mindset toward a more inclusive workplace.Through these approaches,we will ensure that our employees feel engaged and that they play anintegral part in what we do as a company.Generative AI and Sustainability ManagementIn 2023,we witnessed an epoch-making technology,generative AI,take the world by storm,impacting industries and society as a whole.Generative AI can significantly improve work efficiency,allowing people to focus on more value-added and creative tasks.However,as its useexpands,the demand for data centers will rise,leading to increased power consumption and CO2 emissions.So how should we view this innovative technology from the perspective of balancing planetary boundaries and wellbeing?At Hitachi,we aim to analyze both the positive and negative impacts of generative AI from multiple perspectives,including environmental impactsand ethical implications.Our goal is to derive optimal solutions that enhance societys wellbeing while staying within planetary boundaries.Securing top-tier digital talent is crucial for Hitachi,especially in this context and with our business centered around Lumada.Our digital talentworkforce has grown from 83,000 in fiscal 2022,to 95,000 in fiscal 2023,and we will continue strengthening the acquistion and development ofdigital talents to 97,000 by fiscal 2024 as per our original target.Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 411Message to Our StakeholdersHitachi has been dedicated to reforming our business portfolio with a focus on the SocialInnovation Business under the slogan of“Hitachi Social Innovation is POWERING GOOD.”We are committed to contributing to a sustainable society and to peoples happinessthrough various social innovation initiatives based on this concept.This approach hasenabled Hitachi to grow sustainably,which I believe is reflected in our stock price,marketvalue,and reputation for sustainability management,including our performance on ESGevaluations.As the global company we have become,I truly believe that we can do even more to makea positive impact on a global scale through our Social Innovation Business.As ChiefSustainability Officer,CHRO,and CDEIO of Hitachi,my goal is to foster collaborations thattranscend the boundaries of geographical regions and business fields,unleashing our fullcapabilities.I feel that society and the world trust Hitachi and have high expectations of us,and we are committed to continuing to meet and exceed theseexpectations.Lorena DellagiovannaSenior Vice President and Executive Officer,Chief Sustainability Officer,CHRO,General Manager of Human Capital Group and CDEIO Hitachi,Ltd.Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 412ManagementHitachi Group IdentityCarrying out Corporate Activities Based on the Hitachi Group IdentityApproach&PolicySince our founding,Hitachi has been working to solve the challenges facing society by following our MISSION:Contribute to society through thedevelopment of superior,original technology and products.Our VALUES,present in the Hitachi Founding Spirit and reflecting Harmony,Sincerity,and Pioneering Spirit,guide our mission and inspire our actions.The MISSION and VALUES are our foundation,and together with the addition ofthe Hitachi Group Vision of the companys future,we define the Hitachi Group Identity.As the group continues to grow globally,Hitachi had reached approximately 270,000 employees on a consolidated basis in fiscal 2023,about 60%of whom working outside Japan.Similarly,sales revenue generated in non-Japanese markets account for about 60%of total revenue.In this ageof working together with employees from different countries with different cultures,we must cherish Harmony,Sincerity and Pioneering Spirit.Hitachi businesses solve social issues and supports sustainability.Moving forward,it is essential that all employees around the world,despite theirdifferent language and thinking,continue to engage in constructive discussion.As we pursue our goal of contributing to society,we must maintaincommon Hitachi VALUES across the group.With the Hitachi Group Identity as our foundation,we will grow as individuals and as an organization.Together with our colleagues worldwide,wewill contribute to society through our Social Innovation Business.Hitachi Group IdentityHitachi Group IdentitySolidifying the Hitachi Group IdentityActivitiesHitachi offers awareness activities through training tools and courses,assuming that social issues can be solved if each employee understandsand practices the Hitachi Group Identity.One way we encourage an understanding of and familiarity with the Hitachi Group Identity and the Hitachi Brand is with the annual Inspiration ofthe Year Global Awards.These awards recognize remarkable activities that contribute to enhancing the value of the Hitachi Brand by building onthe Hitachi Group Identity.In fiscal 2023,we received 229 applications from Hitachi Group employees around the world.Among them,the GrandsPrix were awarded to the projects from each region that use technology to achieve sustainability and improve well-being,including a project inwhich a global team uses digital technology and experimental automation technology to create a system for the quick development of highlyfunctional materials,and another that supported the development of intelligent prosthetics and orthotics for victims who lost limbs in the war inUkraine.The Grand Prix-winning projects were recognized at the Global Awards Ceremony and shared with all employees through our intranet.Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 413ManagementMid-term Management Plan 2024 and SustainabilityTowards Sustainable SocietiesMid-term Management Plan 2024Approach&PolicyStrategy&TargetIn accordance with Hitachis Mission to“contribute to society through the development of superior,original technology and products,”we pursueour Social Innovation Business leveraging core strengths in IT(Information Technology)OT(Operational Technology)Products,and Lumada*1to help build sustainable societies.To respond to the increasingly complex global issues of recent years,it is essential that we conduct management from a long-term perspective andmaximize Hitachis diverse management resources to achieve further evolution in our Social Innovation Business.Hitachi has responded by imagining the futurewhat the earth,society,and people will look like and what Hitachi will act like in 2050.Based onthe future,in April 2022,we back-casted to formulate the Mid-term Management Plan 2024 which clarified what Hitachi should do now and whatHitachi should achieve over the medium-to long term.*1 Lumada:Solutions,services,and technologies that leverage Hitachis digital technology and are offered to customers to accelerate the digitization ofcustomers businesses.Mid-term Management Plan 2024Progress of the Mid-term Management Plan 2024Vision Targets of the Mid-term Management Plan 2024With the three growth drivers of Digital,Green and Innovation,the Mid-term Management Plan 2024 aims to achieve global growth.The environment is reaching limits on a global scale as the thresholds of several of the nine planetary boundaries have already been crossed.Also,wellbeing(physical,mental,and social)is a growing global issue,therefore it is significant that we focus both on planetary boundaries andwellbeing.Hitachi aims to resolve the increasingly complex social issues through its business,while respecting planetary boundaries and realizing wellbeingfor all individuals.We will further evolve our Social Innovation Business and contribute to solving social issues.Supporting Quality of Life with Data and Technology that Foster a Sustainable SocietyHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 414Contributing to the SDGsApproach&PolicyHitachis Social Innovation Business aims to create sustainable societies by solving global social and environmental issues as defined by theSDGs,and we consider the business to be a source of sustainable growth for us.We strive to create social,environmental,and economic valuethrough our Social Innovation Business,reduce negative social and environmental impacts and seek a deeper understanding of business risksarising from social and environmental changes to ensure business continuity and greater resilience.Based on our Mid-term Management Plan 2024,we examined the relationship between the opportunities and risks associated with the SDGs andour businesses to identify 13 goals as Hitachi priority SDGs issues:five goals through which we make particularly significant impacts through ourkey businesses and eight goals through which we particularly contribute in the course of our corporate activities.Through our active involvement across a broad range of business fields,we believe we can contribute extensively to the achievement of SDGsbeyond the 13 goals identified,and we will strive to contribute to the achievement of all 17 SDGs.Hitachis Priority SDGsHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 415ManagementMaterialityToward a Sustainable Society:Hitachis MaterialityApproach&PolicyStrategy&TargetHitachi practices Sustainability Management,which positions sustainability as the core of its business strategy,and is working toward realizing asustainable society through the Social Innovation Business.In the Mid-term Management Plan 2024,we declared our aspiration of“supporting peoples quality of life with data and technology that fosters asustainable society.”While some of the nine planetary boundaries have already been exceeded,Hitachi is aware of each one and works to protectthe planet and maintain society.Hitachi aims to solve social challenges to realize a future that balances protection of the planet and peoplesindividual wellbeing.Planetary BoundariesThe Materiality Analysis ProcessWith a comprehensive understanding of social issues,Hitachi has identified six material topics and 15 sub-material topics based on an analysis ofrisks and opportunities from a sustainability perspective as well as feedback from stakeholders.Based on these material topics,Hitachi is monitoring measures as well as discussing the progress,and new initiatives for each materiality at theSenior Executive Committee and the Board of Directors.Materiality Analysis ProcessHitachi is currently working to gain an understanding of and prepare to act on the sustainability reporting standards prescribed by the EUsCorporate Sustainability Reporting Directive(CSRD),the International Sustainability Standards Board(ISSB),and others.We will continue toreview our material topics and the process of identifying them on an ongoing basis,informed by the changing demands of society and needs of ourstakeholders.16Hitachi Sustainability Report 202415 Sub-Material Topics and TargetsMaterialityOur aspirationsSub-material topics Targets/KPIsFY2023 ProgressEnvironment Contributing todecarbonizationand resourcecirculationAs a climate change innovator,Hitachi will contribute to therealization of a carbon neutralsociety with Hitachis superiorgreen technologies,by providingvalue to customers in allbusiness segments.We will alsopromote resource efficiencytoward the transition to a circulareconomy.DecarbonizationCarbon neutrality through the value chain Targets/KPIs FY2030:Achieve carbon neutrality in businesssites(factories and offices)FY2050:Achieve carbon neutrality through thevalue chain74%of total CO2reduction rate atfactories and offices(compared toFY2010)Contributing to CO2 reduction throughbusiness Target/KPI FY2024:100 million metric tons of CO2avoided emissions per year153 million metrictons per year*1 ofCO2 avoidedemissionsResourcecirculationTransition to a circular economy Targets/KPIs FY2024:Full application Eco-Design for allnewly developed products FY2030:Zero*2 waste to landfill*3 frommanufacturing sites198 productsidentified as subjectof Eco-Design 146 sites(75%)achieved zero wasteto landfillEffective use of water Target/KPI Reduction rate in water use per unit(compared to FY2010)FY2024:24%,FY2050:500%reduction inwater use per unitHarmonize withnatureMinimize impact on natural capitalAchieving aHarmonized Societywith Nature17Hitachi Sustainability Report 2024MaterialityOur aspirationsSub-material topics Targets/KPIsFY2023 ProgressResilience Contributing tothe maintenanceand rapidrecovery of socialinfrastructureHitachi helps people live safelyby contributing to the rapidrecovery of supply chains andthe maintenance of socialinfrastructure by providingsystem solutions that canrespond immediately to risks,such as natural disasters,pandemics,and cyberattacks.Strengtheningsupply chainsBuild flexible supply chains capable ofresponding to disasters and risksSocial InnovationBusinessMaintainingsocialinfrastructureResilience and sophistication of maintenancethrough DX of social infrastructureBusiness Case:Contribute to stable energysupply through substationmanagement to approx.1.9 billionpeople*4Safety&Security Contributing tosafe and securesociety-buildingHitachi contributes to therealization of comfortable andactive lifestyles for people byproviding solutions in thebuilding,mobility,and securityfields that support urbandevelopment for safe and secureliving.Safe andsecure urbanenvironmentsSafe and comfortable transportationBusiness Case:Contributed to a total of 15 billionpeople annually through railwayservices*4Ensuringcyber securitySecure cybersecurity for social infrastructureand business systems18Hitachi Sustainability Report 2024MaterialityOur aspirationsSub-material topics Targets/KPIsFY2023 ProgressQuality of Life Contributing tophysical andmental wellnessand a prosperouslifeHitachi is harnessing ourhealthcare and digitaltechnologies to help more peopledevelop bonds and enjoyhealthier,more prosperous lives.We will also continue to pursuethe happiness and wellbeing ofour employees,as we believe thattheir happiness and wellbeing isthe ground on which Hitachisfuture will flourish even more fully.ConnectedandprosperoussocietyIncrease healthy life expectancy and wellbeingBusiness Case:Blood tests and other physicalexams:20 billion tests/year*4Build a trustful relationship with others Target/KPI Users of happiness service:90 thousand inFY202449 thousand users ofhappiness serviceEmployeehappinessMore flexible working styles to increaseengagement Target/KPI Employee engagement(positive response rate):FY2024 71.0%*568.6*6 employeeengagement(positiveresponse rate)19Hitachi Sustainability Report 2024Social InnovationBusinessMaterialityOur aspirationsSub-material topics Targets/KPIsFY2023 ProgressBusiness withIntegrity Adhering toethical standardsas well as respecthuman rightsAs a Group responsible for socialinfrastructure around the world,Hitachi will manage its businesswith honesty and integrity,trustedby society,respect human rightsand provide a safe workplace.We will reflect a system of ethicaland responsible businessconduct,including respect forhuman rights,in our businessactivities and decision-makingstandards,working together withour employees,collaborativepartners and communitiesthroughout the supply chain.Businessethics andcomplianceEncourage employees to apply ethicalstandards in day-to-day work.Target/KPI Achieve a score of at least 60(out of 100)inFY2023,the first year of results from EthicalCulture&Perceptions Assessment,improving itevery yearScore of 76.5Respect forhuman rightsPromote human rights due diligence andstrengthen monitoring of procurementpartners for responsible procurement,including human rights Targets/KPIs FY2023:Conduct human rights riskassessments for all BUs(10 BUs)and majorGroup companies FY2024:Respond to human rights risksConduct humanrights riskassessments at allBus(10 BUs)andmajor Hitachi GroupcompaniesOccupationalsafetyCreating a safe working environment withoutaccidents Target/KPI Zero fatal accidents4 fatal accidentsSafe andsecureproducts andservicesEnsure products and services safety whileputting customers firstQuality and ProductSafety ManagementDiversity,Equityand Inclusion(DEI)Contributing to asociety whereeveryone canshineHitachi has a place for everyone,welcoming differences incolleagues background,age,gender,sexuality,family status,disability,race,nationality,ethnicity,and religion.At Hitachi,we treat everyone fairly,recognizing differences to alloweveryone to perform at their fullpotential.We respect and valuethese and other differencesbecause only through them wecan understand our markets,create better ideas and driveinnovation.Diverseorganizationthat fostersinnovationStrengthen diversity in management Target/KPI Ratio of women and non-Japanese executiveand corporate officers:FY2030 30%respectively11.8%of women and25.0%of non-Japanese executiveand corporateofficers*7Acquiring and developing digital talent Target/KPI FY2024:97,000 persons*895,000 personsContributionto a diverseandequitablesocietyEmpower DEI of society through communityrelationship programs Target/KPI Nurture and empower next-generation talentParticipants inHitachi YoungLeaders Initiative 32people 437 peoplecumulative*9 Participants inHitachi High-Techscience educationsupport activities 59,911 people427,273 peoplecumulative*1020Hitachi Sustainability Report 2024*1:Mid-term Management Plan 2024 three-year average*2:Less than 0.5%*3:Wherever this is compatible with local conditions and regulations*4:FY2022 results*5:Target has been raised in FY2023 since we achieved the initial target/KPI in FY2022*6:Excluding Hitachi Astemo*7:As of June 2024*8:Excluding Hitachi Astemo*9:Cumulative total since 1996*10:Cumulative total since 1990 Hitachi has mapped the 15 sub-material topics in terms of importance for Hitachi and stakeholders.The level of importance to Hitachi is defined as the gap between our goals and our current initiatives.Stakeholder Dialogue about the MaterialityWe held a stakeholder dialogue on the theme of materiality in Japan and Europe in fiscal 2021.We received feedback on Hitachis proposedmateriality and measures for each materiality from disclosure experts,leading sustainability companies,European Commission,NGOs,international organizations,and institutional investors.In Europe,we divided it into a planet session and a people session,with Hitachi explainingits measures for the environment,human capital,and respecting human rights,while participants gave suggestions for new perspectives andimprovements.Principal comments from stakeholdersWe will continuously engage with diverse stakeholders and strive to enhance sustainability management.Hitachi should indicate the direction society wants Hitachi to move along or the goals that Hitachi itself has.When it comes to diversity and inclusion,it would be better to include equity and make it diversity,equity,and inclusion.For the circular economy,the approach shouldnt just be to reduce materials and waste but also to think about new business models.With human rights and decent work,Hitachi should go beyond conventional monitoring,audit,and other compliance approaches to engage withall aspects of supply chains through partnerships with external stakeholders.21Hitachi Sustainability Report 2024Reflecting Sustainability Targets in Executive Compensation EvaluationActivitiesIn fiscal 2023,Hitachi amended the executive compensation system to further accelerate growth as a global company,and to further strengthenlinks between increases in corporate value and compensation.The revised executive compensation system is more closely linked to the Mid-termManagement Plan 2024 and incorporates sustainability targets.Specifically,sustainability evaluations that had been used as an index for individual short-term incentive compensation(STI)are now treatedseparately and account for a ratio of 20%.In addition,an additional grant of shares equivalent to 10%of the standard amount of medium-to long-term incentive compensation(LTI)will begranted if the sustainability targets are achieved.Sustainability evaluation in STI will be aligned to materiality topics including Environment,Business with Integrity and Quality of Life,each linked tosub-materiality topics targets listed below.Going forward,Hitachi will enhance link of compensation and the growth of the company,cultivating a growth mindset and strive to achieve globalgrowth as One Hitachi.22Hitachi Sustainability Report 2024Materiality Targets Linked to Executive CompensationSustainability Evaluation Categories Related to STIsMaterialitySub-material topics targetEnvironmentDecarbonizationResourcecirculationBusiness with IntegrityOccupationalsafetyQuality of LifeEmployeehappinessSustainability Evaluation Categories Related to LTIsMaterialitySub-material topics targetQuality of LifePositive response rate regarding employee engagement:68%more as a wholegroupDiversity,Equity andInclusion(DEI)DEI achievement rate:(1)Ratio of women executives:15%or more(2)Ratio of non-Japanese executives:15%or moreAcquisition and development of digital talents:98,000 or more employees as awhole groupCompensation to Executive OfficersCarbon neutrality through the value chainContributing to CO2 reduction through businessEffective use of waterCreating a safe working environment without accidentsMore flexible working styles to increase engagement23Hitachi Sustainability Report 2024ManagementFramework for Promoting Sustainability StrategyEstablish a System to Promote SustainabilityStructureHitachi pursues sustainability initiatives across the group under the leadership of Chief Sustainability Officer,Lorena Dellagiovanna.At the HitachiGroup,the Senior Executive Committee,which includes the Growth Strategy Meeting,Risk Management Meeting,and Human Resource StrategyMeeting,deliberates and makes decision on important sustainability issues.These issues are submitted to the Board of Directors as needed.The Growth Strategy Meeting discusses matters relating to the management strategies necessary for the Groups growth.The Risk Management Meeting deliberates and makes decisions on important group-wide risks.The Meetings goal is to strengthen theCompanys management base linked to growth strategies through a unified and horizontal understanding of risks across the entire Group.The Human Resource Strategy Meeting is positioned as an advisory body to the President,who makes decisions related to the organization andhuman capital,and the Meeting discusses matters needed to foster an organization and culture aimed at the growth of the Group,and to secureand cultivate human resources.We promote sustainability practices throughout the entire Group under the leadership of the Chief Sustainability Officer.We hold the SustainabilityPromotion Meeting once or twice a year to discuss important sustainability initiatives and share information.The meeting is chaired by the ChiefSustainability Officer.The other members are the heads of the Business promotion divisions of each business unit(BU)and key Group companiesand the Sustainability Officers of regional headquarters.Individual sustainability themes such as carbon neutrality,circular economy,human rights due diligence(HRDD),diversity,equity,and inclusion(DEI),occupational safety and health,supply chains,quality assurance,etc.are promoted by meeting bodies consisting of responsible staff at BUsand principal Group companies as part of cross-organizational activities in the Hitachi Group,who discuss measures and share information acrossthe entire Group.Framework for Promoting Sustainability StrategyHitachi Sustainability Report 202424Overview of Sustainability Related Conference BodiesMeetingAttendeesPurposeFrequencySustainabilityPromotionMeetingChief Sustainability Officer,Business promotion divisionheads at BUs&key Group companies and RHQSustainability OfficersDeliberation,information sharing related to materialsustainability initiativesOnce ortwice per yearEco-ManagementMeetingHeads of Business promotion/Environment-related/MONOZUKURI(production)/Procurement divisions from BUs and key GroupcompaniesDeliberation,planning,and implementation of actionplans(environmental action plans)to achieve theHitachi environmental long-term goalsEvery half-yearEco-ManagementCN2030Promotion ProjectMeetingHeads and members of Environment-related/MONOZUKURI(production)divisions from BUs and key Group companiesMonitoring and implementation of CN action planand discussion of accelerationEvery half-yearEco-Management3RPromotion ProjectMeetingHeads and members of Environment-related/MONOZUKURI(production)divisions from BUs and key Group companiesPromotion of actions for 3R activities towardrealizing CEEveryquarterSustainableProcurementConferenceChief Procurement Officer,heads of the procurementdivisions at BUs and key Group companies,andindividuals responsible for and engaged in sustainableprocurementCommunicate the Hitachi Group sustainableprocurement policies and strategies to allprocurement divisions,improve knowledge andshare best practicesEvery half-yearHRDDExecutionManagersMeetingHRDD execution managers from BUs and key GroupcompaniesProvide information and knowledge necessary forHRDD implementation,and share status ofimplementation in BUs and key Group companiesOnce ortwice per yearSenior DEICouncilDEI leaders from each sector and BU(CDEIO and CHRO)Set our DEI Strategy,targets,and global priorityissuesEvery half-yearGlobal DEICouncilDEI leaders from BUs and key Group companiesImplement DEI policies,initiatives and share bestpracticesOnce pertwo monthsHealth andSafetyLeadersMeetingIndividuals responsible for health and safety at BUs,keyGroup companies(CHRO,officer in charge of health and safety)Instruct and communicate occupational health andsafety activity policies and measures,confirmprogress Share the details of important incidents related tooccupational health and safety,discuss measures toensure the prevention of recurrenceOnce per two monthsQA Division-ManagerLiaisonMeetingHeads of the quality assurance divisions at BUs and keyGroup companiesDiscuss and develop shared Hitachi Group qualityimprovement activity policies and measures for products and servicesEveryquarterHitachi Sustainability Report 202425Framework for Implementing the Hitachi GX StrategyAiming to be a global leader in green transformation(GX),Hitachi formulated a Green Strategy consisting of GX for CORE and GX for GROWTH,striving to put into place a framework to execute our strategy.With the aim of increasing our environmental presence,we established the Environmental Strategy Planning Division in April 2024.This Divisionwill facilitate the development of policies and roadmaps for our Green Strategy as a whole.Based on this strategy,our Internal EnvironmentInitiatives Division(which leads GX for CORE,our environmental activities within the Hitachi Group)and our Global Environment Business Division(which drives GX for GROWTH,Company growth through green businesses)collaborate with each of our business sectors,all fosteringenvironmental contributions in their respective business fields,to promote the Green Strategy throughout the group.Framework for implementing GX strategyHitachi Sustainability Report 202426ManagementEngagement and LeadershipStakeholder EngagementApproach&PolicyActivitiesIn its commitment to promoting the Social Innovation Business,Hitachi endeavors to accurately identify the various social issues facing eachcountry and region,and to work toward resolution of these issues through engagement in collaborative creation with a wide range of stakeholders,including customers,governments and municipalities,as well as academic and research institutions.In addition,with the goal of enhancing thevalue of our human capital,we work to promote for direct dialogues between the management and employees,who are an essential managementresource.Furthermore,with the recent rise in ESG investment,we actively engage in dialogues with shareholders and investors as well.Dialogues with StakeholdersDisclosure PolicySustainability LeadershipApproach&PolicyActivitiesHitachi work with diverse global initiatives and organizations to make rules that contribute to the creation of a sustainable society and to solvesocial issues.Industry Leadership and Policy RecommendationsAs part of developing Hitachis Social Innovation Business on a global scale,Hitachi views government institutions and private bodies in eachcountry and region of the world as important partners.Our Government&External Relations Group leads our efforts to strengthen ties with thesebodies.We collaborate with business locations worldwide to develop mutual relationships with local communities,working with governments andinternational organizations in each country.At the same time,the Group seeks new business opportunities for Hitachi,creating value based on thevarious regional social issues and policies.More frequently,governments are asking for our opinions.We also contribute to building better societies by making requests directly andproposing solutions through discussions in economic organizations and industrial bodies.Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 427Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 428Participation in Government Councils/Business and Industry AssociationsCouncil/GroupParticipantActivitiesPanel Discussion regardingInfrastructure SystemInternational ExpansionStrategy 2025(CabinetSecretariat of Japan)Executive Chairman ToshiakiHigashihara (attended as a private sectormember)Proposals regarding appropriate concrete measures to be taken based onthe Japanese governments Infrastructure System International ExpansionStrategy 2025Japan Business Federation(Keidanren)Executive Chairman ToshiakiHigashihara (attended as the Vice Chair)Disseminating opinions on important issues such as digital transformation(DX)and green transformation(GX)to accelerate Keidanrens effortsunder the theme of Society 5.0 for SDGs and to establish sustainablecapitalismJapan Electronics andInformation TechnologyIndustries Association(JEITA)President&CEO Keiji Kojima (attended as the Chairman)Examining and making proposals on the promotion of digital technology,data use,and market creation under the mission to achieve Society 5.0 Offering insights into paradigms of international legislation,agreements,and standards to develop digital trade and strengthen internationalcompetitivenessJapan Electrical ManufacturersAssociation(JEMA)Vice President Kenji Urase (attended as the Director)Promoting the sustainable development of electrical manufacturing bysubmitting opinions on various governmental and administrative policiesand promoting product safety awareness,international standardizationand compatibility evaluation,statistical research work,and thedevelopment of human capital for STEM fieldsJapan Machinery Federation(JMF)Executive Chairman ToshiakiHigashihara (attended as the Chairman)Providing opinions to the Diet and the government,conducting surveysand research on the machinery industry,and promoting internationalstandardization activities for the comprehensive progress anddevelopment of the machinery industryWorld Economic ForumExecutive Officers centered onExecutive Chairman ToshiakiHigashihara and President&CEOKeiji KojimaContributing to improve world affairs through discussions toward solvingglobal,regional,and industrial challenges by cooperating with leadersfrom economics,politics,and academia participating in the forum.Signingan open letter calling for commitment to net zero,shared globally aheadof COP28,as a member of the Alliance of CEO Climate LeadersJapan-U.S.Business CouncilExecutive Chairman ToshiakiHigashihara (attended as an ExecutiveCommittee member)Exchanging opinions and proposing policies regarding various issues withJapan-U.S.economic relations from the point of view of the Japan-U.S.business community as a wholeNational Association ofManufacturersHitachi Corporate Office inWashington DCLobbying and making policy proposals,as the largest association ofmanufacturers in the United States,to support the internationalcompetitiveness of member corporationsJapan Business Council inEurope(JBCE)Hitachi Europe GovernmentRelations OfficeMaking policy proposals to contribute to the further development of EU-Japan relations and the EU economy as the body representing Japanesecorporations in the EUEfforts in International Standardization ActivitiesHitachi considers international standardization as an activity to define the international rules necessary for achieving sustainable societies.Hitachialso recognizes that international standards are stipulated specifications or criteria endorsed by members representing specialized fields anddiverse stakeholders through fair discussion and international agreement.Therefore,Hitachi strives to solve social issues from a global perspective,engages in collaborative creation with a diverse range of stakeholders,including national and regional governments,academic and research institutions,corporations,NGOs and NPOs,and users around the world tocreate new social norms(rules),and contribute to sustainable societies through our Social Innovation Business.Hitachi believes international standardization is as important as R&D and intellectual property.Hitachi participates actively in standardizationactivities at international standardization organizations that include IEC*1,ISO*2,and ITU-T*3.Hitachi also participates in consortia established invarious regions and industrial fields around the world.For example,Hitachi is engaged in international standardization activities in various fields including efforts concerning the circular economy(ISO/TC*4 323),the environmental standardization for electrical and electronic products and systems(IEC/TC111),smart communityinfrastructures(ISO/TC 268/SC*5 1),and unmanned aircraft systems(ISO/TC 20/SC 16).In addition to the subjects around which there arealready debate and established technical committees within international standard organizations,we also give attention to subjects that still requirea space for international discussion and the creation of an international consensus going forward.For example,ISO/IWA 39*6 was finalized infiscal 2021,and Hitachi is working to create opportunities for various stakeholders to hold concrete discussions and come to an internationalconsensus based on the conclusions of this agreement,in the aim of achieving Society 5.0(an initiative led by the Japanese government that aimsto build a human-centered and sustainable society).Providing solutions consistent with international standards through these international standardization activities,Hitachi supports the sounddevelopment of global markets and facilitate innovation to resolve social issues.*1 IEC:International Electrotechnical Commission.An international organization composed of member countries and regions.*2 ISO:International Organization for Standardization.An international organization composed of member countries and regions.*3 ITU-T:International Telecommunication Union Telecommunication Standardization Sector.A specialized agency of the United Nations.*4 TC:Technical Committee*5 SC:Subcommittee*6 IWA:International Workshop Agreement,an ISO deliverable.ISO/IWA 39 provides gap analysis for standardization on sustainable human-centeredsocieties enabled with cyber physical systems.Participation in International Standardization ActivitiesAn employee member of the Hitachi team has been serving as a member of the SMB*,an upper-level committee supervising the IECsstandardization activities,since January 2023.Our employees can also be found in other key international positions,including chairpersons,secretaries,and committee managers to various bodies,and participate in a variety of technical committees within international standardizationorganizations.In recognition for these contributions to international standardization activities,two Hitachi employees received the IECs 1906Award and one employee received an Excellence Award from the ISO in 2023.*SMB:Standardization Management Board.Fifteen members are appointed from IEC member countries.Seven members are elected by the standingmember countries and eight by general election.Structure for Promoting International Standardization Activities at HitachiThe Hitachi Group Standardization Committee has been established to engage with international standardization activities involving groupwidecooperation.The Steering Committee*1 for the Standardization Committee selects areas for Hitachi to prioritize over the medium to long term.Each working group engages in detailed discussions and strategic activities toward international standardization.The Hitachi Group Standardization Committee is also working to develop human resources who will promote international standardizationactivities.This includes incorporating international standardization into our training programs for developing business leaders and running aninternal awards program to recognize those who have made contributions through their work for international standardization.*1 Steering Committee:Headed by the executive officer overseeing R&D,this entity includes chief technology officers of Hitachi business units and key Groupcompanies.The committee is responsible for decisions on cross-departmental and companywide standardization projects.Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 429Hitachi Group Standardization CommitteeMain Initiatives and Groups Hitachi Is Involved withBased on its corporate mission of“contribute to society through the development of superior,original technology and products,”Hitachi promotesits Social Innovation Business with the aim of contributing to the realization of a sustainable society.As part of this,to play its proper role as aglobal corporation,Hitachi actively participates in international initiatives and groups addressing social issues on a global scale.Initiative or GroupActivitiesUnited Nations GlobalCompact(UNGC)Became a participant in 2009.Joined workshops organized by the Global Compact Network Japan(GCNJ)onten different topics in fiscal 2022,including ESG,SDGs,and WEPs(theWomens Empowerment Principles)World Business Councilfor SustainableDevelopment(WBCSD)Became a member in 1995 Adopted SOS 1.5 project in 2020Business for SocialResponsibility(BSR)Became a member in 2007 and has participated in the Human Rights WorkingGroup(HRWG)since 2016World Economic ForumParticipated in Davos Forum since 2014Task Force on Climate-related FinancialDisclosures(TCFD)Announced support for TCFD in 2018 and disclosed climate-relatedinformation based on the TCFD recommendationsHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 430Initiative or GroupActivitiesJapan Climate Initiative(JCI)Became a member in 2018 Joined the JCI Race to Zero Circle established in 2021The Science Based Targetsinitiative(SBTi)Obtained accreditation of“Targets for 1.5(medium-term targets)”in2020Business Ambition for1.5Became a member in 2020,along with SBT1.5C certificationRace To Zero CampaignJoined in 2020,along with Business Ambition for 1.5C commitmentThe Valuable 500Became a member in 2021ESG Disclosure StudyGroup(EDSG)Participated as a founder and start-up member since 2020Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 431ManagementExternal Assessments and AwardsInclusion in ESG Indices(Hitachi,Ltd.)(Continued inclusion in 2024)MSCI Japan ESG Select Leaders IndexTHE USE BY HITACHI,LTD.OF ANY MSCIESG RESEARCH LLC OR ITS AFFILIATES（“MSCI”）DATA,AND THE USE OF MSCILOGOS,TRADEMARKS,SERVICE MARKSOR INDEX NAMES HEREIN,DO NOTCONSTITUTE A SPONSORSHIP,ENDORSEMENT,RECOMMENDATION,ORPROMOTION OF HITACHI,LTD.BY MSCI.MSCI SERVICES AND DATA ARE THEPROPERTY OF MSCI OR ITSINFORMATION PROVIDERS,AND AREPROVIDED AS-IS AND WITHOUTWARRANTY.MSCI NAMES AND LOGOSARE TRADEMARKS OR SERVICE MARKSOF MSCI.(Selected in 2023)MSCI Nihonkabu ESG Select Leaders IndexTHE INCLUSION OF HITACHI,LTD.IN ANYMSCI INDEX,AND THE USE OF MSCILOGOS,TRADEMARKS,SERVICE MARKSOR INDEX NAMES HEREIN,DO NOTCONSTITUTE A SPONSORSHIP,ENDORSEMENT OR PROMOTION OFHITACHI,LTD.BY MSCI OR ANY OF ITSAFFILIATES.THE MSCI INDEXES ARE THEEXCLUSIVE PROPERTY OF MSCI.MSCIAND THE MSCI INDEX NAMES ANDLOGOS ARE TRADEMARKS OR SERVICEMARKS OF MSCI OR ITS AFFILIATES.(Continued inclusion in 2024)FTSE4GoodFTSE Russell(the trading name of FTSEInternational Limited and Frank RussellCompany)confirms that Hitachi,Ltd.hasbeen independently assessed according tothe FTSE4Good criteria,and has satisfied therequirements to become a constituent of theFTSE4Good Index Series.Created by theglobal index provider FTSE Russell,theFTSE4Good Index Series is designed tomeasure the performance of companiesdemonstrating strong Environmental,Socialand Governance(ESG)practices.TheFTSE4Good indices are used by a widevariety of market participants to create andassess responsible investment funds andother productsHitachi Sustainability Report 202432Hitachi Sustainability Report 2024(Continued inclusion in 2024)FTSE Blossom Japan IndexFTSE Russell confirms that Hitachi,Ltd.hasbeen independently assessed according tothe index criteria,and has satisfied therequirements to become a constituent of theFTSE Blossom Japan Index.Created by theglobal index and data provider FTSE Russell,the FTSE Blossom Japan Index is designedto measure the performance of companiesdemonstrating strong Environmental,Socialand Governance(ESG)practices.The FTSEBlossom Japan Index is used by a widevariety of market participants to create andassess responsible investment funds andother products(Continued inclusion in 2024)FTSE Blossom Japan Sector Relative IndexFTSE Russell confirms that Hitachi,Ltd.hasbeen independently assessed according tothe index criteria,and has satisfied therequirements to become a constituent of theFTSE Blossom Japan Sector Relative Index.The FTSE Blossom Japan Sector RelativeIndex is used by a wide variety of marketparticipants to create and assess responsibleinvestment funds and other products(Continued inclusion in 2024)S&P/JPX Carbon Efficient IndexExternal Assessments Related to ESG(Awarded in 2023)Terra Carta SealHitachi,Ltd.has been awarded the 2023Terra Carta Seal by the Sustainable MarketsInitiative.The Terra Carta Seal recognizesglobal companies that are actively leading thecharge to create a climate and nature-positivefuture.(Awarded in 2024)SX BrandHitachi,Ltd.has been selected as a SX Brand2024 by the Ministry of Economy,Trade andIndustry and the Tokyo Stock Exchange.Theaim of the SX Brand project is to select andaward a group of progressive companies thatenhance their ability to create a source offunds for growth in a sustainable manner andincrease corporate value throughsustainability transformation*1.*1 SX Brand is an initiative in which companiesstrive to improve long-term and sustainablecorporate value by synchronizing thesustainability of society with that of itself whilecarrying out the necessary management andbusiness reforms to achieve suchsynchronization.(Rated in 2024)MSCIHitachi,Ltd.earned an AA rating under theMSCI ESG Rating.Hitachi Sustainability Report 202433Hitachi Sustainability Report 2024(Rated in 2023)CDPHitachi,Ltd.was selected for the CDPs AList,the highest rating for climate change,forthree consecutive years.A List,the highestrating given by the CDP for companies,in thetwo areas of climate change and watersecurity.The company is also selected as aSupplier Engagement Leader,the highestrating for supplier engagement.(Continued inclusion in 2023)ISS ESGHitachi,Ltd.has also been certified as Primein the ESG Corporate Rating by ISS ESG.Human Resources Awards and RecognitionKurumin CertificationHitachi,Ltd.received Kurumin certification from the Ministry of Health,Labour and Welfare in 2011.This certification was granted underJapans Act on Advancement of Measures to Support Raising Next-Generation-Children,in recognition of Hitachis achievement indeveloping and implementing action plans supporting child care,helping employees work with the peace of mind that comes from agood work-life balance.In addition to Hitachi,Ltd.,several other groupcompanies in Japan received Kurumin certification including HitachiHigh-Tech,Hitachi Systems,and Hitachi Solutions.Eruboshi CertificationHitachi,Ltd.pursue diversity as an important component ofmanagement strategy and strives to create work environments thatenable diverse talent to play active roles.In recognition of theseinitiatives,we received Eruboshi certification,which is conferred tocompanies that implement exceptional measures under Japans Act onPromotion of Womens Participation and Advancement in theWorkplace.In addition to Hitachi,Ltd.,several other group companiesin Japan have received Eruboshi certification,including Hitachi High-Tech,Hitachi Systems,and Hitachi Solutions.Hitachi Sustainability Report 202434Hitachi Sustainability Report 2024Received Award in the Technology Utilization Categoryat the 2024 Nikkei Smart Work AwardsHitachi,Ltd.received an award in the Technology Utilization Categoryat the 2024 Nikkei Smart Work Awards sponsored by Nihon KeizaiShimbun,Inc.This award recognizes advanced companies thatincrease productivity and achieve sustainable growth through workstyle reform.Hitachi,Ltd.received the highest overall ranking of 5 stars(deviation value of 70 or higher),receiving the highest level of S inall three evaluation categories.In addition to efforts to improve inter-organizational communication using AI and the use of AI atmanufacturing sites,Hitachi also received high praise for its efforts tospeed up the search for materials that are likely to have desiredproperties by introducing materials informatics that utilize knowncompound data accumulated by its unique natural language processingtechnology and new compound data generated by AI.Hitachi alsoreceived high scores in technology evaluations by reporters.Hitachi received Award in the Technology Utilization Category at the2024 Nikkei Smart Work Awards(Japanese only)Awarded Gold in the 2023 Pride IndexHitachi,Ltd.has been recognized for its efforts to promote diversity,equity and inclusion,including LGBTQIA groups.Hitachi,Ltd.received the Gold award,the highest award in the 2023 Pride Index,which is an index sponsored by work with Pride that evaluatesinitiatives related to sexual minorities.Pride Index(Japanese only)Awarded Human Capital Leaders and Human CapitalManagement Quality(Gold)in the 2023 Human CapitalSurveyHitachi,Ltd.has been awarded the Human Capital Leaders andHuman Capital Management Quality(Gold)in the 2023 Human CapitalSurvey jointly conducted by the HR Technology Consortium,HRResearch Institute(ProFuture Inc.),and MS&AD Interrisk Research&Consulting,Inc.The survey investigates the status of efforts bycompanies and organizations regarding their human capitalmanagement and disclosure.Hitachi,Ltd.has been continuouslyworking on the evolution of human capital management for more than10 years,and has implemented this framework on a global basis.Consequently,Hitachi received the awards in recognition of its clearand detailed disclosure of the link between its management and humanresources strategies.Hitachi,Ltd.receives the Human Capital Leaders and Human CapitalManagement Quality(Gold)awards in the 2023 Human Capital Survey(Japanese only)Ranked First in industry for Four Consecutive Years inNikkei Womans 100 Best Companies Where WomenActively Take PartHitachi,Ltd.has claimed top spot for the fourth consecutive year in the2024 edition of Nikkei Womans 100 Best Companies Where WomenActively Take Part in the electrical,machinery,and automobile-relatedindustry category(36th out of 479 responding companies in allindustries).This survey measures and gives scores based on fourindicators:1)promotion to managerial positions,2)promotion ofwomens active engagement,3)work-life balance and 4)workstylediversity.In addition to career support including mentoring for womenand dialogue with top executives,Hitachi has been strengthening itsequality and inclusion measures,such as establishing a womenshealth consultation desk,striving to create an environment in which allemployees can thrive.Hitachi Sustainability Report 202435Hitachi Sustainability Report 2024Social Innovation BusinessSocial Innovation BusinessAiming for a Sustainable SocietyApproach&PolicyHitachi has identified six material topics and 15 sub-material topics as important management issues and pursues sustainability management asthe core of business strategy.The Mid-term Management Plan 2024 focuses on business that emphasizes both environmental challenges and the wellbeing of each and everyperson.Based on this strategy,we strive to grow and expand our Social Innovation Business.Hitachis Social Innovation BusinessApproach&PolicyHitachi aims to support peoples quality of life with data and technology that fosters a sustainable society,while respecting planetary boundariesand realizing wellbeing for all individuals.The key to achieving this goal is the growth of our Social Innovation Business,which is business thatprovides solutions for social and customer challenges through co-creation with various partners by leveraging IT x OT x Products and Lumada.Hitachis Social Innovation Business CasesActivitiesMaterialityAdvancing a Sustainable Energy Future for AllHitachi Energy is a global technology leader that is advancing a sustainable energy future for all and supporting the worldwide efforts in reducingthe impact of greenhouse gases.The elimination of SF6 from high-voltage electrical substation equipment is widely accepted as being animportant step toward reaching carbon neutrality and enabling more sustainable grid operations.EconiQ,Hitachi Energys eco-efficient portfoliofor sustainability,accelerates the industrys transition away from SF6 with products,services,and solutions,that are proven to deliver exceptionalenvironmental performance.Over the last two years,Hitachi Energy has made substantial progress in commercializing high-voltage EconiQ products that eliminate SF6 withscalable solutions for the lowest carbon footprint.Various high-voltage SF6-free EconiQ products have been installed across the globe,including72.5 and 145-kilovolt(kV)Live Tank Breakers,145 kV gas-insulated switchgear,and 420 kV gas-insulated lines.An important milestone was the launch of the 420 kV SF6-free circuit breaker in 2022,a breakthrough technology that unlocks the widest range ofeco-efficient switchgear applications and accelerates the energy transition.Another innovation,EconiQ retrofill,replaces SF6 in installed high-voltage gas-insulated lines with an eco-efficient gas mixture to improve the environmental and life cycle performance of the equipment.Thecommercialization of SF6-free alternatives is important as it unlocks new decarbonization pathways for transmission system operators.HitachiEnergy is reinforcing its commitment toward a carbon-neutral energy future through EconiQ.Addressing the growing demand for eco-efficientsolutions,Hitachi Energy will continue to expand the SF6-free portfolio across the entire high-voltage switchgear range,demonstrating thescalability of the portfolio and strengthening the companys position as a sustainable technology leader within the industry.Hi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 436EconiQ of Hitachi EnergyCo-creation on Advanced Technologies Leading Environmental and Social Value CreationIn Andorra,Hitachi Energy is working as a partner with the countrys public electricity supplier,Forces Elctriques dAndorra(FEDA),to meetgrowing electricity demand while protecting the natural environment and peoples livelihoods.Located inland in Europe with an area of 468km2,approximately 92%of Andorras land is covered in forest.The country therefore puts great effort into environmental conservation to mitigate theeffects of climate change.Hitachi Energy provides a new renewable energy solution that can guarantee the growth of the electricity supply while working on FEDAs LaGonarda substation to optimize the distribution of electricity between two valleys in the north of the country.Operations at this substation havebeen made possible through collaboration between companies that share a common vision and passion for a sustainable energy future.Whenbuilding the substation,environmental impact study was conducted to check the impact on local residents,flora and fauna and to ensure thesubstations efficiency.Measures are then taken to minimize the impact on the environment when building substations in woodland close toresidential areas.During this process,Hitachi Energy was selected by FEDA as a partner capable of providing sustainable and environmentallyfriendly power equipment.Specifically,Hitachi Energy provided Europes first EconiQ transformer to FEDA.As well as its low carbon footprint,Hitachi Energys 20/26 MVA,106/21 kV three-phase power transformer also emits extremely low levels of noise,minimizing noise disturbance to local residents and wildlife.It is also insulated and comes with optimal cooling technology to suppress vibration and electromagnetic interference beyond required standards.To further improve safety,the transformer was filled with high fire point fluid and inside a room with an isolating wall.Those supplementarycharacteristics not only help in reducing noise levels but also contribute to physically isolate the transformer to create extra containment levels incase of transformer failure.The collaboration between FEDA and Hitachi Energy has improved operational efficiency and reduced the carbon footprint by approximately 15%compared to conventional designs.Hitachi Energy also provides a Life Cycle Assessment(LCA)report to enable FEDA to make decisions basedon a thorough assessment of the transformers environmental performance and service life as an asset.A disposal manual is also provided toensure that,when the time comes to dispose the transformer,materials are salvaged safely and with minimal impact on the environment.This project,with co-creation at its heart,considers the lifecycle from raw material procurement to disposal at every stage of the order process toproduct evaluation.Hitachi Energy will continue to work towards achieving a decarbonized society through its business.FEDAs La Gonarda substation equipped with a Hitachi Energy EconiQ transformerHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 437Hitachi Rail Develops Europes First Tribrid TrainAs the EU and European governments set goals to achieve net zero by 2050,decarbonization solutions are being sought for various transport.Due to cost of new infrastructures,there are thousands of tracks that are unlikely to be electrified in Europe.Electrification,construction andmaintenance of overhead lines are costly and take time to deliver.As a result,the proportion of electrified railway lines across Europe remainsbelow 60%.To address such social challenges,Hitachi Rail has developed Europes first tribrid train derived from Hitachi Rails Masaccio Platform and called“Blues”in collaborations with the customer.Blues is a train that runs off three different power sources that include electricity,batteries,and a dieselengine.On electrified routes,it uses pantographs to draw power from the overhead lines,but on non-electrified lines,it primarily operates usingbatteries.When the batteries are low on charge,it switches to the diesel engine.This flexibility enables the train to operate smoothly andseamlessly on both electrified and non-electrified sections,reducing CO2 emissions and saving fuel.Furthermore,by shutting off the engine whenapproaching,stopping at,and departing from stations,fuel consumption can be reduced by up to 50%compared to conventional diesel trains,witha significant reduction in noise as well.Moreover,the Blues is equipped with the European Rail Traffic Management System(ERTMS),a single European signaling and speed controlsystem that ensures operability across national railway systems.ERTMS monitors and controls train speed,acceleration,and braking systems tooptimize energy consumption and reduce CO2 emissions,while automatically activating train safety features in an emergency.Every feature and solution are designed to optimize energy consumption,such as the innovative air conditioning system that regulates itsfunctioning based on real time number of passengers on board and the LED lighting system that contributes to save energy significantly.Blues Train introduction not only addresses environmental concerns but revolutionizes the passenger experience thanks to its distinctive designimproved by merging Italian and Japanese cutting-edge technologies and well-proof know-how in the industry.The four-car layout can host up to300 passengers,reaching a maximum speed of 160 km/h,thereby enhancing performance and reducing journey times.Blues Train embraces the most innovative solutions to improve passengers journey(e.g.passengers information screens,passengers countingtechnology,drinks and snacks dispenser area,bike areas and high luggage transport capacity,USB and 220V power sockets for greaterconnectivity)and ensures passengers safety controls thanks to closed-circuit television(CCTV)surveillance.Hitachi Rail has delivered the Blues model to Italys railway operator,Trenitalia.Trenitalia is on track to modernize its trains and transform regionalrailway systems with Blues trains now operating in eight regions across the country.Looking ahead,Hitachi Rail aims to leverage its advancednext-generation hybrid technology to support Europes train operators and their moves toward decarbonization,while offering secure,comfortable,and highly convenient transportation options.Blues is Europes first tribrid train developed by Hitachi RailHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 438Supporting High-capacity EV Charging at Major Commercial Truck DepotHitachi Energy is supporting US-based Penske in its efforts to deploy electric vehicles to its customers by providing the state-of-the-art Grid-eMotion Fleet EV charging system.Grid-eMotion Fleet is an integrated DC fast-charging grid-to-plug charging solution.Penske is rolling this outat a major commercial truck depot in Stockton,California,to support high-capacity charging for its electric vehicles.In this groundbreaking project,Grid-eMotion Fleet offers scalability and multi-megawatt high-power charging capacity tailored to meet thedemanding requirements of truck fleets of varying sizes.System features include space savings of up to 60 percent compared to conventionalcharging systems,and reduced cabling needs by up to 40 percent,all while maintaining high-capacity charging performance.Investing in electric vehicle and charging solutions enables customers to decarbonize their fleets and comply with emissions regulations.As such,building a robust public and private charging infrastructures is essential.Penske has been a pioneer in adopting battery electric commercialvehicles and has made substantial investments in testing,maintaining,and expanding charging infrastructure to support these vehicles.Thecompany has been continually testing and operating EV trucks across its leasing,rental and logistics fleets in various industries including retail,manufacturing,grocery,quick-service restaurant chains,medical,and automotive parts.Hitachi Energys Grid-eMotion Fleet charging system in Stockton is already being used to charge a growing number of small,medium and heavy-duty trucks.Its 10 charging stations can simultaneously charge 10 trucks at a maximum of 100kW each,or five trucks at a maximum of 200 kWeach,showcasing its versatility and scalability for Penskes fleet operations.Additionally,Hitachi and Penske are exploring AI-based smart charging solutions to optimize vehicle charging processes.This endeavor isexpected to unlock fresh prospects in service,maintenance and electric vehicle charging throughout Penskes fleet.Penskes EV charging station equipped with Hitachi Energys charging solution,Grid-eMotion FleetHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 439Consolidated Digital Backup to Boost CybersecurityHitachi Vantara has developed a robust data protection and digital backup system for Germanys RWTH Aachen University,helping the universitybolster its cybersecurity measures.The German State of North Rhine-Westphalia(NRW)is a leading industrial region in Germany and home to 18.1 million people.NRW is focusingon strengthening the digital capabilities of its 42 public universities and higher education institutions to improve and streamline services across thehigher education sector.As part of this innovation program,NRW has decided to consolidate digital infrastructure services,including data backupand recovery.RWTH Aachen University,one of Germanys Universities of Excellence and home to over 47,000 students,has been spearheading the drive tocreate a standardized backup and recovery service.Traditionally,the design and operation of data backup and recovery processes and solutionsat universities in NRW varied by school,faculty,and research institute,with some more reliable than others.To boost productivity acrossuniversities,increase cost-efficiency and strengthen protection against cyberthreats such as ransomware,the state decided to fund a project tobuild a consolidated digital infrastructure service for all universities.Working closely with Hitachi Vantara,RWTH deployed Hitachi Content Platform(HCP),a high-performance,scalable distributed object storagesolution,across six data centers at RWTH Aachen.The system was built with six clusters,each with 12 nodes and a total capacity of 56 PB,toensure that if one location fails due to a major disaster such as a power outage or fire,there will be no impact for users or mission-critical data.The university also launched a large-scale IT service program called Datensicherung.NRW(NRW Data Backup),available to all universities in thestate,with the HCP playing a crucial role in its operation.By utilizing NRW Data Backup,universities in the state of NRW can more easily and cost-efficiently minimize the risk of data loss.RWTH Aachen University has deployed the Hitachi Content Platform(HCP)to its data centersRWTH Aachen Enhances Cybersecurity with Scalable Object Services|RWTH Aachen University Customer Story|Hitachi VantaraHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 440Initiatives to Develop HealthcareAmong numerous social issues,the increasing prevalence of serious illnesses such as cancer accompanying an aging population is becoming asignificant challenge not only in Japan but also worldwide.Because of this,there are high hopes for development in the healthcare field.Throughcollaborative creation with medical and pharmaceutical professionals,Hitachi is contributing to the development of global healthcare,includingearly detection of diseases and less invasive treatments,by promoting the advancement and digitalization of diagnosis and treatment.In the field of diagnostics,Hitachi primarily develops and provides measurement and analysis systems used in the biomedical and life sciencefields,supporting accurate and reliable in vitro diagnosis.In the field of clinical chemistry and immunological blood testing,in particular,HitachiHigh-Tech analytical systems are used to conduct approximately 20 billion tests per year,supporting the advancement of diagnosis and therapyplanning around the world.With regard to new in-vitro diagnostics,we have invested in U.S.company Invivoscribe,Inc.,a global provider of testingservices mainly for blood cancers,collaborating with them to advance molecular diagnostics.This collaboration will enable us to contribute to theearly detection of cancer,therapy planning,and drug development by pharmaceutical companies,leading to healthier and safer societies.Additionally,we have begun developing a new genetic testing system in collaboration with Sysmex Corporation.This genetic testing system will bedeveloped based on Hitachi High-Techs capillary electrophoresis sequencer.Initially focusing on clinical implementation in the field of cancer,theaim is to gradually expand into other disease areas.Hitachi High-Tech has opened the Healthcare Innovation Center Tokyo,an integrated laboratory near Tenkubashi Station in the Haneda area,which serves as a place for collaborative creation with customers and knowledge sharing.We will use the innovations created at the center toimprove the quality of life for people all over the world.Hitachi has been actively engaged in advancing radiation cancer therapy and regenerative medicine in therapeutics.Radiation therapy is a cancertreatment method that involves treating the affected area without the need for surgical removal,thereby putting the body under relatively lessstress.In May 2023,Taiwans first heavy ion therapy system commenced operations at Taipei Veterans General Hospital.Additionally,in July,theHKSH Medical Group,with the Hong Kong Sanatorium&Hospital under its umbrella,and in August,the National Cancer Centre Singapore,started operations of proton therapy systems,reflecting the growing use of radiation therapy systems around the world.To date,more than100,000 patients have been treated with Hitachis system(as of December 2023).In addition,by leveraging our expertise accumulated in radiation therapy systems,we have developed a new X-ray therapy equipment,the OXRAYlinear accelerator,taking it to market in July 2023.Hitachi will contribute to the further development of cancer treatment by providing minimallyinvasive,cost-effective radiotherapy systems that are tailored to each patient,helping to create a society without fear of cancer.In regenerative medicine and cell therapy,we are conducting joint research with Kyoto University and Rebirthel Co.,Ltd.to promote the use ofallogeneic T-cell therapy,an effective treatment for cancer.The widespread use of allogeneic T-cell therapy,which is more versatile and allows forthe treatment of larger numbers of patients,will require the development of automated cell culture technology that supplies large quantities of cellswith consistent quality.Hitachi will contribute to the practical application of this technology through this joint research.We have also begun joint research with Mass General Brigham(MGB)of Harvard Medical School,the world-renowned medical research institutionin the United States,in the field of gene and cell therapy to overcome intractable diseases.Hitachi will leverage its diverse technology portfolio,including its automated cell culture and digital technologies,to contribute to the practical application of the new therapy pioneered by MGB.In April 2024,Hitachi integrated some if its businesses,including its radiation therapy system and automated cell culture system for regenerativemedicine,into Hitachi High-Tech.By further integrating digital technologies into diagnosis and treatment,we aim to create healthcare innovations,from high-quality,high-function diagnostics and minimally invasive treatments,to optimal diagnosis and treatment,and personalized medicine.Healthcare Innovation Center TokyoThe OXRAY linear acceleratorHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 441Creating a Happy WorkplaceThe change from the mass production and consumption society of the 20th century to a 21st century society that values the environment anddiversity is rapidly occurring.So there is a growing movement to review companies,work styles,and communities from the perspective ofhappiness or,in other words,wellbeing.Hitachi established Happiness Planet,Ltd.in 2020 to develop software applications and services that use data to enable people and groups to behappy and productive.By analyzing large amounts of data,we discovered that people in happy and productive groups are more likely to havetriangular-shaped connections,whereas those in unhappy groups have V-shaped ones.The Happiness Planet application helps to create suchtriangular connections,i.e.Factor X for happy and productive people.Since organizations tend to have V-shaped or vertical relationships with people,we use digital technology to help establish the triangularrelationships that lead to the creation of happy and productive groups.Facilitated by smartphone or PC apps,people are put into groups of threeeach week in order to create triangular connections and interactions that lead to mutual understanding.By fiscal 2023,Happiness Planet have provided services to 200 companies and over 40,000 users.This creation of triangular relationships wasfacilitated in a wide range of organizations in various sectors,from large corporations to small-and medium-sized enterprises,in areas rangingfrom IT,manufacturing,finance,healthcare,and nursing.All Nippon Airways Co.,Ltd.(ANA)held a team competition event called the ANA GroupHappiness Cup using the Happiness Planet app to give employees a better sense of connection between each other and help stimulatecommunication.The Hitachi Group used this app to create triangular relationships between new employees.Use of the app strengthened peerrelationships,increased employee motivation,and improved performance in examinations for IT certifications.Working with various partners toleverage our strengths in IT,OT,and products,Hitachi will continue to pursue initiatives to create happy workplaces,happy lives,and wellbeing insociety.Triangular Relationships Essential for Wellbeing in anOrganizationSmartphone App ScreenshotHi t ac h i Su s t ai n ab i li t y Re po rt 2 0 2 442EnvironmentalAdvancing Our Environmental Vision and Long-term EnvironmentalTargets“Environmental Vision”and“Hitachi Environmental Innovation 2050”Approach&PolicyStrategy&TargetTaking into account the growing urgency of environmental issues in the world and the management policies,Hitachi formulated an EnvironmentalVision that clearly outlines our vision for society from a long-term perspective.In working toward achieving this vision,we have established a set oflong-term environmental targets aimed at building a decarbonized society,a resource-efficient society,and a harmonized society with nature underthe banner of Hitachi Environmental Innovation 2050 and are working to advance them.With the aim of achieving a decarbonized society and based on the Paris Agreement and the discussions within the international community thatfollowed its signing,Hitachi has set targets aimed at limiting the average global temperature rise to 1.5C as compared to pre-industrial levels.Hitachi set the goal of achieving carbon neutrality by fiscal 2030 in our factories and offices,and by fiscal 2050 throughout our value chain.We arecurrently engaged in measures to achieve these goals.To meet our goal of Achieving a Resource-Efficient Society,we aim to create a sustainable society,while keeping the transition to a circulareconomy in mind,by improving the efficiency of water and resources use at Hitachi by 50%by fiscal 2050(compared to fiscal 2010 levels).To meet our goal of Achieving a Harmonized Society with Nature,we strive to minimize our impact on natural capital by keeping a close eye oninternational initiatives such as the 15th Conference of the Parties(COP15)to the Convention on Biological Diversity,held in December 2022,andthe Task Force on Nature-Related Financial Disclosure(TNFD).Hitachis environmental initiatives,including the achievement of these long-term environmental targets,are mandated by the short-termEnvironmental Action Plan which is updated every three years and pursued Groupwide.Achieving a Decarbonized SocietyAchieving a Resource-Efficient SocietyAchieving a Harmonized Society with NatureEnvironmental Vision and Long-term Environmental Targets:Hitachi Environmental Innovation 205043Hitachi Sustainability Report 2024Progress in Reaching Hitachi Environmental Innovation 2050 TargetsActivitiesWe are making progress with major Hitachi Environmental Innovation 2050 targets,as shown below.We are generally on track,and we willcontinue strengthening our environmental activities to achieve these targets.Regarding our long-term value chain target to help build adecarbonized society,we are developing activities which help to reduce CO2 emissions by providing products with top-tier environmentalperformance.For a Decarbonized SocietyReduced CO2 Emissions at Business Sites(Factories and Offices)FY2023TargetFY2023ResultFY2030TargetFY2050TargetReduction Rate of Total CO2(Compared to FY2010 Hitachi Group)35trbonNeutralityCarbonNeutralityActivities and Achievements at Business Sites(Factories and Offices)For a Resource Efficient SocietyEnhanced Efficiency in the Use of Waste and Valuable Generation at Business Sites(Factories and Offices)FY2023TargetFY2023ResultFY2030TargetFY2050TargetReduction Rate in Waste and Valuables Generation per Unit(Comparedto FY2010 Hitachi Group)17P%reductionManagement of Waste and Valuables Generated at Business SitesEnhanced Efficiency in the Use of Water at Business Sites(Factories and Offices)FY2023TargetFY2023ResultFY2030TargetFY2050TargetReduction Rate in Water Use per Unit(Compared to FY2010 HitachiGroup)230P%reductionManagement of Water Use at Business Sites44Hitachi Sustainability Report 2024Green StrategyApproach&PolicyGreen Strategies for Sustainable GrowthThrough its Social Innovation Business,Hitachi is leading the way in resolving global environmental issues,helping to create a sustainable societythat balances protecting the global environment with quality of life(QoL).To realize this vision,Hitachi is promoting a green strategy consisting of two pillars.The first pillar,known as GX for CORE,accelerates the HitachiGroups own green transformation.The second pillar,GX for GROWTH,provides innovative solutions,strongly supporting green transformation for customers and society.By working on both pillars,GX for CORE and GX for GROWTH,Hitachi will accelerate the deeper development of technology and expertise,thusimproving the environmental value it provides on a continued basis.Through the steady implementation of our green strategy,we will acceleratethe realization of a decarbonized society,a resource-efficient society,and a society in harmony with nature,paving the way for a sustainable futurewhere people can live with peace of mind.The Hitachi Green Strategy45Hitachi Sustainability Report 2024Environmental Action PlanApproach&PolicyTo achieve its Environmental Vision and the Hitachi Environmental Innovation 2050 long-term environmental targets,Hitachi draws up anEnvironmental Action Plan containing indicators and targets for the three-year period covered by the Mid-term Management Plan and steadilypromotes its implementation.Environmental Action Plan for 2024(Fiscal 20222024)Hitachi pursues environmental activities under the Environmental Action Plan for 2024(Fiscal 20222024)that were based on the 2024 Mid-termManagement Plan.The targets set for fiscal 2023 and our results are as follows.Environmental Action Plan for 2024Our environmental activities and targets are updated every three years with a view to achieving our long-term environmental targets.Environmental ManagementItemsIndicatorsFY2023TargetsFY2023Results(Achievement Level)Final FY(2024)TargetsEnvironmentalhuman capitaldevelopmentPromoteenvironmentalhuman capital developmentPromote environmental human capitaldevelopmentEnvironmental human capital development mindfulof changes in personnel composition,includinggenerational shifts A Decarbonized Society:Achieved,:Partially achievedItemsIndicatorsFY2023TargetsFY2023Results(Achievement Level)Final FY(2024)TargetsFactories andofficesReduce total CO2Reduction rate of total CO2*1(compared toFY2010)35tP%Improvetransportationenergyconsumption per unit(Japan)Improvement rate of transportation energyconsumption per unit(Japan)*2(compared to FY2020)30%4%Products andservicesReduce CO2emissions ofproducts andservicesReduction rate of CO2 emissions per unit(compared to FY2010)13$%CO2 avoided emissionsTarget:CO2 avoided emissions of 100 million metrictons per year(FY2024)Forecast:CO2 avoided emissions of 153 millionmetric tons per year*3Promote eco-designEnvironmentally conscious design assessmentsand LCA application rates for newly developedand designed productsTarget:Full application Eco-Design for all newlydeveloped products FY2023 Results:198 products identified as subjectof Eco-Design46Hitachi Sustainability Report 2024 A Resource Efficient Society:Achieved,:Partially achievedItemsIndicatorsFY2023TargetsFY2023Results(Achievement Level)Final FY(2024)TargetsProducts andservicesPromote eco-designEnvironmentally conscious design assessmentsand LCA application rates for newly developedand designed productsTarget:Full application Eco-Design for all newlydeveloped products FY2023 Results:198 products identified as subjectof Eco-DesignFactories andofficesEnhanceefficiency in theuse of resourcesNumber of sites achieving zero landfill waste*4124146158Reduction rate in waste and valuablesgeneration per unit(compared to FY2010)17 %Reduction rate in water use per unit(comparedto FY2010)230$fective utilization rate of plastic waste81%Water risksRespond to waterrisksResponding to water risksMinimization of business impacts regarding waterrisks A Harmonized Society with Nature:Achieved,:Partially achievedItemsIndicatorsFY2023TargetsFY2023Results(Achievement Level)Final FY(2024)TargetsWater risksRespond to waterrisksResponding to water risksMinimization of business impacts regarding waterrisksChemicalsubstanceReduce chemicalemissionsReduction rate in chemical atmosphericemissions per unit(compared to FY2010)6%8osystempreservationImpact on naturalcapitalCalculation of negative impacts(business unit/group company-level LCA implementation)/Calculation ofpositive impacts(forest conservation activities)*1 Reduction rate of total CO2:Indicator representing CO2 emissions from Hitachis consumption of energy alone*2 This is a target for Japan only.Targets in other countries are set on a voluntary basis*3 Three-year average*4 Pursued in assumed conformance with regulations,conditions,etc.Less than 0.5GHitachi Sustainability Report 2024EnvironmentalEnvironmental GovernanceFramework for Promoting Environmental GovernanceStructureTo achieve our Environmental Vision and Hitachi Environmental Innovation 2050 long-term targets,Hitachi is building a global system to supportdecision-making and environmental management for a total of 574 companies,comprising Hitachi,Ltd.and 573 consolidated subsidiaries(as ofMarch 31,2024).In fiscal 2022,we established the Sustainability Promotion Meeting,chaired by the Chief Sustainability Officer and consisting mostly of managersfrom each business unit(BU)and major group company.The purpose of these meetings is to discuss and share information related toenvironmental issues and other important matters related to sustainability.The Senior Executive Committee discusses and makes decisionsrelated to important environmental matters for achieving our long-term environmental targets,including decarbonization,water use,and resourcecirculation.Matters are referred to the Board of Directors when necessary.Hitachi established separate meetings to address important topics such as carbon neutrality and the circular economy.The main membersattending these meetings are individuals responsible for environmental activities at each BU and major group companies.Through these meetings,we pursue environmental activities across the Hitachi Group,examining measures and sharing information.Aiming to be a global leader in green transformation(GX),Hitachi formulated a Green Strategy consisting of GX for CORE and GX for GROWTH,striving to put into place a framework to execute our strategy.In an effort to enhance our presence in the environmental field,we established our Environmental Strategy Planning Division in fiscal 2024.ThisDivision will develop policies and a comprehensive roadmap for our Green Strategy.Based on this strategy,our Internal Environment InitiativesDivision leads environmental activities(GX for CORE)within the Hitachi Group.At the same time,the Global Environment Business Group drivesgrowth(GX for GROWTH)through green businesses.In addition,the business sectors foster environmental contributions through their respectivebusiness fields,collaborating to implement green strategies across the group.Hitachi,Ltd.,a company with a Nominating Committee,etc.under the Companies Act,has adopted a committee system to s
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Impact Report2023/2024Table of ContentsOverview3OurCompany4Highlights5CEOletter6Selectawardsandrecognition8OurcorporateStrategicFramework9Ourapproachtosustainability10OurpriorityUNSustainableDevelopmentGoals(SDGs)17AccesstoHealth18Discoveryandinvention22Availability28Affordabilityandsustainableaccess33Strengtheninghealthsystemsandaddressinginequity40Employees45Globaltalentmanagement46Diversity,equityandinclusion55Healthandsafety62Compensationandbenefits70EnvironmentalSustainability73Climate,energyandairemissions74Water84Biodiversity89Waste92Materials96Ethics&Values101Ethicalcorporatebehavior102Customerhealthandsafety106Supplychain113Humanrights122Privacyanddatasecurity124Governmentrelations127Reportingindices130GlobalReportingInitiative(GRI)131SustainabilityAccountingStandardsBoard(SASB)140UNGlobalCompact(UNGC)143UNSustainableDevelopmentGoals(SDGs)144CultureofHealthforBusiness(COH4B)145StakeholderCapitalismMetrics147About this reportThisisthe2023/2024ImpactReportofMerck&Co.,Inc.,Rahway,NJ,USA,which is known as MSD outside the United States(U.S.)andCanada.AlldataiscurrentasofDecember31,2023,unlessotherwisenoted.InformationondocumentsfiledwiththeSecurities and Exchange Commission(SEC),such as our 2023 Form 10-Kand2024proxystatement,canbefoundonourcorporatewebsite,whichisintendedonlyforresidentsoftheU.S.andCanada.ToalignwithU.S.governmentreportingrequirements,thedataforgenderdiversityinthisreportusesthetermsmenandwomen.Werecognizeandembracethegenderspectrumanddiversityofouremployees,andhaveinternallyestablishedvoluntarySelf-IDoptionsforemployeestoself-reportontheirgenderidentity.Thetotalsinthisreportmaynotequal100percentduetoroundingoremployeeswhohavenotreportedtheirgenderand/orrace/ethnicity.Forward-looking Statement of Merck&Co.,Inc.ThisreportofMerck&Co.,Inc.,Rahway,NJ,USA(the“Company”)includes“forward-lookingstatements”withinthemeaningofthesafeharborprovisionsoftheU.S.PrivateSecuritiesLitigationReformActof1995.Thesestatementsarebased upon the current beliefs and expectations of the Companys managementandaresubjecttosignificantrisksanduncertainties.There can be no guarantees with respect to pipeline candidates that the candidates will receive the necessary regulatory approvals orthattheywillprovetobecommerciallysuccessful.Ifunderlyingassumptionsproveinaccurateorrisksoruncertaintiesmaterialize,actualresultsmaydiffermateriallyfromthosesetforthintheforward-lookingstatements.Risks and uncertainties include but are not limited to,general industry conditions and competition;general economic factors,includinginterestrateandcurrencyexchangeratefluctuations;the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally;global trends toward health care cost containment;technological advances,new products and patents attained by competitors;challenges inherent in new product development,including obtaining regulatory approval;the Companys ability to accurately predict futuremarketconditions;manufacturingdifficultiesordelays;financialinstabilityofinternationaleconomiesandsovereignrisk;dependenceontheeffectivenessoftheCompanyspatentsandother protections for innovative products;and the exposure to litigation,includingpatentlitigation,and/orregulatoryactions.The Company undertakes no obligation to publicly update anyforward-lookingstatement,whetherasaresultofnewinformation,futureeventsorotherwise.Additionalfactorsthatcouldcauseresultstodiffermateriallyfromthosedescribedintheforward-lookingstatementscanbefoundintheCompanysAnnualReportonForm10-KfortheyearendedDecember31,2023andtheCompanysotherfilingswiththeSecuritiesandExchange Commission(SEC)available at the SECs Internet site(www.sec.gov).Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverview2Merck 2023/2024 Impact ReportOverviewIn this section:Our CompanyHighlightsCEO letterSelect awards and recognitionOur corporate Strategic FrameworkOur approach to sustainabilityUN Sustainable Development Goals(SDGs)Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices3Merck 2023/2024 Impact ReportOverviewWeusethepowerofleading-edgesciencetosaveandimprovelivesaroundtheworld.GlobalReportingInitiative(GRI)/SustainabilityAccountingStandardsBoard(SASB)disclosuresinthis section:GRI2-1GRI2-12GRI2-13GRI2-14GRI2-22GRI3-1GRI3-2GRI3-3 For more info on disclosures,see the Reporting indices.How we operate We are a global health care company that delivers innovative health solutions through our medicines,includingbiologictherapies,vaccinesandAnimalHealthproducts.IntheU.S.andCanada,weareknownasMerck&Co.,Inc.,orMerck.OutsideoftheU.S.andCanada,weareknownasMSD.Wemanageourbusinessthroughtwooperatingsegments,PharmaceuticalandAnimalHealth.The Pharmaceutical segment includes human health pharmaceuticals and vaccine products.Humanhealthpharmaceuticalproductsconsistoftherapeuticandpreventiveagents,generallysoldbyprescription,forthetreatmentofhumandisordersanddiseases.We sell these products primarily to drug wholesalers and retailers,hospitals,government agenciesandmanagedhealthcareproviderssuchashealthmaintenanceorganizations,pharmacybenefitmanagersandotherinstitutions.Humanhealthvaccineproductsconsistofpreventivepediatric,adolescentandadultvaccines.Wesellthesevaccinesprimarilytophysicians,wholesalers,distributorsandgovernmententities.The Animal Health segment discovers,develops,manufactures and markets a wide range of veterinary pharmaceutical and vaccine products,as well as health management solutions and services for the prevention,treatment and control of diseases in all major livestockandcompanionanimalspecies.Wealsoofferanextensivesuiteofdigitallyconnectedidentification,traceabilityandmonitoringproducts.WesellourAnimalHealthproductstoveterinarians,distributors,animalproducers,farmersandpetowners.For more information on our business,please see our 2023 Form 10-K.Our Company Inadditiontoourscientificpriorities,wealsowork to foster a diverse and inclusive global workforce,to ensure a safe and sustainable future for our communities,and to operate responsiblyeveryday.This report includes our voluntary disclosures againsttheEnvironmental,Social&Governance(ESG)reportingframeworksweveprioritized,andcoversourenterprise-wideoperationsfromJanuary1,2023,toDecember31,2023,withsome information on activities that took place in2024.For over a century,we have brought transformative science to society by developing anddeliveringlife-changingmedicinesandvaccinestopatientswhoneedthem.Asaleading biopharmaceutical company,we are attheforefrontofscientificresearch,workingtirelessly to provide innovative health solutions to advance the prevention and treatment of diseasesinbothhumansandanimals.As of Dec.31,2023,we had approximately:72,000Employees worldwideMore than550millionPeople reached with our medicines and vaccines in 2023(p.20)Annual revenue in 2023:$60.1 billionR&D spend in 2023:$30.5 billionAccess to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices4Merck 2023/2024 Impact ReportOverview550 millionPeople reached with our medicines and vaccines in 2023(p.20)240 millionPeople enabled to access our innovative medicines and vaccines through access solutions in 2023(p.33)54 millionPeople,underserved by health care,reached through our social investments(2021-2023)(p.40)79%Of countries reached globally with our products in 2023(p.28)83%Of the top 20 global burdens of disease addressed by our pipeline and products(p.22)99%Parity indicated in our global pay equity study for female employees compared to their male colleagues.For the third year in a row,we have maintained greater than 99%pay equity by race as well as gender in the U.S.(p.61)51%Women comprise more than half of our global workforce(p.60)21,000Employees are members of at least one of our 10 Employee Business Resource Groups,nearly 30%of our global workforce(p.57)Net zeroCommitted to a net-zero target for our greenhouse gas(GHG)emissions across our global operations(Scopes1,2,and 3)by 2045,aligned with the guidelines of the Science Based Targets initiative(SBTi)(p.75)6Times since 2017 weve been honored as a winner of the Green Chemistry Challenge Awards sponsored by the Environmental Protection Agency(EPA)and/or the American Chemical Society(p.100)24/7Availability of our MSD reporting tool,which allows employees and third parties to raise concerns confidentially and anonymously(where permitted by law)(p.103)99%Employees who completed our Leading With Ethics&Integrity training series in2023(p.104)$3.6 billionSpending with small and diverse Tier 1 and 2 suppliers globally in 2023(p.119)Highlights10 pointsAllocated to certain sustainability metrics tied to Access to Health and Employees out of 100 points in our 2023 Company Scorecard,which is used to determine the payout of our annual incentive plan for most employees,including our executives(p.10)Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesAccess to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices5Merck 2023/2024 Impact ReportOverviewCEO letterDear Stakeholders,For more than a century,weve been devoted toinnovativescientificdiscovery,deliveringmedicines and vaccines to address critical health needs,optimizingtheefficiencyofoursupplychain,increasing diversity in clinical trials,evolving our Merck Manual for medical reference andsomuchmore.Importantly,everythingwe do is inspired by our purposeto save and improve the lives of people and animals around theworld.Byharnessingleading-edgescience,weve tackled some of the worlds biggest health challenges for generations,and we remaincommittedtoexpandingaccesstolife-changing medicines,vaccines and technologies formanymoredecadestocome.Operatingourbusiness responsibly and sustainably is at the core of our values and foundational to our ways ofworkingandbusinessoperations.To help propel our purpose,we continue to prioritizeourambitioussustainabilitygoals,whichspanfourkeyfocusareas:1)Accessto Health;2)Employees;3)Environmental Sustainabilityand4)Ethics&Values.Over the last year,our concerted focus on innovation,collaboration and delivering significantandsustainedstakeholdervaluehas driven remarkable progress and impactful outcomes.Totheseends,Improudtosharethefollowingkeyaccomplishments:Expanding and enabling access to health Enabling access to health underpins every actionwetakeandeverydecisionwemake.Across our enterprise,we collaborate with global partners and stakeholders to advance our scientificdiscoveries,expandandenableaccessto our medicines and vaccines,and implement initiativesthatdrivehealthequity.In2023,wereachedmorethan550millionpeoplewithour medicines and vaccines through commercial channels,clinical trials,voluntary licensing andproductdonations.Thesecriticaleffortsinclude our MECTIZAN Donation Program,the longest-runningdisease-specificdrugdonationeffortofitskind,whichaimstocombatriverblindnessandlymphaticfilariasisandreachedapproximately385millionpeoplelastyear.In2023,wealsoexpandedonour2021accessto health ambition,and now have a new goal toenable350millionmorepeopletoaccessourmedicinesandvaccinesby2025.In2023alone,oureffortsenabledaccessfor240millionpeople.Ourproductsweredeliveredtonearly80%ofcountriesglobally.Andthroughoursocial investments,including partnerships to advance health equity and other impact initiatives,wereachedmorethan54millionpeopleinlow-andmiddle-incomecountriesand populations underserved by health care in high-incomecountries,surpassingourgoalofreachingmorethan50millionpeopleby2025.Developing and rewarding a diverse,inclusive and healthy workforceWe believe the best path to value creation is through our talent,and the variety of backgrounds and ideas they bring are central tothesuccessofourcompany.Diversity,equityandinclusionisabusinessimperative.Itimprovesourunderstandingofourcustomers,promotes the inclusion of diverse populations in our clinical trials and inspires the innovationthatdrivesourbusiness.Weremaincommitted to actively cultivating a talented,diverse and inclusive workforce that best representsand can thus best serveour customers,healthcareprovidersandpatients.In2023,wedefinedandintroduced15newenterprise leadership skills,designed to further advanceourculture,powerorganizationalandindividual performance,and drive value for our stakeholdersandcommunities.We continue to nurture a diverse,equitable andinclusiveworkplace.Womencomprise51%ofourglobalworkforce,50%ofourboardof directors,and in 2023,our global pay equity studyindicatedagreaterthan99%parityin compensation between female and male employees.Further,intheU.S.,forthethirdyear in a row,we have achieved greater than 99%payequityacrossraceandgender.Embodying and prioritizing environmentalstewardshipWe know the global health of people and animals isinextricablylinkedtothehealthoftheplanet.This is why we are committed to playing an active role in mitigating the impacts of climate change.Notably,in2024,wecommittedtobenet-zeroacrossScopes1,2and3greenhousegasemissionsby2045,alignedwithguidancefromtheScienceBasedTargetsinitiative.Our environmental sustainability strategy is designed to achieve our objectives by focusing on three critical areas:operational efficiency,designingnewproductstominimizeenvironmental impact,and reducing the impacts in our upstream and downstream valuechain.Andwehavebeenrecognizedwith six consecutive Green Chemistry Challenge Awardsnine overallas a resultofourongoingeffortstominimizethefootprintofourproducts.Theawardsare sponsored by the Environmental Protection Agency and the American ChemistrySocietyandrecognizenewandinnovativeenvironmentallyconsciouschemistrytechnologies.Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices6Merck 2023/2024 Impact ReportOverviewHolding ourselves to the highest standardsWe operate responsibly every day in every way,and we hold ourselves accountable to thehigheststandardsofethicsandvalues.Ourcodeofconductisourcompass,ensuringwe maintain our reputation as a trusted,credibleandresponsiblecompany.Italsoencourages employees to speak up and report potential concerns to ensure our ethics and valuesarereflectedinourbusinessoperations.Wemaintainfullcompliancewithallprivacyanddataregulatoryrequirementsrelatedtoactiveincidentmonitoring,risk/harmanalysisandon-timenotificationofdatabreaches.We are also a signatory to the United Nations Global Compact(UNGC),and we align our operations with the Ten Principles of the UNGC toimprovecommunitiesaroundtheglobe.Additionally,we increased our spend with smallanddiverseTier1and2suppliersfrom$3.2billionin2022to$3.6billionin2023,fostering a healthy,equitable and diverse supplychain.In 2023,we also added sustainability metrics to our Company Scorecard,which directly correlatestoourannualincentiveplan.Themetricslinkthecompensationformostemployees,including executives,to our performance in driving greater access to health care and employee engagement and inclusion.AndImpleasedtoreportthat,inour inaugural year,we achieved all of our goals for these new sustainability metrics on our CompanyScorecard.Sustaining our momentumI am very proud of our collective progress and the positive impact weve made on the lives of people,animals and communities around theworld.In2023,MerckwasnamedoneoftheTop100MostSustainableU.S.Companiesby Barrons and one of Americas Most JUST CompaniesbyJUSTCapitalandCNBC.Andnotably,werankedNo.1inthehealthsectorforbothrecognitions.Thisyear,wewerealsorecognizedonTIMEsinaugurallistof the Worlds Most Sustainable Companies,rankingNo.28outof500companies.Thesehonors are a testament to our unwavering passion and commitment to saving and improvinglivesglobally.Iremainconfidentthatwecandoevenmoreto further advance global health and access,drive diversity,equity and inclusivity,protect theenvironmentandoperateresponsibly.Imexcitedandenergizedbythepossibilitiesofourscience-ledstrategy,thepromisethatourshort-andlong-termeffortspresent,andthepositive,sustainable impacts that we can make todayandwellintothefuture.My sincerest thanks for your continued support as wepursueahealthierandbrighterfutureforall.Very best regards,Rob Davis Chairman&ChiefExecutiveOfficerAccess to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices7Merck 2023/2024 Impact ReportOverviewSelect awards and recognitionBarronsTop 100 Most Sustainable U.S.Companies#38 overall and#1 in the sector(2024)NewsweekAmericas Most Responsible Companies#1 overall and#1inthe sector(2024)JUST CapitalAmericas Most JUST Companies#25 overall and#1 in the sector(2024)Were proud that our longstanding commitment to drive responsible actions has received external recognition as westrivetomanagesustainability-relatedrisksandcreatevalueforourbusiness,societyandourstakeholders.Fortune#62 on the 100 Best Companies to Work For list(2024)SeramountOne of the 75 companies on theTop Companies for Executive Women list(2023)TIME#28 on the Worlds Most Sustainable Companies list(2024)Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices8Merck 2023/2024 Impact ReportOverviewOur corporateStrategic FrameworkOur ValuesPatients FirstEthics and IntegrityRespect for PeopleInnovation and Scientific ExcellenceOur AspirationWe aspire to be the premier research-intensive biopharmaceutical companyOur PurposeWe use the power of leading-edge science to save and improve lives around the worldOur Ways of WorkingWin asone teamFocus onwhat mattersAct withurgencyExperiment,learnand adaptEmbrace diversityand inclusionSpeak up and beopen-mindedWe operate responsibly every day on behalf of society,shareholders and all our stakeholders to enable a safe,sustainable and healthy future for people and communities everywhere.Invest in,augment,and accelerate our pipeline to deliver life-changing productsDemonstrate value to our stakeholders and extend access to solutions that address unmet medical needsDrive innovation,growth and productivity enabled by digital and dataInvest in the growth,success,and well-being of our peopleOur PrioritiesAccess to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices9Merck 2023/2024 Impact ReportOverviewOur strategy includes a commitment to integrating sustainability at every level of our businessoperations.Bydoingso,wecreateopportunities to serve our patients,employees and society,as well as to bring value to our businessandshareholders.Building on our legacy of stewardship,we drive progress in our four longstanding focus areas:Access to HealthIn collaboration with key stakeholders,we work to ensure our science advances health care,and our products are accessibleandaffordablearoundtheworld EmployeesOur success is built on a culture thatembracesdifferentperspectivesandvaluesthecontributionsofeachindividual.Werecognizethatourcompetitivenessis strengthened by a diverse,skilled and engagedworkforce.Environmental SustainabilityA healthy planet is essential to human and animal health and the sustainability of our business,while also providing opportunities for product innovation and reduction in costsandrisks.Wehavealonghistoryof environmental stewardship and compliance,andwecontinuouslyevolveourstrategyandeffortsinthefaceofachangingclimate.Ethics&ValuesOur ethics and values drive everything we do,creating an accountable culturethatenhancesourdecision-makingandabilitytodeliveronourpurpose.Were strategically embedding actions across our focus areas to serve our most important stakeholders:ourpatients.Oursustainabilityeffortsaimtopositionusas a partner of choice within the global health ecosystem to drive environmental and social change,to build stakeholder trust,to improve ourlong-termbusinessperformance,toincreaseinvestmentflow,andtocultivateadiverseandinclusiveculturewherebest-in-classtalentchoosestowork.Thisapproachalso manages risks across our supply chain and business operations,increases patient and investorconfidence,bringsinnewopportunitieswith customers and peers and builds stronger communities through our health equity initiatives.To be successful,proactive and meaningful engagement with stakeholders is critically important to building enduring relationships andfosteringmorecollaborativepartnerships.Thisensuresthatourstrategiesareinformed,relevant and aligned,with both societal needs andbusinessobjectives.Our corporate Strategic FrameworkFor over a century,our unwavering dedication to operating responsibly has been a hallmark of ouridentity.Thiscommitmentisintegraltoourcorporate Strategic Framework(see next page),and underscores our pledge to foster a safe,sustainable and healthy future for communities worldwide.In 2023,we added sustainability metrics to our Company Scorecard,which directly affectsthepayoutunderourannualincentiveOur approach to sustainability Update on our sustainabilitybondThrough September 30,2023,we havefullyallocatedthe$994millionofthenetproceedsfromour2021sustainabilitybond.Weallocatedapproximately81percentoftheamount to projects that are either completed or underway during the three-yearlook-backperiod,andallocatedtheremaining19percentto social and green projects in alignment with our sustainability financingframework.For more information,please see our 2023 Sustainability Bond Allocation Report on our Investor Relations page of our corporatewebsite.plan.Themetricsaccountfor10percentofthe Scorecard,and link the compensation for most employees,including executives,to our Companys performance in driving greater access to health care,employee engagement andinclusion.Notably,wemetallofthegoalsforthesenewsustainabilitymetricsinthefirstyear.For more information about our Company Scorecard,please see page 55 of our 2024 proxy statement.Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices10Merck 2023/2024 Impact ReportOverviewManagementThe groups below are responsible for directing theday-to-daysupervisionofoursustainabilitystrategy and driving performance:Strategic Policy&Sustainability Council(SPSC)The SPSC,under the guidance of the Executive Team,ensures we advance our Strategic Framework through public policy and sustainability effortsthatproactivelyshapeandrespondtothechangingregulatorylandscape.Thisgroupofcross-functional senior leaders makes recommendations to the Executive Team on critical public policy and sustainability issues,and monitors related performanceacrossregionsandfunctions.ESG Strategy Management Team(ESMT)With guidance from SPSC,the ESMT advises,shapesanddrivesourlong-termsustainabilitystrategy,including providing recommendations regardingbusinessrisksandopportunities.Therole of this group of functional experts is to create long-termvalue,differentiateusasaleaderinsustainability and answer to stakeholder demands about key issues across our four focus areas:Access to Health,Employees,Environmental Sustainability andEthics&Values.TheESMTensuresourstrategy and priorities align with and support our corporate Strategic Framework to meet our public commitmentsandstakeholderexpectations.ESG Strategy&Engagement Team This team is responsible for raising the visibility of sustainability-relatedissuesandactivities,aswellas fostering connections across business units and functional areas to assist with the integration of sustainability principles into business policies,strategiesandpractices.ThisincludesproducingourannualImpactReport.Governance of environmentalsustainabilityOur Environmental,Health and Safety(EHS)Councilisacross-functionalbodywith leadership representation from each area of our business and is responsible for overseeing our environmental sustainability strategy,policyandriskmitigationcontrols.It monitors performance against our targets and increases transparency on environmental issues within the Company,theExecutiveTeamandtheBoard.The Global Safety and Environment(GSE)vice president communicates progress on environmental sustainability goals,objectives and other material issues to the Board,ExecutiveTeamandEHSCouncil.The GSE vice president is also a part of the Strategic Policy&Sustainability Council(SPSC).Additionally,theheadoftheEnvironmental Sustainability Center of Excellence(CoE)isamemberoftheESMT.Ourcross-functionalEnvironmentalSustainability Implementation Steering Committee was designated by the EHS Council to oversee the progress of initiatives that support the achievement of our public targets and provide guidance on resourcing of our environmental sustainabilitystrategy.For information on environmental health and safety management and governance,please visit the Sustainability Resources page on our corporate website.Sustainability governanceBoard of directorsWe are committed to governance policies and practices that serve the interests of ourbusinessandourshareholders.Ourgovernance structure is an integral part of this commitment.OurBoardofDirectorsoverseesESG matters for the Company,through its committeesandasawhole.OurExecutiveTeamand senior management are responsible for reviewing,refiningandimplementingourlong-termsustainabilitystrategy.Throughgroupssuch as the Strategic Policy&Sustainability Council,ourseniorleadersdirecttheday-to-daysupervisionofthisstrategy.Corporate governance20192020202120222023Independent directors on the Board1212121211Board members who are independent92%Separate chairman of the Board and CEO1NoNoYesNoNoLead independent directorYesYesYesYesYesWomen on the Board46FCFP%Members of underrepresented ethnic groups on the Board231!%Note:Exceptasotherwisenoted,allfiguresabovearederivedfromourproxystatementfiledthefollowingyearandarerounded.1 FromJuly1,2021,toNovember30,2022,thepositionsofBoardchairmanandCEOwereseparate.AsofDecember1,2022,thepositionsofBoardchairmanandCEOarenotseparate.For information on our Boards nomination process and the Boards roles and responsibilities for the management of and reporting on sustainability topics at the Company,please see our 2024 proxy statement(pages 20-22).For information onhow to communicate with the Board,please see page 25 of our proxy statement.Our Executive Team updates the Board on ourlong-termsustainabilitystrategyandperformance through both discussions as a full Board as well as through Committee discussions onspecifictopics.Forexample,theBoardsGovernance Committee,which monitors and assists the Board in its oversight of sustainability matters,ensures relevant issues are subject to review by Board Committees with relevantareasofcompetency.Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices11Merck 2023/2024 Impact ReportOverviewESG impact materiality assessmentOur approach to ESG impact materiality assessmentTo conduct the assessment,we began with a list of material issues for our industry,including:We conduct an ESG impact materiality assessment to focus,act and report on the mostcriticalpotentialbusinessrisksandopportunitiesthatinfluenceourabilitytocreatevalue.Weassesstheexternallandscape,ourbusinesspriorities,andtheissuesthatarecriticalforourstakeholdersandtheplanet,toprioritizethemostimportanttopicsthatwillbemanagedthroughoursustainabilitystrategy.Natural capital Physical and sociopolitical risks Product and service safety and quality Product design and lifecycle management Public health risks Responsible consumption and production Selling practices and product labeling Sourcingefficiencyandmanagement Talent management Transition to renewables and alternative energies Transparency Wasteandhazardousmaterialsmanagement Water and wastewater managementWe then partnered with a third party to scan competitor,supplier and customer ESG reportsandfinancialcommunications,aswellas news sources and mandatory and voluntary regulationsfromaroundtheworld.Wecoupledthis assessment with surveys to our leaders as well as to investors we engage with regularly on sustainability-relatedtopics.We also conducted ESG impact materiality assessmentsin2015,2018and2021.Access to health care and medicine Air emissions Business model resilience Climate change risks and management Community relations Competitive behavior Customer practices Customer privacy and data security Ecological impacts Employee diversity and inclusion Employee health and safety Energy management Equityandaffordability Ethical corporate behavior Ethics in R&D GHG emissions Governance structures and mechanisms Human rights Innovation and technology Labor practices Management of local impacts Management of the legal and regulatory environmentIn our 2023 ESG impact materiality assessment,the following topics emerged as the most critical.Theyaregroupedbelowbyourfocusareas:Access to Health Access to health care and medicine(pages 18-44)Equityandaffordability(pages33-44)Product safety and quality(pages 106-112,Clinical trials)Public health risks(pages 18-44)Employees Employee diversity and inclusion(pages 55-61)Employeehealthandsafety(pages62-69)Talent management(pages 46-54)Environmental Sustainability Climate change risks and management(pages 74-83)Ethics&Values Ethical corporate behavior(pages 102-105,Code of Conduct&Compliance)Privacy and data security(pages 124-126,MSD Privacy)Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices12Merck 2023/2024 Impact ReportOverviewOur approach to stakeholder engagementWe engage with a diverse group of stakeholders to gain insights that caninformoureffortsandfosterourprogresstowardsolutionsthatbenefitsocietyandsupportourbusiness.Wenotemanyoftheseengagementsinthisreport,and the groups of stakeholders with whom we regularly engage include:Patients and caregiversFor patient communitieswhich include individual patients,their caregivers and family members,patient advocacy leaders and patient organizationsitiscriticalthatwerespectand honor their life experiences to better understand their health care journeys,expected outcomesanddecision-makingconsiderations.For more information on our work with patient groups,please see our Patients page which includes ourCommitment to Patients on our corporate website.ShareholdersThroughout the year,we regularly engage with our shareholders and seek to better understand theirperspectives.We have a proactive shareholder engagement program,in which members of Investor Relations,theOfficeoftheSecretary,HumanResources and the ESG Strategy&Engagement Team,aswellasothersubject-matterexperts,engagewithourshareholderstoremainwell-informed regarding their perspectives on current issues and to address any questions orconcerns.Theseteamsserveasliaisonsbetween shareholders,members of senior managementandourBoard.In addition,we conduct an extensive shareholder outreach program twice a year focused on governance,executive compensation and ESG matters.Webelieveitismostproductivetodiscuss these matters well in advance of the AnnualMeetingofShareholders.Thisenablesmanagement and the Board to gather investor perspectives and make educated and deliberate decisions that are balanced and appropriate for our diverse shareholder base and in the best interestsofourbusiness.For more information on our engagements with shareholders,including topics discussed,please see our 2024 proxy statement(pages 24-25).Health care professionalsWe are committed to providing appropriate and balanced information to physicians and other health care professionals about our medicines,vaccinesandongoingresearch.For more information on our work with health care professionals,please see pages18-44,and for our disclosures on payments to health care professionals,please visit the Transparency Disclosures page on our corporate website.EmployeesWe strive to foster a positive and inclusive working environment for our employees by providing resources to improve their health and that of their families,as well as opportunities to further their professional development and get moreinvolvedinthecommunitieswheretheylive.Aspartofoureffortstomaintainasatisfyingand productive work environment,we routinely survey employees to learn about their perspectives on the business and on how we are responding to the needs of our globalworkforce.TheEmployeePulseSurvey,ourall-employeeengagementsurvey,isourflagshipemployeefeedbackmechanismandisconductedmultipletimesayear.To learn more about our work with employees,please see pages 45-72.PayersWe work with payers worldwide to inform their understanding of the relationship between the prices of our products and the true value they delivertopatientsandhealthcaresystems.For more information on our work with payers,please see our 2023 Pricing Action Transparency Report on the Sustainability Resources page of our corporate website.Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices13Merck 2023/2024 Impact ReportOverviewGovernments,multilateral organizationsandregulatorsWe work with policymakers,legislators,multilateralorganizationsandgovernmentsworldwide to ensure that policy and regulatory environments globally,nationally and locally foster patient access to medicines and vaccines,and that these environments are conducive to ethical business practices,scienceandinnovation.For more information on these engagements,please see pages 127-129.Suppliers and businesspartnersWe encourage responsible approaches on the part of suppliers regarding labor,employment,human rights,health and safety,ethics,diversityandprotectionoftheenvironment.Inaddition,westrivetoengagesmallanddiversesuppliers.To learn more about our work with suppliers,please see pages 113-123.Trade and industry associationsWe engage with stakeholders through our membershipinnumerousorganizations.Weareamemberofmanyindustryandtradegroups.Weworkwiththesegroupsbecausethey represent the pharmaceutical industry and business community in debates led by governments and other stakeholders,and because they help the industry reach consensus onpolicyissues.To learn more about our work with industry and trade organizations,please see pages 127-129.Local communitiesWe work toward developing culturally appropriate mechanisms to engage and build relationships with our local community stakeholdersandnon-governmentalorganizations(NGOs).Weconductthisengagement predominantly through our philanthropicefforts,whichcanbefoundonthePhilanthropy pageonourcorporatewebsite.Veterinary professionals and animal caretakers We value our partnerships with veterinary professionals and animal caretakers as a way to contribute to the health of the animals in their care with innovative products and solutions for farmandcompanionanimalspecies.Weregularlycommunicate and collaborate with our customers and industry leaders in our shared pursuit of improvingthehealthofanimals.To learn more about our work with veterinarians and animal caretakers,pleasevisitthe Animal Health website.Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices14Merck 2023/2024 Impact ReportOverviewSustainability goals and performanceGoals(in millions)202120222023TOTALFurther advance health equity by reaching 50 million people in LMICs and people underserved by health care in high-income countries with our social investments by 2025.1,215.018.621.254.8Reach at least 75%of countries around the world annually with our products.379vy%Enable 350 million more people to access our innovative medicines and vaccines globally through access solutions by 2025.466.7189.2240.0Access to HealthAsaresearch-intensivebiopharmaceuticalcompany,expandingaccesstohealthiscentraltoourpurposetosaveandimprovelives.Wediscover,developanddeliverinnovativemedicinesandvaccines.Incollaborationwithkeystakeholders,wehelpensureourscienceadvanceshealthcare,andourproductsareaccessibleandaffordableglobally.Wealsoapplyourexpertiseandfinancialresources to address systemic barriers to health equity,where we believe we can make the strongest contributionstohealthsystems,communitiesandpatients.EmployeesOursuccessisbuiltonacultureofdiversityandinclusion,recognizingtheinvaluablecontributionsofeachindividual.Wearededicatedtocultivatingaworkforcethatisnotonlydiverseandskilledbutalsoengaged,recognizingthisasacriticaldriverofourcompetitiveness.Ourgoalsrepresentourpubliccommitmentstodeliveringvaluetosociety.Overthe past year,we challenged ourselves to continue meaningful progress towards ourambitiouscommitmentswithineachofourfocusareas.Throughcollaborativepartnerships and a holistic approach,were creating scalable solutions to major globalissues.Goals202120222023Maintain or exceed our current inclusion index score by 2025.5,6On trackOn trackOn trackMaintain or exceed our current employee engagement index score by 2025.5,6On trackOn trackOn track1 SocialinvestmentsincludeourCompanysphilanthropicpartnerships,programsandimpactinvestments.Underservedpopulationsaredefinedasthosethatfacehealthdisparitiesduetodisadvantagesrelatedtoinsurancestatus,socialdeterminantsofhealth,race,ethnicity,genderidentity/sexualorientation,ageand/orlanguagepreference.Thegoaliscumulativeacrossthereportingperiodof2021-2025andisindependentofabaselineperiod.Actualsforeachyeartodatearebasedonreportsreceivedbetweenthe1stofMarchandthelastdayofFebruaryofthecorrespondingperformanceyear.2 Third-partyreportingisusedtocalculatethenumberofpeoplereachedthroughsocialinvestments.Insomecases,third-partyreportsmayincludecumulativepeoplereachedforthereportingperiod,and/ordatathatisattributabletootherpartnersaswellasourCompanysphilanthropicinvestment.3 CountriesareasdefinedbytheWorldBankCountryandLendingGroups.Includesonlyhumanhealthproducts.4 Metrics contributing to this goal are displayed on an annual basis and provide information on the number of people who we estimate nowhavetheoptiontoaccessmedicinesandvaccinesasaresultofoursustainableaccessstrategies,solutionsandpartnerships.ThesesolutionsincludeourcommitmenttoGaviandUNICEF(ratherthandosesshipped),collaborationstooptimizeresourcesinhealthsystems,expandedfinancialcoveragethroughinsurance,andnewcommunity-basedchannelpartnerships.“Innovativemedicinesandvaccines”referstoourCompanyson-patentproducts.Enable“morepeople”isdefinedaspopulationssupportedbyinitiativesimplementedandlaunchedinmarketandwillbeincomparisontothebaseline(2020)asof2025.Evidenceformetricsissourcedfrompubliclyavailabledataandproxysourcesbymarket.Whileproxiesdifferbymarket,allmethodologiesareevaluatedandrepresentourbestestimateofpeopleenabledtoaccessinnovativemedicinesandvaccines.Peoplewhowereenabledtoaccessinnovativemedicinesandvaccinesdidnotnecessarilyreceivesuchinnovativemedicinesandvaccines.5 In2022,werevisedemployeesurveymeasurementstoalignwithevolvingbestpractices.Inthisreport,2022dataareusedasthebaselineforfuturecomparison.6ThePulsesurveyisopentoemployeesglobally.Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices15Merck 2023/2024 Impact ReportOverviewEnvironmental SustainabilityWerecognizethevitalconnectionbetweenthehealthofourplanetandthewell-beingofpeopleandanimals.Wehaveadoptedasetofclimategoalstohelpussucceedinanincreasinglyresource-constrainedworld.Goals202120222023Reduce our operational GHG emissions(i.e.,Scopes 1&2)46%by 2030,from a 2019 baseline.110low baseline8low baseline212low baselineReduce our value chain(Scope 3)GHG emissions by 30%by 2030,from a 2019 baseline.39ove baseline6ove baseline4ove baselineSource 100%of our purchased electricity from renewable sources by 2025.441EWhieve net-zero greenhouse gas(GHG)emissions(Scopes 1,2&3)by 2045.In 2024,we committed to a net-zero target for our greenhouse gas(GHG)emissions across our global operations(Scopes 1,2,and 3)by 2045,aligned with the guidelines of the Science Based Targets initiative(SBTi).Ethics&ValuesWearecommittedtoupholdingintegrityandthehighestethicalstandardsineverythingwedo.Wefosteraworkplaceenvironmentwhereemployeescanvoicetheiropinionssafelyandfreely.Bygrounding our operations in our core ethics and values,we cultivate accountability that enhances our decisionmaking,adaptabilityandreliability.Ethics&Values202120222023Foster a“Speak Up”culture by maintaining or exceeding our current percentage of global employees responding favorably to the“Willingness to report”question in an internal survey as an annual average,by 2025.5,6On trackOn trackMaintain 100%compliance to privacy and data protection regulatory requirements for active incident monitoring,risk/harm analysis and on-time notification of data breaches.7100%compliance maintained100%compliance maintained100%compliance maintainedScope1GHGemissionsaredirectemissionsfromownedorcontrolledsourcessuchason-sitefuelcombustionandfleetvehicles.Scope2GHGemissionsareindirectemissionsfromthegenerationofpurchasedenergyconsumedbythereportingcompany.InaccordancewiththeWorldResourceInstitutesGHGProtocol,prior-yeardatahavebeenadjustedtoaddorremovefacilitiesthathavebeenacquired,soldorspun-off.Adjustmentsalsoreflectchangesinmethodologytoensureconsistencyfromyeartoyear,includingScope2emissionfactorupdatesE-GRID(2023),IEA(2023),EUResidual(2023),UKDefra(2023)&InventariosCorporativos(2023)andScope1&3emissionfactorupdatesEPAClimateLeaders(2023).Scope3GHGemissionsincludeallotherindirectemissionsinacompanysvaluechain.4Wehavedefined“purchasedelectricity”aselectricitysourcedfromexternalsuppliersaswellasrenewableelectricitythatwasgeneratedandutilizedonsitewhereweretainedtherenewableattributesorwherewehaveobtainedrenewableattributesthroughcontract.5 Favorable response indicates the percentage of respondents who respond“yes”to the question stating,“I am willing to report employee misconductandpotentialethicsorcomplianceissues.”6In2021,wedevelopedthe“WillingnesstoReport”questionreferencedinfootnote4toalignwithevolvingbestpractices.ThisquestionwasfirstincludedinourPulsesurveyinMarch2022,and2022dataareusedasthebaselineagainstwhich2023dataarecompared.7 Regulatoryrequirementsdifferbyregion.Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices16Merck 2023/2024 Impact ReportOverviewOur priority United Nations(UN)Sustainable Development Goals(SDGs)The SDGs represent the international communitys plan of action for“people,planetandprosperity.”The2030AgendaforSustainable Development,adopted by all United NationsMemberStatesin2015,providesashared blueprint for peace and prosperity for theplanetanditspeople.Atitscorearethe17SDGs.We believe we have an important role and a responsibility to help reduce the burden of disease and improve access to medicines and vaccinesaroundtheworld.ThatiswhySDG3(GoodHealthandWell-being)isattheheartofourbusiness.Italsoalignswithourpurposetosaveandimprovelives.While every SDG is essential to fostering sustainabledevelopment,wehaveprioritizedeight(listed above the photo)where we believe wecanhavethebiggestimpact.Access to HealthEmployeesEnvironmental SustainabilityEthics&ValuesReporting indices17Merck 2023/2024 Impact ReportOverviewAccess to HealthExpanding access to health is at the core of our purpose to use the powerofleading-edgesciencetosaveandimprovelives.Ourfocusis on discovering,developing,and delivering innovative products and services that address medical needs and improve health in a responsibleandsustainablemanner.Ourcommitmenttoimprovingaccess is embedded in our business strategies and across functions andgeographies.Topics covered in this section:Discovery and inventionAvailabilityAffordability and sustainable accessStrengthening health systems and addressing inequityGoals(in millions)2023TOTALFurther advance health equity by reaching 50 million people in low-income and middle-income countries(LMICs)and people underserved by health care in high-income countries with our social investments by 2025.1,221.254.8Reach at least 75%of countries around the world annually with our products.379%Enable 350 million more people to access our innovative medicines and vaccines globally,through access solutions by 2025.4240.01 SocialinvestmentsincludeourCompanysphilanthropicpartnerships,programsandimpactinvestments.Underservedpopulationsaredefinedasthosethatfacehealthdisparitiesduetodisadvantagesrelatedtoinsurancestatus,socialdeterminantsofhealth,race,ethnicity,genderidentity/sexualorientation,ageand/orlanguagepreference.Thegoaliscumulativeacrossthereportingperiodof2021-2025andisindependentofabaselineperiod.Actualsforeachyeartodatearebasedonreportsreceivedbetweenthe1stofMarchandthelastdayofFebruaryofthecorrespondingperformanceyear.2 Third-partyreportingisusedtocalculatethenumberofpeoplereachedthroughsocialinvestments.Insomecases,third-partyreportsmayincludecumulativepeoplereachedforthereportingperiod,and/ordatathatisattributabletootherpartnersaswellasourCompanysphilanthropicinvestment.3 CountriesareasdefinedbytheWorldBankCountryandLendingGroups.Includesonlyhumanhealthproducts.4 Metrics contributing to this goal are displayed on an annual basis and provide information on the number of people who we estimate now have the option to access medicines and vaccines as a result of oursustainableaccessstrategies,solutionsandpartnerships.ThesesolutionsincludeourcommitmenttoGaviandUNICEF(ratherthandosesshipped),collaborationstooptimizeresourcesinhealthsystems,expandedfinancialcoveragethroughinsurance,andnewcommunity-basedchannelpartnerships.“Innovativemedicinesandvaccines”referstoourCompanyson-patentproducts.Enable“morepeople”isdefinedaspopulationssupportedbyinitiativesimplementedandlaunchedinmarketandwillbeincomparisontothebaseline(2020)asof2025.Evidenceformetricsissourcedfrompubliclyavailabledataandproxysourcesbymarket.Whileproxiesdifferbymarket,allmethodologiesareevaluatedandrepresentourbestestimateofpeopleenabledtoaccessinnovativemedicinesandvaccines.Peoplewhowereenabledtoaccessinnovativemedicinesandvaccinesdidnotnecessarilyreceivesuchinnovativemedicinesandvaccines.18Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthOur approach to access to healthWe developed our Statement of Guiding Principlestosteerouraccessapproach.Thebelowgoalsdemonstrateourambition:Discovering and inventing medicines and vaccines that address global health needs where we can have the greatest impact(for more information,please see pages 22-27)Making available a reliable,safe global supply of quality medicines and vaccines,and investing in solutions to enable timely access to our products in a responsible and sustainable manner(for more information,please see pages 28-32)Developing,testing and implementing solutionsthataddressbarrierstoaffordabilityand sustainable access of our medicines and vaccines(for more information,please see pages 33-39)Through collaborations,investment and innovation,applying our expertise and investing resources to address systemic barriers to access and health equity(for moreinformation,pleaseseepages40-44)These principles align to our goals and demonstrate our measurable and meaningful actionstoadvanceaccesstohealth.We strive to make our products accessible andaffordabletothosewhocanbenefitfromthem.Forexample,weworkwithcustomerstoenhancetheflowofpatientcareprocesses,andwithgovernmentsandnon-governmentalorganizations(NGOs)toexpandhealthcarefinancingandopennewdeliverychannelsforinnovativemedicines.Wealsoworkwithmultilateralandnon-profitorganizationsonaccesssolutionsforLMICs.Strengtheninghealthsystems through collaboration is a crucial part of oureffortstoenableaccesstohealthcarethatisaffordable,efficient,equitableandsustainableonaglobalscale.Additionally,werecognizetherisingimpactofclimatechangeonhealth.Wecollaboratetomitigate that impact through our environmental stewardship and compliance,and by advancing novel medicine and vaccine candidates to address diseases with an increasing prevalence due to changingclimatepatterns.Ourcollaborationsextendtohumanitariandisasterresponseeffortsandstrengtheningresilienceinhealthsystems.Itisessentialtobalanceaffordabilitywhileappropriatelyincentivizingthediscoveryanddevelopmentofnewmedicinesandvaccines.We believe it is possible to have a pricing system that allows patients to access the latest products whilesustainingleading-edgescientificresearchforfuturemedicalinnovations.Suchinventionsareoftenkeytoexpandingaccess.Forexample,the development of new formulations can broaden distribution of medicines and vaccines,includinginresource-constrainedhealthsystems,ortheycanhelptreatearlier-stagediseases where health and economic impacts maybeimproved.19Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequity550 M Commercial channels Clinical trials We reached 79%of countries with our products in 2023.To understand the reach and impact of our products,we track and report the number of people reached with our medicines and vaccines.people reached with our medicines and vaccines(2023)1 Commitment to UNICEF/GAVI Customer collaborations Merck for Mothers Charitable contributionspeople enabled to access our innovative medicines and vaccines(2023)2We also develop,test and implement market-based solutions that address barriers to access,enabling more people to access our medicines and vaccines.In addition,our social investments help to reduce barriers for populations underserved by health care globally.people reached with our social investments to address health equity(2021-2023)3,4240 M54 M Voluntary licensing Product donations External financing solutions New access channels Impact investments Health equity initiativesReaching people with our medicines and vaccinesEnabling sustainable access and strengthening health systems1 This people reached metric estimates the number of people who have received a Merck&Co.,Inc.productthroughcommercialchannels,clinicaltrials,voluntarylicensingandproductdonations.ProductdonationsincludepeoplereachedthroughtheMECTIZANDonationProgram,U.S.PatientAssistancePrograms,andtheMerckMedicalOutreachProgram.SourcesofdataareMerck&Co.,Inc.andthird-partydatasetsthataretrackedwithinanenterprise-wideinternaldatabase.Thepeoplereachedmetricforallsourcesiscalculatedasdosessolddividedbytheaveragedosescheduleforagivenmarketinagivenyear.Peopletaking multiple products may be counted as multiple people toward the total estimate.Insomeinstances,thisestimatemayincludepeopleenabledtoaccessour products through access solutions,which are calculated as part of our goal to enable access to our innovative medicines and vaccines(page 33).Thepeoplereached metric does not include people reached through social investments,which are calculated as part of our goal to further advance health equity for populations inLMICsandunderservedbyhealthcareinhigh-incomecountries(page 40).2 Metrics contributing to this goal are displayed on an annual basis and provide information on the number of people who now have the option to access medicines and vaccines as a result of our sustainable access strategies,solutions and partnerships,including our commitment to Gavi and UNICEF(rather than doses shipped),collaborationstooptimizeresourcesinhealthsystems,expandedfinancialcoveragethroughinsurance,andnewcommunity-basedchannelpartnerships.“Innovativemedicinesandvaccines”referstoourCompanyson-patentproducts.Enable“morepeople”isdefinedaspopulationsininitiativeslaunchedinmarketsasof2025,incomparisontoa2020baseline.Evidenceformetricsissourcedfromthebestpubliclyavailabledataandproxysourcesbymarket.Whileproxiesdifferbymarket,allmethodologiesareevaluatedandrepresentthebestestimateofpeopleenabledtoaccessinnovativemedicinesandvaccines.Peoplewhowereenabledtoaccessinnovativemedicinesandvaccinesdidnotnecessarilyreceivesuchinnovativemedicinesandvaccines.3 SocialinvestmentsincludeourCompanysphilanthropicpartnerships,programsandimpactinvestments.“Underservedpopulations”aredefinedasthosethatfacehealthdisparitiesduetodisadvantagesrelatedtoinsurancestatus,socialdeterminantsofhealth,race,ethnicity,genderidentity/sexualorientation,ageand/orlanguagepreference.Thegoaliscumulativeacrossthereportingperiodof2021-2025,andisindependentofabaselineperiod.Actualsforeachyeartodatearebasedonreportsreceivedbetweenthe1stofMarchandthelastdayofFebruaryofthecorrespondingperformanceyear.4 Third-partyreportingisusedtocalculatethenumberofpeoplereachedthroughsocialinvestments.Insomecases,third-partyreportsmayincludecumulativepeoplereachedforthereportingperiod,and/ordatathatareattributabletootherpartnersaswellasourCompanysphilanthropicinvestment.20Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityWe build accountability for access improvements intoourgovernance.OurExecutiveTeamandseniormanagementreview,refine,andimplementourlong-termsustainabilitystrategy,whichincludesourapproachtoglobalaccess.Our Strategic Policy&Sustainability Council(SPSC)provides oversight and guidance to ensurealignmentwithourstrategicobjectives.Policies:Access to Health Statement of Guiding PrinciplesAntimicrobial resistance global Action PlanAccess to our vaccinesAccess to investigational medicinesCharitable product donationsEuropean Union health technology assessment regulationHealth technology assessmentIntellectual propertyReal-world evidenceForthefirsttime,in2023,ourcommitmenttoaccess is also part of our Company Scorecard and approved by the Board of Directors Compensation and Management Development Committee.Inadditiontoothermetrics,theCompany Scorecard incorporates sustainability metrics,including access to health metrics,which directly impact annual incentive pay forexecutivesandmostemployees.External charters,principles and initiatives that guide our work in our Access to Health focus area:AMR Industry Alliance:Common Antibiotic Manufacturing Framework AMR Industry Alliance:Industry Roadmap for Progress on Combating AMR Health for Animals:Antibiotics Commitment Declaration of Helsinki InternationalCouncilforHarmonisation:GoodClinicalPractice(ICH-GCP)International Federation of Pharmaceutical Manufacturers&Associations(IFPMA)Code of Practice TheKigaliDeclarationonNeglectedTropicalDiseases U.S.NationalAcademyofSciences:GuidelinesforHumanEmbryonicStemCellResearch21Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityDiscovery and inventionWe discover and invent medicines and vaccines to address vital global healthneedswherewecanhavethegreatestimpact,nowandinthefuture.In2023,ourresearchanddevelopment(R&D)expenseswere$30.5billion,including$17.1billioninchargesforseveralsignificantbusinessdevelopmenttransactions,aswellasclinicaldevelopmentanddiscoveryresearchspending.AspartofourR&Defforts,wecollaboratewithacademicinstitutions,non-profitorganizations,governmententitiesandotherbiopharmaceutical/biotechnology companies to help us advance the latest science and ultimately bringmedicinesandvaccinestopatients.Clinicaltrialsareacriticalpartofhowweadvancescientificinnovations.Wearecommittedtothestudyofappropriatelydiversepatientpopulations,including groups who have been previously underrepresented in clinical trials:women and children,people of varying ages,sexual orientation and gender identities,various socioeconomic,ethnic and demographic backgrounds,andothercharacteristics.During development,we evaluate the potential of our pipeline candidates toaddressmedicalneedsandsignificantpublichealthchallenges.Whenacandidatehaspotentialforsignificantpublichealthimpact,ourproductdevelopmentteamsplanwaystoprovideaccessforthefuture.Finally,once approved,we endeavor to ensure our products are available ineverycountrywhereweconductedclinicaltrials.$30.5 billionIn total R&D expenses83%Of the top 20 global burdens of disease(GBD)addressed by our pipeline and products76Significant external R&D licenses and collaborations100,000People reached through clinical trials in 50 countriesGRI/SASBdisclosuresinthissection:GRI 203SASB240a.1 For more info on disclosures,see the Reporting indices.For more information on our R&D efforts,please visit the Research&Products page on our corporate website.22Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityReflecting global health care needs inR&DAsdefinedbytheglobalburdenofdisease(GBD)visualizationtoolsdevelopedbytheInstitute for Health Metrics and Evaluation(IHME),our products address diseases that rank high on the list of worldwide causes of illness,disabilitiesanddeath.Inaddition,ourvaccine and infectious disease research targets major burdens of disease,including in LMICs,where health care infrastructure may be resource-constrained.Considering our pipeline,the products we market,and our external collaborations,weestimatethatourCompanyisseekingtoaddress 83 percent of the top 20 GBD(this figureexcludesroadinjuriesandage-relatedhearingloss)asdefinedbytheIHME,thesamepercentagein2023asin2022.Ofnote,themost recent version of the GBD by the IHME isfrom2019.We strive to discover treatments for diseases thataffectpeopleacrossabreadthofcountries,such as cardiovascular disease,which the WorldHealthOrganization(WHO)identifiesastheworldsleadingcauseofdeath.Wehavea long history of developing treatments for cardiovasculardisease.Morethan60yearsago,weintroducedourfirstcardiovasculartherapyandoureffortstounderstandandtreatcardiovascular-relateddisordershavecontinued,includingwithourinvestigational,once-dailyoralproproteinconvertasesubtilisin/kexintype9(PCSK9)inhibitor,currentlybeingevaluatedinadultswithhypercholesterolemia.Despitetheinventionofseveralwell-establishedlipid-lowering therapies,millions of people globally do notachievetheirdesiredlow-densitylipoprotein(LDL)cholesterol treatment goals,leaving them atriskforcardiacevents.In2023,webeganthreePhase3studiesevaluatingourPCSK9inhibitor,including for its potential to reduce cholesterolandimprovecardiovascularoutcomes.“The initiation of a comprehensive Phase 3 program is an important milestone in our goal toofferahighlyeffectiveoralmedicationwiththepotentialtoprovideaccesstoabroadpopulationandpotentiallyallowsubstantiallymorepeopletoreachtheirLDLtreatmentgoals.Inacknowledgmentofthesignificantracial,ethnicandgenderdisparitiesincardiovascularcare,we are taking proactive measures to engage potential participants from populations thathavehistoricallybeenunderrepresentedinclinicaltrialsofthistype.”Dr.Joerg Koglin,Senior Vice President,Merck Research Laboratories23Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityResearch and development20192020202120222023R&D expenses(in billions)1,2$9.7$13.4$12.2$13.5$30.5Top 20 global burdens of disease addressed by our products and pipeline3100q%Establishedsignificantexternallicensesandcollaborations478123929776 R&Dexpensesincludea$2.7billionchargein2020relatedtotheacquisitionofVelosBio,Inc.,a$1.7billionchargein2021relatedtotheacquisitionofPandionTherapeutics,Inc.,$1.7billionofintangibleassetimpairmentchargesin2022,andchargesof$17.1billionin2023fortheacquisitionsofPrometheusBiosciences,Inc.,andImagoBioSciences,Inc.,andtheformationofcollaborationswithDaiichiSankyoandKelunBiotech.2 ThehistoricalresultsofthebusinessesthatcontributedtoOrganon&Co.inthe2021spin-offhavebeenreflectedasdiscontinuedoperationsintheCompanysconsolidatedfinancialstatementsthroughthedateofthespin-offandthereforeareexcludedfromthe2019,2020and2021figurespresented.3 AllcalculationsforourCompanysGBDimpactarebasedonthelatestIHMEreportavailable,from2019.Assuch,impactfrommorerecentdiseaseslikeCOVID-19isnotaccountedfor.Wealsodonotincluderoadinjuriesorage-relatedhearinglossinourGBDaccountingsincetheyarenotsubjecttopharmaceuticalintervention.4 Thesepartnershipsaredeemed“significant”becausetheyinvolveanassetortechnologywiththepotentialtomakeanimportantenhancementtoourR&Dcapabilities.R&D investments and collaborations for LMICsWe have a strong legacy of infectious disease research,including for diseases that greatly impact people in LMICs like respiratory syncytial virus(RSV),tuberculosis(TB),humanimmunodeficiencyvirus(HIV),malariaanddengue.RSV is a contagious,widespread seasonal infection.Thoughalmostallchildrencontractit at least once before they are two years old,forsome,itcanbecomplicated.Anestimated95percentofRSVinfectionsandmorethan97percentofRSV-relateddeathsgloballyoccurinresource-limitedcountries,makingRSV a substantial burden of disease in these settings.Weareevaluatingamonoclonalantibody for the prevention of RSV in infants andcertainchildrenoverageone.In 2022,we entered into a licensing agreement with the Gates Medical Research Institute(Gates MRI)for two preclinical candidates discovered at our Company with potential in combination regimens for treating TB,oneofthetop10causesofdeathinLMICs.Inearly2023,oneofthesecompoundsenteredaPhase1clinicaltrial.Ourscientistsdiscovered the compounds as part of the TBDrugAccelerator(TBDA),acollaborationamong biopharmaceutical companies,researchorganizationsanduniversitiestoaccelerate new TB therapies,supported by theGatesMRI.ThelicensingagreementwithGates MRI,facilitated through the TBDA,and covering preclinical candidates,is an example of a collaboration that can help advance drug candidates toward becoming potential novel combinationTBtreatments.R&D collaborations In2023,weenteredinto76significantexternal licenses,collaborations and acquisitions with a broad range of partners,fromearly-stagesciencetoclinical-stageprograms.Thesecollaborationsaredeemed“significant”becausetheyinvolveanassetortechnology with the potential to enhance our R&Dcapabilitiesorportfolio.Hilleman Laboratories:A first-of-its-kind R&D joint ventureIn collaboration with the Wellcome Trust,we founded Hilleman Laboratoriesover10yearsago,afirst-of-its-kindR&Djointventuretofacilitatewider,affordableaccesstolife-savingvaccinesandbiologicsinLMICs.Ourlongstandingsupportfor Hilleman Laboratories is part of oureffortstoexploreacontinuumofapproaches and partnership models to better enable supply stability and facilitate more equitable access to innovativehealthproductsinlow-resourcesettings.24Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityDengueAccordingtotheWHO,climatechangeisasignificantcontributingfactortotheincreaseintheincidenceandspreadofdengue.Changesinclimatepatterns,includingtemperatureandrainfall,caninfluencethebreeding,survival,andbehaviorofmosquitoesthattransmitthedenguevirus.Abouthalfoftheworldspopulation,or4billionpeople,isatriskfordengue,primarilyintropicalandsub-tropicalregions.Wearecommittedto addressing dengue through development of our investigational vaccine,currently inlate-stagedevelopment.Since 2018,wehavecollaboratedwithInstitutoButantan,anon-profitproducerofimmunobiologicproductsforBrazil,tosharedataandlearningsfromourrespectivedenguevaccineprograms.InstitutoButantanisalsodevelopinganinvestigationalvaccineforwhichitwillseekregulatoryapprovalinBrazil;weplantoseekregulatoryapprovalinmanycountriesoutsideofBrazil.New formulations Innovation goes beyond new treatments.Withafocusonreducing pill burden by investigating thepotentialtoprovidelong-actingoptions to enhance the patient experience,we strive to provide options that increase the ease of administeringtreatments.Forexample,in HIV,we are researching long-actingmedicationsdesignedto reduce the frequency of administration,whichmaybenefitpatientsandresource-constrainedhealthsystems.HIV is a global epidemic that disproportionately affectspeopleinsub-SaharanAfrica.Infact,accordingtoIHME,two-thirdsofthemorethan 38 million people with HIV reside in theregion,accountingforabout75percentofHIV-relateddeathsglobally.Formorethan35years,wehaveresearchedwaystoaddresstheHIVepidemic.WehaveabroadR&D program for HIV,including a Phase 3 developmentprogramforanewonce-daily,two-drugregimen.Aspartofanagreementwith Gilead Sciences,we also have a program evaluating an investigational,weekly oral combinationtreatmentconsistingofourantiviralislatravirandGileadslenacapavir.Recent Phase 2 data for this investigational oralcombinationregimenshowitmaintainedviralsuppressionat24weeks,supportingits continued development as a potential long-actingoralcombinationtreatmentoptioninvirologicallysuppressedpeoplewithHIV,withthepotentialtobethefirstoralweeklyHIVtreatment.In addition,we are collaborating on a potential new treatment option for malaria,an infection that the 2023 World Malaria Report notes is one of the largest causes of death in pregnant womenandchildrenunderage5inmostresource-poorcountries.Importantly,thereisrisingresistancetoexistingmalariatreatments.A new antimalarial drug candidate,discovered through our longstanding collaboration with theWalterandElizaHallInstituteofMedicalResearch in Australia and with funding from theWellcomeTrust,recentlyenteredintoclinicaldevelopment.25Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequitySystematic evaluation to inform product access strategiesWe are implementing a new collaborative enterprisego-to-marketmodelthatfacilitatesaccess to health considerations early in a productsdevelopment.This framework helps us evaluate our pipeline candidates and identify their potential in addressingsignificantpublichealthburdensand unmet medical needs,particularly in underserved health care settings,including LMICs.Theinsightsfromthisevaluationprocessinform our product development and access strategies,with the overarching objective of expanding availability of our medicines and vaccinestoasmanyindividualsaspossibleinaneconomicallysustainablemanner.Starting early in development,we conduct acomprehensiveevaluationofourcandidatespotential to address unmet medical needs,particularlyinLMICs.Thisearlyandsystematicevaluation encompasses multiple factors,including the understanding of barriers to access,medical needs and economic considerations.Candidateshavingsignificantpotentialtobenefitpopulationsinunderservedsettings are assessed for investment in access solutions,with the intent of enabling widerpatientreachglobally.Furthermore,werecognizetheimportanceofunderstandingthe existing health system infrastructure and funding mechanisms,as they play a crucial roleinfacilitatingthesafeandeffectiveuseof our products and ultimately enhancing patientaccess.OurR&Dandenterprise-levelgovernancecommittees are accountable for evaluating our candidates as a part of the standard developmentprocess.Theirrecommendationsarereviewedatinternal,cross-divisionalforumsofseniorleaders.Toaccountforchangesintheexternal environment,products continue to be evaluated for their potential to address disease burdensthroughouttheirlifecycle.Sometimes the evaluation of a candidate reveals barriers to access in LMICs or underservedsettings.Inthesesituations,the evaluation can inform how we might strengthen health systems and improve healthequity.Werecognizethataddressingthecomplexandmulti-facetedchallengestoaccess in LMICs requires collaborating with multiple stakeholders and seeking partnerships thatenablehealthcareaccess.26Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityIncreasing diversity of patients in clinical trialsIn2023:337late-stagestudies,across 21,000sitesin50countries,and 100,000peoplereachedinclinicaltrialsClinicaltrialsarecriticaltoadvancingscientificinnovations and we are determined to expand access to themincluding through increased racial and ethnic diversity among trial participants.In2023,wereachedmorethan100,000peoplethroughourclinicaltrialsinmorethan50countriesworldwide.Increasing the diversity of participants inclinicaltrialsrequiresacomprehensiveapproach,which is why we are addressing avarietyofassociatedfactors.Forlate-stagetrials,werequireplanstorecruitpatientswhoreflectthediversityofthepeoplewhowilluseourproducts.Inaddition,weprioritizeplacementofU.S.studysites in communities with higher populations of individuals who have historically been underrepresentedinclinicaltrials.And,weprovide resources and training to improve diversityinclinicalresearch.Forexample,weestablished a community advisory board to gain firsthandinsightsandincorporatethevoiceofthe patient in our site and patient engagement methods.Wevealsoestablishedanewroleresearchnavigatorat12keyU.S.partnersitestoaiddiverseenrollment.Collaborations are a vital part of increasing participantdiversity.In2022,wejoinedtheNovartis-ledcollaboration,BeaconofHope,a10-yearprogramthatestablishesclinicaltrialcenters of excellence at four historically Black medical schools,to increase diversity among clinicaltrialinvestigatorsandparticipants.Wealsocontributetosponsorshipstoconnectwith,support and train clinicians from underrepresentedgroups.Toeaselogisticalbarriersthatmakeitdifficultfor some patients to visit clinical trial sites,were working with Greenphire,a provider of globalfinanciallifecyclemanagementsolutionsforclinicaltrials.TheorganizationsClinCarddebit card provides direct stipends and travel reimbursementforclinicaltrialparticipants.In addition,we have developed tools to reach study participants within their communities,suchasourpartnershipswithBlackDoctor.organdAcclinate,leadingorganizationsfocusedon increasing awareness of clinical trials among diverseparticipants.Wealsoco-sponsortheImproving Patient Access to Cancer Clinical Trials(IMPACT)studyattheLazarexCancerFoundation.IMPACTisathree-yearpilotprogram that strives to increase the diversity of people enrolled in clinical trials,as well as to improve retention and equitable access inoncologytrials.Wealsoimplementnoveltools and approaches to build relationships and reach potential study participants within theircommunities.Consistent with the International Conference on Harmonisation:Good Clinical Practice(ICH-GCP)requirements,aspartoftheinformed consent process,we make clinical trial participants aware of the compensation or treatment available to them and whom to contactintheeventofatreatment-relatedinjury.Inaddition,wemaintainproceduresthataddressthecostsoftreatmentintheeventoftrial-relatedinjuries,inaccordancewithapplicableregulatoryrequirements.27Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityGoal2023Reach at least 75%of countries around the world annually with our products.179%1“Countries”areasdefinedbytheWorldBankCountryandLendingGroups.Includesonlyhumanhealthproducts.Availability Our Company is committed to a comprehensive global supply chain management strategy that addresses accessibility,agility,resilience,capabilityandsustainabilityonaglobalscale.Ourcommitmenttoglobalproductavailabilityisreflectedinourgoaltoreachatleast75percentofcountriesworldwideannuallywithourhumanhealthmedicinesandvaccines.In2023,weexceededexpectationsbyreaching79percentofcountries,surpassingourgoalforthethirdconsecutiveyearandshowcasingourdedicationtoextendingtheaccessibilityofourlife-savingproductsacrosstheglobe.GRI/SASBdisclosuresinthissection:GRI 203SASB240a.1SASB240a.2 For more info on disclosures,see the Reporting indices.28Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityCommercialization and supply chain planningOurapproachtocommercialization,manufacturing,and supply chain planning focuses on extending access to our products,driving innovation through digital tools,and demonstratingvaluetoourstakeholders.We are using a collaborative enterprise go-to-marketmodeltoallowearlierplanningforallmarkets,includinghigh-,middle-andlow-incomecountries.Theaimistoenableaccess to our medicines and vaccines globally,including the areas of the world where they areneededmost.Our supply chain operations are integrated across the enterprise,playing a crucial role Availability2020202120222023Countriesaroundtheworldreachedwithourproducts(Target:75%)78yvy%Ordersshippedontimeandinfull(Target:95%)98%Logisticspartnerswithsecurity-riskassessmentcompleted,annually(Target:100%)100000%Reportingonthesemetricsbeganin2020.CountriesasdefinedbytheWorldBankCountryandLendingGroups.Includesonlyhumanhealthproducts.Maintainingproductqualityisparamount.Toprovidehigh-qualitymedicinesandvaccinesto people who need them,when and where theyneedthem.Wemanageoursupplychainthrough policies and procedures designed to keep the distribution system secure,agile andefficient.We strategically design our supply chain networks while monitoring evolving pipeline,globalandmarketdynamics.Theintegrationof new partners and novel modalities further diversifiesthesupplychainlandscape(e.g.,small molecules,macrocyclic peptides,biologics,antibody-drugconjugates,andvaccines),and helps to enable a secure and continuous distributionofmedicinesandvaccinesglobally.Oursupplychainstrategyisbuiltonresilience.Initialandperiodicsecurity-riskassessmentsforlogistic partners and contract manufacturers align with our unwavering commitment to robustsafetymeasures.Wearecommittedtoachievinga100percentsecurity-riskcompletion rate for all new logistics partners during the logistics procurement process,as wedidin2023.Theseassessmentssetacriticalbaseline to measure security risk at the onset of the business relationships and ensure alignment with our supply chain security standards to protectourproductsandpatients.Thisplanningenables us to continue to surpass our target of95percentofordersshippedontimeandinfull,withanachievementof98percentin2023(seeAvailabilitytabletotheleft).Maintaining and sustaining a global supply network alongproductlifecycles.Wedesignsupplychains comprised of internal sites and external partners that enable resiliency while improving accessinasustainableway.Our Digital Logistics Program helps build the supply chain of the future and ensure continuous supply of critical medicines and vaccines to patients worldwide through efficient,tech-enabledoperations.Thecloud-based data integration service gives insights intothephysicalflowofourproducts,minimizingdisruptionsandimprovingserviceandsecuritywhilereducingcosts.This commitment to resilience is evident in our proactive risk preparation,including assessment and mitigation of risk related to geopolitical events,natural disasters andpandemics.Oursupplychainsabilitytopromptlyre-routeshipments,useagilecold-chaintechnologies,andproactivelyaddressdisruptions demonstrates the strength of its framework,and our commitment to sustain aglobalsupplyofproductsforpatients.For more information on our supply chain operations see the Supply Chain section on page 113,Serialization and product security section on page 111,and the Climate risk assessment section on page 75.29Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityRegistering medicines and vaccines where there is need Product registration and prequalificationWe seek to ensure global access to our medicinesandvaccinesbymaintainingup-to-dateproductregistrationsaroundtheglobe.In2023,weregistered159productsanddevices,withmostoftheseinLMICsintheAsiaPacific,Central and Eastern Europe,Middle East and Africa,andAmericasregions.In addition to having our medicines and vaccines approved by regulatory authorities and enhancing access to LMICs,we also pursue WHOprequalificationforcertainmedicinesandvaccines so they can be more easily procured byanddistributedtoLMICs.ThetabletotherightsummarizestheregistrationandWHOprequalificationstatusofaselectlistofourmedicinesandvaccines.WHOprequalificationfacilitatesproductprocurement by United Nations agencies inmanyLMICs.Intheabsenceofstringentnationalmedicineauthorities,itcertifiesthatproducts meet required quality,safety and efficacystandards.WHOsprequalificationprogram covers routine vaccines and medicines forHIV/AIDS,malaria,TB,hepatitis,diarrhealdiseasesandselectneglectedtropicaldiseases.We work to address the unique needs of LMICs where the infrastructure and personnel to deliverimmunizationservicescanbeseverelylimited.Specifically,wehavefocusedonproduct improvements such as the introduction of vaccine vial monitors(VVMs)to assess controlled-temperature-chainconditions.Products prequalified by WHOInternational nonproprietary name(INN)Date of prequalificationNumber of countries prequalified in 2023VaccinesM-M-RIIMeasles,Mumps,Rubella Virus Vaccine LiveJanuary200976ROTATEQRotavirus Vaccine,Live,Oral,PentavalentOctober 2008121GARDASILHumanpapillomavirusvaccinetypes6,11,16,18(recombinant,adsorbed)”May2009129GARDASIL9Humanpapillomavirus9-valentvaccine(recombinant,adsorbed)February201890VARIVAXVaricellaVirusVaccineLive(firstvaricellavaccinetoreceiveWHOprequalification)February201886ERVEBOEbola Zaire Vaccine,LiveNovember201945HIV/AIDS treatmentsSTOCRINEfavirenz(600mgtablet,OralSolution30mg)Efavirenz(50mgtablet,200mgtablet)May2006,May 200846 NotcurrentlyavailablethroughUNICEFprocurement;awaitingVVM.Product registration20192020202120222023New product registration(annual)9779141156159ProductssubmittedthathaveachievedWHOprequalification(cumulative)2,31313777Numberofpatentapplicationsfiledinlow-incomecountries400000 Dataincludenewproductsandnewindications.2 ThreeproductspreviouslyreportedarenolongerpartoftheCompanysproductportfolioduetotheOrganon&Co.spin-offin2021.3 Three GARDASILproductsthathadbeenpreviouslyreportedseparatelyarereportedasoneproductstartingin2021.4 Countriesclassifiedaslow-incomecountriesinthe2023WorldBankCountryandLendingGroupclassifications.30Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityManufacturing and supplying vaccinesIn the last few years,various countries have introduced new or expanded routine vaccination programs,creating unprecedented increases in globalvaccinedemand.Tomeetthis,wecontinuetoincreaseourcapacityandsupplycapabilities.Weplantoinvestapproximately$18billioninsupply-relatedcapitalprojectsfrom2023-2027,withaportiondedicatedtovaccines.Wealsocontinuetoinvestinmanufacturingandend-to-end supply improvements in both capability and capacity to help ensure a sustainable,reliable supplyofqualityandaffordablevaccines.Wearecommittedtovaccineaccessibilityandhavespecificstrategiesinplacetoenhancetheavailabilityofvaccines.Partnering to fortify vaccine supplyIn Canada,we partnered with the Ministry of Health,a pharmacy chain,and a distributor in agroundbreakingsupplychaininitiativethatintroducesablockchain-basedsecurenetworkforreal-timetrackingofvaccinedoses.Thetechnologyallowsforseamlessvaccinetransferandenhancesend-to-endvisibilityacrossthesupplychain.Italsorevolutionizesinventorymanagement,creatingacollaborativenetworkwherestakeholdersshareandvisualizeinventory,improvingdistributionandpreventingsupplyissues.Partnering to reduce cervical cancer in IndonesiaIn alignment with the HPV NationalImmunizationProgramin Indonesia,our Company forged a pivotal partnership with a local manufacturing company(Bio Farma)in late 2022 through the signing of a technology transfer agreement.Thisstrategiccollaboration facilitated the transferoftechnologyandlocalizedproductionofour4-valentHPVvaccinewithinIndonesiasborders.By establishing local manufacturing capabilities,this agreement facilitates enhanced accessibility and distribution of this vaccine in Indonesia.Distributioncommencedin August 2023,with the goal of vaccinating up to three million age-appropriategirlsinIndonesia.Given the high prevalence of HPV-relatedcervicalcancerinIndonesia,our partnership holds promise in helping expedite the countrys journey towards reducing cervicalcancer.31Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityEnhancing data and decision making for access planningWerecognizetheimportanceofintegratedaccess planning,data,and decision making throughoutthesupplychain.Acoordinatedapproach ensures the availability of products through streamlined processes,which in turn fostersefficiencyandresponsivenesstoglobalhealthchallenges.Toimproveefficiencyandresponsiveness,wehavedevelopednewmethodologiesthatmodeldemandandcapacity.Thesemethodologies help us meet increased patient demandsmoreefficientlyandnavigatesupplychain complexities with strategic foresight and strategic acumen,setting the stage for further advancementsinsupplychainstrategies.Empowering health care:using supply chain capabilities to enhance aPatient Access ProgramThroughinnovativedigitalcapabilities,suchasblockchainandserialization,weareleveraging a supply chain initiative to enhance our Patient Access Programs in the Asia PacificRegion.Thisinitiativeaimstoenhancepatientaccesstoouroncologyportfoliobyensuringproductsecurityandcompliancewithhealthauthoritiesrequirements.Throughtheimplementationofend-to-endtraceabilityandpackageverification,weprioritizepatientsafetyandensuretheintegrityofourproducts.For more information on serialization and product security,see page 111.New supply strategies to expand accessOur commitment to expanding access is not justanaspirationbutacontinuouseffortmarked by tangible actions and impactful outcomes.In2023,ourCompanydevelopedstrategic partnerships to enable expansion of product reach to markets that were previously inaccessible.OurSupplyChainManagementteam is actively engaged in breaking down accessibility barriers by engaging in capability building,forging strategic partnerships,and building a global internal and external supply network.OurCompanyistransformingitsmanufacturing approaches to deliver on itspromiseofmakinglife-savingproductsaccessibletopatientsworldwide.Innovations in supply chain technologies:Driving resilience and agilityOur commitment to advancing health careextendsbeyonddevelopinginnovativebiopharmaceuticals.Weunderstandtheimportanceofarobustandefficientsupplychain to ensure timely and broad access tolife-savingproducts.Asthehealthcareecosystem and global supply chain dynamics continue to evolve rapidly,we have been leveraging our digital capabilities to be more resilient,enhancingsupplychainagility.With manufacturing operations across the globe,supply chain resilience becomes paramount.Withthecomplexityinherentin biopharma supply chains,proactive identificationandmitigationofrisksiscrucial.One of the ways we are addressing this is by leveragingartificialintelligence(AI)toenhanceourabilitytoidentify,monitor,analyze,andrespondtosupplychainrisksglobally.OurAI-poweredriskorchestrationplatformand continuous event monitoring provide real-timevisibilityandenabledata-drivendecisionmaking.Strongsupplychainsystems,made more robust with these innovations for efficiencyanddistributiontounder-resourcedand remote locations,will be the engine that helpsusnavigatethesechallenges.For more information on our supply chain operations see the Supply Chain section on page 113,and the Climate risk assessment section on page 75.32Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordabilityandsustainableaccess|Strengthening health systems and addressing inequityAffordability and sustainable access InspiredbyourformerCEOGeorgeW.Merck,whooncesaid,“Wecanneverrestuntilawayhasbeenfoundtobringourfinestachievementstoeveryone,”we are working toward a world where everyone,everywhere,can receive the medicinesorvaccinestheyneed,whentheyneedthem.Westrivetodothisin a way that creates sustainable access to our innovative products,creating long-termvalueforourstakeholders,includingshareholders,patients,andhealthsystems.Grounded in a deliberate systematic approach,our Company develops,tests andimplementsmarket-basedsolutionsthataddressbarrierstoaccessandaffordabilityofourmedicinesandvaccines.Thisallowsustoservethegreatest number of patients today,while meeting the needs of patients in thefuture.Whereappropriate,wepursuethesesolutionsinpartnershipwithprivateenterprises,governmentagencies,multilateralandnon-governmentalorganizations.Whenmarket-basedsolutionsareinadequateorunavailable,we pursue programs to provide direct access to our medicines and vaccines,includingproductdonationsandpatientassistanceprograms.Havingexceededourinitialgoalin2023,wehavenowsetanewgoaltoenable350millionmorepeoplegloballytoaccessourinnovativemedicinesandvaccinesby2025andwearewellonourway.Toreachthisgoal,wearebuildinghealthcarecapacity,strengtheningchannelsforcaredeliveryandfosteringsustainablefinancing.For more information on how these solutions are working to improve affordability and sustainable access,please see“How we enable affordability and sustainable access to ourinnovative medicines and vaccines”on page 34.Enabling access to our medicines and vaccines20192020202120222023Total number of people enabled to access our innovative medicines and vaccines through access solutions(estimate in millions)NRNR66.7189.2240.0People reached globally through product donation and patient assistance programs and partnerships(estimate in millions)403.7268.3197.3359.2385.2NR:notreported.1 Metrics contributing to this goal are displayed on an annual basis and provide information on the number of people who we estimate now have the option to access medicines and vaccines as a result of our sustainable access strategies,solutionsandpartnerships.ThesesolutionsincludeourcommitmenttoGaviandUNICEF(ratherthandosesshipped),collaborationstooptimizeresourcesinhealthsystems,expandedfinancialcoveragethroughinsurance,andnewcommunity-basedchannelpartnerships.“Innovativemedicinesandvaccines”referstoourCompanyson-patentproducts.Enable“morepeople”isdefinedaspopulationssupportedbyinitiativesimplementedandlaunchedinmarketandwillbeincomparisontothebaseline(2020)asof2025.Evidenceformetricsissourcedfrompubliclyavailabledataandproxysourcesbymarket.Whileproxiesdifferbymarket,allmethodologiesareevaluatedandrepresentourbestestimateofpeopleenabledtoaccessinnovativemedicinesandvaccines.Peoplewhowereenabledtoaccessinnovativemedicinesandvaccinesdidnotnecessarilyreceivesuchinnovativemedicinesandvaccines.IncludespeoplereachedthroughtheMECTIZANDonationProgram,theMMOP,andtheU.S.PatientAssistanceProgram.TotalpeoplereachedwiththeMECTIZANDonationProgramincreasedin2023aspartnercountriescontinuedtoresumeadditionalMECTIZANdistributionfollowingdisruptionsduetothepandemic.Formoreinformation on the details related to the people reached through donations,please see page 38.GRI/SASBdisclosuresinthissection:GRI 203SASB240a.1 For more info on disclosures,see the Reporting indices.33Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordability and sustainable access|Strengthening health systems and addressing inequityHow we enable sustainable access to our innovative medicines and vaccinesWe strivealong with many in the health care sectortofindsustainablewaystoexpandaccesstoourinnovativeproducts.Wehaveestablished a globally available framework for diagnosing barriers to access and for designing and delivering practical solutions tohelpaddressthem.Wealsohaveadedicatedinternal unit tasked with accelerating access by evolving our capabilities and capturing learnings across countries,including by helping health care systems better serve those in need through customer collaborations,health care financing,employerbenefitdesignandnewdeliverychannels.Throughthisapproach,wehave accelerated the development of patient access models and solutions that expand the populationswecanreach.We remain committed to our goal to enable 350millionmorepeopletoaccessourinnovative medicines and vaccines through accesssolutionsby2025.In2023,wemadesteadyprogress,enablingaccessfor240millionpeople(see page 33).CustomercollaborationsSome health care systems are challenged with long wait times and capacity constraints relatedtodiagnosisandtreatment.Thatiswhywe collaborate with more than 80 health care and service providers across Europe and Latin America to understand hurdles and advance solutionsthatstrengthenhealthcaresystems.Using our expertise,particularly in oncology,and our deep understanding of the health care ecosystem,we partner with health systems to better understand cancer patient pathway constraints and to identify solutions that enable accessandoptimalresourceuse.One such approach is in the United Kingdom.Throughout2023,wecompleted16collaborativeprojects,andinitiatedanother32,to support the National Health Services(NHS)inoptimizingcancertreatmentpathwaysandexpandingcapacity.WeworkedwithLloydsPharmacy Clinical Homecare to deliver infusion services that sit outside of a university teaching hospital in Newcastle,an area with high cancerprevalence.Theoutpatientsitebringscareclosertopatients,reducingtraveltothecity center for treatment and improving the patientexperience.In Colombia,we work with multiple health maintenanceorganizationsandoncologyhealthcareprofessionalstoidentifyinefficienciesandpain points,helping reduce the time to lung and breastcancerdiagnosis.In collaboration with Financial Times Longitude,we launched the Sustainable Access website to advocate for greater stakeholder collaborations to develop,test and scalesustainableaccesssolutions.Financing health careA recurring access challenge in LMICs is the potentiallyhighout-of-pocketcostsforcriticalillnesstreatments.Recognizingthisissue,wework with reinsurers and insurance companies todevelopaffordablehealthinsuranceproductsthatcoverinnovativecancertherapies.For example,in China we are collaborating with public health authorities to provide accesstoimmunotherapyfinancingthroughsupplemental medical insurance,driving greaterhealthcareinclusion.We believe that expanding the reach of insurance products will help solve major access hurdles and,in turn,increase patient accesstoinnovativecancertherapies.Thiscollaborative approach to addressing access challenges reinforces our commitment to being part of a wider ecosystem,working with those with complementary capabilities to tackle accesschallenges.34Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordability and sustainable access|Strengthening health systems and addressing inequityEmployers role inbenefitdesignIntheU.S.,employersplayanimportantrole in the health care system through their employeehealthplans.Theprinciplesofvalue-basedinsurancedesign(V-BID)focusonstructuringhealthplanstoincentivizehigh-valueinterventionsanddisincentivizelow-valuecare.V-BIDaimstoimprovepatientoutcomes and manage costs,allowing funding tobereallocatedforinnovativenewtreatments.WehaveevaluatedaV-BIDOncologyPilotthatpioneeredtheuseofV-BIDprinciplesincorporate cancer coverage for our employees intheU.S.Wearealsousingdatatobetterunderstand our employees health risks and ourcancercareexpenditureto:Identify opportunities to move from low-valuetohigh-valuecare ContinuouslyrefineandevolvetheplanWe have been sharing lessons from this pilot with stakeholders and other employers in hopes itwillwidenaccesstoqualitycare.Additional information on sustainable access strategies,solutions and partnerships can be found on the Sustainable Access website.Newcommunity-levelaccess channelsWe seek strategic partnerships with health care professionals who have the potential to enhance awareness,availability,accessibility andaffordabilityofourproducts.Thesepartnerships enable access for populations who traditionally have been unable to access innovativemedicinesandvaccines.For example,we collaborate with a health care provider who operates across nine African countries to reimagine the prevention,screeningandtreatmentofcervicalcancer.Our commitment to Gavi andUNICEFWe are deeply committed to Gavi,the Vaccine Alliance(Gavi),andUNICEFintheireffortstoexpand access to vaccines and protect global health.Gaviisapublic-privatepartnershipthathasmadesignificantstridesinimmunizingchildren and reducing child mortality in lower-incomecountries.Gavialsoprovidesfunding support for health systems and global stockpiles of crucial vaccines for Ebola,cholera,meningitisandyellowfever.As a member of Gavis board,and the worlds largest buyer of vaccines for developing countries,UNICEF has a pivotal role in immunizationprogramsinGavi-supportedcountries.UNICEFsSupplyDivisionprocuresmostGavi-fundedvaccines,ensuringtheiravailabilityanddistribution.Our commitment to helping protect global health by broadening access to our vaccines is fundamentaltoourmission.Toenablefurtheraccess to our HPV vaccine,to help prevent HPV-relatedcancersanddiseases,weprovidethe vaccine to Gavi at an access price for use inGavi-supportedcountries.Throughalong-term agreement with UNICEF,we committed toprovideover115milliondosesofourHPVvaccineforuseinGavi-supportedcountriesfrom2021-2025.Inaddition,for2021-2025,wecommittedtoextend our current Gavi prices for our HPV vaccinetoGavi-transitionedcountrieswithaper-capitagrossnationalincomenotexceeding$3,200.Thisgreatlyassistsinexpandingand sustaining access in countries that have transitionedoutofGavisupport.WebelieveourpricingapproachforGavi-supportedand-transitionedcountriesinconjunctionwithour commitment to partner with stakeholders tostrengthenresilienceofimmunizationprogramscontributes to broader access toourvaccinesworldwide.ERVEBO(Ebola Zaire Vaccine,Live)is the worldsfirstU.S.FoodandDrugAdministration(FDA)-approved,WHO-prequalifiedvaccineforthepreventionofEbolavirusdisease.Throughour agreement with UNICEF,we have built a500,000-doseERVEBO stockpile,and we continue delivering licensed doses to maintain it.AsofMarch2024,thevaccineisapprovedin11Africancountries.We are a sponsor of Investing in Innovation(i3),apan-Africaninitiativetosupportthecommercializationandimpactof60promisingearly-andgrowth-stageAfricanhealthinnovatorcompanieswithgrantsandaccesssupports.Aglobalnetworkofindustryplayers,donorsandinternationalorganizationssponsorstheinitiativetosupporthigh-potentialstartupswhoaspiretotransformtheavailability,accessibility,affordability,qualityandvisibilityofhealthproductsatscaleacrossAfrica.i3seekstoadvancemarketaccessforstartupstraditionallyexcludedfromfundingandsupport.35Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordability and sustainable access|Strengthening health systems and addressing inequityOur pricing approachWe believe it is possible to have a pricing system that allows patients to access the latestproductswhilesustainingleading-edgescientificresearchforfuturemedicalinnovations.Wehavealonghistoryofmakingour medicines and vaccines accessible and affordablethroughresponsiblepricingpracticesandindustry-leadingpatientaccessprograms.We are working to bring our products to more people globally in ways that are as accessible andaffordableaspossible.Whileeachsituationvaries based on unique circumstances and market dynamics,generally we consider:Value to patients Value to health care systems Unmet need Access R&D sustainability Competition U.S.productpricingIn2017,webegandisclosinginformationaboutthepriceofourmedicinesintheU.S.Our2023U.S.Pricing Action Transparency Report shows an average annual net price increaseof4.4percentin2023.Theaverageannual list price across our portfolio increased by4.5percentin2023andourgrossU.S.saleswere reduced by 37 percent in 2023 because of rebates,discountsandreturns.For more information on our approach to pricing,please see our U.S.Pricing Action Transparency Report,available on the Transparency Disclosures page of our corporate website.Additional information on our efforts and suggestions to address patient access challenges in the U.S.is available in our CEOs testimony to the United States Senate Committee on Health,Education,Labor&Pensions in February 2024.Voluntary licensing We have experience working with generic manufacturersonglobalhealthconcerns.Overthelastseveralyears,weputthisexperiencetoworkaddressingCOVID-19globally.FromtheearlydaysofCOVID-19,andcontinuingthrough2024,wehavehelpedmeetthesignificantunmetmedicalneedgloballythroughamulti-facetedstrategytoenhanceaccesstoourinvestigationalCOVID-19oraltreatmentfollowingregulatoryauthorization:We entered into advance purchase and supply agreements with the governments ofmorethan40countriestosupplyourinvestigationalCOVID-19oraltreatmentthroughatiered-pricingapproachbasedonWorldBankcriteriatoreflectcountriesrelativeabilitytofinancetheirhealthresponsetoCOVID-19.We signed voluntary license agreements during the clinical development process with multiple Indian generic manufacturers and the Medicines Patent Pool,to facilitate availability of generic versions ofourmedicinetomorethan100LMICs.These licenses and local manufacturing partnerships provide supply coverage for approximately90percentofthepopulationinLMICs.We allocated up to three million courses of our supply of medicine to UNICEF for LMICs as a“bridge strategy”until the voluntary licenseeswereabletoprovidesupply.Thisstrategyhasminimizedthegapbetweensupplytohigh-incomecountriesandtoLMICs.ThesupplyagreementinplacewithUNICEF has been extended until the end of2024.WewelcomedtheGatesFoundations2021commitment of$120 million to accelerate accesstogenericversionsofourmedicine.This commitment complemented our voluntary license agreements and highlights the importance of actions from multiple stakeholderstoeffectivelyincreasetimelyaccessforpatientsglobally.Throughour licensing agreements with generics manufacturers and the Medicines Patent Pool,as of the end of 2023,close to six million courses of generic therapy have been shipped to28LMICscoveredbythelicenses.36Merck 2023/2024 Impact ReportEmployeesEnvironmental SustainabilityEthics&ValuesReporting indicesOverviewAccess to HealthDiscovery and invention|Availability|Affordability and sustainable access|Strengthening health systems and addressing inequityPublic policies that improve access and affordabilityPublic policies,including laws and regulations,directlyandindirectlyaffectaccessandaffordability.Wearecommittedtopromotingsound policies that drive sustainability of healthcaresystems.Wecollaboratewithgovernments,industry associations,trade and economic forums,think tanks,academia and advocacyorganizationstoanalyzetheimpactof current and proposed policies,formulate new proposals,disseminate best practices and promoteevidence-basedpolicysolutionsattheglobal,regionalandlocallevels.We use global and regional platforms such astheG7,G20,theAsia-PacificEcon
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Impact Report 2023LULULEMON IMPACT REPORT 2023INTRODUCTION01Contents02 Be HumanInclusion,Diversity,Equity,and ActionEmployee Empowerment People Who Make Our Products16192203 Be WellOur Approach to WellbeingGlobal WellbeingCommunity WellbeingMaker Wellbeing Frontline WellbeingResearch and Engagement27303031313104 Be PlanetClimate ActionProduct and Material InnovationCircularity and New Guest Models Water and ChemistryPackaging and Waste344147505305 SupplementStakeholder Engagement Material TopicsClimate Data TCFD DisclosureSASB IndexGRI Content IndexGlossaryAssurance Statement Forward-looking StatementsThe ArtistContact565758646668727374757501 IntroductionAbout Our ReportA Note from Our CEONotes from Our Impact LeadersWho We AreOur Company StrategyImpact AgendaImpact GovernanceResponsible Business Conduct2023 HighlightsGoal Progress3456789101112Published September 2024 In this report,we outline our progress against publicly stated goals as well as our initiatives and performance data related to environmental,social,and governance(ESG)topics across the three pillars of our Impact AgendaBe Human,Be Well,and Be Planet.In this report,lululemon athletica inc.(together with its subsidiaries)is referred to as lululemon,our Company,we,us,or our.This report covers global business activities and performance for our direct operations(including offices,retail locations,e-commerce,Guest Education Centres,owned and operated distribution centres),and supply chain(including contracted manufacturing suppliers,transportation,and logistics).When referring to external organizations in this report,it is our practice to defer to the language they use to describe their work.Were reporting for the fiscal year ending January 28,2024(referred to throughout this report as“2023”),unless otherwise noted.Except for greenhouse gas(GHG)emissions data in the Supplement,this report does not include information on lululemon Studio(formerly MIRROR)which represents an insignificant portion of our business.1 Our report includes disclosures from the Sustainable Accounting Standards Board(SASB)Apparel,Accessories&Footwear Standard,the Task Force on Climate-related Financial Disclosures(TCFD),and the Global Reporting Initiative(GRI).See the Supplement for details.About Our Report1 In 2022,we shifted our lululemon Studio strategy to focus on providing digital app-based services.We ceased selling the MIRROR in the fourth quarter of 2023.More information is available in our Form 10-K.2 We align with the GHG Protocol definition for Scope 3 Category 6 business travel,which includes emissions from the transportation of employees for business-related activities(and excludes emissions from transportation of employees to and from work,which are accounted for in Category 7).ESG-related disclosures,particularly those related to climate change,contain inherent limitations due to the nature and methods used to determine non-financial information.We continue to monitor evolving measurement methodologies and datasets to support accurate,complete,and timely reporting.As a result,we anticipate updating our measurement methodologies over time.Changes in our methodologies may lead to updated calculations for our current and previous reporting periods,including our baseline.Current methodologies,estimates,and other assumptions are based on information available during the current reporting period.We have developed baseline reporting policies and procedures to evaluate the significance of any changes and determine if restatements and recalculations are required.Where data has been restated throughout the report,we have addressed the nature and significance of the changes.All information in this report is current only as of the date originally presented.For more information,see Forward-looking Statements.In 2023,we obtained limited assurance from a third party on Scope 1 and Scope 2 GHG emissions,and Scope 3 emissions from business travel.2 We continue to review and improve our data collection,validation,and reporting practices in anticipation of expanded assurance and regulatory requirements in the future.301INTRODUCTIONLULULEMON IMPACT REPORT 2023A Note from Our CEOIn 2020,we began a journey to formalize our efforts and set goals that we believe support the wellbeing of people and our planet,and created our Impact Agenda.To make progress toward these goals requires leadership,accountability,and clarity of our role.At lululemon,these attributes are foundational to our purpose to elevate human potential by helping people feel their best.We are committed to evolving and remaining agile in light of the changing macroenvironment,maintaining our focus on innovation and technology,and continuing to work collaboratively on social issues and diversity,equity,and inclusion.We firmly believe that our Company is responsible for exploring and implementing real and tangible strategies and solutions,both within and across our collective.With determination and optimism,we are further embedding impact into our daily work and culture,integrating our people and planet efforts in our global policies and operations,and strengthening partnerships focused on wellbeing.We communicate our goals,work,and what we have achieved in this report each year because we are committed to making progress,and for you to understand the continued impact we want to make on the world.Each year we take time to assess our progress against the goals we set forth through our strategic pillars of Be Human,Be Well,and Be Planet.For 2023,in many cases,we have achieved and even exceeded our goals.In others,we are continuing our work to reach our targets.As part of our Be Human efforts,we are proud to have surpassed our goal for racial diversity of employees below assistant manager level within our stores in Australia,Europe,New Zealand,and North America.Under our Be Well pillar,we established a new portfolio through the lululemon Centre for Social Impact,designed to invest in and support global organizations enabling solutions at the intersection of wellbeing and the environment.Our Be Planet pillar outlines the vision,goals,and targets that guide our climate impact actions and investments,including 2030 climate targets and a 2050 net-zero goal,all of which are externally validated.Among our environment-focused initiatives,our partnership with materials innovator Samsara Eco resulted in one of the worlds first enzymatically recycled nylon 6,6 products as a proof-of-concept,marking a key milestone in textile-to-textile recycling.We are facing turbulent and unsettled socioeconomic and political environments.The complexities of many issues require serious and often difficult conversations,and we are committed to incorporating our learnings along the way.We know this is part of our ongoing journey,and that we will continue to face expected and unexpected hurdles.Across our industry,we increasingly recognize the interconnect-edness of issues and the power of collaboration.To raise the efficacy of our solutions,lululemon and our industry will need to focus our shared efforts on areas that can accelerate progress and address barriers at scale.We are proud of the many achievements in this report,which I invite you to review.I am so appreciative of the many people whose work is reflected on the following pages,and for their dedication and transformational work.Together,we are ready and excited to evolve and elevate the next phases of our Impact Agenda.Sincerely,Calvin McDonaldChief Executive OfficerLULULEMON IMPACT REPORT 20234INTRODUCTION01Notes from Our Impact LeadersOur foundational belief is that by unlocking human potential,we create opportunities to scale positive impact.Rooted in this belief,we shared our Impact Agenda four years ago to build on our efforts to advance meaningful action in the face of pressing societal challenges across our business,industry,and communities.In our Impact Agenda,we set ambitious and considered goals to accelerate our progress on company-wide environmental and social initiatives.Whether its converting to preferred materials,working with our suppliers,or delivering access to wellbeing tools and resources,we are on a journey to build our foundations for scale.In a year with ongoing global issues,we are embracing an interconnected approach to affect meaningful change.We remain committed.We are making strides on both global and local levels.We continue to advance equity in wellbeing through movement,mindfulness,and connection.Through the lululemon Centre for Social Impact,we are on schedule to reach 10 million people with wellbeing tools and resources by 2025.Our responsible supply chain work is core to wellbeing and we continue to uphold robust standards.This year we completed the third of four milestones to reach Fair Labor Association accreditation and reached 23,000 makers through wellbeing projects.We continue to advance work against our science-based climate targets.In 2023,our strategy supported us in achieving a 31 percent carbon intensity reduction from our baseline.We recognize global and industry-level challenges,and have joined new partnerships including the Asia Clean Energy Coalition(ACEC)and the Clean Energy Buyers Association(CEBA)to amplify our voice and help strategically shift access to cleaner energy options.I am inspired by and grateful to our global teams and collaborators that advance this work each day with passion,creativity,and determination.We are proud of how far weve come and will continue to learn,listen,and act,and embrace the path ahead with focus and optimism.Thank you for engaging and learning with us as we share our progress towards building a healthier and more inclusive future.Weve reached a significant moment in our journey toward inclusion,diversity,equity,and action(IDEA),and weve done so powerfully,through the passion and efforts of our leadership and our entire collective.Executing on our strategy,we are elevating and scaling our programs,from racial and gender diversity representation to actionable allyship,and from implementing inclusive design to firmly embedding our initiatives across global markets.Heading into 2023,we expected that we would face challenges,due to shifting local and global landscapes.Despite these challenges,we continued to advance this work due to our dedicated global team and our culture of listening and learning.This last year represents the culmination of goals we set in 2020.Through collective action aimed at fostering behavioral change and establishing more equitable processes,weve notably increased the diversity of our teams.We exceeded our employee racial diversity goal of 40 percent for stores in Australia,Europe,New Zealand,and North America.Although we have more work to do to achieve our 30 percent racial diversity goal for assistant managers and directors,we surpassed 30 percent racial diversity for assistant managers and individuals hired in senior roles within the past four years.As we continue to work toward our remaining targets,these are clear indicators of our strides forward.After introducing Learning in Equity,Actioning Now(LEAN)in fall 2022,the program took flight in 2023,with employees spending over 2,000 hours in LEAN sessions designed to provide actionable education on how to be an impactful ally.We lifted up our women,launching the Women Of Leadership program,a six-month program tailored for women navigating the complexities of their professional paths amidst diverse racial,cultural,and ethnic nuances.We are continuing our journey with resolve,creativity,and optimism.As our programs mature and scale,we are excited by our momentum to realize our vision for IDEA and to continue shaping an ever more inclusive lululemon.Esther SpeckSenior Vice President,Sustainable Business and ImpactStacia Marie Jones,Esq.Vice President,IDEA,Employee Relations and ComplianceLULULEMON IMPACT REPORT 20235INTRODUCTION01Who We AreEstablished in 1998,lululemon is primarily a designer,distributor,and retailer of technical athletic apparel,footwear,and accessories.We develop innovative products and services for our varied markets,and support people,communities,and our partners in creating initiatives for a healthy and inclusive future.employees globally25 markets where we operate56net-new company-operated stores 711company-operated storeslululemon by the numbers in 2023:3 The people employed by lululemon product and material suppliers.38,000300,000 makers employed by our suppliers LULULEMON IMPACT REPORT 20236INTRODUCTION01Our Company StrategyGrowth Strategy:Power of Three 24Impact AgendaWe create transformative products and experiences that build meaningful connections,unlocking greater possibility and wellbeing for all.Product InnovationDouble Mens RevenueBe HumanOur vision:Support our people to succeed by creating an environment that is equitable and inclusive,and that fosters growth.Guest ExperienceDouble Digital RevenueBe WellOur vision:Help our communities thrive by contributing to conditions that support physical,mental,and social wellbeing.Market ExpansionQuadruple International RevenueBe PlanetOur vision:Minimize our environmental impact to contribute to a future where nature and people can thrive.We elevate human potential by helping people feel their best.Our VisionOur PurposeOur company strategy is rooted in the Power of Three 2 and our Impact Agenda,creating a comprehensive roadmap for the future.The Power of Three 2 sets the critical priorities for the growth of our business,leveraging our past accomplishments.The Impact Agenda outlines our company-wide goals to accelerate key social and environmental targets and objectives.4 Our 2026 growth targets are based on our 2021 financial results.LULULEMON IMPACT REPORT 20237INTRODUCTION01 Inclusion,diversity,equity,and action Employee empowerment Fair labor practices and the wellbeing of people who make our products Equitable access to wellbeing tools and resources Climate action Product and material innovation Circularity and new guest models Water and chemistry Packaging and wasteOur Impact Agenda is designed to drive environmental and social action,and support innovation and business resilience.It guidesand is integrated intoour company strategy and operations.Fundamental to our approach is our understanding that individual,community,and planet wellbeing are all linked.To reflect this,our Impact Agenda has three interconnected pillars:Be Human,Be Well,and Be Planet.Each pillar includes a vision,focus areas,goals,and commitments.Our Focus Areas We take seriously our responsibility to advance positive change.We believe we can best do so when we understand both the global sustainability context and the landscape of our industry and business,including the social and environmental topics(material topics)that are most important to our business,society,and the environment.We map each material topic to focus areas within our Impact Agenda and relevant sections of our Impact Report.We also align our Impact pillars with relevant United Nations Sustainable Development Goals(SDGs).To read more about our materiality process,see the Supplement.Our guiding principles to advance our focus areas include:Taking a science-informed approach to our work,where applicable Creating a culture of impact and embedding accountability for goals and values within key business functions Collaborating within and beyond our industry to contribute to platforms and innovation that can advance change at scale Inspiring and engaging our collective through shared expectations,education,and activation opportunities Advocating for thoughtful systems change through collaboration and select policy engagementImpact AgendaBe HumanBe WellBe Planet5 Gender Equality8 Decent Work and Economic Growth10 Reduced InequalitiesSDGs supportedSDGs supported3 Good Health and Wellbeing5 Gender Equality10 Reduced InequalitiesSDGs supported7 Affordable and Clean Energy12 Responsible Consumptionand Production13 Climate Action LULULEMON IMPACT REPORT 20238INTRODUCTION01Impact GovernanceTo drive progress against our impact ambitions,we have a multi-level governance structure that brings together business leaders across lululemon.Our governance structure is designed to build clear cross-functional accountabilities and advance company-wide strategies and practices to embed impact across the organization.GroupResponsibilitiesBoard of DirectorsReviews and approves strategic and annual operating plans,including resource allocation and investment decisions.Oversees environmental,social,and governance(ESG)management with delegation to specific committees.Audit CommitteeOversees enterprise financial reporting and controls,including ESG-related disclosures within the financial reporting framework and compliance risks to our business and supply chain.Corporate Responsibility,Sustainability,and Governance CommitteeReviews and evaluates strategies,policies,programs,practices,and public reporting related to corporate responsibility,environmental sustainability,human rights,social impact,and philanthropy issues to support sustainability and responsible growth.People,Culture,and Compensation CommitteeOversees overall compensation philosophy and policies,including benefits and incentives plans,as well as employee agreements,talent management,succession planning,diversity and inclusion,and related activities.CEOSets corporate direction and strategy.Approves Impact Agenda,including multi-year planning and integration into company strategy.Executive Impact CouncilConsists of executive leadership representatives from Finance,Supply Chain,Product and Brand,Legal and Compliance,and People and Culture.Chaired by SVP,Sustainable Business and Impact.Oversees and executes our Impact Agenda and related strategies,policies,and implementation plans.Functions that engage on ESG topics.Sustainable Business and ImpactSets enterprise Impact Agenda,goals,and commitments;delivers subject matter expertise and key programs;facilitates progress tracking and reporting;oversees the lululemon Centre for Social Impact.Works cross-functionally to operationalize end-to-end and deliver progress.Led by SVP,Sustainable Business and Impact.Inclusion,Diversity,Equity,and Action(IDEA)Sets enterprise goals and supports a culture of inclusion,diversity,and equity across the organization.Oversees People Networks and task forces for locations and specific business functions.Led by VP,IDEA,Employee Relations and Compliance.Other Business Functions and TeamsImplement targets,policies,procedures,programs,practices,and reporting.Includes Finance,Supply Chain,Product and Brand,Legal and Compliance,People and Culture,Risk,Sourcing,Production,Merchandising,and others.ESG Regulatory Compliance CommitteesCross-functional working and oversight groups that track regulations,share information,and govern compliance.Impact Committees and CouncilsSteering committees and advisory councils that govern focus areas of our Impact Agenda.Examples include:IDEA Executive Steering Committee and Advisory Councils,Responsible Supply Chain Steering Committee,Centre for Social Impact Steering Committee and Advisory Board,Climate Council,and Product Sustainability Steering Committee.We monitor performance through mechanisms such as key performance indicators;quarterly updates on our goal progress shared with our Executive Impact Council,Corporate Responsibility,Sustainability,and Governance Committee,and our CEO;and other internal and external tools.LULULEMON IMPACT REPORT 20239INTRODUCTION01Ethical Conduct Ethical conduct is the foundation for how we do business.To root integrity and respect for everyone in our company culture,we maintain a Global Code of Business Conduct and Ethicsa blueprint for responsible business that is applicable to all lululemon employees,Ambassadors,contractors,officers,and directors.Our Vendor Code of Ethics articulates expectations of our suppliers.Human RightsIn 2023,we consolidated our human rights commitments into an overarching Human Rights policy.This policy,which was published in 2024,is guided by the United Nations Guiding Principles on Business and Human Rights(UNGPs)and OECD Guidelines for Multinational Enterprises,among others.It outlines our commitment to conducting due diligence on human rights risks across our value chain.A business and human rights consulting firm provided guidance on our policy and engaged cross-functionally with internal teams and stakeholders,including civil society organizations,industry associations,and peer companies.For more information on our Human Rights approach,see Reporting&Disclosure on our website.Data Privacy Protection Our guests and employees trust us with their personal information,and we are committed to the protection and security of the data we use and collect.Our Global Privacy program is administered by our Chief Legal&Compliance Officer.We also have a Security program within our Global Technology team directed by our Chief Information Officer.These functions work closely together to advise lululemon on continually evolving laws,standards,and best practices related to data privacy and security.Both the Global Privacy and Security programs are overseen by the Audit Committee and are regularly assessed for maturity and scalability to meet the needs of our global organization.Through our privacy policies,we share how we process and protect personal data,in accordance with local privacy laws.To manage privacy and data security risk,we assess applicable requirements that guide our global functions on the collection,use,and access of personal information.We also employ the expertise of external consultancies and law firms to track emerging privacy and security developments as well as the evolution of global privacy regulations and security standards.Performance-related Compensation We reward exceptional performance.Our People,Culture,&Compensation Committee sets competitive levels of compensation to attract,retain,and motivate highly qualified executive officers,senior leaders,and directors.These individuals play a pivotal role in contributing to our success and advancing our culture.We continue to consider the future role ESG metrics can play in our compensation programs.Responsible Business Conduct Makers meet at a supplier facility,Vietnam.LULULEMON IMPACT REPORT 202310INTRODUCTION012023 Highlights41%racially diverse employees in storesWe reached 41%racially diverse representation of employees below assistant manager level within our retail stores in Australia,Europe,New Zealand,and North America.5#1 on KnowTheChainFor the second year in a row,we ranked#1 on the KnowTheChain benchmark for the disclosure of information on forced labor policies and practices.2,000 hours of employee participation in LEANLearning in Equity,Actioning Now(LEAN)is a program that enables all employees to actively learn about the history,experience,and impact of systemic injustices on historically marginalized communities.Environment wellbeing portfolioIn 2023,the lululemon Centre for Social Impact established a new portfolio and invested US$250,000 in support of global organizations enabling solutions at the intersection of planetary and human wellbeing.Employee Impact Fellowship opportunityThis unique development opportunity provides employees with the ability to offer their time to a lululemon Centre for Social Impact non-profit partner for three months,and gain learnings and insights for individual and organizational growth.Samsara Eco collaborationIn partnership with materials innovator Samsara Eco,we unveiled one of the worlds first enzymatically recycled nylon 6,6 products as a proof-of-concept,marking a key milestone in textile-to-textile recycling.Scope 3 GHG emissions intensity reduction We saw a 31%emissions intensity reduction relative to our baseline(2018)due to factors such as materials conversion,a decrease in inbound air freight,and changes in production volumes.7Repair programs and pilotsWe rolled out repair programs in the majority of our stores in China Mainland and Europe,and repair pilots in Australia and New Zealand.7.4 million people reached through the Centre for Social ImpactSince 2021,through partnerships with charitable organizations,we have reached 7.4 million people,6 providing them with access to wellbeing tools and resources.Be HumanBe WellBe Planet5 This metric is tracked through voluntary demographic survey results of our employees in Australia,Europe,New Zealand,and North America.6 We define people reached as those who receive services from our grantees or actively participate in their programming.Our progress includes maker wellbeing programs.See Be Well and People Who Make Our Products for more information.7 This includes Category 1(with the exclusion of other purchased goods and services,which relate to non-product spend)and Category 4 emissions,as defined by the GHG Protocol.For more information on Scope 3 GHG emissions,see Climate Action and Climate Data.LULULEMON IMPACT REPORT 202311INTRODUCTION01PillarFocus areaGoalMetricBaseline yearBaseline2023TargetTarget yearBe HumanInclusion,Diversity,Equity,and Action Reflect the diversity of communities we serve and operate in.8Percentage of racial diversity of employees below assistant manager level in stores8202031A 23Percentage of racial diversity of assistant managers and directors 82020210 239Employee EmpowermentBe the place where people come to develop and grow as inclusive leaders for the world.Employee empowerment is an ongoing initiative at lululemon.We focus on providing our employees with access to learning opportunities.See Employee Empowerment for updates on this goal.Expand gender pay equity to full pay equity.Percentage of employees with full pay equity in the United States10202010000 22People Who Make Our ProductsMake wellbeing programs available to makers.Total number of makers who participate in wellbeing programs11202120K67K100K2025Achieve Fair Labor Association(FLA)accreditation.12Qualitative2020Updated Vendor Code of EthicsCompleted Milestone 3 Accreditation2024Be WellInclusive Access to Wellbeing and AdvocacyProvide access to wellbeing tools and resources.Total number of people reached1320211.4M7.4M10M2025Invest to advance equity in wellbeing through the Centre for Social Impact.Total amount invested(in US$)2021$13.7M$44.8M14$75M2025Launch the Centre for Social Impact.Qualitative2021Centre launchedCentre launched2021Goal ProgressOur three Impact Agenda pillars are designed to work together.Within the pillars are goals and respective targets that drive action and progress.Annually,we report on progress toward our goals,and where we have met or not met goals.We are currently planning the next iteration of our Impact Agenda,which will include refreshed topics and updates to certain goals and targets.The updates will reflect both the significant progress we have made and goals we have met,as well as areas in which we are progressing more slowly toward our targets,as reflected in relevant sections of the report(linked in the table below).8 Metrics for this goal are tracked through voluntary demographic survey results of our employees in Australia,Europe,New Zealand,and North America.9 See more about the extended timeline in Inclusion,Diversity,Equity,and Action.10 We have achieved full pay equity,including gender and race,in the United States,which is the only country where we currently collect individually attributable race data.We also seek to maintain 100%gender pay equity within our entire global employee population,meaning equal pay for equal work across genders,by geography.11 This metric is tracked through our Vendor Grant program and is also applied toward our goal to provide wellbeing tools and resources to more than 10 million people by 2025.Data is self-reported from grant recipients.For more information,see Be Well and People Who Make Our Products.12 FLAs accreditation evaluation focuses on improving member companies social compliance programs.It includes four milestones that each include requirements for companies to fulfill.The milestones include:1.Governance and Internal Alignment,2.Implementation and Monitoring,3.Review and Improvement,4.Full Implementation and Integration.13 We define people reached as those who receive services from our grantees or actively participate in their programming.Our progress toward this goal includes maker wellbeing programs.See Be Well and People Who Make Our Products for more information.14 We have contributed US$44.8 million(cumulative since 2021)to the lululemon Centre for Social Impact,US$32.4 million of which has been contributed directly to social impact organizations.The remaining US$12.4 million primarily consists of contributions toward a donor-advised fund for future grant making.LULULEMON IMPACT REPORT 202312INTRODUCTION01Goal Progress(continued)PillarFocus areaGoalMetricBaseline yearBaseline2023TargetTarget yearBe PlanetClimate ActionMeet our 2030 science-based climate targets.15Percentage of absolute reduction in GHGs in all owned and operated facilities(Scope 1 and Scope 2)16201818,248 tCO2e-77%-60 30Percentage of intensity reduction in GHGs in purchased goods and services,and upstream transportation and distribution(Scope 3)172018262.5 tCO2e per US$million of gross profit from operations-31%-60 30Source renewable electricity to power our owned and operated facilities.Percentage of renewable electricity in our owned and operated facilities201810100 21Product and Material InnovationMake our products with preferred materials and end-of-use solutions.19Percentage of products procured containing preferred materials202027G0 30Achieve preferred materials for our products.Percentage of total preferred materials procured for our products202030Wu 25Circularity and New Guest ModelsOffer our guests new business models20 that extend the use of products.Percentage of stores in North America 212021210 25Water and ChemistryReduce freshwater use intensity with our priority wet process suppliers.22Percentage of reduction of freshwater use intensity2021130 l/kg 23-2%-20 25Implement ZDHC Manufacturing Restricted Substances List(MRSL)at priority suppliers.Percentage of priority suppliers that have implemented ZDHC MRSL202110000 22Packaging and WasteReduce single-use plastic packaging per unit.Percentage of intensity reduction of single-use plastic packaging2420210.016kg/unit 16%-50 2515 These targets are approved by the Science Based Targets initiative(SBTi),which develops standards,tools,and guidance that allow companies to set GHG emissions reductions targets.Climate data is reported on a calendar year basis.16 The Supplement contains both market-based and location-based emissions.Our goal reflects market-based emissions.17 In 2024,we updated our Scope 3 target as part of our target re-validation process with SBTi to include Category 1(with the exclusion of other purchased goods and services,which relate to non-product spend)and Category 4 emissions,as defined by the GHG Protocol.This exceeds the SBTi requirement of including at least two-thirds Scope 3 emissions.We also updated the denominator of our economic intensity target metric,which was developed using the GEVA(GHG emission per unit of value-added)methodology,from revenue to gross profit to align with the latest SBTi requirements.We have updated our baseline and prior year progress to reflect these changes as well as other methodology enhancements,including data improvements and updates to emissions factors.18 In 2023,we procured 100%renewable electricity to power our owned and operated facilities,with 98%sourced in compliance with the RE100 technical criteria.We were unable to source renewable electricity in South Korea,due to unavailability of an Energy Attribute Certificate(EAC)program.In 2023,our Australian locations experienced a particularly warm year and used more electricity than expected.As a result,we were only able to procure renewable electricity for 98%of our Australian electricity use.Consequently,renewable energy credits were procured from nearby geographies.19 Our footwear line was launched in 2022.We include footwear in our 2023 metrics for this goal.The comparative volume of footwear to our apparel and accessories products is small and does not impact our goal progress.To count toward this goal,products must contain at least 25%preferred materials by weight,with transparently communicated attributes defining preferred materials.Detailed performance and preferred materials attributes are shared in Product and Material Innovation.20 New business models refer to offerings for guests to extend the use of their products(e.g.,initiatives related to product care,reuse,and repair)and help progress toward a circular economy.21 Excludes outlets and pop-ups.22 Water data is reported on a calendar year basis.23 In 2023 and early 2024,lululemon conducted 21 on-site verifications of facility-provided water data from 2021 onwards and determined that a revision to our baseline was required in line with our baseline policy to reflect the most accurate and up-to-date information.Our baseline has been updated from 134 l/kg to 130 l/kg;this change does not affect our goal or our progress in prior years.24 Our product packaging refers to total packaging used.Our non-product packaging(e.g.,e-commerce,transport)refers to total packaging procured.The metrics differ as we use the best available information for each type of packaging.Data is self-reported by suppliers.This data excludes our shoppers.LULULEMON IMPACT REPORT 202313INTRODUCTION01LULULEMON IMPACT REPORT 202314BE HUMAN0202Be HumanWe envision a moreequitable world.Inclusion,Diversity,Equity,and ActionEmployee EmpowermentPeople Who Make Our Products 161922LULULEMON IMPACT REPORT 202315BE HUMAN02Why It MattersInclusion,diversity,equity,and action are fundamental for shaping and building our company,industry,and communities,and creating a shared sense of respect and belonging.This is particularly important when it comes to historically marginalized groups.Companies that listen to employees,hear what they are saying,and act accordingly are more likely to inspire a sense of belonging.25We met this target in 2022 and have maintained it since.In our 2023 voluntary demographic survey,41 percent of employees below assistant manager level in stores in Australia,Europe,New Zealand,and North America reported as racially diverse.We have made progress,and also have more work to do.In our 2023 voluntary demographic survey,27 percent of assistant managers and directors in Australia,Europe,New Zealand,and North America reported as racially diverse.While we did not reach our 30 percent target for assistant managers and directors collectively,we did have 31 percent of assistant managers reporting as racially diverse in 2023.Additionally,34 percent of individuals hired into assistant managers and directors roles over the past four years reported as racially diverse.While maintaining our aim to hire the most competitive candidates,we focus on equitable and inclusive hiring practices.This has contributed to an increase in diverse representation.However,lower attrition rates,along with limited open roles for higher levels of leadership,affected our ability to meet the target in 2023.To continue our progress,we have extended the target year for our goal of 30 percent racial diversity of directors to 2026.Reflect the diversity of communities we serve and operate in.40%racial diversity of employees below assistant manager level in stores by 2023Inclusion,Diversity,Equity,and Action25 The Josh Bersin Company(2021),Elevating Equity:The Real Story of Diversity and Inclusion.%of racial diversity of employees in stores31 20(baseline)37 2141 2340 22Target(2023)40%of racial diversity of assistant managers and directors 21 20(baseline)23 2127 2327 22Target(2023)30%Goal 30%racial diversity of assistant managers and directors by 20235 Gender Equality8 Decent Work and Economic Growth10 Reduced InequalitiesSDGs supportedLULULEMON IMPACT REPORT 202316BE HUMAN02What Were Doing We aim to prioritize a culture of inclusion in which diversity is celebrated,equity is the norm,and action is the commitment.Inclusion,Diversity,Equity,and Action(IDEA)is an enterprise function that sets global IDEA goals and supports a culture of inclusion.Our IDEA strategy includes five focus areasListening&Advocacy,Policy&Process,Programs&Initiatives,Learning&Development,and Strategy&Partnering.We design and implement initiatives,programs,and policies that shape the culture of our organization and strive to impact stakeholders,including our employees,guests,communities,Ambassadors,makers,and suppliers.Doing this work requires intentional pursuit at our most senior levels,with clear ownership and commitment to accountability across the business.As of 2023,we had 11 IDEA Councils,which are groups of employees from different functions,including from our Store Support Centres(SSCs),distribution centres,and Guest Education Centre,who help advance progress for their specific teams.We remain resolute in meeting and scaling our commitments.In 2023,we focused on listening and advocacy,elevating learning and development,and evolving strategy and partnerships.Where operationally feasible,we work with other organizations to strengthen our approach and broaden our influence.Listening and learningWe hold listening forums with employees,with a focus on historically marginalized groups.This includes 250 hours of conversations in 2023 between our CEO,senior leaders,BIPOC employees,and People Networks to create dialogue around their unique experiences,and drive action and accountability across the organization.We integrate inclusion,diversity,and equity into employee onboarding,training,and learning programs.To see more about our learning offerings,see Employee Empowerment.Our offerings include IDEA Toolkits that help our teams increase awareness and knowledge of key concepts such as privilege and unconscious bias.In 2023,we published three new toolkits on Supplier Inclusion&Diversity,Gender Inclusion,and Navigating Privilege&Ambiguity.Inclusive and equitable design We strive to use inclusive and equitable design across our business,including future physical and digital workspaces,creation of employment policies and programs,marketing,and delivery of product and guest interactions.Our third annual 14-week Inclusive and Equitable Design(I&ED)Certification program enrolled 200 participants in 2023(up from 70 people in 2022).The program helps team members apply I&ED principles to their work,mitigating common design errors that create barriers for accessibility.Supporting and uplifting our people A key component of IDEA is fostering an inclusive culture,in which we welcome people from all backgrounds and support them in developing their careers.We prioritize programming and initiatives that address structural and systemic barriers.Examples of our 2023 programs include:Learning in Equity,Actioning Now(LEAN):Open to all employees,LEAN is designed to help people actively learn about the history,experience,and impact of systemic injustices on historically marginalized communities.In 2023,employees spent over 2,000 hours engaging in LEAN sessions.IDEA Global Internship program:For the third year,we hosted a 12-week full-time,paid internship.This program is open to all employees,and we encourage applications from people who identify as part of an underrepresented group.In 2023,we had the largest cohort to date,with over 50 interns from around the world.Eighty-three percent of interns were from underrepresented groups.People Networks(PNs):PNs create spaces and support for employees who have historically marginalized identities as well as allies(as determined by each network).In 2023,we launched our 11th PN,dedicated to Middle Eastern and North African employees.We also have the following PNs:Asian;Black;Chronic Illness,Mental Health&Disabilities;Indigenous;Jewish;Latine;LGBTQ2IA ;Size Inclusivity;South Asian;and Women.Women Of Leadership:In 2023,we launched the Women Of Leadership program,a six-month course tailored for women navigating the complexities of their professional paths amidst diverse racial,cultural,and ethnic nuances.More than 40 leaders comprised the inaugural cohort,and took part in coaching,mentorship sessions,and virtual development opportunities.In total,more than 150 women from our SSC and retail operations took part in various Women Of initiatives.Employees and members of the LGBTQ2IA People Network march at a Pride parade,Canada.LULULEMON IMPACT REPORT 202317BE HUMAN02Diverse representation We recognize that diversity and inclusion can take on different meanings depending on the location or country,so we continue to work on evolving our initiatives to better serve each community.We use an annual,voluntary regional employee survey called the Demographic Survey Inclusion Index,26 which helps us understand the demographics of our employee base.It also provides us with access to tangible metrics about our employees sense of inclusion and belonging,which helps us focus our engagement and inclusion efforts.Race/ethnicity See page 16 for more information.GenderIn 2023,women made up approximately 50 percent of our Board of Directors(our Board Chair is a woman),70 percent of our Executive Leadership team,50 percent of our Vice Presidents and above,and 75 percent of our overall workforce.27See the GRI Content Index for more information on diverse representation.Equitable solutions In 2023,we continued to review lululemon policies and practices through an integrated and inclusive lens.This helps us evolve,eliminate,or develop policies and practices to align with our values and support a positive and equitable work experience.For example,we enhanced equitable hiring practices,including standardized hiring tools and resources to support bias mitigation and equitable candidate selection.Inclusion and diversity in our non-product supply chain We are committed to equitable and inclusive business practices with our non-product suppliers.Our strategy is designed to increase equity within non-product procurement practices,foster the growth of diverse suppliers,support community resilience,and enhance diverse representation in our non-product supply chain.In January 2023,we launched our Supplier Inclusion&Diversity program in the United States.We focus on engaging third-party certified businesses that are 51 percent or more owned,operated,and controlled by persons belonging to underrepresented communities(e.g.,racial minorities,women,people with disabilities,those who identify as LGBTQ2IA ,US veterans).We recognize that underrepresented communities vary by geographic region,and this variability will be a key consideration as we work to expand the program into global markets.To increase visibility among diverse suppliers,we partner with supplier diversity advocacy organizations;actively take part in procurement conferences,networking events,and best practice sessions to advance our program;and engage with industry peers and diverse businesses in the community.As part of our efforts to develop a more inclusive supply chain,we plan to introduce a new initiative for non-diverse suppliers,which will focus on supplier diversity data collection.See more on the Supplier Inclusion&Diversity page of our website.26 The voluntary demographic survey results presented in this section relate to our employees in Australia,Europe,New Zealand,and North America.27 While we track male and female genders,we acknowledge this does not fully encompass all gender identities.FPOlululemon employees at adistribution centre in Canada.0218LULULEMON IMPACT REPORT 2023BE HUMANEmployee EmpowermentWhy It Matterslululemon aims to be a place where people come to grow and develop as inclusive leaders.By empowering employees through leadership and development opportunities,impact engagement experiences,and competitive benefits,we are investing in their personal and professional growth and working to support their mental health and wellbeing.Developing our people helps us innovate,achieve business growth,stay resilient to change,and fulfill our brand purpose of elevating human potential.While we set this goal in 2020,we have since reviewed historical data and determined we have been achieving full pay equity in the United States since 2018.We continue to maintain full pay equity,including gender and race,in the United States,which is the only country where we currently collect individually attributable race data.We also seek to maintain 100 percent gender pay equity within our entire global employee population,meaning equal pay for equal work across genders,by geography.Expand gender pay equity to full pay equity.100%of employees with full pay equity in the United States by 2022Goal5 Gender Equality8 Decent Work and Economic GrowthSDGs supportedLULULEMON IMPACT REPORT 202319BE HUMAN02Members of lululemon leadership team address attendees at internal leadership summit.What Were Doing We focus on providing our employees with equitable pay,an inclusive workplace,wellbeing support,and access to personal and professional opportunities.Through employee development and support programs,and competitive compensation and benefits packages,we aim for employees to feel respected,valued,and able to express their potential.A culture of learning We believe people,teams,and the entire organization run better when we invest in each others growth.We work to provide people with skills and experiences inside and outside of lululemon.Our development offerings serve three purposes:support employees with their personal growth,strengthen their skills in their current role,and fuel their career progression.In 2020,we communicated a public goal to be the place where people come to develop and grow as inclusive leaders,with the intention to report on a quantitative target.While we have previously reported quantitative progress,we are shifting to qualitative reporting due to challenges in collecting global data in a comparable way.In parallel,we are working toward advancing our global data processes and technology solutions to best capture training and development data.We offer many types of learning experiences that are accessible to all full-time,part-time,and fixed-term employees.Below are a few of our offerings:Purpose,Vision,and Goals(PVG)program:Through our PVG program,employees are given paid time to explore a six-module learning experience to help declare their personal purpose,articulate a guiding life vision,and form goals that are congruent with those ambitions.In 2023,we expanded the PVG program to include a self-guided online learning experience.We also translated it into all operating languages so that even more of our full-time,part-time,and fixed-term employees are able to participate.Leadership development:We offer leadership development through:Leader Series:As part of their onboarding,all people leaders are enrolled in our Leader Series program,to support them in fostering connected teams.Professional one-to-one internal coaching program:This is available to all employees.In 2023,we trained more than 200 coaches as internal resources for employees at all levels and offered more than 7,500 sessions,including on-demand courses,executive coaching,and long-term one-to-one programming.Mentorship program:In 2023,nearly 500 mentees and mentors signed up for this program.This initiative supports career exploration,development,and progression.Learning opportunities:All employees have access to lululemonU,an online learning portal.We have also invested in LinkedIn Learning to provide quality learning opportunities.In 2023,we tracked over 50,000 hours in elective learning through these platforms.Employee empowerment and inclusive leadership are fundamental to our core values,and we are proud to support our employees on their unique journeys of growth.See more about our continued commitment to providing opportunities for employees,and our progress on supporting their growth and development,in the following sections,and in IDEA.LULULEMON IMPACT REPORT 202320BE HUMAN02Impact Fellows and SSC employees on a Takaya cultural tour in Canada.Employee wellbeing We provide a range of benefits to cultivate the overall wellbeing of our employees.These may include health and dental,retirement savings plans,and an employee share purchase plan.We also offer all eligible global employees competitive paid time off and sick leave,including up to six months of paid parental leave.Our Sweaty Pursuits benefit provides both part-time and full-time employees with monthly allowances to participate in fitness activities.Mental wellbeing resources and support include access to an Employee Assistance Program,coaching,a mental wellbeing toolkit,critical incidence support,and mental health training.lululemonCARE is a program currently available to all people leaders and North American SSC employees,and includes instructor-led modules designed to increase awareness,reduce stigma,and facilitate access to resources for mental health.Store compensationWe aim to be in the top quartile of global retailers for store compensation.We provide competitive hourly wages as well as a team-based bonus program,depending on store-based goals and results achieved.Competitive compensation improves our ability to attract and retain talent to maintain a best-in-class store experience for our guests.For details on pay equity,see page 19.Impact Fellows and SSC employeesThe Impact Fellowship is an annual employee development program that connects employees with non-profit partners supported by the lululemon Centre for Social Impact(see Be Well).Employees selected as Fellows retain their lululemon employment status while taking on a temporary three-month role with a non-profit organization,matched to the skillsets and experience the organization requires.In 2023,six lululemon Impact Fellows worked with organizations such as Movember,the National Alliance on Mental Illness(NAMI),and Yoga of 12-Step Recovery(Y12SR).Employees were able to offer and develop their skills while receiving their full salaries.Each organization received a stipend to support their impact project.DeedDeed is an online giving and volunteering platform where employees can donate directly to lululemon non-profit partners,nominate new organizations for partnerships,find volunteer opportunities,participate in impact events,and join People Network communities as members or allies.In 2023,we scaled our Deed offering to most of our global employees,with the exception of regions where we cannot yet extend the technology.In 2023,approximately 40 percent of our eligible employees participated on the Deed platform.We Stand Together Fund Our We Stand Together Fund supports employees and their family members experiencing financial or personal hardship,or other challenges such as natural disasters or humanitarian issues.Since the fund began in 2020,over 1,000 employees have been awarded approximately US$780,000.The funds balance continues to support beneficiaries when hardships arise.LULULEMON IMPACT REPORT 202321BE HUMAN02Why It MattersEvery person has the right to safe and healthy working conditions.A strong,resilient supply chain is critical to the success of the apparel industry and key to a more equitable future for all.We have completed three of the four FLA milestones.30 As part of the accreditation process,the FLA evaluated our social compliance systems and processes and independently conducted on-site assessments at select supplier facilities.People Who Make Our Products28 This metric is tracked through our Vendor Grant program and is also applied toward our goal to provide wellbeing tools and resources to more than 10 million people by 2025.Data is self-reported from grant recipients.For more information,see Be Well.29 In 2023,we applied methodology enhancements to address inherent limitations of self-reported data from grant recipients.We have updated our 2022 progress(from 55,000 to 44,000)to reflect these changes.This restatement does not impact our goal target.30 FLAs accreditation evaluation focuses on improving member companies social compliance programs.It includes four milestones,each with specific requirements for companies to fulfill.The milestones include:1.Governance and Internal Alignment,2.Implementation and Monitoring,3.Review and Improvement,4.Full Implementation and Integration.Cumulative number of makers participating in wellbeing programs Cumulatively,approximately 67,000 makers have participated in wellbeing programs since 2021.In 2023,we evolved our program to prioritize facility-based projects focused on gender equity and wellbeing in the workplace.See more in Maker Wellbeing.Make wellbeing programs available to makers.100,000 makers who participate in wellbeing programs by 2025 28Achieve Fair Labor Association(FLA)accreditation by 2024.GoalGoal5 Gender Equality8 Decent Work and Economic Growth10 Reduced InequalitiesSDGs supportedLULULEMON IMPACT REPORT 202322BE HUMAN02Target(2025)100,00044,00029202267,000202320,0002021(baseline)What Were Doing 31 The list evolves to reflect the seasonality of lululemons business and corresponding production.It reports suppliers at the facility level based on volume.Our April 2024 list accounts for 100%of Tier 1 facilities and the subcontractors for the top ten Tier 1 facilities by volume.It also includes strategic Tier 2 supplier facilities that account for approximately 75%of Tier 2 facilities measured by volume(excluding trims,packaging,and footwear raw materials)for 2024.All facilities supporting the manufacturing of collegiate products are disclosed.We do not own our manufacturing facilities and rely on contracted suppliers to manufacture and provide fabrics for our products.lululemons Responsible Supply Chain(RSC)social program advances our commitments to fair labor practices and the wellbeing of the people who make our products.This program is based on the principles of the OECD Due Diligence Guidance for Responsible Business Conduct and is designed to identify,cease,prevent,or mitigate supply chain risks throughout our value chain.It is built on three pillars:Monitoring:Assessing and,in collaboration with suppliers,improving working conditions in facilities Integration:Integrating responsible purchasing practices across key lululemon strategies,processes,and tools Collaboration:Working with multi-stakeholder organizations,industry,suppliers,and brands to support systems change and impactOur approachWe are committed to responsible business conduct and to acting ethically and with integrity in our business dealings.Our policies are based on international human and labor rights standards and guidelines,including:Universal Declaration of Human Rights United Nations Guiding Principles on Business and Human Rights International Labour Organization(ILO)Declaration on Fundamental Principles and Rights at Work OECD Guidelines for Multinational Enterprises on Responsible Business ConductOur Vendor Code of Ethics(VCoE)is the cornerstone of our approach to a responsible supply chain.It establishes our commitment to contributing to healthy communities by fostering respectful,inclusive workplaces and sets the minimum standards for our suppliers.See Reporting&Disclosure:Responsible Supply Chain for details on additional policies,commitments,and disclosures.We have worked with industry experts to review our RSC program for alignment with the OECD Due Diligence Guidance.In 2023,we worked to implement recommended actions,including work on our Human Rights policy,which we published in 2024.Our FLA membership provides us with an industry-leading framework for responsible supply chain practices and a forum to engage with peers and industry stakeholders to advance systemic industry issues.See page 22 for additional details on our FLA accreditation process.Our suppliersWe strive to work with suppliers who share our values and collaborate with us to uphold robust standards,address systemic challenges,and support the wellbeing of the people who make our products.We only approve a new supplier if they successfully meet the rigorous requirements of our New Vendor Approval Process,which evaluates suppliers from a social,environmental,sourcing,quality,and production perspective at the facility level.In 2023,we worked with approximately 49 Tier 1 suppliers that manufactured our products and approximately 67 Tier 2 suppliers that provided the fabrics for our products.The majority of our products were manufactured in Vietnam,Cambodia,Sri Lanka,Indonesia,and Bangladesh,and the majority of our fabrics originated from Taiwan,China Mainland,and Sri Lanka.We publish a list of our Tier 1 supplier facilities,strategic Tier 2 supplier facilities,and select Tier 1 subcontractors.31 These facilities employ over 300,000 people.As of April 2024,approximately 76 percent of makers were women.This information can also be found on Open Supply Hub.Monitoring our supply chain Facilities producing for lululemon are regularly assessed against the requirements of our VCoE and supporting benchmarks.We aim to assess all Tier 1 and Tier 2 facilities every 12 months.Follow-up assessments may be performed based on certain risk factors or grievance investigations.Annual supplier assessments are carried out on site and include visual inspections of the facility,documentation reviews,and interviews with management and their workers.In 2023,we expanded our RSC team to include more on-the-ground capacity in key sourcing regions.We carried out approximately 400 RSC assessments(including initial,annual,and follow-up assessments);65 percent were conducted by our internal RSC team and 35 percent were conducted via nominated third-party assessors.As part of the accreditation process,FLA also carried out assessments of 5 percent of our Tier 1 facilities.When an issue is flagged in an assessment,we require suppliers to develop Corrective and Preventative Action Plans(CAPAs)to address identified issues.All zero-tolerance issues are addressed and remediated with high priority.We have zero tolerance for lack of transparency,disclosure,and cooperation;forced labor;unapproved subcontractors;minimum wage violations;child labor;corruption and bribery;and egregious circumstances.As part of our due diligence approach,we actively work to mitigate any identified risks and conduct annual human rights and social risk mapping across our product supply chain.In 2023,we rolled out a new system to enhance our assessment tools and enable more detailed data analysis on non-compliances,root causes,and other trends.Findings feed into our risk systems,inform our programs,and help us with targeted training and capacity building.In 2023,we delivered training to suppliers on RSC topics such as resisting bribery,non-compliance root cause analysis,and health and safety inspections.We also provided all Tier 1 and Tier 2 suppliers with mandatory e-learning on forced labor prevention.See Reporting&Disclosure:Additional ESG Reporting-Responsible Supply Chain and our 2023-2024 Modern Slavery Statement for more information on supplier assessments,grievance mechanisms,remediation,and continuous improvement.LULULEMON IMPACT REPORT 202323BE HUMAN0232 The Global Living Wage Coalition defines a living wage as:the remuneration received for a standard workweek by a worker in a particular place sufficient to afford a decent standard of living for the worker and their family.Elements of a decent standard of living include food,water,housing,education,healthcare,transportation,clothing,and other essential needs,including provision for unexpected events.Responsible purchasing practices We are committed to responsible purchasing practices,which we believe help contribute to the quality of life of makers,the strength of supplier relationships,and supplier resilience.Our responsible purchasing practices strategy is informed by supplier feedback and reflects our aim to foster long-term relationships based on collaboration and continuous improvement.Our work focuses on three key areas:Setting internal targets and measuring our performance.Embedding responsible purchasing practices,principles,working groups,and education across key functions.Engaging our suppliers on responsible purchasing practices to gather feedback.For example,we participate annually in the Better Buying Purchasing Practices IndexTM.In 2023,we finalized an internal Responsible Purchasing Practices(RPP)policy that formalizes processes and accountabilities.Our interactive RPP e-learning for product and supply chain team members has helped further integrate this work across the business.Fair compensationAs a member of the FLA,we are part of a global effort to collaborate toward fair compensation.We believe every maker should be fairly compensated for hours worked,enabling them to have a decent standard of living,in alignment with the living wage definition from the Global Living Wage Coalition.32 We also know that achieving fair compensation in supply chains is a global challenge that must be approached in collaboration with governments,industry,and civil society.Through our RSC assessments,we assess that maker compensation in our supplier facilities is,at a minimum,in compliance with local legal requirements for regular work and overtime.We regularly partner with key suppliers to collect wage data to understand wage management systems,compensation levels,and the effects of our purchasing practices on maker wages.Assessments,along with the data we collect through the FLA Wage Data Collection Tool,inform our fair compensation strategy.This strategy focuses on three key areas:Brand-influenced wage drivers:Identifying areas of opportunity within our purchasing practices and through participation in collaborative pilot projects.Facility-enabled wage levers:Supporting suppliers in improving wage management systems that enable progressive wage increases.Industry support mechanisms:Partnering with organizations that support the advancement of fair compensation through programs and living wage research.Supporting maker wellbeing We offer wellbeing tools and resources to makers through select programs across our supply chain.We engage in industry partnerships(see Be Well),and work directly with some suppliers through training and grants to support wellbeing projects.Through our Vendor Grant program,we work directly with eligible suppliers to help fund projects focused on gender equity and wellbeing in the workplace.Suppliers apply for project grants,with lululemon providing up to 50 percent of the funding for successful applications.In 2023,we contributed US$340,000 toward 15 vendor grants,including:Physical and mental wellbeing:Yoga programming in five facilities in Indonesia,Peru,and Sri Lanka,as well as projects offering psychological and mental health support for makers in four facilities in China Mainland,Peru,and Vietnam.Womens health:Projects supporting womens health in Bangladesh,China Mainland,and Vietnam.These projects included education,support for makers who are pregnant or nursing,and the distribution of sanitary pads and long-term access to sanitary products.Leadership development:A project in Turkey to help develop women in preparation for leadership roles.With funding through the lululemon Centre for Social Impact,we engage in sector-wide initiatives on industry wellbeing challenges such as health,gender-based violence and harassment,and economic resilience.See Be Well for more information on maker wellbeing.Makers participating in a yoga program supported by a vendor grant,Peru.LULULEMON IMPACT REPORT 202324BE HUMAN02LULULEMON IMPACT REPORT 202325BE WELL0303Be WellWe believe that everyone has the right to be well.Our Approach to Wellbeing Global Wellbeing Community WellbeingMaker WellbeingFrontline Wellbeing Research and Engagement273030313131LULULEMON IMPACT REPORT 202326BE WELL03Why It MattersAccording to lululemons 2023 Global Wellbeing Report,global wellbeing levelsincluding physical,mental,and social wellbeinghave not improved in the last three years.In fact,people report they are working even harder to maintain the same level of wellbeing.33 The World Health Organization reports that one in eight people in the world now lives with a mental disorder.34 Many people are unable to access the tools and resources necessary to face challenges that impact their wellbeing,particularly those experiencing disproportionate rates of stress and trauma due to systemic inequities.Wellbeing is also linked to the planet.Climate change has adversely affected physical and mental health globally,and it is projected that extreme weather events will continue to negatively impact wellbeing.35Our Approachto Wellbeing Cumulative people reached through the Centre for Social Impact Cumulative Centre for Social Impact contributions33 lululemon 2023 Global Wellbeing Report.The results of this report are based on an online survey commissioned by lululemon and managed by Edelman Data&Intelligence.The survey included 14,000 respondents across Australia,Canada,China Mainland,France,Germany,Hong Kong SAR,Japan,New Zealand,Singapore,South Korea,Spain,Thailand,the United Kingdom,and the United States,between May and June 2023.34 World Health Organization(June 2022),World mental health report.35 Intergovernmental Panel on Climate Change(February 2023),Sixth Assessment Report Impacts,Adaptation and Vulnerability.36 We define“people reached”as those who receive services from our grantees or actively participate in their programming.Our progress toward this goal includes maker wellbeing programs.See People Who Make Our Products for more information.37 In 2023,we applied methodology enhancements to address inherent limitations of self-reported data from grant recipients.We have updated our 2022 progress(from 4.4 million to 3.7 million)to reflect these changes.This restatement does not impact our goal target.38 We have contributed US$44.8 million(cumulative since 2021)to the lululemon Centre for Social Impact,$32.4 million of which has been contributed directly to social impact organizations.The remaining$12.4 million primarily consists of contributions toward a donor-advised fund for future grant making.1.4M2021(baseline)US$13.7M2021(baseline)3.7M372022US$29.4M 20227.4M2023US$44.8M2023Cumulative target(2025)10MCumulative target(2025)US$75MProvide access to wellbeing tools and resources.10 million people reached36 through the lululemon Centre for Social Impact by 2025Invest to advance equity in wellbeing through the lululemon Centre for Social Impact.US$75M invested by 2025GoalGoalWe have reached 7.4 million people to date through partnerships with charitable organizations.For examples of people reached,see Global Wellbeing,Community Wellbeing,Maker Wellbeing,and Frontline Wellbeing.Since 2021,we have made a cumulative investment of US$44.8 million.38For details on our investments,see pages 29-31.SDGs supported3 Good Health and Wellbeing5 Gender Equality10 Reduced InequalitiesLULULEMON IMPACT REPORT 202327BE WELL03Launched in 2021 with a commitment of US$75 million by 2025,the lululemon Centre for Social Impact invests in and advocates for the wellbeing of those most affected by systemic inequity around the world.The Centre is led and managed by a global internal team of experts in social impact,innovation,and wellbeing.LULULEMON IMPACT REPORT 202328BE WELL03Centre for Social Impact FrameworkCulture of ImpactSolutions that create a culture of impact for our people,communities,and guestsResearch&EngagementGrants,partnerships,and publications that explore solutions for systemic barriers to wellbeingMaker WellbeingIndustry grants and programs that care for those who make our productsFrontline Wellbeing&Crisis ResponseGrants and programs that support aid workers globallyPursue impact at scale through partnerships,philanthropy,research,and engagement.Build internal capacity.Invest in local community resilience.The Centre for Social Impacts purpose is to disrupt inequity in wellbeing through movement,mindfulness,and advocacy.Our goal is to positively impact 10 million people globally by 2025.Centre for Social Impact FrameworkGlobal WellbeingLarge grants and partnershipsthat advance the wellbeing ofthose experiencing systemicinequity traumaCommunity WellbeingGrants and partnerships that increase access to wellbeing opportunitiesFocus AreasStrategyVisionWhat Does It Mean to Be Well?Physical wellbeingFeeling empowered and able to give ones body what it needs for health and quality of life.Mental wellbeingFeeling emotionally prepared and able to handle what the future holds.Social wellbeingFeeling connected to others,being part of something larger than oneself,and contributing to a supportive community.Frontline wellbeingUS$1.6MMaker wellbeingUS$1.5MGlobal wellbeingUS$5.1MCommunity wellbeingUS$1.1MResearch and engagementUS$1.1MProduct donationsUS$269KTotal contributions:US$11.3M39Impact engagement through DeedUS$615KAt lululemon,we define wellbeing as a lifetime practice of three interconnected elements:This enterprise definition provides a framework that informs the lululemon Centre for Social Impact and guides the business in how we advance wellbeing for our employees and our collective.Wellbeing is also connected to environmental events such as climate change.This is why,as our work progresses,we have evolved our Centre for Social Impact approach to include a portfolio for environment and wellbeing.What Were DoingWe are working to break down barriers that prevent access to wellbeing tools and resources.The lululemon Centre for Social Impact aims to support wellbeing through movement,mindfulness,and connection.The Centre leverages our business,expertise,resources,and communities to invest in and advocate for the wellbeing of those most affected by systemic inequity.We are also committed to advancing a culture of impact for our employees.See more in Be Human.We started the Centre in 2021 with a primary goal:provide access to wellbeing tools and resources to more than 10 million people by 2025,supported by our commitment to invest US$75 million to advance equity in wellbeing.To reach these commitments,we invest in Global Wellbeing,Community Wellbeing,Maker Wellbeing,and Frontline Wellbeing focus areas,as well as Research and Engagement.See details in the pages that follow.Our rigorous partnership and grantee selection process is conducted by global and regional colleagues across lululemon,as well as social impact experts.This team selects organizations based on their ability to effectively reach and impact a variety of communities and populations,including Indigenous Peoples,people with disabilities,adolescents,makers,and frontline workers.We also established a Mental Wellbeing Global Advisory Board in 2023 made up of 11 external experts,including social innovators,academics,social service providers,advocates,and physicians,who guide and support us as we continue to evolve our work.In particular,the Board advises us on global mental wellbeing programming and employee offerings,Centre for Social Impact initiatives,and analysis of our annual Global Wellbeing Report.39 We also made contributions to a donor-advised fund for future grant making and crisis response organizations.Contributions to social impact organizations in 2023LULULEMON IMPACT REPORT 202329BE WELL03Global WellbeingBy collaborating and innovating with leading charitable organizations operating at scale,we can help support the wellbeing of people experiencing disproportionate rates of stress and trauma.In 2023,the Centre for Social Impact invested US$5.1 million in global wellbeing organizations and provided them with access to lululemon resources,platforms,and support.Global initiatives include support for 24 organizations with strategic relevance to our vision and mission,including 10 new strategic partnerships established in 2023.Examples of our partnerships include:Girls Opportunity Alliance,a program of the Obama Foundation focused on empowering adolescent girls globally through education and wellbeing United for Global Mental Health,dedicated to creating a world where everyone,everywhere has access to mental health support,free of stigma or restrictions Investing in people and the planetIn 2023,we established a new portfolio to invest in organizations focused on the intersection of planetary and human wellbeing.The funding stream works to address a growing segment of the mental health crisisclimate anxiety and depression.In 2023,we invested US$250,000 in organizations supporting youth-led climate action and Indigenous nature stewardship,including Action for the Climate Emergency(ACE),Force of Nature,and MakeWay Foundation.Indigenous wellbeingWe have a commitment to amplify Indigenous voices,support Indigenous communities,and sustain ongoing partnerships.We are members of The Circle on Philanthropy(The Circle)and Native Americans in Philanthropy(NAP).We have been working withand learning fromThe Circle for the past four years;during that time,we annually donated CAD$250,000 each to the Musqueam,Squamish,and Tsleil-Waututh Nations.In 2023,we also funded 10 Indigenous-serving organizations through our Here to Be grant program.Drummers from Tsleil-Waututh Nationsing an honor song at the Olympicpin gifting ceremony,Canada.Community WellbeingWe know that different communities face different challenges.Thats why we are committed to funding organizations that prioritize the unique needs of the communities they serve,and to advancing equitable access to wellbeing through movement,mindfulness,and connection.We support grassroots and community-led organizations in our regional markets across the globe,partnering with organizations that align with issues relevant to communities in their location.In 2023,the Centre for Social Impact invested US$1.1 million in community wellbeing organizations.Here to Be grant programEstablished in 2016,our Here to Be grant program is an annual application-based grant led by the lululemon Centre for Social Impact that supports local organizations around the world in creating inclusive access to physical,mental,and social wellbeing practices.We prioritize grants to organizations that have diverse and representative leadership,serve populations most affected by systemic inequities,and have programming that addresses the unique needs of their respective communities.Our 2022-23 Here to Be cohort was composed of 71 organizations across 13 locations in Asia,Australia,China Mainland,Europe,India,New Zealand,and North America.These organizations are advancing equitable access to wellbeing in many ways,including removing barriers to movement and mindfulness practices,expanding financial accessibility to wellbeing services,and offering culturally responsive and trauma-informed programming to improve mental health outcomes.In 2022,we provided US$2.8 million in grants to our cohort,which impacted one million people in 2022 and 2023.It included organizations such as Hauora Aotearoa(New Zealand),Mindwalk Yoga(United Kingdom),and Shanghai Lanjingling Sports Volunteer Service Center/beYoureyeS (China Mainland).In 2023,we launched the Grow Impact Fund to provide strategic,multi-year funding and capacity-strengthening programming to select Here to Be alumni organizations.This new funding stream aims to drive growth and enable long-term planning of community-led organizations that are disrupting inequity in wellbeing,ultimately contributing to a more robust global wellbeing ecosystem.03LULULEMON IMPACT REPORT 2023BE WELL30The suppliers who make our products employ more than 300,000 makers,most of whom are women.We aim to support the wellbeing of makers through industry grants and programs designed to benefit them,their families,and their communities.Industry partnerships We support programs and initiatives that focus on women,gender equity,and wellbeing.In 2023,we continued three multi-year partnerships,totaling US$3.45 million(cumulative since 2021),to help advance initiatives at global non-profits and local grassroots organizations.Our partners include:CAREs Made by Women,which supports programs for women in the garment industry,ranging from violence prevention to leadership The Resilience Fund for Women in Global Value Chains,a first-of-its-kind pooled funding initiative that invests in the long-term health,safety,and economic resilience of women working in global value chains Women Win,a global womens fund advancing girls and womens rights,including womens economic resilience through private sector engagement For more details on maker wellbeing,including the Vendor Grant program,see Be Human.Frontline WellbeingFrontline workers play an essential role in creating safe,healthy communities,and responding to the worlds toughest crises.Our frontline wellbeing efforts support those affected by disasters and global crises as well as the mental wellbeing of people acting on the frontlines.Through the lululemon Centre for Social Impact,we partner with the United Nations(UN)Foundation on the co-created Peace on Purpose program,which provides evidence-based mindfulness tools to support the physical and mental wellbeing of UN development and humanitarian workers on and off the front lines of global conflicts.In 2023,Peace on Purpose provided in-person and digital offerings to more than 6,000 UN personnel across more than 170 countries.We also renewed our partnership with a commitment of US$1.6 million from 2024 through 2025.Crisis responseWe provide crisis response assistance as part of our direct support of frontline workers,communities,and individuals affected by natural disasters and catastrophic events.In 2023,we provided US$690,000 to crisis response initiatives,including relief efforts for natural disasters around the world.Research and EngagementWe support and conduct research to examine systemic barriers to equity in wellbeing and amplify collaborative solutions through engagement and advocacy.In 2023,examples included:Global Wellbeing ReportWe released our third Global Wellbeing Report to guide where and how we support research and engagement efforts.This report includes a Global Wellbeing Index,which measures wellbeing by market.We expect to release our next Global Wellbeing Report in September 2024.NAMIWe continue to evolve our collaboration with the National Alliance on Mental Illness,and provide funding to help reimagine crisis response in the United States through increased access and awareness of 988 as a nationwide mental health crisis and suicide prevention number.Center for Reproductive RightsIn 2023,our Centre for Social Impact made a US$450,000 contribution to the Center for Reproductive Rights,a non-partisan organization that uses the power of law to advance reproductive rights as fundamental human rights around the world.Maker WellbeingPeace on Purpose program delivery,Ethiopia.0331LULULEMON IMPACT REPORT 2023BE WELLLULULEMON IMPACT REPORT 202332BE PLANET0404 Be PlanetOur lives are interconnected with the health of the planet.Climate ActionProduct and Material InnovationCircularity and New Guest Models Water and ChemistryPackaging and Waste3441475053LULULEMON IMPACT REPORT 202333BE PLANET04Climate Action Why It MattersClimate change is damaging ecosystems and causing adverse impacts to human health and wellbeing,representing an urgent global challenge.40 We take responsibility for our impact on the climate and have a role to play in helping to reduce emissions in the apparel industry value chain.The path ahead is complex,requiring unprecedented levels of learning,transformation,and collective action,including partnerships across the apparel industry.40 The Intergovernmental Panel on Climate Change,Climate Change 2023 Synthesis Report.41 We received verification from Apex Companies on our Scope 1,Scope 2,and Scope 3(business travel)emissions.See the Assurance Statement for details.42 The Supplement contains both market-based and location-based emissions.Our goal reflects market-based emissions.43 This target is approved by the Science Based Targets initiative(SBTi),which develops standards,tools,and guidance that allow companies to set GHG emissions reductions targets.Our climate data is reported on a calendar year basis.44 For a breakdown of our Scope 1 and 2 emissions and science-based target,see the Supplement.%reduction in Scope 1 and 2 absolute emissions in owned and operated facilities(tCO2e)44Meet our 2030 Scope 1 and 2 science-based climate target.41 60solute reduction in greenhouse gas(GHG)emissions in all owned and operated facilities(Scope 1 and 242)by 203043GoalWe achieved this goal in 2021 and have continued to maintain it since.This is in large part driven by renewable electricity usage,including a wind Virtual Power Purchase Agreement(VPPA)in North America.Our procured renewable electricity also includes on-site solar from one of our distribution centres(DCs),energy attribute certificates(EACs)from accredited tracking agencies,and green premium options from renewable utility providers.We will continue to manage emissions in our owned and operated facilities and maintain achievement of our goal,and we are implementing energy efficiency measures,including energy management systems(EMS)and heating,ventilation,and air conditioning(HVAC)upgrades.See more in Owned and Operated Facilities.SDGs supported7 Affordable and Clean Energy12 Responsible Consumption and Production13 Climate Actionlululemon distribution centre,Canada.LULULEMON IMPACT REPORT 202334BE PLANET04 9 1919,852-29 2012,928-82 213,203-78 223,937-77 234,264Target(2030)-60 18(baseline)18,24845 We received verification from Apex Companies on our Scope 1,Scope 2,and Scope 3(business travel)emissions.See the Assurance Statement for details.46 In 2024,we updated our Scope 3 target as part of our target re-validation process with SBTi to include Category 1(with the exclusion of other purchased goods and services,which relate to non-product spend)and Category 4 emissions,as defined by the GHG Protocol.This exceeds the SBTi requirement of including at least two-thirds Scope 3 emissions.We also updated the denominator of our economic intensity target metric,which was developed using the GEVA(GHG emission per unit of value-added)methodology,from revenue to gross profit to align with the latest SBTi requirements.We have updated our baseline and prior year progress to reflect these changes as well as other methodology enhancements,including data improvements and updates to emission factors.For a breakdown of total Scope 3 and science-based target emissions,see the Supplement.47 This target is approved by SBTi.48 In 2022 and 2023,we procured 100%renewable electricity to power our owned and operated facilities,with 98%sourced in compliance with the RE100 technical criteria.We were unable to source renewable electricity in South Korea,due to unavailability of an EAC program.In 2023,our Australian locations experienced a warmer year than expected and used more electricity.As a result,we were only able to procure renewable electricity for 98%of our Australian electricity use.Consequently,renewable energy credits were procured from nearby geographies.Total Scope 3 emissions within science-based target(tCO2e)%reduction in Scope 3 emissions intensity(tCO2e per million US$of gross profit from operations)476,8152018(baseline)517,0722019620,5152020893,92920211,093,90120221,014,3192023Target(2030)-60%-31 23180.82018(baseline)262.5-11 19232.6-6 21247.7-7 22243.5-4 20251.8GoalMeet our 2030 Scope 3 science-based climate target 45 60%intensity reduction in GHGs in purchased goods and services,and upstream transportation and distribution(Scope 3)46 by 203047The majority of our total emissionsover 95 percent in our 2018 baselineoccur in the supply chain and represent our biggest challenge and opportunity.As with other growth companies,it is difficult to decrease absolute emissions across Scope 3 while executing business growth.Consistent with our Scope 3 target,we work to take a systemic approach to reduce emissions intensity over time across manufacturing;product,materials,and packaging;and transportation and logistics.In 2023,we realized a reduction in emissions intensity.Continued efforts to achieve this reduction included preferred material conversion,supplier carbon-reduction activities,and a decrease in inbound air freight.In addition,because production and related emissions may occur months before products are sold,emissions intensity is sensitive to production and inventory level fluctuations.In 2023,lower production volumes contributed to the reduction in emissions intensity.In future years,we expect production volumes to increase with growth and are continuing the work to progress toward our Scope 3 target.See more in Manufacturing;Products,Materials,and Packaging;and Transportation and Logistics.Renewable electricity in our owned and operated facilities (total renewable electricity48)50%preferred materials15)8T Our footwear line was launched in 2022.We include footwear in our 2023 metrics in this Product and Material Innovation section.The comparative volume of footwear to our apparel and accessories products is small and does not affect our goal progress or target.55 Data in this Product and Material Innovation section is from February 2023 to January 2024.56 Trims are not included in product data in this Product and Material Innovation section;they are estimated to represent a small portion of our overall portfolio.We are working to establish processes and systems to track and report on the use of preferred materials in our trims.%of products procured containing at least 25%preferred materials by weight27 20(baseline)29 2144 2247 23Target(2030)100%Make our products with preferred materials and end-of-use solutions54,55 100%of products procured containing preferred materials by 2030GoalIn 2023,we focused on continuing to increase the percentage of preferred materials used in existing products.To count toward this goal,products must contain at least 25 percent preferred materials by weight,with transparently communicated attributes defining preferred materials.Thirty-eight percent of our products were procured with more than 50 percent preferred materials,up from 29 percent in 2022,and 9 percent were procured with between 25-50 percent preferred materials.See more in Nylon,Polyester,Cotton,Animal-derived Materials,and Forest-based Materials.See more about end-of-use solutions in Circularity and New Guest Models.SDGs supported12 Responsible Consumption and Production13 Climate ActionLULULEMON IMPACT REPORT 202341BE PLANET04%of total preferred materials procured for our products30 20(baseline)38 2144 2257 23Target(2025)75W The 2022 recycled polyester number(54%)has been corrected from what we reported in our 2022 Impact Report(55%).This update does not affect our overall polyester target.58 We purchased renewable nylon in 2022 for use in our 2023 limited global pilot of plant-based nylon in our Swiftly and Metal Vent Tech Short Sleeve Shirts.59 We consider our regenerated cellulosics fibers to be sourced responsibly when our suppliers are verified through CanopyStyle Audits.Preferred fibers used in products as a%of all fibers sourcedMaterialType2020202120222023PolyesterRecycled36CTW61%NylonRecycled2%6%8%6%Renewable0%0%1X0%CottonResponsibly sourced367F%Animal-derived materialsResponsible/traceable37Pux%Responsible Down Standard100000%Regenerated cellulosics(excluding packaging materials)Assessed as sourced responsibly59100000%Natural rubber(excluding footwear)Forest Stewardship CouncilTM(FSC)certified8t00hieve preferred materials for our products.75%of total preferred materials procured for our products by 2025GoalWe continue to increase the percentage of preferred materials procured for our products year over year.In 2023,our recycled polyester was at 61 percent(up from 54 percent in 2022).Recycled and renewable nylon remains the biggest challenge to scale.We have made investments with Geno,Samsara Eco,and ZymoChem,and work closely with them to help drive innovations that can scale in the future.Given the complexityof this work,the timeline to scale these initiatives challenges our ability to reach our full 75 percent preferred materials goal by 2025.We celebrate the advancements being made,continue to support our innovation collaborators,and will provide updates on our progress.See more in Nylon,Polyester,Cotton,Animal-derived Materials,and Forest-based Materials.LULULEMON IMPACT REPORT 202342BE PLANET04We have created fiber-specific targets that directly support our overarching Impact Agenda goals.See more in Nylon,Polyester,Cotton,Animal-derived Materials,and Forest-based Materials.We remain focused on developing materials with lower environmental impacts,including those that are made of recycled,renewable,or responsibly sourced content,or that use lower-impact manufacturing processes.We are also committed to responsibly sourcing agricultural fibers(e.g.,cotton)in a way that reduces environmental impacts and respects human rights,and to adopting appropriate industry traceability standards.We assess material production and product impacts using multiple sources,including the Higg Materials Sustainability Index(Higg MSI)and Higg Product Module(Higg PM),Preferred Fiber and Material Matrix(PFMM),60 and select Life Cycle Analysis(LCA)methodologies.We also partner with suppliers to conduct LCAs on products and materials,and continuously strive to improve and fill data gaps in our materials portfolio.Through a multi-year initiative,we are developing tools and processes for evaluating the environmental impact of products and materials at scale.This will allow our product creation and innovation teams to improve their ability to optimize product design to meet a products intended function,reduce impacts,and comply with future regulatory requirements.Our largest procured fiber by weight is polyester,followed by nylon,then cotton.Where operationally feasible,we are converting to recycled and renewable synthetic fibers,as well as responsibly sourced cotton and other natural fibers.For example,we aim to source 100 percent of our recycled fibers from Global Recycled Standard(GRS)or Recycled Claim Standard(RCS)certified suppliers by 2025.In 2023,we began working with TextileGenesis,a preferred materials tracing platform,to verify adopted preferred materials in our products.We started with recycled polyester and nylon,as well as regenerated cellulosics,and began enrolling our supply chain in What Were Doing 60 The Preferred Fiber and Material Matrix(PFMM)assesses the trade-offs of different sustainability certifications,initiatives,and branded materials.Owned and managed by Textile Exchange,it shares data and guidance on over 65 of the most common materials,programs,and initiatives.61 Other includes elastane(8%),other fibers not identified(1%),and various other fibers,including synthetic rubber/foam(1%).Regenerated cellulosics do not include packaging materials and natural rubber does not include footwear.Key fibers used in our products(%by weight)61 33%Polyester19%Cotton10%Other31%Nylon6%Regenerated cellulosicsAnimal-derived 1%Natural rubber 1%this platform.This initiative will support the scale of our preferred materials work.See Traceability for more information.The development of preferred materials is complex,requiring years of investment in research and development.Industry engagement is an essential component of this work.Our goal is to find scalable,long-term solutions,while taking incremental steps to contribute to shifting the industry away from virgin materials.Examples of our collaborations include Geno,Samsara Eco,and Textile Exchange.See Plant-based Nylon and Recycled Nylon.Through Textile Exchange,we participate in expanding the use of preferred materials across the industry.In 2023,we co-sponsored research into best practices for regenerative agriculture,sponsored the kick-off of an industry-wide nylon LCA study,participated in Textile Exchanges Materials Benchmark,and funded a landscape analysis report on The Future of Synthetics.See the Partnerships&Memberships page of our website for a full list of partnerships.LULULEMON IMPACT REPORT 202343BE PLANET04Targets:Launch alternative nylon solutions by 2025.62 Source 100%renewable or recycled nylon for our products by 2030.Nylon makes up a large portion of our materials and is essential in providing lululemon products with their characteristically unique performance,feel,and quality.Our aim is to find alternative nylon solutions to nylon 6 and nylon 6,6 that provide the same characteristics but reduce dependence on fossil fuels.The challenge is finding readily available sources of preferred nylon that can be easily scaled.We are focusing on investing in innovations that can aid in the scaling of alternative nylon,to help reach our target to transition from virgin nylon fiber to 100 percent renewable,recycled,or newly created fiber.Plant-based nylonOur initial approach is to help bring plant-based nylon to scale.Plant-based nylon focuses on a bio-based solution for caprolactam,the precursor to nylon 6.It offers the same quality,look,and feel of nylon.We have a multi-year investment with Geno,a leader in biotech innovation and materials,to incorporate renewably sourced materials into our product lines,including plant-based nylon.We are working closely with Geno to optimize the overall environmental benefits of plant-based nylon and scale its use to help achieve our 2030 product targets.In 2023,we launched a limited global pilot of our Swiftly and Metal Vent Tech Short Sleeve Shirts with plant-based nylon 6.These Swiftly and Metal Vent Tech products also contained recycled polyester and elastane with 30 percent plant-based content.With every pilot and launch,we continue to learn about and adapt new innovations.62 We have launched limited pilots using alternative nylon solutions.We have also invested in biomanufacturing firm ZymoChem,which has technology that uses proprietary,carbon-conserving microbes to convert renewable feedstocks into bio-based materials.This technology will play a pivotal role in helping us scale our plant-based nylon supply.We are also exploring verification methods to understand how to responsibly scale sourcing and commercialization of plant-based nylon.Recycled nylonWe have incorporated recycled nylon 6 in select product styles and are exploring opportunities to convert additional styles over the next few years.Our plan is to scale adoption through both existing and emerging solutions such as textile-to-textile recycling.In 2023,we announced a multi-year collaboration with Australian enviro-tech startup,Samsara Eco.Through this partnership,we unveiled one of the worlds first enzymatically recycled nylon 6,6 productsa proof-of-concept sample of our Swiftly Tech Long-Sleeve Topmarking a key milestone in textile-to-textile recycling.%renewable or recycled nylonBaseline year Baseline2023 resultsTargetTarget year20202%60 30NylonLULULEMON IMPACT REPORT 202344BE PLANET04Target:Source at least 75%recycled polyester by 2025.Target:Source 100%of cotton from responsible sources by 2025.Animal-derived materialsTarget:Trace or certify as sourced responsibly 100%of our animal-derived materials by 2025.Our responsibly sourced cotton portfolio grew in 2023.This progress was due to key suppliers completing onboarding and enrollment into our approved responsible sourcing initiatives.We are working to further adopt responsibly grown cotton platforms in our portfolio,including initiatives that provide greater traceability such as the US Cotton Trust Protocol,certified organic,and regenerative organic cotton chain of custody models.Our aim is for all cotton fiber used in products to be sourced from Australia,Brazil,Peru,or the United States.Only a small amount of our overall material portfolio(approximately 1 percent by weight)utilizes animal-derived fibers,including down,wool,cashmere,and silk.In 2023,78 percent of our animal-derived fibers came from certified or traced sources.All down is sourced from Responsible Down Standard(RDS)-certified suppliers.In 2023,61 percent of our total procured polyester was made from recycled polyester,primarily from post-consumer recycled polyester from plastic bottles.However,relying on plastic bottles as a feedstock for recycled polyester is only an interim step.We are looking at alternative feedstock sources such as post-consumer textiles and other plastic waste that is currently landfilled and historically hard to recycle.See Circularity and New Guest Models for more information on our innovations in textile-to-textile recycling.Increasing the adoption of recycled polyester is a priority for our cross-functional teams.We have converted high-volume product styles to recycled polyester and are working to update remaining styles to use recycled polyester as well.In 2023,we continued to drive progress toward our recycled polyester goal by converting liners as well as Scuba and Steady State garments.In early 2024,as part of our partnership with Samsara Eco,we launched a limited edition Packable Anorak,our first product made with enzymatically recycled polyester.We also use elastomultiester fiber,a bi-component yarn often made with a mix of recycled polyester and/or plant-based polyester.We are working with our suppliers to maximize the recycled content in these yarns.In 2023,we also continued our participation in the 2025 Recycled Polyester Challenge.This joint initiative between Textile Exchange and the UN Fashion Industry Charter for Climate Action aims to increase the uptake of recycled polyester in the industry.%recycled polyesterBaseline year Baseline2023 resultsTargetTarget year202036au 25%responsibly sourced cottonBaseline year Baseline2023 resultsTargetTarget year202036F0 25%traceable or certified animal-derived materialsBaseline year Baseline2023 resultsTargetTarget year202037x0 25By 2025,we aim to source 100 percent of animal fibers from suppliers certified to the following standards:Responsible Wool Standard(RWS),Responsible Alpaca Standard(RAS),and the Good Cashmere Standard(GCS)by Aid by Trade Foundation.In 2023,we further aligned our wool,alpaca,and cashmere sourcing with these standards.We plan to continue assessing responsible sources for the small amount of silk in our portfolio.We do not use animal-based leather in our products and we continue to explore leather alternatives.Packable Anorak made with enzymatically recycled polyester.PolyesterCottonLULULEMON IMPACT REPORT 202345BE PLANET04Forest-based materialsTarget:Certify or assess by a third party 100%of our forest-based materials are sourced responsibly63 by 2023.We met this target in 2022 and have maintained it since.We use regenerated cellulosic materialssuch as rayon/viscose,lyocell,and modalas well as natural rubber in some of our products.One hundred percent of our regenerated cellulosic fibers are sourced responsibly.We use CanopyStyle Audits to verify suppliers are at low risk of sourcing from ancient or endangered forests.In 2023,we also implemented a third-party system,TextileGenesis,as an additional verification step to continuously monitor and certify regenerated cellulosics data.In 2023,all yoga mats made with a mix of natural and synthetic rubber continued to use Forest Stewardship CouncilTM(FSC)certified natural rubber(FSC N002716).TraceabilityTraceability is foundational to building a more resilient supp
2024-11-28
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