Delivering Sustainable LegaciesOur 2024 Sustainability ReportTable of Contents1Letter from the CEO12Achieving Net Zero3AECOM at a Glance28Improving Social Outcomes6Sustainable Legacies39Enhancing Governance9Q&A with President Lara Poloni44Embedding Sustainable Development and Resilience Across Our Work11AECOMs Approach to Sustainability-Related Reporting50SASB and TCFD TablesThis year,we took our initiatives a step further by improving the diversity of our workforce and achieving our near-term goal of women comprising at least 20%of our leadership.We continue to make further progress against our 35%near-term target of women company-wide while also advancing our nongender diversity targets within each region of our business.In addition,we have implemented required unconscious bias training and set specific targets within each of our regions.We also strengthened our professional development programs to help our employees build meaningful careers and foster talent.I am pleased to report that these actions are receiving positive feedback.In our latest employee survey,a record number of employees recommended AECOM as a great place to work.In addition,our employee retention midway through fiscal 2024 is well ahead of pre-pandemic levels.We extended these practices focused on social impact by launching our AECOM relief campaign in collaboration with the American Red Crosss Hawaii Wildfires Relief Fund.As we reflect on our achievements and progress made over the past year,I am proud of our teams unwavering commitment and the progress to our purpose of delivering a better world.Our Sustainability Report highlights our ongoing commitment to embedding leading sustainability,resilience and governance practices in everything that we do.Embracing sustainability in our culture Our employees are our greatest asset,and we have taken several steps to create the best workplace in our industry,with sustainability and resilience at the center.Last year,this included implementing required sustainability and related training programs to help our employees work safely,sustainably,and ethically.We have achieved strong employee engagement and training compliance due to our efforts for the fourth consecutive year,reflecting our commitment to our workforce and training initiatives.As part of this process our teams are trained on our global sustainability risk framework that aligns with our Sustainable Legacies strategy and is critical in continually assessing project and environmental risks in every decision we make.Letter from the CEOLetter from the CEOTroy RuddChief Executive OfficerSince adopting our Think and Act Globally strategy,sustainability and resiliency have remained paramount in our business decisions,forming the core of our current strategy.Reflecting this commitment,we developed our Sustainable Legacies strategy that ensures we take action across our organization.Over the past year,weve made significant progress on these initiatives,placing us at the forefront of sustainable practices.This has not only extended our competitive advantage as industry leaders but also enabled us to lead more comprehensively,delivering for both clients and the communities we serve.Ultimately,our aim is to create a lasting impact on the planet for future generations.1|AECOM 2024 SUSTAINABILITY REPORTBy engaging with our clients earlier and longer,we have created a competitive advantage in our offering.Our global scale and experience are proving to be key differentiators as we are winning work at an all-time sustained high.As part of this,we are winning the work that matters by focusing our environmental technical expertise on the largest and most profitable markets.Critical pursuits such as the UK Network Rail,California High-Speed Rail,and NEOM International Airport highlight the breadth of our advisory and program management services that,when coupled with our technical expertise,are setting new standards for complex,sustainable infrastructure.Our progress was no more apparent than in our leading industry recognitions that were announced by the Engineering-News Record in April 2024.In these rankings,we were named the number-one Water design firm,displacing two of our closest competitors,while our number one rankings in Transportation and Facilities design were also reaffirmed.Moreover,our recent acknowledgment from USA Today as one of Americas Climate Leaders for 2024 underscores our progress on our environmental commitments.With these recognitions,we are now the top ranked firm across each of our major end markets,further reflecting the tremendous value we bring to clients every day.Driving sustainable infrastructure Our commitment to sustainability drives us forward with the latest technology,particularly in our role leading the Sustainable Markets Initiative task force on measurement and transparency.This work has led us to build the innovative and collaborative SMI Nature Risk Tool.Developed in partnership with stakeholders and industry experts,weve created a solution designed to guide early-stage infrastructure decisions.This tool empowers users to assess and address the impact of projects on nature,mitigating risk,and maximizing value.Leveraging global data sets and frameworks,it offers comprehensive insights into biodiversity and ecosystem dependencies.User friendly visualizations simplify complex data,enabling informed decision making from site selection to risk identification.As we embark on pilot projects,our aim is to democratize access to this transformative tool,advancing sustainable and resilient infrastructure worldwide.Our work on this tool underscores the type of impact we can have as a company to promote and enhance nature and biodiversity.Looking aheadWe are leading across our markets at a time when sustainability factors have become increasingly important for clients around the globe.This is due to the changing effects of climate change and environmental issues,including evolving regulatory frameworks following continued multi-decade investments in areas such as sustainability and the energy transition.Our clients are increasingly turning to us to navigate these evolving priorities.We are beginning to witness a surge in momentum in our pipeline from the Infrastructure Investment and Jobs Act(IIJA)and other substantial infrastructure funding initiatives around the world,and we expect substantial growth opportunities on the horizon.We are best positioned to advise and execute on these priorities with our multiple decades of experience and the digital delivery capabilities required to navigate in this changing landscape.I am incredibly proud of the impact we are making through our sustainability efforts.These are complex challenges that cannot be solved in a day,and,through our Sustainable Legacies strategy,we are committed to continuously improve our capabilities to create infrastructure opportunities for all.I would like to extend a thank you to our employees,clients,and stakeholders for supporting us on this sustainability journey.Together,we will continue to build a better and more equitable future.Troy RuddChief Executive OfficerAECOM has a long and proud history of delivering for clients and communities across Hawaii,and through this campaign we have made a corporate donation combined with offering a global matching program to collectively raise$300,000 to aid in the challenging recovery.On a global scale,we partnered with the Government of Ukraine to provide program management and advisory services that will aid in the reconstruction of Ukraine.These are notable examples of the type of initiatives that unify our teams across the world and deliver sustainable legacies for generations to come.Within AECOM,we have established a culture centered on flexibility,trust,and collaboration.For the tenth consecutive year,we have been recognized as a Fortune Worlds Most Admired Company,a testament to our continued excellence in our field.Sustaining our recognition is only possible because of the strength of our employees52,000 talented professionals who are dedicated to our clients and our purpose of delivering a better world.To ensure we continue fostering a culture focused on impact and providing greater opportunities for our professionals,we continue to invest in professional and technical development programs.In 2023,we also celebrated the value and success of these programs that led to TIME magazine naming us one of the Best Companies for Future Leaders,complementing our status as one of the Worlds Most Ethical Companies for the eighth year,as recognized by Ethisphere.Winning with our technical expertise Over the last year,our ESG Advisory practice,which provides our clients with leading sustainability and resilience-related consulting services,grew a double-digit pace and have made key senior hires in nature-based solutions and the energy transition.Serving as a complement to our world-class program management and advisory services,we have expanded our addressable market to support our clients more holistically across the lifecycle of their investmentsfrom assessing risk and developing a strategy to the detailed design and execution of the project.Letter from the CEO2|AECOM 2024 SUSTAINABILITY REPORTAECOM at a GlanceAECOM at a GlanceStrengthened financial profile with transformed balance sheet and returning capital to shareholders.Capitalizing on market leading positions,substantial backlog and ongoing continuous improvement initiatives to drive long-term profitable growth.Focused on our core higher-returning and lower-risk businesses.Leading in key transportation,water and environment markets and ideally positioned to advise clients on their sustainability and resilience priorities.71%U.S.4nada5%U.K.and Ireland3%Europe5%Middle East4%Hong Kong5%Australia-New Zealand3%OtherGeographies by Revenue Key strategic priorities3|AECOM 2024 SUSTAINABILITY REPORTDeep Technical ExpertiseLower-Risk Business Model 16%Program Managers 12%Consultants/Planners 10%Scientists 20sign,Digital&Other 38%Fixed-Price Design 8%Construction Management Attractive Exposure to Key End MarketsDiverse Funding Sources 38%Transportation 28cilities 10%Environment/New Energy 29%Non-U.S.Governments 8deral U.S.Government 39%PrivateAll figures presented as a percentage of FY23 NSRAs a Professional Services business,AECOM is poised to thriveAECOM at a Glance24%Water42%Engineers24%State&Local U.S.Government54%Cost-Plus Design4|AECOM 2024 SUSTAINABILITY REPORTSustainable LegaciesA leader in helping our clients deliver their most challenging projectsEngineering News-RecordTransportation Design FirmEnvironmental Consulting FirmFacilities Design FirmEnvironmental Engineering FirmChemical RemediationMass TransitAirports HighwaysDams and ReservoirsWater Design FirmEnvironmental FirmWater Treatment Lines and AqueductsWastewater Treatment PlantsEducationGreen Design FirmMarine and PortsWater Treatment and DesalinationClean Air ComplianceSite Assessment and ComplianceGreen ContractorHazardous WasteProgram ManagementSewer and WasteWind Power#1#2#3#4Source:2023/2024 ENR Rankings,reflecting global revenue3%SDG 3:Good Health and Well Being8%SDG 6:Clean Water and Sanitation3%SDG 9:Industry,Innovation and Infrastructure4%SDG 13:Climate Change9%SDG 16:Peace,Justice,and Strong InstitutionsPercentage of FY23 Gross Revenue Aligned with the Sustainable Development Goals(SDGs)3%SDG 4:QualityEducation3%SDG 7:Affordable and Clean Energy40%SDG 11:Sustainable Cities and Communities1%SDG 15:Life On Land72%Percentage of FY23 gross revenue aligned with the SDGs5|AECOM 2024 SUSTAINABILITY REPORTSustainable LegaciesSustainable Legacies is AECOMs strategy for reaching ambitious objectives across four key pillars:embed sustainable development and resilience across the companys work,improve social outcomes for communities,achieve net-zero carbon emissions,and enhance governance.AECOM is committed to publicly reporting on its Sustainable Legacies pillars as we work to enhance performance in the most responsible manner possible.Our strategic approach not only helps us manage and measure our progress,but also helps us to engage with key stakeholders from around the world.Sustainable Legacies6|AECOM 2024 SUSTAINABILITY REPORTDelivering Sustainable LegaciesEmbedding Sustainable Development&Resilience Across Our WorkEnhancing GovernanceSustainable LegaciesOur strategy in detail To solve for carbon using ScopeX,our AECOM platform is designed to reach our aspiration of reducing at least 50%of carbon on major projects To align with our clients ambitions,increasing the depth and breadth of our sustainability and biodiversity services each year To work with clients and partners to drive innovation in climate change,sustainable design,social value,and governance To embed net zero,resilience and social value targets into our client account management program and the work we bid for To measure key impacts and the work for which we bid such as carbon emissions,climate resilience,and social value on client projectsImproving Social Outcomes To deliver social value through our business,empowering staff and delivering projects that proactively improve social value outcomes to individuals,communities,and society in general To ensure our teams reflect the diversity of the clients and communities we serve in order to maximize employee engagement and satisfaction,meet client expectations and maximize community impact by:To guarantee a minimum representation of women at 20%of senior leadership roles and at least 35%of the overall workforce in the near term To promote social equity,diversity,and inclusion in our supply chain and communities through partnerships with small and minority-owned businesses To make strategic community investments that positively impact clients and society,including through employee-driven community investment opportunities To ensure women comprise at least 20%of senior leadership roles and at least 35%of the overall workforce in the near term Achieving specific and culturally relevant diversity goals implemented within each region of our business based on local community demographics,while investing in underrepresented groups within the regions of our business Achieving Net-Zero Carbon Emissions Following our achievement of operational net zero in 2022,maintain operational net zero status including through ongoing emissions reductions Reflecting our more ambitious emissions reduction targets approved by the Science-Based Targets initiative in April 2022,reach science-based net zero by 2040 by:Achieving a near-term 60%reduction in Scope 1 and 2 emissions by 2030 Achieving a near-term 50%reduction in Scope 3 emissions by 2030 Achieving a long-term 90%reduction in total emissions by 2040 Developing carbon reduction targets in partnership with our supply chain Decarbonizing fleet vehicles and increasing renewable energy use Participating in nature-based solution projects To leverage our enterprise framework to continually assess environmental and social risk in potential projects and evaluate the framework to ensure ongoing alignment with best practices To drive leadership accountability and advocacy through ongoing specific Sustainable Legacies objectives/metrics in annual goals To ensure strong employee engagement through 100%compliance of required ethics,compliance,safety,and Sustainable Legacies specific training programs To track and report on sustainability performance targets in line with leading industry benchmarks(i.e.,Sustainability Accounting Standards Board SASB and Task Force on Climate-related Financial Disclosures TCFD)7|AECOM 2024 SUSTAINABILITY REPORTzzzEnhancegovernanceOUR TARGETSOUR PROGRESSEmbed sustainable development and resilience across our work Advancing ScopeXTM to design out at least 50%of carbon on major projects Increase the depth and breadth of our sustainability services each year Embed net zero,resilience and social value targets into our client account management program and the work we bid for Measure key sustainability impacts through our operations and projects Ensure our project teams reflect the diversity of the clients and communities we serve Ensure women comprise at least 20%of senior leadership roles and at least 35%of the overall workforce in the near term Achieve regionally-specific near-and long-term diversity goals Make strategic investments that positively impact clients,communities,and society Ensure we remain operationally net zero Reach science-based net zero by 2040,including a 90%reduction in total emissions Implement a 50%reduction in business travel Partner with our supply chain to develop their own carbon reduction targets Investigate creation of our own nature-based solution projects Leverage our enterprise framework to continually assess sustainability and social risk in potential projects Drive accountability through ongoing specific ESG goals/metrics in leadership annual goals and employee-wide required training programs Report on sustainability performance in line with the SASB and TCFD frameworksLeveraging Sustainable Legacies to create competitive advantages to win key pursuits Growing our ESG advisory practice at a double-digit pace and added key senior hires in nature-based solutions and energy transitionDriving substantial engagement with internal ScopeXTM portal to aggregate project-specific case studies and decarbonization data Leading Sustainable Markets Initiative task force on measurement and transparencyProgressing on our near-term gender diversity targets;now exceed senior leadership diversity target with continued diversity gains across the company Continue to implement diversity-specific KPIs and associated near-and long-term targets in each region within our business in FY24 Employee-matched donation campaign to support Maui recovery efforts concluded with nearly$300,000 raisedSet net-zero emissions targets approved by SBTi,among the first companies globally Kicked off innovative supplier engagement program,engaging approximately 500 of our most emitting suppliers Achieved operational net zero for FY23 and already positioned to maintain operational net zero for the next several yearsImplemented quarterly sustainability dashboards for each region including regional travel emissions reduction goalsAwarded Terra Carta Seal by SMI in FY23Incorporated sustainability-related KPIs in CEO and executive officer compensation aligned with sustainability-linked financing amendment Implemented an enterprise-wide risk framework to ensure work aligns with our Sustainable Legacies strategy and ensures alignment with climate science Achieved 100%training compliance in FY23,including completion of Sustainable Legacies training;implemented further enhanced Sustainable Legacies training curriculum for FY24 program Improve social outcomesAchieve net-zerocarbon emissionsProgress Against Our Sustainable Legacies Strategy Sustainable Legacies8|AECOM 2024 SUSTAINABILITY REPORTIn this Q&A,President Lara Poloni shares her expertise and the considerable progress we have made in advancing our Sustainable Legacies initiatives over the past year.Q:Reflecting on the past year,what notable achievements do you find most significant?A:The importance and urgency of our work has been underlined throughout a year marked by destructive natural disasters and weather events.Amid this backdrop,it is encouraging to see sustained progress across all four pillars of our Sustainable Legacies strategy.What truly stands out is the increasing depth and scope of our capabilities,along with the consequential impact we can make.Our growing ESG Advisory business,for instance,assists clients in achieving their own ambitious net zero and sustainability agendas.Our perspectives and approaches,built upon our extensive experience in the Environmental space,distinctly differentiates AECOMand our clients are actively engaging and responding.As part of our ESG Advisory services,our new global ScopeX internal portal aggregates project-specific case studies and gathers decarbonization data from current and ongoing projects.Simultaneously,we have established a carbon technical practice group focused on enhancing carbon knowledge and training throughout the organization.Further progressing on our net zero ambitions,we conducted an internal audit of carbon emissions reporting and processes to identify opportunities for further operational emission reductions.We have made significant strides in achieving our short-term gender diversity goals,particularly in promoting women representation across all levels at AECOM.And as part of enhancing governance,we achieved strong employee engagement with a 100%completion rate on compliance and Sustainable Legacies-specific training programs.These initiatives extended our leadership position in sustainability and resilience.We were honored with the Terra Carta Seal by the Sustainable Market Initiative,underscoring our prominent role among private sector firms working toward a more sustainable future.In addition,as ranked by the Engineering-News Record,we were recognized as the top water,transportation and facilities design firm in April 2024.When combined with our existing number one positions in environmental engineering and environmental science,we have established ourselves as the leading firm across each of our end markets.Q&A with President Lara PoloniLara PoloniPresident9|AECOM 2024 SUSTAINABILITY REPORTLara Poloni on Our ProgressQ:How is AECOM pioneering innovation to enhance biodiversity outcomes?A:Innovation is key to addressing complex sustainability challenges around the world,including the increasing impacts of land-use changes.In response to the increasing demands from our clients requirements to report and improve biodiversity,we have introduced our new digital platform,EcoUplift,a capital accounting digital platform specifically tailored for the biodiversity in the UK.The innovative nature technology helps policymakers,landowners,and developers in the UK make informed and sustainable land-use decisions to enhance restorative biodiversity outcomes.The tool connects with our PlanEngage stakeholder engagement platform,which was streamed on Microsofts Azure marketplace to generate highly visual,interactive natural capital accounts that bring our clients natural assets and reporting to life.Additionally,we recognize that our focus on the environment cannot just be limited to carbon emissionswe must be evaluating the impact of our operations and our client work on biodiversity and nature more holistically.That is why,during fiscal 2023,we formalized a biodiversity statement that has been signed by our CEO,Troy Rudd,and includes commitments to support the Global Biodiversity Framework of reversing nature loss by 2030.Furthermore,reflecting our commitment to sustainability and leadership in advancing environmental stewardship industrywide,we were awarded the Terra Carta Seal by the Sustainable Markets Initiative in fiscal 2023.Q:Could you provide an update on the progress of your ambitious ScopeX initiative?A:We believe ScopeX can be our biggest contribution in addressing climate emergencies.It involves comprehending our clients carbon reduction commitments,challenges,and aspirations and utilizing that knowledge to guide our own decarbonization work.As such,most recently we implemented our ScopeX decarbonization policy,which aims to emphasize the importance of our principles,ensuring early engagement and alignment with project scope to maximize carbon reduction impact.ScopeX is a way of systemizing the methods,workflows and technologies needed to decarbonize the projects we deliver,and our recent ScopeX decarbonization policy formalizes how we can embed decarbonization principles into everything we do.Critical to achieving our aspirations with this program is ensuring all our technical experts have the resources and training available to bring decarbonization strategies to their projects around the world.As such,the ScopeX portal is a key enablera central,global hub for our technical professionals to access and share emissions data,Life Cycle Analysis tools and existing project decarbonization work and data.The portal,as a knowledge management platform,is helping build the skills of our global teams to deliver low-carbon planning,design,and engineering solutions.Q:With the increasing global focus on hazardous chemicals,how is AECOM uniquely positioned to tackle these complex issues?A:AECOM has been working with clients and industry partners to better understand and address forever chemicals for decades,with PFAS at the center.It is estimated that the total liability for public and private organizations worldwide is over$200 billion and possibly as much as$1 trillion.With robust sustainability investment around the world and with increasing regulatory focus on these issues,such as recent action taken by the U.S.Environmental Protection Agency,we expect there to be substantial demand over the coming years,and we are well positioned to capitalize through our strong capabilities,proven track record and valuable industry relationships.Our current work to provide environmental services addressing PFAS for the U.S.Navys CLEAN program in the Atlantic and Pacific regions is a good example of the deep,technical knowledge,and experience we can deliver at scale for our clients.It also demonstrates the benefits of bringing together the full power of our company and resources to lead two of the worlds largest environmental programs,which address the most critical restoration challenges of our time.Q:In the realm of greenfield infrastructure,what proactive measures can ensure the integration of long-term resilience and adaptability right from the outset?A:The focus on social equity,community building and engagement;social value is stronger than before and,in many places,it is the one key consideration in an infrastructure project,city planning,or regeneration.The supporting supply chain is also more mature,but we have to continue to be more deliberate about how we drive the engagement at the planning stage.Resilience and adaptation should be primary considerations rather than afterthoughts.Leveraging data and nature-based solutions alongside the fostering of government and private sector partnerships can ensure long-term resilience and community support.Affordable housing,disaster preparedness,accessible healthcare and education,and the preservation of green spaces are priorities requiring policies that promote social inclusion,as well as continuous investment,technological innovation,stable long-term policy frameworks,and community engagement.10|AECOM 2024 SUSTAINABILITY REPORTLara Poloni on Our ProgressWritten in alignment with the Sustainability Accounting Standards Board disclosure for the Engineering&Construction Services,the UN Sustainable Development Goals,and the Task Force on Climate-Related Financial standard,this report focuses on the following topics deemed most meaningful to our long-term performance:Achieving Net Zeroincluding our environmental management program,climate change initiatives,our pledge to net zero,and our environmental responsibility.Within these sections,we provide an overview of our environmental impacts of project development(SASB IF-EN-160a),structural integrity&safety(SASB IF-EN-250a),lifecycle impacts of buildings&infrastructure(SASB IF-EN-410a),and climate impacts of our business mix(SASB IF-EN-410b).We also discuss the governance,strategy,risk management,and metrics related to our climate change endeavors(TCFD).1234Improving Social Outcomesincluding diversity initiatives,LGBTQ reducing equity,employee turnover,programs for people with disabilities,STEAM education,veteran support,health&safety,and our local community initiatives.Within these sections,we provide an overview of our Workforce Health&Safety(IF-EN-320a)and related activity metrics(SASB IF-EN-000).Enhancing Governanceincluding oversight of our corporate governance program,ethics and integrity,risk management,and responsible supply chain management.Within these sections,we provide an overview of business ethics(SASB IF-EN-510a)and governance of our climate change program(TCFD;SASB IF-EN-160a.2).Embedding Sustainable Development and Resilience Across Our Workincluding how we are partnering with clients to advise on their own increasingly ambitious sustainability initiatives,such as through our ScopeX process that aims to reduce the embodied carbon in our designs by at least 50%(SASB IF-EN-410a).We believe that investing in environmental leadership,social impact,and a culture of governance will drive long-term value for AECOM.Our priorities center on these four elements,and we look forward to providing more information on the pages that follow.AECOMs Approach to Sustainability-Related ReportingAECOMs Approach to Sustainability-Related Reporting11|AECOM 2024 SUSTAINABILITY REPORTAchieving Net ZeroWhy we are committed to net zero Emissions dataWhat we are committed toHow were reducing emissionsHow we communicate,report,and externally engage on net zeroClimate change oversightClimate change risk managementConstruction managementClimate change risks and opportunitiesEnvironmental managementAchieving Net Zero12|AECOM 2024 SUSTAINABILITY REPORTThis is echoed by the goals of the Paris Agreement that aspires to achieve net zero emissions ahead of 2050 to avoid the worst impacts of climate change.Therefore,a key aspect of our Sustainable Legacies strategy is following the science in our climate change response.This is to safeguard the planet and the communities we serve,especially people who live in vulnerable areas and will be disproportionately affected.We also have a duty and opportunity as a leading global firm as part of the built environment sector to reduce our impact and support our clients and suppliers in this journey.Our net zero targets align with this climate science.These are to achieve:Science-Based Net Zero by 2040 to achieve the following:at least 50%reduction by 2030 and 90%reduction by 2040 of total emissions before neutralizing the remainder,compared with 2018 Operational Net Zero every year from 2021(reducing Scope 1 and 2 emissions in line with 1.5C reduction and offsetting the remainder annually)Our Science-Based Net Zero target is validated by the Science-Based Targets initiative,making AECOM one of the first companies globally to achieve this validation.A Science-Based Net Zero target commits a company to decarbonize across its value chain(in line with the Paris Agreement)and then neutralizing any remaining emissions through carbon offsetting.In addition,we continue to maintain our commitment to being operationally net zero,which allows us to contribute more climate impact and be ready for our science-based net zero target.Why We Are Committed to Net ZeroThe 2018 Intergovernmental Panel on Climate Change Report showed we need to limit global warming to 1.5 degrees to avoid the worst effects of climate change,requiring significant changes globally,including from companies.Achieving Net ZeroScience-Based Net Zero by2040Operational Net Zero Every Year from202113|AECOM 2024 SUSTAINABILITY REPORTAchieving Net Zero60%reduction in Scope 1 and 2 emissions by 2030,compared with 201850%reduction in Scope 3 emissions by 2030,compared with 201890%reduction in total emissions by 2040,compared with 2018 10%of emissions from 2040 can be mitigated by offsetting the remaining maximumAs part of our Science-Based Net Zero by 2040 commitment we are targeting:To retain our annual Operational Net Zero commitment(first achieved in 2021)we:MaintainMaintain our annual reduction required to achieve 60%reduction in Scope 1 and 2 emissions by 2030OffsetOffset the remainder of Scope 1 and 2 emissions annually12What We Are Committed toScope 1:Direct Emissions Scope 2:Purchased EnergyScope 3:Business TravelScope 3:Supply Chain Emissions OffsetsOur commitment to 1.5C-aligned Science-Based Net Zero by 2040201820242030203620212027203320392019202520312037202220282034204020202026203220382023202920352041Illustrative Graph:Not to Scale or intended to accurately reflect actual emissions or reductions2018 BASELINEOperational Net ZeroFully Aligned Science-Based Net ZeroEmissionsNeutralizationScope 3:50%Reduction by 2030Scope 1,2,&3:90%Reduction before offsettingScope 1&2:60%Reduction by 2030Scenario:60%reduction in Scope 1 and 2,50%reduction in Scope 3 by 2030,90%of all scopes by 2040.The offset operational began in 2021 and will continue until 2040,when it reaches full offset.The new net zero year signifies less offsetting compared to the current approach,while maintaining the same level of reductions.14|AECOM 2024 SUSTAINABILITY REPORTAchieving Net ZeroOur emissions data has been verified in accordance with ISO 14064-3:2019 against the requirements of the WRI GHG ProtocolCorporate Accounting Standard and The Greenhouse Gas ProtocolCorporate Value Chain(Scope 3)Standard.Note that other Scope 3 categories are screened regularly but not reported publicly due to lack of materiality.Scope 1,2,and 3 Emissions for FY18 and FY23GHG Inventory61%Reduction in Scope 1 and 2 emissions vs base year,currently surpassing our Science-Based Targets22%Reduction in Scope 3 emissions vs base year,meaning we are on track with required reductions for our Science-Based Target24%Reduction in total emissions vs base year,meaning we are on track with required reductions for our Science-Based TargetCategoryFY18 Baseline Emissions FY23 Emissions%Change from BaselineSBTi Target ProgressScope 1Fleet Vehicles (Mobile Combustion)33,71823,721-29.6%On trackFugitive Emissions024N.A.On trackScope 1 Total33,71823,745-29.6%On trackScope 2Purchased Electricity(Location-Based)75,31516,768-77.7%On trackPurchased Heat28,99213,345-54.0%On trackScope 2 Total(Location-Based)104,30730,113-71.1%On trackScope 3Supply Chain(Purchased Goods&Services,Capital Goods)2,740,4822,214,243-19.2%On trackBusiness Travel158,18256,032-64.6%On trackScope 3 Total2,898,6642,270,275-21.7%On trackProgress Against Science-Based TargetsScope 1 and 2138,02553,858-61.0%Target metScope 32,898,6642,270,275-21.7%On trackScopes 1,2&33,036,6892,324,133-23.5%On trackCarbon Credits Retired053,859Net Carbon Impact3,036,6892,270,274-25.2%(Emissions in MtCO2e)15|AECOM 2024 SUSTAINABILITY REPORTWe track carbon reduction performance against our baseline carbon inventory 2018.Our Inventory Management Plan articulates the basis and context for any recalculations of base year emissions.This includes a significance threshold of 10%for scope 1,2,business travel and upstream scope 3 emissions.Triggers for re-calculating baseline emissions are aligned to the recommendations of the Greenhouse Gas Protocol and apply equally to GHG emission increases and decreases.Changes to baseline year numbers will be disclosed as part of our annual disclosures where appropriate.As we continue to enhance calculation methodologies and improve accuracy of emissions factors and activity data,we will likely meet the 10%significance threshold for re-baselining across multiple categories.Data improvementAchieving Net ZeroThe majority of AECOMs emissions are in the supply chain,hence why significant amount of focus has been in this area.FY23 Emissions BreakdownFY23 Emissions Breakdown 0%Scope 1:Fugitive Emissions 1%Scope 1:Fleet Vehicles 1%Scope 2:Purchased Heat&Electricity 3%Scope 3:Business Travel95%Scope 3:Supply Chain16|AECOM 2024 SUSTAINABILITY REPORTHow We Are Reducing EmissionsOur Scope 3 emissions from the supply chain make up 95%of our total footprint,and as a result,our Corporate Net Zero(CNZ)team has developed and initiated its Supplier Engagement Program.The goal of this program is to actively work with our top-emitting suppliers to reduce their carbon emissions and get them on a science-based trajectory in line with 1.5C.As a large organization with dedicated resources to addressing our climate change impact,we see our role as leaders in this space,with a responsibility to share our experience with members of our value chain and to push them to improve.Over the last year,in particular,we have put in place key personnel to support supplier engagement on net zero.Our Supplier Engagement Program covers the top 80%of our supply chain emissions,which is about 1,000 suppliers around the world.This coverage includes companies of all sizes and a variety of capabilities to address their carbon emissions.We are especially focused on supporting small-and medium-sized enterprises(SMEs)that may not be able to justify allocating significant resources to decarbonization,Scope 3 data reporting.Greenhouse gas(GHG)accounting can be challenging to learn and even more challenging to properly execute.Rather than leaving them behind,we are transparent about our ambitions and expectations,offering dedicated support to help them move forward with us.Our approach includes hosting group briefing sessions to allow a base understanding of the importance of sustainability considerations and net zero,as well as AECOMs own net zero strategy and what we require from them to achieve it.We are also facilitating one-to-one conversations to better understand barriers,offer practical advice,and develop steps to support and accelerate our suppliers journey to net zero.As a result of our Supplier Engagement Program,we are improving the accuracy of our Scope 3 data and empowering our suppliers to take on the decarbonization challenge for themselves.Supplier engagement is an ongoing process that will result in carbon reduction over the long term as we continue to connect with our supply chain on a regular basis.Through our efforts on the Supplier Engagement Program,we have been recognized as a Supplier Engagement Leader by CDP.Supplier Engagement ProgramAs a Supplier Engagement Leader,were working with our suppliers to cascade environmental action across our supply chain.Collaborate Collaborate with suppliers through engagementReduce Develop strategy to reduce emissions and achieve net zeroImprove Improve accuracy of baseline and reportingCollect Collect supplier data and forecasts(RFI)Sustained long-term continuous influence and operational improvementWe are here17|AECOM 2024 SUSTAINABILITY REPORTAchieving Net ZeroPartnering Throughout the Infrastructure Supply Chain to Drive ChangeWithin our Americas segment,we provide Construction Management(CM)services for large scale projects in the United States.Our core markets and building types include sports(stadiums and arenas),commercial office high rise,aviation,convention centers,hospitality,entertainment,and residential towers.As one would expect,construction is a very carbon-intense industry,and decarbonizing long-entrenched supply chains and construction practices is challenging.Within the life cycle of a construction project,there are three key sources of carbon emissionsbuilding material manufacturing,transporting materials to a job site and the on-site construction activity to build the project.The distribution of carbon emissions across these three sources is heavily weighted toward the building material manufacturing stage,with some studies attributing 80%or more to this stage.We commonly refer to this as the embodied carbon of construction materials,and this is our current area of focus for decarbonization.As a construction manager,we subcontract the procurement of building materials to execute our projects.This gives CM a very different emissions profile compared to our DCS business,particularly as it relates to Scope 3/supply chain emissions.Over this past fiscal year,we have identified steel and concrete as the two largest contributors to CMs carbon emissions.And while these are famously hard-to-abate sectors,we are undaunted and actively working to decarbonize these two trades in the following ways:Leveraging our deep relationships to engage both sub-contractors and manufacturers on carbon,sending a clear market signal.Data improvements by engaging project teams directly for location-specific carbon emissions data for concrete and steel.In doing so,we are moving up the data accuracy hierarchy in the GHG Protocol.Embedding carbon measurement into our workflows including pre-construction engagement,bid evaluation tools,and new contract language for sub-contractors.For new,large projects,we proactively engage potential material suppliers before awarding contracts to signal our commitment to sourcing low carbon materials,understand their expertise and ideas for low carbon options,and to de-risk potential cost premiums.At the other end of the supply chain,we recognize that our clients hold the ultimate decision-making authority.So,we take a proactive approach by engaging them in discussions regarding carbon reduction opportunities in construction early on the project timeline.By engaging in these activities,guided by our Net Zero commitment and our Scope 3 emissions disclosures,AECOM Construction Management demonstrates its leadership among US construction firms on carbon.18|AECOM 2024 SUSTAINABILITY REPORTAs well as engaging our suppliers on net zero,we are embedding low carbon and sustainability considerations into our procurement processes.As part of onboarding,we will require all our suppliers to provide information about their current sustainability data and strategies.These questions will also inform which suppliers need focus for engagement,particularly those that are less mature.Over time,we intend to build these factors as a standard part of procurement across the organization and set a minimum requirement.Our Sustainable Procurement Policy also outlines how emissions reduction is a key part of our supplier onboarding and other procurement processes.AECOM is committed to improving travel performance by implementing our Travel with Purpose guidance prioritizing digital tools instead of traveling(for business and commuting),and if travel is necessary,prioritizing sustainable modes of travel(e.g.walking,cycling,public transportation and zero emissions vehicles)in conjunction with a location-specific risk assessment.This is particularly important as we have seen rebounding in travel emissions following the COVID pandemic.We are engaging with our travel service providers to identify opportunities to improve data accuracy and promote low carbon travel choices.For our vehicle fleet,we are developing a roadmap to transition to electric vehicles,including installing charging infrastructure at our owned offices.As part of the continuing initiative to move to greener offices and consolidate real estate,we will prioritize moving to leased offices that have electric vehicle chargers,where possible.support standards for quality and integrity in the voluntary carbon market.Our existing portfolio of carbon credits pre-date the publication of the CCP framework and subsequent assessment,and we will continue to monitor developments and consider our approach to procurement over time.Each credit in our existing portfolio was intended to align with the Taskforce on Scaling Voluntary Carbon Markets(TSVCM)s Core Carbon Principles available at the time.In 2023 and aligned with the previously noted criteria,we retired credits equivalent to our remaining Scope 1 and 2 emissions in fiscal 2023 sourced from an alternative energy project in the Jingyuan region of China whose vintage is 2018.We will continue to evaluate opportunities to complement our carbon offset portfolio with additional high-quality credits for use in future fiscal years.We are continuing to investigate the use of natural climate solution projects(ecosystem conservation,restoration or habitat creation,which will also support biodiversity enhancement and improve social outcomes for local communities).This would be utilizing our technical expertise gained from projects,such as the Natural Capital Laboratory,and by forming external partnerships with project development partners to scale support for climate,people,and nature.This work is partly to support our operational net zero commitment and is also expected to contribute to offsetting for science-based net zero from 2040.AECOM is focused on reducing energy demand in offices to achieve Net Zero.AECOMs Workplace of the Future and Freedom to Grow initiatives helped increase work flexibility and allowed further real estate consolidation and travel reductions,and we continue to encourage our staff who work from home to follow our guidance documentation on how to live and work more sustainably at home.We are in the process of conducting energy audits in offices that account for 80%of our energy footprint utilizing AECOMs OCEAN energy audit tool.OCEAN will benchmark energy performance to inform site selection,identify opportunities for energy efficiency initiatives,and on-site renewable energy generation.Our Green Lease criteria improves access to utility data and enables collaboration with landlords to implement energy efficiency and renewable energy initiatives.To further drive down emissions and ensure consistency,our sustainability guidelines require energy efficiency measures for office refurbishments.OffsettingAs part of our commitment to maintain net zero emissions in our operations,we intend to retire necessary carbon credits to offset the remainder of our Scope 1 and 2 emissions.We intend to align carbon credit procurement with the Integrity Council for the Voluntary Carbon Markets(ICVCM)Core Carbon Principles(CCPs),to Procurement integrationBusiness TravelFleet vehiclesOffice EnergyOffice EnergySourceFY18(MWh)Baseline FY23 (MWh)%Change from BaselineElectricity Purchased From Grid237,73944,048-81%Renewable Energy Purchased Through Market-Based Instruments2,444N.A.Non-Renewable Fuel Consumed for Generating Heat153,92071,437-54%Total Energy Consumption391,659117,928-70%Energy Consumption(MWh)19|AECOM 2024 SUSTAINABILITY REPORTAchieving Net ZeroAchieving Net ZeroHow We Communicate,Report,And Externally Engage on Net-ZeroTransparency is a key part of the transition to Net Zero for AECOM and corporate sustainability in general.We are paying close attention to the convergence of sustainability reporting standards and the related emerging reporting regulations in various jurisdictions.These standards and regulations will continue to guide our reporting practices going forward as we understand the value of standardization and increase corporate transparency.AECOM publishes its GHG data and key sustainability initiatives in the Annual report and goes into deeper detail in this annual Sustainability Report.Our Sustainability Report is aligned with the Task Force on Climate-Related Financial Disclosures(TCFD)and the Sustainability Accounting Standards Board(SASB).AECOM also responds annually to CDP,which details our climate-related strategy,risks and opportunities,and granular data.As a large influential organization,we have a responsibility to engage external organizations to progress carbon reduction efforts across our industry.For example,we are members of the SBTis Buildings Expert Advisory Group that is developing science-based target setting guidance for the buildings sector.We are also co-founding members of the Pledge to Net Zero,which has been established to commit organizations from the environmental sector to take a leadership role in the transition to a net-zero carbon economy.Reporting PracticesWe engage with or report to the following additional organizations:20|AECOM 2024 SUSTAINABILITY REPORTAECOMs CEO,Troy Rudd,leads the Executive Leadership Team,which comprises of senior executives representing all business segments and retains overall responsibility for Safety,Health and Environment(SHE)and Enterprise Sustainability,including climate-related issues,policies,and strategy.Our CEO signed off on the development of the Sustainable Legacies Global Council and kickstarted our process of developing our Sustainable Legacies Strategy,which included the setting of industry leading science-based GHG emissions reduction targets.AECOMs President,Lara Poloni,and Chief Legal Officer,David Gan,both report to our CEO and are co-Chairs of our Sustainable Legacies Global Council,which was launched in September 2020 and comprises dozens of sustainability experts and business leaders across the organization to best advise on all sustainability-related matters.The membership of the Sustainable Legacies Global Council is regularly reviewed and refreshed so that the right leaders remain engaged on these matters.This Sustainable Legacies Global Council was responsible for developing our Sustainable Legacies strategy,that was originally launched in April 2021,was most recently refreshed in May 2022 to reflect progress made in the first year of implementation,and is reviewed at least annually.This includes a multitude of commitments on sustainability matters and associated targets,such as our commitment to achieving science-based,net-zero carbon by 2040.The Sustainable Legacies Global Council is also actively involved in reviewing and mitigating climate-related risks associated with our project portfolio.The responsibility for assessing and managing climate-related risks and opportunities related to our own operations,including our greenhouse gas reduction target,also lies with the Sustainable Legacies Global Council.The President is responsible for our global operations,including the advancement of our sustainability priorities across the business.As co-leads of the Sustainable Legacies Global Council,both the President and the Chief Legal Officer are responsible for providing status updates on Sustainable Legacies program initiatives,objectives,and targets to our Board on a quarterly basis at minimum.Regional leaders sit on this council,and there is a cascade to each region from the Global Council.Sustainability strategies,objectives,and initiatives are cascaded down into the business through various working groups and teams.Internal environmental issues are managed by the Corporate Net Zero team,which is comprised of technical and operational people focused on tackling our various emissions Scopes.Performance is also embedded into the business through quarterly net zero reviews with senior leadership,as well as requiring all separate elements of the business to develop their own Net Zero Roadmaps.Progress against regional Net Zero Roadmaps ultimately gets reported back to the Corporate Net Zero team,the Sustainable Legacies Global Council,and the Board.The Enterprise Risk Management(ERM)steering committee provides governance over an established continuous improvement platform that actively assesses,analyzes,and works cross-functionally to identify and mitigate AECOMs inherent and strategic risk profile,including risks related to energy and climate change,concurrently empowering associated enablers.The team actively monitors AECOMs risk profile and facilitates risk-based,efficient,cross-functional solutions.The team facilitates the preparation of reports on AECOMs risk profile that are regularly shared at least quarterly with management and the AECOM Board of Directors.Risks are reported via three key risk indicators:exposure,readiness,and performance.All of the global activity and initiatives are cascaded,implemented,and directed through regional sustainability leadership teams that have delegated responsibility for managing climate related risks.These regional sustainability leadership teams work with local leadership as appropriate and report to regional executives.Refer to the Governance section of this report for a detailed illustration of our governance structure.Climate Change Oversight21|AECOM 2024 SUSTAINABILITY REPORTAchieving Net ZeroOur ERM program identifies external and internal threats to physical assets,data,and intellectual property,as well as vulnerabilities that exist within them.Based on the enumeration of those assets and threats,we develop risk management strategies and improve resilience.The prioritization of risks is done through a collaborative process of discussing the main risk profiles with relevant stakeholders on an ongoing basis and evaluating the potential impact,the level of exposure(vulnerability)as a company to that risk,and speed of onset.Our prioritization process is based on the size(in potential revenue)of an opportunity,as well as our relationship,and competitive advantage with the client.Subsequently,AECOM adapts to changing global business environments and risk conditions through its strategic resiliency practices,led by our Global Security and Resiliency(GSR)Department,which includes global oversight and coordination of disruptive event response and business continuity management.These teams focus on identifying threats across the globe before they come to fruition,while creating strong countermeasures that are designed to safeguard our data,people,projects,and communities.These teams are composed of representatives from communications,human resources,legal,facilities,and real estate to help anticipate,act on,and learn from disruptive events.In 2023,we completed a global climate risk assessment to understand the physical and transition risks and opportunities across our operating regions.We leveraged the expertise of our Sustainability and Resilience professionals responsible for providing clients with technical climate change services to conduct quantitative and qualitative scenario analysis to identify our physical risk exposure and primary transition risk and opportunity drivers.Through this assessment,we have considered the risks and opportunities facing both our operations and the services we provide.Due to our global presence of offices and people,we understand the potential for climate-related physical risks to affect our ability to carry out our work.These physical risks,both acute and chronic,are identified through our risk assessment and evaluated through our ERM.The results of this evaluation inform various operational functions including Real Estate,Procurement,Security and Resilience and our Corporate Net Zero team.Both reducing the risk of disruption to our operations and mitigating our own impact are key risk management strategies that drive these functions.The identification of key transition risks will increasingly drive risk management as efforts to transition to a low-carbon economy increasingly affect our industry,including existing and emerging regulatory requirements,changes in technology,changes in our primary markets,and potential reputational risks associated with our work.These potential transition risks will inform how we manage our own climate change impacts through the work of our Corporate Net Zero team and will also inform the services we offer related to climate change and sustainability.Following our 2023 global climate risk assessment,each of the AECOM regions will undergo their own region-specific climate risk assessments when there are triggers to do so,including regional climate risk disclosure regulations.This will enable us to systematically review the climate-related risks and opportunities we have identified as part of the ERM process and therefore increase the granularity of our awareness of regional and local risks and opportunities.This will also enable us to review our businesses resilience taking into consideration different climate-related scenarios.Achieving Net ZeroClimate Change Risk Management22|AECOM 2024 SUSTAINABILITY REPORTAchieving Net ZeroThrough our 2023 global climate change risk assessment,AECOM recognizes numerous risks and opportunities related to climate change and the transition to net-zero carbon emissions.To identify these risks and opportunities over time and to manage the uncertainty around future changes to the climate,we have conducted scenario analysis using the Intergovernmental Panel on Climate Changes(IPCC)Shared Socio-economic Pathways(SSPs)published in the Sixth Assessment Report(AR6).More specifically,we have focused our assessment on SSP5-8.5 for physical risk and SSP1-2.6 for transition risk.Using these scenario pathways,we have assessed risks at three timescales:Near term2030(represents the average for the 20-year period 2021 2040)“Business as Usual”Temperature Projection:2.4-5.7C“Paris Agreement Alignment”Temperature Projection:1.0-2.4CMedium term2050(represents the average for the 20-year period 2041 2060)Long term2090(represents the average for the 20-year period 2081 2100)123Climate Change Risks and OpportunitiesWe have chosen these timescales to analyze risks in the near-term over more typical business planning periods while also assessing exposures to greater structural changes in the economy over the medium-and long-term.A 20-year period is used to capture different aspects of climate variability and change.Scenario SSP5-8.5:Scenario SSP1-2.6:Policy focused on free markets Effective international cooperation Reduced inequality High economic growth High consumption Low population growth Policy focused on sustainable development Effective international cooperation Reduced inequality within and across countries Low consumption Low population growth23|AECOM 2024 SUSTAINABILITY REPORTTo assess AECOMs exposure to physical risk,we used the SSP5-8.5 pathway as it is the pathway with the highest emissions concentration that would most likely lead to increased intensity and severity of extreme weather events.It is also the pathway along which we are tracking globally,thus presenting a“business as usual”(BAU)scenario marked by inadequate policy response and increased potential for physical asset damage.As a global company,AECOM is exposed to all hazards somewhere,but the table below outlines where those hazards are of highest relative exposure.Physical risksHazardRisk DescriptionRegional Exposure Over TimeExtreme TemperaturesAn increase in extreme temperatures can impact employee productivity and well-being and can also put stress on building heating and cooling systems.These impacts can be even more extreme for employees working outdoors on project sites.U.S.East&LATAM,ANZ,and MEA are the most highly exposed regions in the near-term,while India,Asia and U.S.West become highly exposed in the medium-term,joined by Europe in the long-term.DroughtReduced precipitation and increased water stress can put pressure on water supply and pose risks to public health and our ability to work in certain areas.U.S.East&LATAM,ANZ,and MEA are the most highly exposed regions at each timescale.Extreme Precipitation and floodingExtreme precipitation can lead to flooding and may make offices and project sites inaccessible.Canada,India,and MEA are the most highly exposed regions in the near-term with Asia and U.S.West becoming increasingly exposed over time.Sea level riseSea level rise can cause damage and impact employee ability to access our offices and our project sites.In the near term,the U.S.West is the most highly exposed region while other regions may see mild exposure.High exposure will spread to ANZ,Europe,and U.S.East in the medium-term and to India in the long-term.WildfiresWildfires may increase in frequency and intensity with a warming climate,producing air quality issues,risks to human health,and impacts on our employees ability to travel to work and perform in offices or on project sites.ANZ,Canada,Europe,and U.S.West are projected to be highly exposed in the near term.This high exposure spreads to all regions in the medium-and long-termHurricanes&CyclonesExtreme weather events could damage our offices and our projects,while also impacting the ability of our employees to travel to work.Our operations in ANZ,Asia,India,and U.S.East&LATAM are projected to have high exposure in the near term.These remain the most highly exposed regions over time,but exposure increases overall across all regions.Physical risksOverall,the business is most exposed to extreme temperatures and extreme precipitation,particularly in the U.S.West,U.S.East,MEA,and ANZ regions in the near term.Additionally,the business is most exposed to wildfires in the ANZ,Canada,Europe,and U.S.West regions and cyclones in the ANZ,Asia,India,and U.S.East regions in the near-term.In the medium-term,these exposures intensify and grow to include extreme temperature exposure in Canada and India,while wildfire exposure extends to all regions and ANZ,Europe,MEA,U.S.East,and U.S.West are highly exposed to sea level rise.In the long-term,all exposures intensify with ANZ,Canada,India,MEA,U.S.East,and U.S.West being most exposed to extreme temperatures and precipitation.Sea level rise,wildfire,and cyclone exposure continue to be high in long-term as they were in the medium-term.Our response to physical risksAECOMs existing operational processes are already setup to respond to climate-related risks through several business functions.For example,we continually evaluate our real estate portfolio as part of normal processes to ensure our office locations are best suited to serve our client work.Through our Security and Resilience department,we have established processes to respond to disruptive events to the business and our employees,which includes extreme weather events.Furthermore,our ERM program evaluates climate risk as a strategic risk to the company and will continue to evaluate the physical risks from climate change to respond as necessary.The results from this years climate risk assessment will be socialized throughout the company to identify further opportunities for integration of climate consideration through existing business functions.24|AECOM 2024 SUSTAINABILITY REPORTAchieving Net ZeroTo assess transition risks and opportunities,we used the SSP1-2.6 pathway as it is the pathway that requires the most accelerated and aggressive mitigation response to curb emissions,proposing increased uptake of technologies and strategies to manage energy use and intensity.It is the scenario most closely aligned to the Paris Agreement target,thus is appropriate to identify risks and opportunities in the transition to a low carbon economy.In general,our exposure to these transition risk exists in the near-term but is projected to increase in the medium-and long-term.Our reputational risk of not meeting our net zero targets is the exception to this rule in that this risk is specifically tied to our target dates 2030 for our interim targets and 2040 for our net zero target.Transition riskTransition risks and opportunitiesDriverRisk DescriptionOpportunity DescriptionPolicy&LegalFailure to comply with emission limits,energy efficiency requirements,waste management regulations,and other measures aimed at reducing greenhouse gas emissions and mitigating climate impacts could lead to legal and financial consequences.AECOM has an opportunity to increase revenues by serving clients in complying with emerging regulations related to climate,energy,and the built environment.Mandates on and regulation of existing products and services,e.g.,projects incorporating a higher level of resilience have a cost uplift.The number of new infrastructure/projects as clients work within existing funding budgets.Changes to industry standards and regulation for buildings and construction.Increased costs on project work associated with changes in these regulations.Increased operating costs due to carbon pricing of energy,making utility and fuel costs increase.TechnologyTransitioning to lower emissions technology e.g.,procurement of renewable energy for operations,transition of fleet to EVs and the purchase of offsets.Increased costs in the near term.AECOM has an opportunity to assist clients in adopting lower emissions technologies,increasing market share of these markets.MarketMarket demand changes as energy transition progresses,driven by changing policies and regulations.AECOM has an opportunity to continue developing services and designing infrastructure that supports a net zero transition,in order to meet market demand.Opportunity to build our reputation as designers of climate resilient infrastructure,a market which is projected to grow.Risk that we are working with wrong clients,or clients that are too heavily focused on fossil fuels or other stranded sectors.Risk that we design projects that are not resilient to future climate change scenarios efficient/able to use future infrastructure.Reputational damage associated with our projects being damaged leads to community disruption,increased costs,and legal challenges.ReputationReputational impact of not achieving our net zero commitments.We can build on our reputation as champions of sustainability and climate change by meeting our targets.Opportunity to meet growing market demand for sustainability and climate-related services.Not having technical expertise/technical capabilities to deliver against demand.Growing demand for sustainability services requires investment in our technical capabilities to respond.25|AECOM 2024 SUSTAINABILITY REPORTAchieving Net ZeroTo respond to potential transition risks and opportunities,our Sustainable Legacies strategy has prompted the rapid growth of our sustainability and climate-related service offerings.These client-facing teams continue to evaluate the market for climate-related services to meet and capture increasing demand for these services.All our business lines seek to ensure our work is in compliance with emerging industry standards and regulations.Additionally,our business lines seek to ensure that we are developing projects with best practice resilience strategies that can withstand the impacts of a changing climate.AECOM recognizes the potential risk of lacking the technical capacity to meet demand for sustainability services and are addressing this risk through recruitment of experts and by upskilling our existing employees.Our Corporate Net Zero team is implementing numerous initiatives(see how we are reducing emissions,p.17)in order to manage and reduce AECOMs own carbon footprint to reach our SBTi-validated Net Zero commitment.This includes reducing fossil fuel-based energy consumption in our offices and vehicles in order to avoid increases in operating costs due to carbon pricing of fuels.ResilienceThrough the implementation of our Sustainable Legacies strategy,our current business aims to be resilient in the current condition of climate change.As future impacts will increase and change over time,both for physical and transition risks,we will continue to assess our strategies in order to be resilient into the future.This includes improving the resilience of our offices and any owned assets to reduce the risk of business disruptions for our customers.It also means continuing to adjust our service offerings and our ability to meet market demand for expected increases in climate-related services.Finally,this means ensuring that our projects are designed to withstand environmental changes due to climate change.To ensure continued resilience of our business,we intend to continue to improve our climate risk assessment methodology and region-specific granularity.We will advance our understanding of our climate risk by conducting financial analysis of risks and opportunities that we have identified.Our Response to Transition Risks and OpportunitiesIn response to escalating global and sustainability challenges,particularly the escalating consequences of land-use alterations,we have launched EcoUplift,a tailored capital accounting digital platform designed for UK biodiversity.Responding to client demands for enhanced biodiversity reporting,EcoUplift integrates with our PlanEngageTM platform on Microsofts Azure marketplace.This innovative technology empowers UK policymakers,landowners,and developers to make informed and sustainable land-use decisions,fostering restorative biodiversity outcomes.Recognizing the broader impact of our operations,we formalized a biodiversity statement in fiscal 2023,endorsed by our CEO,Troy Rudd.This statement includes our commitment to support the Global Biodiversity Framework of reversing nature loss by 2030.Reflecting our leading approach to environmental stewardship,we were awarded the Terra Carta Seal from the Sustainable Markets Initiative that same fiscal year.Transformative Solutions for Biodiversity Conservation26|AECOM 2024 SUSTAINABILITY REPORTAchieving Net ZeroOur Environmental Management System(EMS)is designed to help limit the impact on the environment.It forms part of the Integrated Management System(IMS),which covers the approach to health,safety,environment,quality,and risk.An effective EMS means we can be confident in the focus on reducing both direct and indirect impacts on the environment,including reducing carbon footprint,and supporting clients with sustainability solutions.Our EMS is managed on applicable sites by project staff,supported by the Safety,Health and Environment team,ensuring the system is implemented and maintained.Our Environmental Sustainability Policy is available to all employees,customers,and suppliers on our website and is regularly reviewed at operational meetings throughout the company.In 2022,we also formalized and published our Environmental Sustainability Policy that outlines AECOMs approach to achieving best-in-class environmental sustainability across its business for all stakeholders,including through Board and Executive Oversight and execution of the environmental elements of our Sustainable Legacies strategy.AECOM is committed to complying with all applicable legal and regulatory requirements to control and reduce emissions and energy usage in our operations.We recognize the need to comply with strict environmental standards and an increasing number of environmental laws and regulations.We are committed to making the necessary investments in systems and technology to ensure compliance and to meet or exceed these standards.We are committed to improving our energy efficiency,as this is the largest and most cost-effective way to reduce CO2 emissions.We believe that our focus on innovation,with the objective of reducing costs and improving sustainability of our operations,provides a strategic benefit through the ability to fund,develop,and implement new technologies and quickly respond to changes in customer requirements and industry demand.Achieving Net ZeroEnvironmental ManagementWhile climate change and carbon emissions are the primary focus of this pillar,environmental sustainability is critical for competitiveness and business success.The sustainability of operations,products,supply chains,and infrastructure projects are central to sustained value creation,growth,and resilience.27|AECOM 2024 SUSTAINABILITY REPORTImproving Social OutcomesSocial ValueThrive with AECOMAECOM VoicesLGBTQ EquityEmployee RetentionInternal Mobility and Workforce PlanningEmployee DevelopmentPeople with DisabilitiesSTEAM EducationVeteran SupportHealth,Safety and Well-beingCOVID-19 ResponseCommunity Investment and EngagementImproving Social Outcomes28|AECOM 2024 SUSTAINABILITY REPORTImproving Social OutcomesAcross our company and in our workplaces,we understand that diverse ideas and perspectives make us a stronger,more innovative company.Through our Global Social Value Working Group,were deploying the diversity of our global teams to define social value at AECOM and audit best social value practices across the organization.We recognize that social progress must also be measured objectively.In 2023,we reached our target of women accounting for least 20%of senior leadership roles,which places us closer to our goal of women comprising of at least 35%of the overall workforce in the near term.Weve also implemented diversity-specific KPIs and associated near-and long-term targets in each region within our business and have set non-gender diversity goals for our workforce to be met in 2023.Our teams commitment to equity drives work with greater social value.Whether through partnering with disadvantaged business enterprises or conducting environmental remediation in consultation with Indigenous communities,were embarking on projects that rectify inequities through their design,development,and delivery.Social Value doesnt just inform the work we deliver.It also determines the work we choose.In our response to the devastating fires impacting communities in Hawaii and Russias unlawful invasion of Ukraine,we exited the Russian market.Our teams subsequently participated in an employee donation match program that raised nearly 300,000 dollars to relief funds and volunteered on the ground to support the conflicts refugees.We believe our response embodies our culture.Investing in employees who prioritize equity,diversity,and inclusion allows us to deliver clear social value.And we have taken steps to ensure these commitments are codified within our operations with the development of our Social Value policy that was implemented in fiscal 2022.Social ImpactIn pursuit of a more equitable world,we start by investing in our most important asset:our people.52,000employees worldwideAchieved target that women account for at least 20%of senior leadershipProgressing against our target for women to account for at least 35ross our companyBy developing our strategy with a focus on improving social outcomes and supported by the strength of our technical excellence,global collaboration,and local engagement we will continue to drive innovation in our industry.29|AECOM 2024 SUSTAINABILITY REPORTAt AECOM,we believe that investing in local communities to create social and economic outcomes is at the heart of generating social value.We work with our clients,partners,and suppliers to link the opportunities presented by our projects to the needs of the local communities we operate in,delivering a positive,lasting legacy.As we transition our economies to net-zero carbon,we recognize that businesses must deliver the employment,skills,and business outcomes to sustain this green economy.Put simply,Social Value is critical to delivering on our Sustainable Legacies strategy.We will achieve this by:Advising clients through our tools to help select the most equitable project approach for their community Designing and developing solutions that improve well-being and provide better social outcomes for all Utilizing our technical expertise and STEAM activity to develop a diverse,skilled workforce of the future that represents the communities we live and work in Supporting local economies by contracting with local subject matter experts and building capacity within our supply chains Strategically giving our time,skills,and money to support communities in needReflecting our commitment to Social Value,we have implemented a global Social Value policy that outlines AECOMs approach to providing solutions that lead the industry resulting in meaningful and sustainable social value outcomes across its business for all stakeholders,including Board and Executive oversight.Social ValueImproving Social OutcomesSocial Value Through Client DeliveryEmbed social value principles into all our work for clients to improve social outcomes that uplift individuals,communities,and society in generalThrive with AECOMFoster an inclusive environment within AECOM and beyond by building diverse talent,expanding understanding,enriching communities,and thinking without limitsCorporate ResponsibilityExtend our social value contributions through employee-driven community investments,including strategic nonprofit partnerships,pro bono work,skills-based volunteering,and philanthropySocial Value-based ProcurementPromote supplier diversity and social value-based sustainable procurement methods by providing opportunities and supporting small,minority,and/or women owned businesses30|AECOM 2024 SUSTAINABILITY REPORTOur commitment to diversity starts with our goal to attract,retain,and develop a workforce that is diverse in background,knowledge,skills,and experience.This commitment is reflected in our recognition in TIME magazine as one of the best companies for future leaders in 2023,underscoring the value and success of our diversity programs.The acknowledgment serves as a testament to our continuous efforts in promoting diversity and inclusion within our organizations.Our Board of Directors recognizes that a diverse workforce and a culture of equity and inclusion helps us compete more effectively,sustain success,and build long-term shareholder value.In leading from the top,the Nominating and Governance Committee considers a variety of diversity characteristics for board composition,including business experience,geography,age,gender,and ethnicity.We believe that supporting and promoting a diverse and inclusive workplace brings new perspectives that can result in new ideas and help mitigate risk.Our commitment to diversity starts with our goal to attract,retain,and develop a workforce that is diverse in background,knowledge,skills,and experience.As of September 30,2023,across our global employee base,approximately 34%were women,including more than 20%within leadership roles.More broadly,our executive teams include representation from a diverse array of communities,with approximately 56%of our executive team and 44%of our Board being from a diverse background in regard to race,ethnicity,gender and sexual orientation.In addition,we have implemented diversity-specific KPIs and associated near-and long-term targets in each region within our business.We encourage every one of our team members to form deeper relationships with those around them based on mutual respect,dignity,and understanding.In addition,we include a variety of stakeholders in proactive engagement to gather feedback,increase transparency,and further understanding.Thrive with AECOMOur executive teams include representation from a diverse array of communities,with approximately 56%of our executive team and 44%of our Board being from a diverse background in regard to race,ethnicity,gender and sexual orientation.Improving Social Outcomes31|AECOM 2024 SUSTAINABILITY REPORTImproving Social OutcomesEquity Soars in Airport TransformationIn our pursuit of transforming aviation infrastructure,weve embraced the power of digital tools,leveraging computational and automated design techniques for the modernization of JFK Terminal 1.This innovative approach,inspired by global best practices,exemplifies the AECOM way of problem-solving,significantly accelerating processes,and earning enthusiastic support from the Port of Authority of New York and New Jersey.Recognizing airports as vital hubs akin to small cities,our global aviation lead,Dwight H.Pullen Jr.,and Los Angeles economic inclusion lead,Ken Billips,emphasize the crucial role of equity in infrastructure.They discuss embedding equity,diversity,and inclusion strategy to drive transformational change in airport communities.By intentionally implementing business inclusion and workforce development practices,we aim to create opportunities defined by equity,with a commitment to leaving the community better than we found it.This commitment is exemplified in our design and construction of the JFK International Airport expansion,where ambitious targets for women-owned and minority-owned businesses,local workforce recruitment.Intuit Dome Transforming Communities Through Sustainable Sports InfrastructureIn 2024 the Inuit Dome,future home of the NBAs Los Angeles Clippers,emerged not just as a sports arena but as a beacon of community transformation and sustainability.Our innovative design creates an iconic addition to the citys sports landscape,prioritizes fan and athlete experience while revolutionizing environmental responsibility in sports infrastructures.The Intuit Dome incorporates natural ventilation,recycled water,and renewable energy sources,setting new standards for arena sustainability globally.Committed to annual emissions monitoring and community engagement,it signifies a shift towards a low-carbon future.Moreover,the project catalyzes economic growth in Inglewood,California,generating thousands of jobs and injecting$260 million annually into the local economy.Partnering with stakeholders like LA/OC Building Trades and Inglewood Unified School District,we introduced the groundbreaking Pre-Apprenticeship MC3 training program,ensuring access to construction careers for residents.Through a$100 million community benefits package,the Intuit Dome invests in affordable housing,youth programs,and senior services,fostering a stronger,more vibrant community.Our collaboration with local educational initiatives like the ACE Mentor Program further cements our commitment to delivering a better world by partnering with local communities.Empowering Diversity Through InternshipsDuring last summer,AECOM offices in Australia and New Zealand hosted undergraduate interns from The Smith Family,CareerSeekers,and CareerTrackers.These internships aimed to support STEM students from disadvantaged backgrounds,refugees,and First Nation students,aligning with AECOMs commitment to diverse and inclusive workplaces.Interns received hands-on experience and mentorship across various departments,contributing to their academic and career development.The programs not only reinforced AECOMs dedication to diversity but also enriched organizational culture while empowering interns with valuable skills and insights.By providing for underrepresented groups in STEM,AECOM contributes to building a more inclusive society,exemplifying its commitment to fostering equity and opportunity in the workforce and beyond.Through strategic partnerships and proactive engagement,AECOM continues to lead by example in championing diversity and inclusivity in the STEM fields across Australia and New Zealand.32|AECOM 2024 SUSTAINABILITY REPORTTo empower those in our industry to thrive,were focused on four key areas to drive greater equity,diversity,and inclusion within AECOM and beyond:Thinking Without LimitsBuilding Diverse TalentExpanding UnderstandingEnriching CommunitiesEnsuring,through our recruitment efforts,that our teams reflect the diversity of the communities we serve with a focus on building leadership accountability,and partnering with nonprofit organizations and universities to build the talent pipeline for the future.Enriching communities through pro bono work,volunteerism,philanthropy,and strategic partnerships.Thinking without limits by prioritizing social equity and impact in every project we pursue and in every innovative solution we deliver.Expanding understanding and empathy among employees through employee resource groups,events and celebrations,unconscious bias training,and family-friendly benefit policies.123433|AECOM 2024 SUSTAINABILITY REPORTImproving Social OutcomesBeyond Abilities:Americas,Europe,and India Community for the disabled,neurodiverse,and caregiversMOSAIC:Americas Asian Pacific Islander communityConnect:Americas,Asia,Australia,and New Zealand Early career professionalsPride:Americas,Europe,Australia,and New Zealand LGBTQ communityEthnic Diversity Network:Europe and India Community for ethnic minoritiesVeterans Alliance:Americas Veterans communityBeBOLD:Americas Black communityJUNTOS:Americas Hispanic communityGender Alliance:Europe and India Community for gender empowermentWomens Leadership Alliance:Americas Community for gender equalityOur ERGs play a vital role in fostering community and understanding within AECOM.These groups facilitate rich exchanges of ideas,professional networking,and philanthropic impact.In 2023,we proudly launched two new global ERGs:Beyond Abilities,dedicated to supporting individuals with disabilities,neurodiversity,and caregivers,and Connect,focused on early career professionals.One standout example of our ERGs impactful work is our Pride ERGs collaboration for Pride Month this June.Our Pride chapters united to host a groundbreaking event:24 Hours of Pride.This global initiative featured diverse programming spanning the Americas,Asia,Europe,India,Australia,and New Zealand.From engaging trivia and DJ sets to insightful panels and sessions for parents of LGBTQ children,the event showcased our commitment to diversity,inclusion,and allyship.Through initiatives like 24 Hours of Pride and ongoing cultural activities,our ERGs serve as vital platforms for celebrating what makes each of us unique and fostering connections among our employees and the communities we serve.Cultivating Community and Connection 34|AECOM 2024 SUSTAINABILITY REPORTImproving Social OutcomesLGBTQ Equity AECOMs commitment to the LGBTQ community is reflected in our companys policies.We offer same-sex domestic partner benefits and have a strong anti-discrimination policy.Beyond these measures,to make our employees feel welcome and included,we recognize and contribute to LGBTQ community initiatives,including AECOMs features locally based Employee Resource Groups(ERGs),onsite townhalls,and participation in national I&D groups.Furthermore,for Pride Month,we held a round table discussion with our LGBTQ colleagues and allies,who shared their experiences.The organization has also previously hosted interviews with one of our Board members,Sander van t Noordende.Employee Retention As a Professional Services business,we are focused on ensuring we attract and retain the best talent in the industry.We believe that our comprehensive employee retention program plays a vital role in attracting and retaining our key employees.As a result,we continually review our compensation and rewards practices,conduct annual performance reviews,and provide substantive professional development opportunities,among other initiatives.We believe employee job satisfaction and engagement are key ingredients of retention.Reflecting on our successes,employee satisfaction remained above our benchmark level,with 76%of employees recommending AECOM as a great place to work in our most recent employee survey.In addition,turnover between our permanent employees and within our high performers remained significantly below industry benchmarks in fiscal 2023,and further reflecting our progress,our turnover has continued to decline into fiscal 2024 and is now below pre-pandemic levels.Internal Mobility and Workforce PlanningAECOMs Internal Mobility program outlines the organizations commitment to foster and encourage our employees growth and development within the organization.In addition,our corporate strategy is to focus on our human capital by providing internal mobility for employees across the company.Our employees who are working in a regular full-time,part-time,part-time variable,or temporary status are eligible to participate in the program.We publish all opportunities to our internal employees through an Internal Careers site.For a period before being made available to external candidates.We encourage all employees to own their career and express interest in internal opportunities,while also ensuring our managers and talent acquisition teams have a focus on internal mobility during the recruitment process.While AECOM empowers our employees to own their own career path,we also recognize that at times our employees will face a shortage of work or reduction in force due to the completion of projects.To endeavor to ensure continued employment for our employees,we redeploy our employees where possible in order to maximize our valuable talent.We work closely with employees when assignments are complete to place them in new opportunities within the organization that will fit their experience,skills,and backgrounds.Employee Development At AECOM,we recognize that our talent is our greatest asset.Our performance and development are designed to encourage rich and meaningful discussions between all full-and part-time employees and their managers to drive successful business outcomes and enable fulfilling careers.Our framework includes annual goals setting,performance and development conversations,manager evaluations,and annual rewards planning.In 2023,we continued to expand our career pathways framework that helps guide our professionals on their paths forward and development opportunities within our company.We are home to some of the industrys best technical mindsapproximately 52,000 technical and business professionals who thrive in an environment that supports their learning and growth,encourages innovation,and celebrates great project and client outcomes.Our ability to deliver excellence and a high level of service to our clients requires attracting and retaining the industrys best talent and advancing our equity,diversity and inclusion objectives.Weve made significant investments to support the learning and development of our people so they can build their skills and rewarding careers with us,provide competitive pay and benefits so they can make the best choices for themselves and their families,and are building a culture of flexibility,trust,and performance so they can be at their best.From a progressive career development philosophy that offers multiple paths to Global Technical Academies that provide structured technical learning and professional development programs for learners at every career level,our people are supported with resources to build connections throughout our organization and to explore the opportunities that inspire them.To help navigate the tremendous opportunities at AECOM,we encourage everyone to develop their core skill set and capabilities and then explore different roles across our business to broaden their experience.People with DisabilitiesThe inclusion of people with disabilities helps drive our sustainable revolution for our employees,communities,and customers.As such,AECOM provides a training course for employees on disability inclusion in the workplace.Reasonable accommodations at AECOM include adaptive equipment,allowances for on-site service animals,flexible work arrangements,special parking assignments,hotlines,and a number of other inclusive services.35|AECOM 2024 SUSTAINABILITY REPORTImproving Social OutcomesSTEAM EducationAECOM believes the infrastructure industry needs to diversify and engage with young people if it is to avoid a future recruitment crisis.Furthermore,it is more important than ever to continue engaging with schools to attract the best talent.The need to attract the best talent in the industry remains as does the need to be more inclusive and employ people from a diverse range of backgrounds.As key stakeholders in the infrastructure industry,engaging and investing in social value is no longer optional,its essential.As a result,AECOM partnered with nonprofit organizations across the globe to:Grow the number of students who earn a STEAM degree;Increase underrepresented minorities in STEAM fields;Continue to support STEAM initiatives,including being the Titanium Sponsor of the virtual 2021 Joint Engineer Training Conference,an educational and networking forum whose mission is to lead collaborative efforts to identify and resolve national security infrastructure-related challenges.Furthermore,reflecting the positive return on our professional development programs,turnover among our teams that has participated in a leadership development program was substantially lower at a low-single digit percentage.Veteran SupportAECOM is a long-time supporter of veteran communities,with more than 9,000 veteran employees working on projects around the world.Their strong leadership,team-building,and analytical skills,as well as unwavering commitment to a job well done,are critical when the work involves managing complexity,making decisions in the face of uncertainty,and ensuring safe operations in high-risk environments.We value the outstanding contributions veterans make to our contract performance and overall business success,and AECOM has a long-standing commitment to supporting those who serve as well as those who have returned to civilian life.As part of this commitment,AECOM partners with organizations such as the Wounded Warrior Project,Semper Fi Fund,American Corporate Partners,the Officers Association,and the Career Transition Partnership,which ensure veterans have the support they need during and after their service.AECOM is also a Military Friendly Employer and Military Friendly Spouse Employer,and we maintain an active Veterans Alliance ERG within the Americas region of our business.36|AECOM 2024 SUSTAINABILITY REPORTImproving Social OutcomesCore to our corporate values is safeguarding our people and fostering a culture of caring that promotes the well-being of our employees,contractors,and business partners.We protect our people,projects,and reputation by striving for zero employee injuries and illnesses,while operating and delivering our work responsibly and sustainably.We maintain best-in-class lost workday cases and recordable incident rates,and our safety performance is consistently recognized by key clients across the regions where we work as well as by recognized safety organizations.Specifically,AECOM was awarded the Royal Society for the Prevention of Accidents(RoSPA)Presidents Award for having achieved 14 consecutive annual Gold Awards.RoSPA defines Gold Award winners as having achieved a very high level of performance,demonstrating well-developed occupational health and safety management systems and culture,outstanding control of risk and very low levels of error,harm and loss.In fiscal 2023,our Total Recordable Incident Rate(TRIR)in our Professional Services businesses improved by 45%compared to fiscal 2020,while our Lost Workday Case Rate(LWCR)improved by 67%over the same period.Both of these metrics reflect a world-class level of safety performance and the benefits of our safety performance and the commitment,participation,and accountability of our people throughout the year.Safety is also a key element of our subcontractor and supplier onboarding and prequalification.Reflecting our focus in this regard,in our CM business,our TRIR is materially ahead of the BLS All Construction Contractors benchmark of 2.5,and we estimate that TRIR for our design subcontractors is materially consistent with our performance.Safety requires focus and continuous effort.We thoroughly investigate serious incidents and near misses to identify root causes.The knowledge gleaned from our analysis forms the basis for modified behaviors,more effective safety programs,and improved communications and training on safety issues.We are also committed to fostering the physical and mental well-being of our workforce.We provide a comprehensive and competitive benefits package that supports the health and financial wellness of our people.Some common features offered to our employees in 2023 included the following:Medical,dental,and vision benefits for employee,spouse,and dependents;Flexible spending accounts for both healthcare and dependent care;Health savings accounts and health reimbursement accounts;401(k)retirement savings program with company matching contributions;Short-term and long-term disability benefits;Mental health resources and assistance programs;Wellness incentives for employees;and Employee assistance program.Furthermore,we provide our employees several opportunities to focus on physical,mental,and financial wellness by maintaining paid vacation,holiday,family leave,sick leave,adoption support,fertility support,and maternity/paternity support programs.Health,Safety,and Well-beingImproving Social Outcomes0.120.100.080.060.040.0200.0300.0250.0200.0150.0100.0050FY22FY22FY23FY230.090.06FY21FY210.09FY20FY200.11Multi-Year TRIR Trend 45%Reduction in TRIR since FY200.030.010.030.03Multi-Year LWCR Trend 67%Reduction in LWCR since FY2037|AECOM 2024 SUSTAINABILITY REPORTWe are passionate about being good corporate citizens in the communities where we live and work.Through strategic nonprofit partnerships,pro bono work,skills-based volunteering,and philanthropy,Blueprint for a Better World,our corporate responsibility platform,is focused on delivering access to safe and secure infrastructure to those who need it most,creating opportunity for the leaders of tomorrow,and protecting our planet.Together,these efforts will allow AECOM to fulfill its purpose to deliver a better world.As part of the Blueprint pro bono program,our technical experts partner with nonprofit organizations in their local communities to provide critical design,engineering,and infrastructure solutions.Maui CampaignOur corporate responsibility platform is focused on delivering access to safe and secure infrastructure to those who need it most via strategic nonprofit partnerships,pro bono work,skills-based volunteering,and philanthropy.In fiscal 2023,we continued to take a leading role in the response to extreme events that devastated communities.This was no more apparent than in the aftermath of the Maui,Hawaii fires,where we contributed nearly$300,000 through an employee-matched donation campaign in collaboration with the American Red Crosss Hawaii Wildfires Relief Fund.Funds raised contributed to ongoing assessment activities,distribution of relief supplies,and other important work.Volunteerism is a big part of who we are at AECOM,and it takes form in many waysfrom individuals committing their time to help local nonprofits to small and large employee groups teaming up to support community initiatives.Regional events over the past year included efforts to end homelessness,mentorship of youth in business,collecting food for the elderly,environmental clean-up,and participation in community beautification projects.Furthermore,we partner with nonprofit organizations,including our longstanding partnerships with Engineers Without Borders and Water for People,that work to increase the number of individuals with technical skills,decrease the number of individuals facing economic barriers,and make our communities better via innovation and improvement.Community Investment and EngagementImproving Social Outcomes38|AECOM 2024 SUSTAINABILITY REPORTEnhancing GovernanceOversightEthics and IntegrityRisk ManagementResponsible SupplyChain ManagementEnhancing Governance39|AECOM 2024 SUSTAINABILITY REPORTSince then,weve continuously updated our framework to adhere to the latest SASB and TCFD standards,as well as evolving science-based best practices like those outlined at COP26.Were holding ourselves to high standards by incorporating sustainability-related key performance indicators(KPIs)into our CEO and officer compensation this year,as well as completing a sustainability-linked financing amendment in April 2024,to make sure that sustainability performance is embedded in our financial metrics.Our commitment to rigorous governance spans our organization.For the fifth consecutive fiscal year,we have achieved 100%training compliance,and,as such,we have set even more ambitious training compliance goals,which now include four new Sustainable Legacies-relevant training modules.To envision and execute our long-term governance strategies,our Sustainable Legacies Global Council and its constituent working groups instill sustainability principles across each wing of AECOM,from project management to marketing and communications.As a global organization,we naturally see governance as a global effort.Every element of our organization is focused on governance principles so that our strategic decision-making and projects delivery can adhere to rigorous standards in every market and region we serve.Culture of GovernanceGovernance is the foundation of our Sustainable Legacies strategy.Since the implementation of our Sustainable Legacies strategy in 2021,we have sought to build that foundation into everything we do.Culture of Governance 33%of directors are women 67%of directors are new within the last four years 44%of directors are diverseincluding self-identifying as LGBTQ AECOM is governed by a 9-person Board of Directors.Our Board of Directors oversee the affairs of the company for the benefit of stockholders,including monitoring overall c
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2024 GLOBAL CORPORATE RESPONSIBILITY REPORT 2024 Global Corporate Responsibility Report/2 /Introduction.Letter From Ernie Herrman.About Our Company.Our Approach to Corporate Responsibility.FY24 Highlights.Recognition.Workplace.Culture&Engagement.Recruitment&Development.Inclusion&Diversity.Health&Well-Being.Communities.Basic Needs.Education&Training.Patient Care&Research.Empowering Women.Environmental Sustainability.Climate&Energy.Waste Management.Responsible Sourcing.Global Social Compliance.Sustainable Sourcing.Supplier Diversity.Table of ContentsGovernance&Integrity.Human Rights.Governance.Cybersecurity&Privacy.Reporting&Disclosures.About This Report.Data Tables.SASB Index.UN SDGs Index.EEO-1 Report.Related Disclosures.Endnotes.Forward Looking Statement.334589 10 11121722242729313335364347485456585961636465667476787980812024 Global Corporate Responsibility Report/3 /Value.This is core to TJX.It drives our business mission to deliver great value to our customers every day.It also drives the many corporate responsibility initiatives we have launched over the years,including how we value and support our Associates and the communities where we operate,mitigate our impact on the environment,and operate our business responsibly.Weve formally reported on our corporate responsibility efforts now for nearly 15 years.We firmly believe that our continued commitment to this work is important as we move forward.Part of our approach to corporate responsibility is to build on prior efforts,evolving over time and remaining flexible to reflect varying expectations and changes happening in the world.In the pages that follow,we have outlined many details about our ongoing programs,reported under four pillars:workplace,communities,environmental sustainability,and responsible sourcing.Valuing Our AssociatesInclusion and diversity have been an important part of who we are for many years,and we continue to make progress on our journey of fostering a culture where all of our Associates feel welcome,valued,and engaged.Our efforts are guided by three global inclusion and diversity priorities,developed,in part,based on Associate feedback from our 2021 Global Inclusion Survey.Earlier this year,we completed our second Global Inclusion Survey to serve as a pulse-check on our work.Our Associate Resource Groups(ARGs)and our inclusion and diversity committees support an inclusive workplace,helping to align our programming with the needs of our Associates.In various regions where we operate,weve continued to increase the number of ARGs Associates can choose to participate in,and over the last year,we were pleased to see Associate participation grow.Valuing Our CommunitiesIn our communities,we are proud to have supported over 2,000 non-profit organizations globally in 2023,covering a variety of important causes such as education,food insecurity,and medical care.Our Associates across the globe have enthusiastically supported this work,running fundraising campaigns in our stores,participating in our Associate Nominated Grants program,helping build homes for those in need,serving as career coaches for students,and more.We are also very grateful to our customers,who have provided generous donations during our in-store fundraising campaigns throughout the year.Valuing Our EnvironmentWe are continuing to work towards our global environmental sustainability goals that aim to achieve net zero greenhouse gas emissions in our own operations,source more renewable energy,improve our abilities to keep operational waste out of the landfill,and find opportunities to reduce the environmental impact of certain products and packaging.These goals build on the work weve been doing for many years to pursue initiatives that are environmentally responsible and smart for our business,and we are proud of the progress were making in this area.Valuing Ethical OperationsWe are serious about operating our business responsibly.We hold ourselves to high ethical standards and expect the same of our vendors.Our Global Social Compliance Program aims to convey and reinforce our expectations of respect for the human rights of the workers in our supply chain.At the center of this Program is our Vendor Code of Conduct,which sets those expectations.We also regularly monitor a portion of our merchandise supply chain through our factory auditing program.In 2023,we audited,or received audit reports from,more than 3,100 factories in approximately 30 countries.Although its impossible to cover all of our achievements and efforts in a brief letter,I hope these few examples inspire you to continue reading to learn more about how we are approaching this work.Importantly,I want to thank our Associates around the globe.With their hard work,commitment,and dedication to these programs,we continue to see progress on our journey.Im proud of what weve accomplished,and I look forward to the road ahead.Letter From Ernie HerrmanTo Our Associates,Customers,Neighbors,Vendors,and Shareholders:Ernie Herrman,Chief Executive Officer and President,The TJX Companies,Inc.IntroductionWorkplaceCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/4 /TJX is the leading off-price apparel and home fashions retailer in the U.S.and worldwide with a mission to deliver great value to our customers every day.We do this by offering a rapidly changing assortment of quality,fashionable,brand name,and designer merchandise at prices generally 20%to 60low full-price retailers(including department,specialty,and major online retailers)regular prices on comparable merchandise,every day.Our Off-Price Business ModelWe acquire merchandise in a variety of ways to support our mission to deliver great value to our customers every day.Our global buying strategies are intentionally flexible to allow us to react to frequently changing opportunities and trends in the market and to adjust how and what we source.The majority of the product we sell in our stores and online is brand-name merchandise.Our buyers obtain merchandise from vendors around the globe stemming from opportunities including department store cancellations,a manufacturer making up too much product,or a closeout deal when a vendor wants to clear merchandise at the end of the season.We also design or develop some of our merchandise,which allows us to supplement our merchandise assortment,including when what we are seeing in the marketplace is not the right value for our customers,meaning the right combination of brand,fashion,price,and quality.We source merchandise from an expansive and changing universe of more than 21,000 vendors and acquire merchandise from more than 100 countries around the world.About Our CompanyAssociates329,00087th RankedFortune 500Stores4,800 Websites7 E-comm4,900 Stores19Countries6 E-commWebsites349,000Associates180th RankedFortune 5001,300 Associates in our Buying Organization21,000 MerchandiseVendors100 CountriesIntroductionWorkplaceCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/5 /Our Approach to Corporate ResponsibilityCorporate responsibility has been part of the fabric of who we are from day one,and we strive to continue to develop and implement meaningful practices to help mitigate our impact on the world.Our efforts are anchored by our Companys mission to deliver great value to our customers every day.For more than 45 years that mission has remained steadfast,and so has our commitment to acting as a responsible corporate citizen.Our focus on value drives the many corporate responsibility programs and initiatives we have launched over the years,including those aimed at supporting Associates,giving back to the communities in which we operate,mitigating our impact on the environment,and operating our business with integrity.TJX takes a global approach to corporate responsibility,setting global priorities with regional programs and initiatives that support the broader organization.We generally focus our efforts where we believe we can have a meaningful impact and pursue strategies that are feasible for our off-price business model and flexible,opportunistic buying strategy.Our corporate responsibility reporting is organized under four key pillars:workplace,communities,environmental sustainability,and responsible sourcing.We believe it is important to consider feedback on both our corporate responsibility programs and disclosures from our many stakeholders,including Associates,customers,shareholders,and others.Insights from this feedback are carefully considered and weighed against the varied perspectives of our stakeholders and against what is feasible within our off-price business model.We think of our corporate responsibility programs as ever evolving and are proud of the progress weve made.We continue to look for opportunities to further enhance our programs and disclosures in this area.Management&OversightAs part of its oversight role,our Board reviews certain corporate responsibility matters directly and through its Committees.In Fiscal 2024,the Board had sessions with management to receive updates on certain of our corporate responsibility efforts,including in the areas of environmental sustainability,inclusion and diversity,social compliance,and human capital management.In addition,as part of its ongoing risk oversight,the Board reviews findings from TJXs annual Enterprise Risk Management(ERM)program,a global process for considering a broad range of risks to the business and managed by our Senior Vice President,Chief Risk and Compliance Officer(CRO).This process takes into account internal global operational feedback and identifies trends and concerns.Risks are evaluated in light of their probability and severity and are presented to the Board in that context.As with other risks assessed as part of the ERM program,should a risk related to corporate responsibility matters be identified through the ERM program,the CRO would then determine,in concert with other members of management as applicable,how the risks associated with corporate responsibility matters would be appropriately presented to the Board.A Senior Executive Vice President Group President(SEVP)has strategic oversight of TJXs Global Corporate Responsibility programs and chairs a committee of senior leaders representing,among others,Corporate Finance,Operations,and Human Resources.Other cross-functional committees throughout the organization are responsible for collaboration,strategy,and execution against corporate responsibility initiatives.These committees have senior leadership representation from functions including Environmental Sustainability,Corporate Finance,Operations,Human Resources,Global Social Compliance,Inclusion and Diversity,and more.The SEVP and some functional leaders provide regular updates on this work to other members of management and the Board.Further,leaders across the business have oversight of corporate responsibility efforts that fall within their functions.The CRO oversees many of the efforts within our Environmental Sustainability and Responsible Sourcing pillars,in partnership with the Vice President of Sustainability and Assistant Vice President of Global Social Compliance.Similarly,the Executive Vice President,Chief Human Resources Officer oversees many of the efforts within our workplace and communities pillars,including inclusion and diversity,in conjunction with leaders responsible for these areas.Regional leaders are responsible for driving programs as appropriate for the regions business in support of TJXs broader,global corporate responsibility programs.Lastly,to support program evolution and execution,in addition to driving collaboration across regions and business functions,we have working teams and committees,such as the Global Social Compliance Committee,the Global Environmental Sustainability Steering Committee,and the Global Carbon and Energy Management Group.These committees bring together subject matter experts from across the globe and across different functions to collaborate,monitor key issues and trends,review strategies and best practices,and help guide the strategy and execution of various programs.IntroductionWorkplaceCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/6 /We strongly believe that for our policies and practices to be effective,they must evolve and be informed by the perspectives of our many global stakeholders,including our Associates,customers,shareholders,and others.We view engaging with these various stakeholders,in addition to industry associations and partners,as an opportunity to hear insights and learn.We take into account a variety of perspectives,as well as our off-price business model and opportunistic buying strategies,as we consider the evolution of our programs and reporting.Engaging With Our AssociatesWe believe Associate engagement,relationship building,and our open door philosophy are some of the factors that are key to maintaining our culture,whether in our stores,distribution centers,or offices around the world.We want our Associates to be informed about our businesses and encouraged to learn and grow through both formal and informal interactions.We believe these efforts help strengthen our inclusive culture so Associates feel welcome,valued,and engaged.We communicate and engage with our Associates through a number of forums,including Town Hall meetings,State of the Company meetings,and CEO updates.Additionally,we publish The Thread,our global intranet,and The Loop,a weekly e-newsletter,which disseminate announcements and facilitate information and policy sharing;TJX geographic-specific publications,such as TJXtra in Europe;and weekly bulletins in various regions around the globe.We also continue to use Yammer,a social media tool,to foster relationship building.In our stores,we share important Company information with and receive feedback from our Associates through team huddles.Our in-store bulletin boards are another important tool in sharing Company information and also feature store news,like volunteer events,fundraising successes,new processes,and more.We also have programs for Associates to share ideas,including thoughts on how to further improve the customer experience,as well as several in-store programs designed to motivate and reward our Associates,stores,and districts.We also strive to engage with our Associates on corporate responsibility initiatives and efforts.To help foster engagement with our environmental sustainability strategy and programs,teams throughout our business have come together to collaborate.For example,our Green IT committee is focused on managing and leveraging technology to reduce the TJX Global IT teams environmental footprint.Additionally,Associates can get involved with the Companys community relations work.Associates in the U.S.,Canada,and Europe can nominate organizations within their communities for the opportunity to receive a grant from one of the Companys foundations.Over the years,donations have been made to a variety of organizations,including childrens hospices,mental health charities,childrens cancer care centers,foodbanks,and homeless services.We are very proud to have Associates around the world who volunteer their time and who are committed to doing good in their communities.Stakeholder EngagementIntroductionWorkplaceCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/7 /Engaging With Our CustomersOur customers are very important to us,and engaging with them allows us to better understand and address their changing preferences,tastes,interests,and concerns.One way we learn about our customers is by asking them to rate their experience using online customer satisfaction surveys.Based on what we hear from our customers,we regularly provide Store Operations management with feedback regarding store performance so they may identify opportunities and address issues quicklyand with the intent of ultimately improving the in-store experience.This input also allows us to develop clear customer experience training for store managers,team leaders,and Associates.The data has also helped drive broad improvements across many of our retail chains,including redesigning floor plans,creating small“shops,”and changing lighting to better highlight products.We have carefully tested each initiative for how it can drive excitement about our retail chains and products and continue to help deliver the experience we know our customers love and have come to expect.Additionally,each retail chain has a website that highlights important information,such as seasonal offerings,store locations,and contact information for Customer Service groups,and for some of our retail chains,the ability to shop online.Our chains also leverage a variety of different surveys,qualitative research,and social media channels for customer engagement and feedback on brand and shopping experiences.Our engagement efforts are in place so that we can continue with our mission to deliver great value to our customers every day.Engaging With Our Shareholders In addition to our public disclosures and corporate responsibility reporting,we communicate throughout the year with shareholders on corporate responsibility matters through various means,including meetings,conferences,phone calls,written,and electronic correspondence.Our Board of Directors is regularly updated on these engagement efforts.Shareholder engagement has informed a number of enhancements to our corporate responsibility initiatives,practices,and disclosure over the years,including:/Setting our latest global environmental sustainability goals,focused on climate and energy,waste management,and product packaging /Enhancing disclosures related to human capital management,including the publication of our EEO-1 report /Mapping our corporate responsibility programs to SASBs Multiline and Specialty Retailers&Distributors standard /Enhancing our Global Social Compliance Program,including by making updates to our Vendor Code of Conduct and expanding disclosures about our program,including provisions related to forced laborEngaging With External OrganizationsWe believe that developing partnerships with various organizations and industry groups can help educate us,guide and benchmark our programs,and strengthen our initiatives across our corporate responsibility focus areas.We are affiliated with,or members of committees of,a number of organizations focused on environmental protection and sustainability,including:American Apparel and Footwear Association(AAFA)Environmental Committee;British Retail Consortium Climate Action Roadmap;EPAs SmartWay Transport Partnership;Green Chemistry and Commerce Council(GC3);Retail Council of Canadas Stewardship,Plastics,and ESG&Climate Action Committees;Retail Industry Leadership Associations(RILA)Sustainability Committee and Zero-Waste Committee;Sustainable Packaging Coalition;Textile Exchange;and The Microfibre Consortium.To help support us in our Global Social Compliance efforts,we collaborate with various industry groups such as the joint AAFA/NRF/RILA/USFIA(United States Fashion Industry Association)Forced Labor Working Group,RILAs Responsible Sourcing Committee,AAFAs Social Responsibility Committee,and Responsible Business Alliance(RBA)Responsible Labor Initiative.We also are members of the Boston College Center for Corporate Citizenship and the National Retail Federation(NRF).IntroductionWorkplaceCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/8 /FY24 Highlights1Workplace79%of promotions globally were earned by womenMore than 75%of current U.S.Store Managers were promoted into their role from other positions in the CompanyEnvironmental Sustainability68%of people in managerialpositions globally were women237%of people in managerialpositions in the U.S.were people of color2,3,4Communities2 million young people provided access to educational opportunities533 million meals provided5$23 million donated for healthcare research and patient care500,000 shelter nights provided581%of global operational waste diverted from landfill7Responsible Sourcing3,100 factories had audits reviewed as part of our factory auditing program31%of our electricity in our own globaloperations came from renewable sourcesRecognized with a 2024 SmartWay Excellence Award from U.S.EPA for the environmental performance and efficiency of our freight management operationsFunding for disaster relief efforts for wildfires in areas such as Hawaii and CanadaReviewed audits from factories in 30 countries35,000 attendance in Global Leadership Curriculum courses since 2017In recent years we have expanded our Supplier Diversity Program into Canada,the U.K.,Germany,Ireland,the Netherlands,and Australia32%reduction in global GHG emissions from our own operations since FY176We offer training sessions on a regular basis to buying agents,vendors,and factory management within our factory auditing programIntroductionWorkplaceCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/9 /RecognitionFortune 500/Ranking#80 Newsweek/Americas Best Retailers /Americas Greenest Companies /Americas Most Responsible Companies/Most Trustworthy Companies In America/Worlds Most Trustworthy CompaniesJUST Capital/Americas Most JUST CompaniesNewsweek/Americas Greatest Workplaces For Remote WorkBarrons/100 Most Sustainable CompaniesDiversityComm/Top Black Employer/Top Diverse Employer/Top Hispanic Employer/Top Women Employer U.S.Environmental Protection Agency/SmartWay Excellence AwardU.S.Environmental Protection Agency/SmartWay High Performer AwardFortune/Worlds Most Admired Companies ListForbes/Canadas Best Employers For DiversityEuropean Diversity Award/Company of the Year/Social Mobility Initiative of the YearTheJobCrowd/Top Company For Apprentices To Work For/Top Company For Graduates To Work For FTSE4Good IndexIntroductionWorkplaceCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/10 /FY24STATISTICS1WorkplaceAssociates Bring Our Business to LifeOur Associates bring our business to life,and we aim to support them by making TJX a terrific place to work.We strive to attract talented individuals,teach them our off-price model,support their careers,and maintain our strong culture.In fact,developing talent and championing our culture have been global business priorities year in and year out.We believe this encourages many Associates to join us not just to find a job,but to build a career.We believe the diversity of our Associates can help make us a stronger Company and better able to serve our broad base of customers around the world.We strive for an inclusive workplace where our Associates feel welcome in the Company,valued for their perspectives and contributions,and engaged with our business mission to deliver great value to our customers every day.Workplace Initiatives We report on our efforts to make TJX a terrific place to work around the following areas:68%of people in managerial positions globally were women275% of current U.S.Store Managers were promoted into their role from other positions in the Company35,000 attendance in Global Leadership Curriculum courses since 2017 79%of promotions globally were earned by women 37%of people in managerial positions in the U.S.were people of color2,3,451%of promotions in the U.S.were earned by people of color3,4Culture&EngagementWe believe a great company culture is one where Associates feel seen and heard,management is transparent and authentic,a work-life balance is honored,teams are proud and excited to work together,and having fun is encouraged.Recruitment&DevelopmentWe work to attract,develop,and engage a wide range of talent to continue to support our off-price business.Inclusion&DiversityWe are committed to continuing to build a more inclusive and diverse workplace where Associates feel welcome in the Company,valued for their perspectives and contributions,and engaged with our business mission.Health&Well-BeingWe aim to support our large,global,and complex workforce in a variety of ways including global well-being programs focused on physical,financial,and emotional wellness.of Board Members are independent80%WorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/11 /Championing Our CultureSupporting TJXs businesses are great teams of talented individuals who embody our core values of honesty,integrity,and treating each other with dignity and respect.It is these shared values and the relationships that develop in the workplace that help us to maintain the strong culture at the heart of our Company.We believe a great company culture is one where Associates feel seen and heard,management is transparent and authentic,a work-life balance is honored,teams are proud and excited to work together,and having fun is encouraged.We talk throughout this report about wanting our Associates to feel welcome when they walk through our doors;valued for their diversity of thought,background,and experience;and engaged with our mission to deliver great value to our customers every day.We work to foster an environment that promotes this kind of experience so that Associates can find this when they join TJX,and we believe it is an important part of why they stay:41%of people in managerial positions around the world have been at the Company for 10 or more years2 and more than 75%of current U.S.Store Managers were promoted into the Store Manager role from other positions in the Company.Fostering Our Culture for Long-Term SuccessOur leadership is committed to fostering our culture,which includes mentoring and developing our talent in our stores,distribution centers,and offices around the world.The TJX Leadership Competencies and Cultural Factors have served for many years as an important way we help our Associates understand the skills,behaviors,and aspects of our culture that have led to long-term success for many of our Associates.Personal character and integrity are at the core of these competencies,as is investing the time to build relationships,whether that is with co-workers within a store or in another country.We strongly believe that this benefits our business overall.Learn more about our commitment to Developing our Associates.We are also passionate about creating a workplace where individual differences are welcome and valued,and we encourage Associates to be risk takers,think critically,and speak openly.An important part of who we are,and how we work together,is our open door philosophy.This decades-long philosophy is a commitment to our Associates to provide a forum to hear and acknowledge their questions,concerns,and suggestions.Another way we encourage Associate feedback is through global inclusion and diversity surveys.As we continue to work to build a more inclusive and diverse workplace,we completed our second global inclusion and diversity survey in Fiscal 2025 which we believe can help us continue to evolve our work in this area.In fact,one of our global priorities developed from information gathered in the initial survey conducted in 2021 is to help equip leaders with the tools needed to better exemplify and model a culture of inclusion.Learn more about our inclusion and diversity efforts.In our stores,we share important Company information with,and receive feedback from,our Associates through regular team huddles.This ongoing engagement is intended to allow Associates to feel empowered to contribute,influence,and share their points of view.Our in-store dynamic video players are another important tool in sharing Company information and also feature store news like volunteer events,fundraising successes,new processes,and more.We also have programs for Associates to share ideas,including thoughts on how to further improve the customer experience,as well as several in-store programs designed to motivate and reward our Associates,stores,and districts.Another way we support our culture,and foster inclusion and Associate engagement,is through our Associate Resource Groups(ARGs).Both have played an important role in helping to champion our culture of appreciating difference within our workplace.Within the last year,both the number of ARGs around the globe and the number of Associates participating in them have continued to grow.Learn more about our efforts in our specific regions.Culture&EngagementWorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/12 /Attracting and Developing Tomorrows Leaders,TodaySASB:CG-MR-310a.2 As a Fortune 100 company,operating more than 4,900 stores in nine countries,we work to attract,develop,and engage a wide range of talent to continue to support our off-price business.We take a multi-faceted approach to recruiting for our stores,distribution centers,and home offices to reach a pool of candidates that has a diversity of races,ethnicities,ages,sexual orientations,gender identities,abilities,experiences,and more.We are also committed to hiring from the communities we serve.Building a More Diverse Workplace is a PriorityAs we build a more diverse talent pipeline,we continue to use a variety of strategies to support our recruiting efforts and expand our outreach to better connect with diverse networks as well as widen our pool of candidates.For example,in Fiscal 2024,we attended several in-person,as well as virtual,career fairs for underrepresented groups;used tools and resources to improve how we networked and helped us to engage with prospective candidates;promoted internal opportunities to encourage current Associates to seek jobs internally;and actively sought candidates with transferrable skills and nontraditional backgrounds for opportunities at TJX.As part of our outreach efforts to increase diverse candidate representation for early career positions,we continued to broaden our relationships globally with schools and universities and partnered with non-profit organizations regionally.For instance,in the U.S.,we continued to work with several organizations focused on increasing opportunities for underrepresented students,such as Bottom Line,Girls Who Code,Leadership Enterprise for a Diverse America(LEDA),The Posse Foundation,Thrive Scholars,and the United Negro College Fund.We also continued our outreach to Historically Black Colleges and Universities and partnered with diverse on-campus organizations for recruitment events.In Canada,we hosted a networking event with diverse students completing a Masters degree in retail management.Based on the career interests of the students,the event offered opportunities for deeper insight into certain areas of the business and networking with Associates from various business areas ranging from Finance to Merchandising.In Europe,we recruit from a diverse pool of candidates for our Graduate,Placement,and Apprenticeship Programmes and partner with organizations such as The Princes Trust and the UWV in the Netherlands to create career opportunities for disadvantaged young people,including many from underrepresented communities.We are also committed to working toward increasing the representation of diverse candidates in management-level positions,including people of color,LGBTQ individuals,people with disabilities,and women.In certain U.S.markets,we are mindful of the diverse demographics of the communities we serve as we continue to foster inclusion and diversity in our Field Management talent pipeline.Recruitment&DevelopmentWorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/13 /On-Campus Recruiting:From Their Campus to OursWe offer TJX internship and co-op programs across our divisions worldwide in areas including Merchandising,Finance,Human Resources,Information Technology,Store Operations,Distribution Services,and more.We seek candidates for these highly sought-after programs who are curious and have a passion for innovation,relationship building,strategic thinking,and global relations.Globally,many participants in these programs join us full-time after completing their college requirements.In Fiscal 2024,we were excited to have over 600 people participate in these programs.To offer flexibility and widen our pool of participants,we also run a part-time internship program in the U.S.This allows us to attract students who may not be able to participate in our full-time program.Additionally,in Fiscal 2024,we launched an early identification program in the U.S.designed to engage with rising college sophomores for our Merchandising Internship program.Proudly Hiring Those Who Have Served in the U.S.MilitaryOur long-standing commitment to the U.S.Armed Forces is highlighted by our dedication to hiring veterans and military service members,including active Guard and Reserve,as well as their spouses.We value their strong work ethic,professionalism,and loyalty and offer a range of career options to match their talents and expertise.TJX has initiatives supporting military hiring,including in Fiscal 2024,participating in virtual networking events for those transitioning from military to civilian careers and working with military job boards to increase exposure and marketing efforts to military personnel and their families.We are pleased to report that we have hired more than 14,000 Associates who are members of the military,veterans,or their spouses since 2013.Learn more about our Employer Support of The Guard&ReserveLearn more about Military One SourceCreating Personal&Professional OpportunitiesFor nearly 30 years,TJX has been working to provide employment and training opportunities for individuals with varying levels of skills and abilities,those who face barriers to employment,and those in underserved communities.We partner with a variety of organizations in our various regions where our support ranges from providing work readiness,entrepreneurship,and financial literacy skills for young people to creating training and employment opportunities for individuals that may have had difficulty obtaining employment opportunities in the past.As part of these efforts,in the U.S.,we partner with the non-profit organization Best Buddies International.To date,weve been excited to hire more than 350 Best Buddies participants to serve in a variety of functions at our U.S.stores,including cashiers,dressing room attendants,greeters,merchandise organizers,and product assemblers.Teaching&Mentoring Are PrioritiesWe believe our Associates are core to our success.Developing talent has been a global business priority for many years,and we are highly focused on teaching and mentoring to support the career growth and success of our Associates.We believe these efforts have promoted retention,stability,and increased expertise in areas of our workforce.Training happens broadly throughout the organization,from informal mentoring and direct training to arange of career and leadership development programs,such as our TJX University for Merchandising.We are agile in our approach to creating learning opportunities:offering formal training classes online and connecting remote Associates through virtual formats,as well as continuing to provide in-person learning opportunities.No matter the location or format,formal or informal,our career development initiatives are designed to foster open communication and relationship building,which are both key parts of our culture.WorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/14 /Our SuccessWe strive to foster career growth across the organization and our learning and development programs aim to support our Associates in building their careers.We are proud that many Associates choose to grow their careers at TJX,and 41%of people in managerial positions around the world have been at the Company for 10 or more years.2 Our efforts to support and develop our Associates reaches all facets of the organization.In the field,we are proud that,as of the end of Fiscal 2024,more than 75%of current U.S.Store Managers were promoted into the Store Manager role from other positions in the Company.Additionally,in Fiscal 2024,54%of managerial positions in our stores and field offices globally were filled with internal promotions.2Our ApproachWe believe in making investments today to cultivate our Companys leaders of tomorrow.With this in mind,we created Leadership Competencies and Cultural Factors,which help express our organizational values and promote consistency in leadership development.Recently,we developed a new leadership competency and cultural factor,both focused on inclusion-based values and behaviors.Over the course of Fiscal 2024,we continued to roll these out to our global organization,creating engagement and awareness,and providing managers with tools to have relevant conversations with Associates.We strongly believe our full set of competencies and cultural factors helps set Associates up for success,which benefits our business overall.As part of our global development,we continue to support our managers and provide them with tools designed to effectively engage their Associates in meaningful ways and support them as they navigate todays leadership challenges as the world continues to change both at work and outside the office.In Fiscal 2024,we began focusing on“Manager Core Essentials,”a collection of learnings and tools designed to help support managers develop the essential skills they need to manage effectively in todays world.Development ProgramsOur Global Leadership Curriculum is designed to offer a consistent development experience focused on our leadership competencies and cultural factors.The learning experiences are designed to help Associates gain skills in communication,achieve their goals,enhance interpersonal dynamics,and more.We are continuing to update the materials in our courses in an effort to further align with our inclusion and diversity efforts.Since 2017,the Global Leadership Curriculum has had Associate attendance of more than 35,000 across all of our divisions.We aim to offer development opportunities to Associates at every level,from hourly Associates to management and beyond,to help Associates build skills that we believe can enhance a fulfilling career.Recently,additional programs were added to provide development for higher levels of leadership that focused on leading differently,successful transitioning,and taking on new and expanded leadership responsibilities.Additionally,to further encourage Associates to take an active role in their own development,we have a Global Online Learning Library of over 2,000 digital,self-paced learning resources available for enrollment.Although we take a global approach to development,each region aims to tailor offerings to meet their Associates needs.In Canada,we support development by hosting a National Learning Calendar that provides virtual workshops focusing on professional and leadership development,managing a vast set of online learning offerings,and offering a digital lending library.Our internal website offers home office and distribution center Associates support for building development plans,learning about our off-price business model,and enhancing personal growth through curated learning and enriched by storytelling from our Associates and leaders.Our Be Your Best Self developmental approach is also shared by our store Associates and was recently introduced through inspirational Associate videos,promotion highlights,and leadership messaging that supports our tuition assistance,scholarship,and other career development programs available to eligible Canadian Associates.TJX Europe aims to enable our Associates to drive their development journeys.We offer Associates a range of learning and development options designed to provide skills and off-price knowledge through workshops,development programs,training,on-the-job learning,and the Graduate,Placement,and Apprenticeship Programmes.We also offer tools for self-learning and provide bespoke coaching for Regional,Country,District,Store,and Assistant Managers.Also in Europe,we continue to create targeted development programs for operational roles in Stores and our Distribution Centers,equipping individuals with both the technical and leadership skills for their current role and,where appropriate,building readiness for career growth.FY24STATISTICS75% of current U.S.store managers were promoted into their role from other positions in the Company35,000 attendance in Global Leadership Curriculum courses since 2017 of Board Members are independent80%WorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/15 /Leadership DevelopmentIn addition to our Global Leadership Curriculum courses,we offer many other learning and development opportunities.Our global Emerging Leaders program is designed to help high potential Associates at the managerial level prepare to expand their leadership roles.The process consists of targeted assessments,review of feedback,and the creation of an individual development plan.Once completed,these Associates have the opportunity to participate in the Emerging Leader Action Learning,a six-month-long journey focusing on the skills needed to effectively grow from a leader of others to a leader of leaders.Participants are placed on cross-functional teams,assigned self-directed learning,participate in peer coaching,and spend time with executives,who share their stories and experiences.The program consists of critical skills training and business case scenarios,and it culminates in the Associate creating a personalized growth plan.In addition,we have developed strong initiatives focused on executive coaching which includes certifying Associates as internal executive coaches.We have introduced a virtual platform which allows us to offer this resource more broadly across the organization.We also offer various mentoring opportunities which aim to connect Associates with leaders in our organization and to subsequently foster their development.More senior-level Associates may have the opportunity to participate in our Global Strategic Leadership programa 10-month,global development program designed to accelerate leadership readiness.The program offers a variety of opportunities,including gaining exposure to different leaders,TJX businesses,and business units.Participants receive feedback on their leadership style and interactions throughout the process,with the goal of incorporating those learnings into their leadership plan.Participants learn to navigate the organization,build strategic planning skills,and deepen their understanding of the business and of themselves as leaders.Buyers and merchandising managers identified as having potential to rise to a leadership level may have the opportunity to participate in a specialized learning experience called the Off-Price Leadership Center(OPLC).It brings together Associates from across our global divisions to get exposure to the critical merchant and leadership skills necessary for success.OPLCs focus is on understanding the merchant role;integrating strategic,business,and critical relationship skills;and building a diverse,global leadership perspective.TJX Canada also offers training focused on deepening business skills and leadership capabilities.These programs include tiered onboarding programs in Distribution Services and Manager in Training(MIT)in our stores.Store Coordinator Development Days are also being planned,supporting the continued build for training support to a wider range of store Associates.Our home office support functions have specific training curricula designed to prepare Associates at all levels for careers in Planning,Merchandising,Finance,and Information Technology.Our focus on“accessible development for all”means providing the tools and support Associates can use to drive their career.TJX Europes Leader in Me program is designed to accelerate the leadership readiness of managers who show potential for more senior roles.Associates learn more about themselves as leaders,as well as how to use these leadership skills in their current roles and for future opportunities.We also have a Senior Leadership Development program in Europe for Vice Presidents and Assistant Vice Presidents,which cultivates leaders who champion and bring our culture to life.The program develops skills to help leaders thrive in unpredictable circumstances.Participants gain insight into themselves as authentic leaders and gain self-awareness and leadership perspective.We recently expanded this program to include specific workshops on inclusion and diversity.We believe the program builds stronger,more collaborative teams across the organization and elevates the capability of our senior leaders.Merchant Training&TJX University We are particularly proud of our merchant training programs around the world.Our programs are designed to support Associates interested in pursuing careers as merchants and develop them as future leaders in our off-price retail business.The Merchandising career path provides structured growth potential in Merchandise Planning and Allocation and Merchandise Buying,as well as potential management opportunities.The path consists of an initial,intensive training curriculum for a role as an Allocation Analyst.Afterwards,there are ongoing development opportunities and mentoring throughout the Associates career.We are also proud to run TJX University,where we offer new Buying Associates or newly promoted managers in our Buying organization learning opportunities through a two-year-long,one-on-one coaching program.The program includes mentoring on negotiation skills,store exercises,and a curated curriculum to both further their development in their current role and prepare them for the next step in their careers.The coaching may take place in-person or virtually,in our stores,or in the marketplace.The University has a global reach to our merchants around the world.Our focus is to teach a consistent approach to our off-price business model,negotiating fundamentals,and building strong relationshipsall of which have been a critical part of our success.WorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/16 /External Partnerships In addition to our many internal development opportunities,we have established relationships with a variety of organizations to offer additional resources and learning opportunities.In the U.S.,this includes National Hispanic Corporate Council,Catalyst,Diversity Best Practices,PFLAG,National Association of Asian American Professionals,Human Rights Campaign,and others.Our Associates also have the opportunity to participate in programs offered by some of our partner organizations.We belong to Conexin in Boston,Massachusetts,and,on a U.S.national level,The Partnership.Conexin pairs Hispanic/Latino Associates with seasoned mentors at organizations in various industries and provides workshops in leadership.The Partnership offers year-long programs in leadership and cultural navigation for Associates,as well as the Next Generation Executive Program,a five-month training course.We actively bring together Associate alumni of both programs to build a network that can support participants and encourage learning.TJX Europe is a member of the Business Disability Forum,and we partner with Purple Space and Business in the Community to support our efforts to help those who face barriers to employment thrive at work.Having An Impact:Be Your Best Self Our global“Be Your Best Self”philosophy promotes and encourages all Associates to drive their own development.Through various tools,offerings,and manager support,we endeavor to empower Associates to build new skills,develop leadership competencies,enhance their off-price knowledge,and participate in experiences to assist them in developing a career path,whether that means growing in their current roles,or exploring opportunities cross-functionally.“Im not afraid to make mistakes,as a mistake can be a learning experience.”-Saddaf,Store Associate,TJX CanadaWorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/17 /SASB:CG-MR-310a.2,CG-MR-330a.1UN SDGs:5At TJX,inclusion and diversity have been an important part of who we are for many years,and we are strongly committed to continuing to build a more inclusive and diverse workplace.A workforce that includes people from a variety of backgrounds and with a diversity of experiences and perspectives can help us to think creatively,remain agile,and be true to our values.Our inclusion and diversity journey is guided by three global priorities that aim to create an inclusive workplace where all our Associates feel welcome in the Company,valued for their perspectives and contributions,and engaged with our business mission to deliver great value to our customers every day.Through our global priorities we aim to:/Increase the representation of diverse Associates along our talent pipeline./Equip leaders with the tools to support difference with awareness,fairness,sensitivity,and transparency./Empower Associates to integrate inclusive behaviors,language,and practices in how we work together and understand our role and responsibility in inclusion.These priorities were developed,in part,based on Associate feedback from our 2021 Global Inclusion Survey.This survey helped define these priorities and solidify the next steps of our inclusion journey.In Fiscal 2025,we launched our 2024 Global Inclusion Survey.Similar to our initial global survey,this survey was made available to all TJX Associates across the globe.It is an important tool for us to hear from our global Associate population and to help inform future initiatives.At TJX,we view diversity as inclusive of many facets race,ethnicity,age,sexual orientation,gender identity,ability,experience,religion,perspectives,and more.We strive to treat all people with dignity and respect and do not tolerate discrimination or harassment of any kind.These expectations are reinforced to all Associates in the TJX Global Code of Conduct,to which all Associates are required to adhere.Our global inclusion and diversity priorities are designed to further embed inclusion and diversity within our culture and business practices.Inclusion&DiversityWelcome,Valued,&EngagedAdapted from Johns Hopkins Diversity Wheel from http:/web.jhu.edu/dlc/resources/diversity_wheel/WorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/18 /Global Priorities Increase the Representation of Diverse Associates Along our Talent Pipeline We continue to work towards increasing representation of diverse Associates along our talent pipeline and are focusing on ways to recruit more diverse talent while also continuing to provide diverse Associates access to development opportunities.Expanding our outreach,internal training,and other tools and resources to support us in these efforts.We continue to build on existing and new partnerships as well as expand our outreach to diverse networks.In the U.S.,we have worked to increase representation from underrepresented groups in certain areas of the business through professional networks and targeted outreach,attending virtual and in-person career fairs,and looking for transferable skills.These efforts give us the opportunity to widen our talent pool and increase access to potential roles to diverse groups.We also pursue opportunities to increase minority candidate representation in early career positions,and we are expanding the ways we approach our search for early career professionals.For example,some of our U.S.nonprofit partners include The Posse Foundation,Bottom Line,Girls Who Code,The BASE,United Negro College Fund,Fashion Scholarship Fund,SummerSearch,and Thrive Scholars.We work with these organizations to support events,career development,and recruitment opportunities for underrepresented high school and college students.We have also expanded our outreach to Historically Black Colleges and Universities through additional on-campus events,sponsorships,and career fairs.We believe these connections can help us create a pipeline of future diverse talent with TJX.Learn more about how were working to build a more diverse workforce in our Recruitment section.Associates at TJX have access to an array of development opportunities internally and through external partnerships.TJXs Global Leadership Curriculum and our Emerging Leaders program are among our robust internal professional development resources.In addition,in Fiscal 2024,U.S.Associate Resource Groups(ARGs),which are Associate-led groups focused on amplifying the voices of Associates through networking,development,and connection,had access to career development workshops.These workshops focused on helping Associates build individual development plans,have conversations with managers,and build relationships with mentors.We also have long-standing partnerships with community-based non-profit organizationssuch as The Partnership and Conexin in the U.S.;Business in the Community in Europe;and a third-party leadership academy designed for Black executives and early-to mid-career managers in the U.S.and Canadato create access to external support or professional development programs for our diverse Associates.We are proud of our culture that prioritizes development and advancement within our organization,as we simultaneously work to build a more diverse pipeline of talent to support our efforts to increase diversity at all levels of our organization.Equip Leaders with the Tools to Support Difference with Awareness,Fairness,Sensitivity,and Transparency To support our efforts to continue to further integrate inclusion into our culture and business practices,we recognize that it is important that leaders throughout our organization exemplify and model a culture of inclusion.We continue to equip our leaders with the education and tools needed to better understand and embrace working with those who are different than themselves.By adding a focus on inclusion to our Leadership Competencies and Cultural Factors,we have formalized inclusion as a foundational value that represents who we are as a Company and how we expect our leaders and Associates to show up every day.We have developed tools designed to support leaders across the Company in reflecting on and implementing inclusion-based values and behaviors.In Fiscal 2024,we updated our Leadership Development Toolkit with the goal of helping leaders across the Company deepen their understanding and continue implementation of inclusive values and behaviors.In recent years,we have also enhanced our Global Leadership Curriculum to provide our leaders with tools designed to champion inclusion and encourage,empower,and engage their direct reports.In addition to providing tools to support their own learning,we are also equipping managers with resources to help them engage in dialogue with their teams.For example,this past year in the U.S.,we expanded our Leader Learning series,where leaders are invited to gather monthly for candid conversations on inclusion and diversity topics designed to inform,inspire,and equip them with the confidence to lead inclusively.Some topics discussed since its inception include“Diversity as your Superpower,”“Being Authentic,”“Build Resilience,”“Beware the Four Conversation Traps,”and“What is Feedback.”WorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/19 /Empower Associates to Integrate Inclusive Behaviors,Language,and Practices in How We Work Together and Understand our Role and Responsibility in Inclusion Inclusion is an ongoing journey,and everyone can play a part.Over the past year,we have been working on integrating inclusion and diversity into our everyday work and daily interactions.One of the ways we do this is through education and storytelling.In addition to our orientation materials focusing on the value we place on inclusion and diversity,as well as a library of inclusion and diversity-related online learning resources available to our Associates,our leaders are encouraged to take the learning tools that have been rolled out globally and integrate them into ongoing discussions with their teams.For example,many leaders are leveraging content and tools specifically developed to support their conversations with teams around topics such as unconscious bias and being authentic.In Fiscal 2024,we hosted an Inclusion and Diversity Summit to bring together inclusion and diversity champions from across the organization.ARG leads,Inclusion and Diversity Advisory Board members,Inclusion and Diversity Business Committee members,and more came together to connect,educate,and grow.Additionally,in Fiscal 2024,TJX Europe held an Inclusion and Diversity event focused on education,storytelling,and raising awareness.Sessions ranged from information about ARGs and how to get more involved in our communities,to interactive sessions on language and culture and deaf awareness.To promote awareness and align with best practices,we are also working to continue encouraging candid conversations and Associate feedback.Over the past several years,our inclusion and diversity teams in the U.S.,Canada,Europe,and Australia have conducted Associate listening sessions and focus groups to help guide open conversations,solicit input,and grow our collective capacity to be champions of inclusion.Across various functions within the organization,Associates,supported by Human Resources,are setting up committees or engagement groups to help better incorporate inclusion and diversity into our everyday work.This has resulted in new initiatives that we believe support inclusion.For instance,our merchandising and product teams are finding opportunities to use an inclusion and diversity lens on product assortments as appropriate for our opportunistic buying and off-price business model.Additionally,we implemented gender-neutral gifting signage for certain merchandise in some of our stores.At TJX,we have long known that mentoring is a great way for Associates to learn our business and find success.We also view mentoring as a means to promoting inclusivity.We have a number of mentoring approaches in place across the organization globally to build stronger connections among diverse groups of Associates and leaders.These approaches are designed to foster Associates development and include formal 1:1 mentoring relationships,informal mentoring,and facilitated mentoring roundtables that are geared toward generating group conversations on topics that are important to our Associates,including career guidance,executive presence,self-awareness,and authentic leadership.We are continuing to partner with groups around the organization to incorporate mentoring into their Associate development practices and expand mentoring opportunities to more Associates.WorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/20 /Championing Inclusion In recent years,we have launched Inclusion and Diversity Advisory Boards in the U.S.,Canada,Europe,and Australia.The Advisory Boards allow the opportunity for voices across the organization to be heard and members of these advisory boards include Associates representing a variety of functions,levels,and backgrounds across our stores,distribution and processing centers,and corporate offices.Advisory Board members provide recommendations and feedback to support our continuing inclusion and diversity work and guide us in striving to align our programming with the needs of various Associate populations.Inclusion is championed within our culture in many ways,one of which is through our Associate Resource Groups(ARGs)in the U.S.and Europe.ARGs are Associate-led groups and important to our efforts to champion inclusivity throughout our workplace.ARGs support the business in a multitude of ways including helping to align with business priorities and inclusion and diversity strategies,offering professional and social support to ARG members,amplifying the voices of our diverse Associates,and promoting diversity awareness in the workplace.Both the U.S.and Europe have a variety of ARGs that collectively include support for Asian and Pacific Islander Associates,Black Associates,Hispanic and Latino/a/x Associates,Associates with disabilities,members of the LGBTQ community,members of the U.S.Armed Forces,women,and working parents.In recent years,both the number of ARGs and participation rate have increased.Some of our newest ARGs include ASPIRE(Asian and Pacific Islanders for Representation and Empowerment)and HoLA(Hispanic Latinx Alliance)in the U.S.,a wellbeing ARG in Germany,and a womens ARG in Poland.ARGs develop annual business plans and manage a variety of engaging activities and initiatives to support a work environment that is welcoming to all.ARGs may plan education sessions,guest speakers,volunteerism and charitable giving,celebration of diversity appreciation months,and consult on business opportunities,as appropriate.For example,In Fiscal 2024 in the U.S.the LEAD(Leadership,Education,and Adaptation for Disabilities)ARG hosted an event on neurodiversity;the Pride ARG held an event on pronouns;and the BLAC(Black Leadership&Associate Coalition)and HoLA(Hispanic Latinx Alliance)ARGs held an event for their members on how to maximize their benefits at TJX.In Europe,ARGs participated in an office inclusion and diversity event where they educated Associates and raised awareness of ARGs among the Associate population.Thanks to our active LGBTQ ARG,we attended our first Pride Parade events in Belfast,Northern Ireland;Manchester,U.K.;and Berlin,Germany in Fiscal 2024.In Canada,inclusion and diversity committees have been established for Associates in our home office,distribution centers,and the field,which includes stores and regional offices.These committees aim to provide opportunities for Associates to share input,generate ideas,and develop annual plans regarding various inclusion-and diversity-related initiatives.For example,the committees plan education sessions,host various guest speakers,and organize diversity appreciation events throughout the year.These committees are also expected to help inform TJX Canadas strategic inclusion and diversity initiatives in support of TJXs global priorities.The Australian inclusion and diversity governance structure consists of four Working Groups and two inclusion and diversity committees that support the delivery of initiatives associated with the inclusion and diversity plan.The four Working Groups focus on supporting topics like mental health,ethnicity,sexual and gender identity,and Aboriginal and Torres Strait Islander cultures.The two inclusion and diversity committees support and represent our store and processing center Associates.These committees are responsible for the implementation of initiatives set by the Working Groups,and are encouraged to provide feedback to the Working Groups,which represent the voice of our largest Associate group.TJX is committed to doing our part to continue to support our many diverse Associates as well as to foster greater inclusion within our communities.In recent years in the U.S.,we enhanced our parental leave policy for benefits-eligible Associates to be more supportive of working parents,we added health,life,and disability benefits for same-sex spouse or domestic partners,and we offer transgender-inclusive healthcare,services,and transition support under our Companys medical plans for eligible Associates.Additionally,we have a variety of offerings that vary by location including areas,such as foot washing stations,to help support our Associates cultural backgrounds,prayer/meditation rooms,improved lactation rooms,and a gender-neutral dress code policy.WorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/21 /Our Diverse WorkforceWe believe the diversity of our Associates can help make us a stronger Company and better able to serve our broad base of customers around the world.We are committed to continuing to execute our global inclusion and diversity initiatives with the goal of driving sustainable,organizational change while striving to increase diversity in our talent pipeline.We are also proud of our culture that prioritizes Associate development and advancement within our organization and are pleased that 41%of Associates in managerial positions around the world have been at the Company for more than 10 years.3 In the field,we are proud that,as of the end of Fiscal 2024,more than 75%of current U.S.Store Managers were promoted into the Store Manager role from other positions in the Company.As we strive to create a more inclusive and diverse workforce,we recognize the importance of building our talent pipeline with diverse talent and providing current Associates opportunities for growth and development.Fiscal 2024 Global Gender Diversity12023 U.S.Workforce Representation By Race/Ethnicity8 Click Here to View Our 2023 U.S.EEO-1 Report77RYP%Fiscal 2024 U.S.Racial Diversity1,4Board of Directors Diversity as of June 2024Pay EquitySince 2020,TJX has periodically conducted a pay equity analysis of its U.S.workforce that covers gender and race/ethnicity.In the U.S.,based on 2023 data and accounting for job title,geography,and full-or part-time status,we found,on average,no meaningful difference in base pay between Associates based on gender or race/ethnicity at TJX.We intend to continue to monitor our processes and review our data periodically to support our goal of continuing to compensate our Associates equitably based on their skills,qualifications,role,and abilities.of our global workforce is femaleof Vice President and above positions globally are femaleof our workforce in the U.S.is people of color3,4of Vice President and above positions in the U.S.are people of color3,4of our Board members are women68y%of people in managerial positions globally are female2of promotions globally were earned by women78%of people in non-managerial positions globally are female 37Q%of people in managerial positions in the U.S are people of color2,3,4of promotions in the U.S.were earned by people of color3,460%of people in non-managerial positions in the U.S.are people of color3,440%of our Board members self-identify as a member of an underrepresented group(race,ethnicity,LGBTQ )70%of our Board members are women and/or self-identify as a member of an underrepresented group/2023 U.K.Gender Pay Gap Statement/2022 Ireland Gender Pay Gap Statement /2023 Ireland Gender Pay Gap StatementWorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/22 /At TJX,fostering a positive and inclusive work environment so that our Associates feel welcome,valued,and engaged is core to how we operate.We aim to support our large,global,and complex workforce in a variety of ways and offer benefit packages that are competitive in the markets where we operate and aligned with the talent needs of our business.We have a range of global well-being programs focused on physical,financial,and emotional wellness.Health&Well-BeingPhysical Well-Being:Supporting our Associates through access to fitness and wellness resources and a range of health benefits for eligible Associates.Financial Well-Being:Supporting our Associates through access to financial education resources,a range of discounts,and retirement,life insurance and disability benefits for eligible Associates.Emotional Well-Being:Supporting our Associates through assistance programs,access to mental health education and services,and paid time off for eligible Associates.We believe providing well-being programs that help support our Associates in and outside of work can assist us in attracting and retaining top talent,meeting the diverse needs of our workforce,and promoting a healthier and happier workforce.We continually review our programs and look for ways to enhance our offerings to best support our Associates.WorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/23 /Below are a variety of examples of the types of benefits and resources available to our Associates.Benefits and resources,and applicable eligibility terms,vary across our geographic operations based on location,position,hours worked,length of employment,and other factors.Examples shown here may not be available to all Associates.Examples of Benefits&Resources Globally9In other regions where we operate,a variety of benefits and resources are made available to Associates to support their physical,financial,and emotional well-being.Some examples include access to scholarship and tuition assistance programs,virtual live and on-demand fitness services,and a variety of tools and educational sessions that support mental health and self-care at TJX Canada;support on mens health,womens health,and menopause at TJX Europe;dedicated support for pregnancy loss and access to a healthcare app,with a range of self-serve resources,including video and phone consultations with expert practitioners on specialized healthcare topics in the U.K.and Ireland;a range of support through private medical insurance options in mainland Europe,where applicable;and access to educational resources focused on stress reduction and relaxation,retirement planning,and caregiver support at TJX Australia.Examples of Benefits&Resources in the U.S.9Physical:Medical,dental,and vision plans;comprehensive fertility coverage and transgender inclusive healthcare benefits under medical plans;domestic partner health coverage;resources for womens health and family planning;travel benefit for medical services when not available within 100 miles of home;diabetes support;access to telehealth services;smoking cessation program;fitness reimbursement.Financial:401(k)company match;life insurance and disability coverage;insurance and retirement benefit coverage for domestic partners;scholarship program;Associate discount at all of our retail banners;childcare discount;cell phone discounts;adoption and surrogacy assistance;pet insurance;legal insurance;discounts on home and auto insurance;access to educational resources on financial topics.Emotional:Employee Assistance Program(EAP);access to no-cost counseling sessions;paid time off including paid parental leave,paid bereavement leave(including for pregnancy loss)and paid sick time(click here for more information on paid sick time policies at TJX);domestic partner coverage under paid time off policies;access to medical and personal leaves of absence;digital mental health support;access to educational resources covering topics such as new and expectant parent support,stress reduction,and support for caregivers.FINANCIALEMOTIONAL401(k)withcompany matchlife insurance&disability coveragescholarshipprogramassociatediscount%childcarediscountcell phonediscountspet insuranceauto,home&legal insuranceadoption&surrogacyassistancePHYSICALEmployee AssistanceProgram(EAP)no-cost counselingsessionspaid time offmedical&personal leavedigital mental healthsupportWORKPLACE BENEFITSpaid bereavement leavepaid parentalleaveeducationalresourcessmoking cessation programfitnessreimbursementfertility coveragetransgenderinclusive benefitswomens health&family planningmedical,dental&vision plansdomestic partner benefitstravel benefit formedical serviceseducationalresourcestelehealthdiabetes support9Benefits and resources,and applicable eligibility terms,vary across our global operations based on location,position,hours worked,length of service,and other factors.Examples shown above may not be available to all Associates within each geography.9WorkplaceIntroductionCommunitiesEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/24 /Helping Build Better Futures Our mission is to deliver great value to our customers every day.For over four decades,our deep commitment to the principles of providing value and caring for others has helped define our culture.It extends beyond the walls of our stores,distribution centers,and offices,and into our local communities around the world.The intersection of these principles defines our global community relations mission:Deliver great value to our communities by helping vulnerable families and children access the resources and opportunities they need to build a better future.Our Social Impact Areas FY24STATISTICS1,10Communities33 millionmeals provided5500,000shelter nights provided5465,000units of product donated25,000domestic violence services provided5 Basic NeedsWe support nonprofit organizations that help fill critical basic needs,such as a warm meal,clean clothing,and a safe place to sleep.Education&TrainingOur efforts focus on quality enrichment and extracurricular programs that provide skills,resources,and opportunities to support school and career success for children,teens,and young adults.Patient Care&ResearchWe support organizations that deliver services to families and children facing health challenges and life-threatening illnesses.Empowering WomenWe support programs that provide services to support women in need,ranging from help for those fleeing domestic violence,to offering education,training,and job placement resources.2,000 organizations supported$23 millionfor healthcare research and patient care10,000young people and women provided workforce readiness opportunities52 millionyoung people provided access to educational opportunities5CommunitiesIntroductionWorkplaceEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/25 /Our Approach to Giving BackWe are a global business with stores located on three continents and in thousands of communities around the world.Our community relations mission is to deliver great value to our communities by helping vulnerable families and children access the resources and opportunities they need to build a better future.Supporting the communities where our Associates live and work is important to us.There are several ways in which we offer our support:/Foundation Giving:Through our three foundations in the U.S.,Canada,and Europe,we provided philanthropic grants to more than 2,000 organizations in Fiscal 2024.These grants included support for national charitable groups and donations to local charities.Each of our foundations has its own focus that supports our global community relations mission:/The TJX Foundation(U.S.):Delivering great value to our communities by helping vulnerable families and children access the resources and opportunities they need to build a better future./The TJX Canada Foundation(Canada):Helping vulnerable women access the skills and support they need so that they and their families can thrive in life./The T.K.Maxx and Homesense Foundation(Europe):Helping vulnerable children,young people,and their families to achieve their potential in our local communities./Cause Marketing and In-store Fundraising:Our retail chains conduct charitable campaigns that support various non-profit organizations.Some examples include selling merchandise that benefits select organizations and point-of-sale fundraising./Associate Volunteerism,Engagement and Giving:Associates contribute to the success of many of our programs through charity nominations,volunteerism,and in-store fundraising events,as well as through their own donations.Throughout Fiscal 2024,TJX Associates engaged in various efforts to support causes they were passionate about,including participating in food and clothing drives,volunteering to help women and young people access mentoring,walks to raise money,education,and workforce opportunities.In addition,TJX Associates in the U.S.,Europe,and Canada have the opportunity to nominate local organizations to receive grants from our foundations.In Fiscal 2024,TJX supported more than 1,250 Associate Nominated Grants,which have included focuses on education,medical care,food insecurity,and providing support for people with disabilities.As with all of our corporate responsibility initiatives,we aim for continuous improvement with our community relations efforts,as we believe this is in the interest of the communities and partners we support.We regularly communicate with our community partners to understand the impact they believe our support has had and how we can continue to make a difference.Other Ways We GiveOur core values of honesty,integrity,and treating each other with dignity and respect have been at the heart of our business since the beginning.These values combined with our community relations mission play a key role in our approach to how we support communities and provide additional ways in which we think about our charitable giving:/Disaster Relief:TJX supports communities in need when unexpected disasters strike.We have contributed generously for over 25 years to Red Cross chapters worldwide and to other organizations that help local communities rebuild and provide clean water,safe shelter,and hot meals in the wake of devastating disasters.In addition to supporting the Red Cross,in Fiscal 2024,The TJX Foundation supported the Maui Food Bank in Hawaii to help provide hunger relief and aid to those affected by the Maui wildfires;The TJX Canada Foundation donated to and helped raise money through local fundraising for the International Disaster Relief Fund to support those affected by the wildfires in Canada;and The TK Maxx and Homesense Foundation donated to the British Red Cross and the German Red Cross to support their emergency appeal helping those affected by the earthquakes in Turkey,Syria,and Morocco./Inclusion&Diversity:As a business,we do not tolerate discrimination or harassment of any kind,and we remain committed to supporting inclusion and diversity and increased access to opportunities for all.As part of these efforts,TJX continues to provide support to communities of color,expanding existing partnerships and creating new ones with organizations in the U.S.,Canada,Europe,and Australia.We are also taking steps to support a more inclusive and diverse workplace;learn more about this work in the Inclusion and Diversity section of this report./25 /CommunitiesIntroductionWorkplaceEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/26 /Dress for Success(U.S.)/Feeding America/Joslin Diabetes Center/Save the Children/Alice House(Canada)/Alzheimers Association(U.S.)/Dress for Success Canada Foundation(Canada)/Feeding America(U.S.)/JDRF(U.S.)/Petites-Mains(Canada)/St.Jude Childrens Research Hospital(U.S.)/Women In Need Society(Canada)/WoodGreen(Canada)/Dana-Farber Cancer Institute/Feeding America/St.Jude Childrens Research Hospital/Feeding America /KABOOM!/National Park Foundation/Alice House/Dress for Success Canada Foundation/Petites-Mains/Women in Need Society/WoodGreen/Alice House(Canada)/Comic Relief(U.K.)/Dress for Success Canada Foundation(Canada)/Enable Ireland(Ireland)/Feeding America(U.S.)/Petites-Mains(Canada)/The Princes Trust(U.K.)/St.Jude Childrens Research Hospital(U.S.)/Women in Need Society(Canada)/WoodGreen(Canada)/Children for a Better World(Germany)/Choose Love(U.K.)/Comic Relief(U.K.)/Enable Ireland(Ireland)/The Princes Trust(U.K.)/The Smith Family(Australia)/Stowarzyszenie WIOSNA(Poland)Our Cause Marketing&In-Store Support Includes:As part of our approach to giving back,our retail brands conduct charitable cause marketing and in-store point-of-sale fundraising campaigns that support various non-profit organizations.Thanks to our generous customers around the world,we are able to continue to deliver on our community relations mission in our stores globally.CommunitiesIntroductionWorkplaceEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/27 /UN SDGs:2 In our communities around the world,many families find themselves unable to meet their basic needs.At TJX,we understand the importance of a warm meal,clean clothing,and a safe place to sleep.This is why we are passionate about supporting nonprofit organizations that help fill these critical basic needs for vulnerable families.In the U.S.,TJX supports Cradles to Crayons,which serves children from birth through age 12 living in homeless shelters or low-income situations,and provides them with high-quality,essential items they need to thrive.In addition to TJXs financial support,many of our Associates participate in engagement programs with Cradles to Crayons where they have the opportunity to volunteer their time.Since 2015,our U.S.retail chains,including TJ Maxx,Marshalls,HomeGoods,Sierra,and Homesense,have teamed up each Thanksgiving season for an in-store fundraising campaign to support families in need of food assistance during the holidays.In Fiscal 2024,through this campaign,funds from our U.S.Foundation and customer donations were provided to Feeding America for distribution to 200 food banks.According to Feeding America,this translated into an estimated 28 million meals served to those in need.Through this campaign and other global efforts and partners,TJX helped provide 33 million meals to those in need in Fiscal 2024.TJX has supported Operation Warm,a U.S.nonprofit that serves children in need through the gift of brand-new,high-quality coats and shoes,since 2003.In Fiscal 2024,across four events,TJX Associates helped to provide coats to more than 2,000 children in need.Through Associate volunteer events and funding donations that help to provide coats and shoes to nonprofit partners and high-need elementary schools,TJX continues to support Operation Warm to act on its mission of providing emotional and physical warmth,confidence to socialize and succeed,and hope for a brighter future through basic need programs and community resources for underserved children.Since the launch of the Find Your Stride initiative in 2019,TJX Canada has embarked on a mission to help vulnerable women access the skills and support they need so that they and their families can thrive in life.Two of our partners are Dress for Success Canada Foundation and the Women in Need Society(WINS).TJX helps Dress for Success Canada Foundation empower women and non-binary individuals to achieve economic independence by providing a network of support,professional attire,and development tools to help them thrive in work and in life.In Calgary,WINS serves as a thrift charity through its House to Home(H2H)program.WINS provides resources and essentials,such as household items,furniture,hygiene products,food,transit tickets,cellular assistance,and clothing to help its clients navigate through tough times.FY24STATISTICS33 millionmeals provided5500,000shelter nights provided5465,000units of product donatedBasic NeedsFilling Critical Basic Needs Through Warm Meals,Clean Clothing,&a Safe Place to SleepCommunitiesIntroductionWorkplaceEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/28 /Having An Impact:Red Nose Day 2023TK Maxx and Homesense in the U.K.have partnered with Comic Relief since 2005 and are official retailers for Comic Relief U.K.s much-loved fundraising campaign,Red Nose Day.Over the years,TK Maxx and Homesense have raised money for Red Nose Day through in-store fundraising and Associate donations,and by selling Red Nose Day merchandise,from which a portion of the sales go to the Red Nose Day campaign.In Fiscal 2024,TK Maxx and Homesense partnered with Mr.Men and Little Miss to create t-shirts,sweatshirts,tote bags,aprons,and mugs to help raise funds for Red Nose Day.Since 2005,TK Maxx and Homesense are proud to have raised nearly$40 million for this worthy campaign./28 /CommunitiesIntroductionWorkplaceEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/29 /UN SDGs:4 TJX has long been committed to helping unlock educational opportunities for at-risk youth and vulnerable young people to support them in reaching their full potential.Over the years,our efforts have focused on quality enrichment and extracurricular programs that provide skills,resources,and opportunities to support school and career success in the hopes of helping to create a brighter future for children,teens,and young adults.In Fiscal 2024,we worked with a variety of organizations and funded education and workforce training opportunities that impacted more than 2 million young people.Since 1984,TJ Maxx has proudly supported Save the Children U.S.to help improve the lives of children and families,making this its 39th year of sponsorship.Over the years,the relationship has grown to include an annual in-store fundraising campaign and donations of profits from co-branded reusable bags.TJ Maxx and Save the Children have also established various custom programs and initiatives,including Save the Childrens Early Childhood Education programs and Family Action network.Read more about TJ Maxxs partnership with Save the Children and its work to support women and caregivers in the Empowering Women section.Fiscal 2024 marked TJXs sixth year in the U.S.working with Jumpstart,an early education organization that provides programming to preschool children in underserved communities to help them enter kindergarten prepared to succeed.TJX is the exclusive presenting sponsor of Jumpstarts annual Read for the Record campaign,a program that engages over two million children,adults,and educators across the country and around the world to read the same book on the same day to help promote early literacy and increase access to high-quality books.In Fiscal 2024,our sponsorship helped achieve a distribution of approximately 145,000 copies of the campaign book,with more than 16,000 copies directly donated to TJX nonprofit community partners and TJX Associates a record number.Sierra aims to help everyone access the outdoors by providing support to nonprofits that help children get outside.Nationally,Sierra partners with KABOOM!to help fund programs that are committed to providing safe places for all children to play.Sierra also partners with Open Outdoors for Kids,a National Park Foundation program that creates opportunities for children to explore nature.In Fiscal 2024,Sierra partnered with KABOOM!to build a new playground in Saint Paul,Minnesota.The playground started with imaginative visions drawn by children in the area to update an outdated playground installed in 1997 and in need of replacement after its 26-year history.It is now open to the public and serving children in the area.The playground was built in alignment with KABOOM!s 25 in 5 initiative,which aims to build playgrounds in 25 markets over five years.This is Sierras fifth playground built in partnership with KABOOM!.TJX has a long history of working with underserved youth in cities around the U.S.to help teach them job readiness skills and expose them to career paths in retail.In Fiscal 2024,we continued to support Junior Achievement,a national provider of work readiness,entrepreneurship,and financial literacy skills for young people.Their goal is to give young people the tools they need to own their economic success,plan for their futures,and make smart academic and economic choices.TJX Associates have the opportunity to volunteer in Junior Achievement programs.Education&TrainingHelping to Provide Opportunities for Children,Teens,&Young AdultsFY24STATISTICS2 millionyoung people provided access to educational opportunities510,000young people and women provided workforce readiness opportunities5CommunitiesIntroductionWorkplaceEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/30 /TJX Canadas Find Your Stride initiative endeavors to provide access to education and job training for women preparing for the workforce,including work skills development,educational programs,and work placement,in addition to supporting some of their basic needs.Through partners like WoodGreen and Petites-Mains,TJX Associate volunteers have conducted training sessions,mock job interviews,and store tours to help build critical skills for program participants.To learn more about the partnerships and other ways TJX Canadas Find Your Stride initiative is supporting women,visit the Empowering Women section.TJX Canada is a proud sponsor of the Canadian Civil Liberties Education Trust(CCLET),a nonprofit research and public educational organization which aims to encourage,promote,and protect the rights and freedoms for all people in Canada,including newcomers.In Fiscal 2024,TJX Canadas funding supported the CCLET in expanding their annual education conference to additional locations to educate Canadians about their rights and freedoms.In addition,the CCLET was able to develop a digital education library program,serving as a free interactive workshop to provide newcomers with a better understanding of their rights.In Fiscal 2024,TJX Europe celebrated 10 years of partnership with The Princes Trust and support of its Achieve and Get Into programs in the U.K.The Achieve program is a development program designed to help young people engage with and succeed in their education by building their confidence and skills.The Get Into program provides training,development,and employment opportunities to help disadvantaged young people build a better future.In partnership with The Princes Trust,TJX Europe runs three Get Into programs across the areas of Retail,Loss Prevention,and Distribution.TJX Europe also partners with Stowarzyszenie WIOSNA in Poland to support their Academy of the Future program to provide one-to-one educational and mentoring support for disadvantaged children and young people.Additionally,since 2010,TJX Europe has partnered with Children for a Better World in Germany to help children achieve their full potential through their Lunch Table and Discoverer Activities programs.These programs take place at local child and youth welfare institutions,where children affected by poverty are empowered to expand their knowledge on nutrition,improve their life skills,and strengthen their self-esteem.TK Maxx in Australia supports The Smith Family,a national,independent childrens education charity that for over 100 years has been working to help change the lives of children in need.Since 2022,TK Maxx in Australia has been able to help provide approximately 650 scholarships through The Smith Familys flagship program,Learning for Life.Each scholarship supports a child in need with financial support for school essentials,personal support for the child and their family,and practical support through learning and mentoring programs,for one year of study.TJX remains committed to supporting inclusion and diversity and increased access to opportunities for all,and this commitment extends into the work we do in our communities.We continue to provide support to communities of color by funding organizations that focus on promoting and supporting racial justice andequity.In the U.S.,TJX has partnered with a number of nonprofits,including The Posse Foundation,Bottom Line,Leadership Enterprise for a Diverse America,and the United Negro College Fund(UNCF)to support their work in helping connect high school and college students with internship and early career opportunities.In Europe,the TK Maxx and Homesense Foundation provides funding to various charities across Europe for projects and initiatives that promote inclusion and diversity.These projects and initiatives provide support for gender equality,the LGBTQ community,racial justice,and people with disabilities in local communities.TJX Canada is proud to partner with Indspire,which aims to enrich Canada through Indigenous education and by inspiring achievement.In Fiscal 2024,the TJX Canada Foundation donated funds to support several scholarships for high school and post-secondary Indigenous students in Canada.Having An Impact:Orange Shirt Day 2023In Fiscal 2024,Winners and Marshalls in Canada supported Orange Shirt Day and the Orange Shirt Society by partnering with Mtis artist Kaija Heitland of indigenousnouveau to create an exclusive orange shirt design sold in stores.All of the profits from the sale of the orange t-shirts were donated to the Orange Shirt Society.The Orange Shirt Society supports Indian Residential School Reconciliation,creates awareness of the individual family and community inter-generational impacts of Indian Residential Schools through their activities,and creates awareness of the concept that Every Child Matters.“As a Mtis artist,Im honored to be able to create a design to support the Every Child Matters movement,The National Day for Truth and Reconciliation,and show our solidarity and kinship with all Indigenous peoples.It takes the efforts of all of us to join together and make change.”-Kaija Heitland,Mtis Artist and Teacher,indigenousnouveau To learn more,visit and www.theribbonskirtproject.ca.CommunitiesIntroductionWorkplaceEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/31 /UN SDGs:3 A key part of our community relations work involves supporting organizations that deliver services to families and children when they are facing health challenges and life-threatening illnesses,as well as funding organizations with missions aimed at spurring advancements in care and cures.Our Associates,our customers,and their families often have a personal connection to health-related causes and are eager to participate in volunteer opportunities and join in fundraising efforts that help affected individuals and families.For more than three decades,TJX has supported the Dimock Center,a Massachusetts-based community health center recognized nationally in the U.S.as a model for the delivery of comprehensive health and human services in an urban community.Dimock aims to break down barriers to care and correct racial health inequities by providing Massachusetts residents access to high-quality,low-cost health care and human services,regardless of their ability to pay.TJX has supported Dimocks substance use,mental health,and trauma recovery programs,which work to improve access to care and critical resources to help individuals progress in their journeys.In Fiscal 2024,TJX contributed to the creation of a new,state-of-the-art addiction recovery center for men,designed to support those at the critical step between detox and residential recovery.In line with Dimocks mission to provide care for the whole person,TJX also supports a variety of Dimocks Child and Family Services programs.Through sponsorship and Associate volunteerism,TJX has helped Dimock increase access to education and other opportunities for more than 1,000 children and families through their early childhood education programs and family shelter.In Fiscal 2024,we were also able to help rebuild a clothing closet,which allows Dimock to provide community members,including patients in Dimocks residential recovery homes,with essentials such as clothing,shoes,coats,and more.These items help patients start their recovery journeys in comfort and dignity.For 30 years,Marshalls has partnered with the Juvenile Diabetes Research Foundation(JDRF)in the U.S.to help the organization find a cure for type 1 diabetes and to improve the lives of children and adults living with it.Through an annual in-store fundraising campaign and support of other local JDRF events,Marshalls is helping to fund new research and support programs.We are proud that Marshalls has been named a Diamond Partner,helping to fund research that may one day eliminate this disease.Marshalls has also supported the Alzheimers Association for 11 consecutive years,raising funds and awareness through in-store fundraising programs to support Alzheimers research,care,and support.For many years,TK Maxx customers and Associates have raised millions for Cancer Research UK for Children&Young People and Enable Ireland.TK Maxx has partnered with Cancer Research UK since 2004 and is proud to be the largest corporate supporter of its research for childrens cancers.The support continues to fund life-saving research to help more children and young people survive cancer with a better quality of life.TK Maxx has also worked with Enable Ireland since 1997,and as the organizations largest retail partner,TK Maxx helps support children with disabilities and their families across Ireland.In Fiscal 2024,TK Maxx continued ongoing support for both organizations through donations from TK Maxxs Give Up Clothes for Good program.Give Up Clothes for Good encourages customers and Associates in the U.K.and Ireland to drop off their used clothes,accessories,and homeware,year-round,at their local TK Maxx store.These items are donated to Cancer Research UK and Enable Ireland shops where they may be sold to help raise funds to support life-saving research and families of children with disabilities.FY24STATISTICS$23 milliondonated for healthcare research and patient carePatient Care&ResearchSupporting Organizations That Deliver Services to Families&Children Facing Health ChallengesCommunitiesIntroductionWorkplaceEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/32 /Having An Impact:Find Home Anywhere For over two decades,HomeGoods has supported organizations like St.Jude Childrens Research Hospital and the Dana-Farber Cancer Institute in helping families facing cancer and serious illness.Over the years,HomeGoodss support has included in-store fundraising and the sale of limited-edition charitable merchandise like rolls of wrapping paper,snow globes,boxed holiday cards,and reusable shopping bags designed by Dana-Farber patients,in which 50%of the purchase prices benefits St.Jude or Dana-Farber.In Fiscal 2024,HomeGoods launched Find Home Anywhere,its commitment to helping people feel a sense of belonging no matter where life takes them.As part of this program,HomeGoods partners with both Dana-Farber and St.Judes to help patients and their families feel a sense of home and belonging.For example,HomeGoods continues to support the Pediatric Patient Assistance Program at Dana-Farber by providing HomeGoods Housing Grants to patient families who are facing financial challenges during treatment.In addition,HomeGoods has begun collaborating with Dana-Farber on a dedicated and welcoming space for adolescent and young adult patients,while also supporting research focused on how to best care for young patients everywhere./32 /CommunitiesIntroductionWorkplaceEnvironmentGovernance&IntegrityReportingResp.Sourcing2024 Global Corporate Responsibility Report/33 /TJX has long partnered with organizations committed to helping empower women and enrich their lives.We support programs that provide services ranging from help for those fleeing domestic violence,to others that offer education,training,and job placement resources.TJ Maxxs Maxx You Project is an ongoing initiative that aims to support women in expressing their full selves.In Fiscal 2024,TJ Maxx provided funding to Save the Children to help support women and caregivers through a variety of
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PUMA Annual Report 2023 Sustainability 30 SUSTAINABILITY Foreword Anne-Laure Descours,CSO 31 Awards and Recognitions 34 PUMAs FOREVER.BETTER.Sustainability Strategy 35 Sustainability Organisation and Governance Structure 36 Most Material Aspects 42 Scope of the Report 48 Due Diligence and Risk Assessment 49 Human Rights 53 Fair Income 79 Health and Safety 89 Environment 94 Climate 104 Chemicals 133 Water and Air 142 Plastics and the Oceans 153 Circularity 156 Products 165 Biodiversity 177 Environmental Key Performance Data 184 Reporting in Accordance with the EU Taxonomy Regulation 188 Index for Combined Non-financial Report and GRI content 198 KPMG Assurance Statement 205 PUMA Annual Report 2023 Sustainability 31 FOREWORD ANNE-LAURE DESCOURS,CSO In 2023 we started preparing our sustainability vision for 2030 by asking our most important partners and internal decision-makers to give us feedback on the sustainability topics that are most relevant for PUMA.The results are included in the materiality assessment published in this report.In parallel,we accelerated the implementation of our FOREVER.BETTER.Sustainability Strategy,making progress towards achieving our 10FOR25 targets in Climate Action,Circularity,and Human Rights.From a products and materials perspective,we produced eight out of ten products*according to our PUMA Sustainability Index,which means these products are made with materials that are classified as preferred fibres by Textile Exchange or originate from certified sources.In 2023,99.7%of all leather was sourced from Leather Working Group-certified tanneries,99.2%of all cotton was sourced from Better Cotton licensed farms or recycled and 99.4%of all paper and cardboard packaging was FSC-certified or recycled paper and cardboard.In Circularity,we expanded take-back programmes in three new countries.Meanwhile,almost 65%of the polyester used for our apparel and accessories products came from recycled materials.We also started to scale up the use of recycled cotton,which reached 8.6%in 2023.We published the results of our RE:SUEDE project,an experiment to turn a new version of our iconic Suede sneaker,into compost(under tailor-made industrial composting conditions)and expanded our RE:FIBRE programme to transform textile waste and other used materials into new textiles.During the Womens World Cup in Australia,the Swiss National Team played in RE:FIBRE jerseys,and our club partners re-ANNE-LAURE DESCOURS CHIEF SOURCING OFFICER(CSO)*Excluding products produced by PUMA Group company stichd and PUMA United.For further details on the reporting scope,please refer to the Scope of the Report section.PUMA Annual Report 2023 Sustainability 32 launched the RE:FIBRE initiative by deploying new take-back bins in additional locations.Overall,46,000 RE:FIBRE garments were produced in 2023.To help fight climate change,we continued to source 100%renewable electricity for PUMAs own offices,stores,and warehouses,with either renewable electricity tariffs or renewable energy attribute certificates.We also invested over 2 million to electrify our PUMA car fleet and the first low carbon shipment tariffs with our logistics service provider Maersk were implemented for our most important sea freight routes between Asia and Europe.This has helped us to reduce our own carbon emissions by 85%(market-based,including the purchase of RECs)compared to our 2017 baseline,as well as our logistics emissions from sea freight by almost 50%compared to 2022.In our supply chain,recycled material was up to 22%of the total material used for our products.Our core suppliers continued to transition to renewable energy with large-scale rooftop solar PV installations,REC purchases,and to transition boiler fossil fuels to renewable fuels.As a result,we reduced our absolute Greenhouse Gas emissions(for Scope 3 category 1)by 30%compared to our 2017 baseline and our core suppliers used 22%of renewable energy.In 2023,PUMA joined Zero 100,a cross-sector membership-based research and intelligence organisation,to accelerate progress on Digital Supply Chain Transformation and the path to zero carbon emissions.On the social side,more than 222,000 factory workers received training on sexual harassment at work,achieving our target three years ahead of schedule.As a long-term signatory to the Bangladesh International Accord on Building and Fire Safety,we also joined Accord Pakistan and a pilot to establish an Employment Injury Scheme in Bangladesh.Collectively,our PUMA employees contributed 57,000 hours of community engagement work around the globe to support educational,women empowerment,environmental,and sports activities.Our efforts were recognised in several rankings and ratings such as the Corporate Human Rights Benchmark,the Platform Living Wage Financials Benchmark,Know the Chain,the Carbon Disclosure Project and being a finalist of the German Sustainability Award.Despite this recognition,there are still many areas for improvement.We need to further strengthen our efforts in Human Rights,Climate Action and Circularity.Following our Conference of the People in 2022,we created our Voices of a RE:GENERATION initiative.Empowering a cohort of four Young Voices to help PUMA identify key areas for improvement.Through various projects,the Voices are helping us to communicate in a way that resonates with the next generation,bringing new perspectives and challenging PUMA to think differently.The Voices have met several times with key players at PUMA to discuss the progress and challenges surrounding our FOREVER.BETTER.Sustainability Strategy and produced PUMA RE:GEN Reports;a podcast series created to engage and better communicate with the younger generation on PUMAs FOREVER.BETTER.10FOR25 targets.The Voices have also produced RE:HACKS(a social content series sharing tips with consumers on how to extend the lifespan of clothing and kicks).The Voices participated in our materiality assessment,giving input into what will shape PUMAs 2030 Sustainability Strategy.There is only one Forever Lets Make it Better.PUMA Annual Report 2023 Sustainability 33 HIGHLIGHTS OF 2023 We continued to implement our FOREVER.BETTER.Sustainability Strategy working towards our 10FOR25 sustainability targets.We also started preparing for the Corporate Sustainability Reporting Directive(CSRD)and of our next target cycle for 2030 with a new double materiality analysis.Eight out of ten PUMA products globally were made with a significant part of recycled or certified materials,such as better cotton or recycled polyester.In Circularity,we re-launched product take-back initiatives at selected stores of our major football club partners.At PUMA,we now operate take-back bins at our Headquarters Store in Germany as well as stores in the USA,China/Hong Kong,and Australia.We equipped the Swiss National Womens Football Team with jerseys made from our RE:FIBRE initiative for the Womens World Cup in Australia and launched product take-back bins at our stores in Switzerland.In Climate Action,we agreed on a new more ambitious science-based greenhouse gas reduction target with the Science Based Targets initiative(SBTi)and published our first Climate Action Transition Plan.We continued to power our own offices,stores,and warehouses with 100%green electricity(including purchase of RECs)and added 92 electric cars to our PUMA car fleet.We decreased the air-freight ratio for the transport of our products to under 0.5%and started using biofuels for the shipping of PUMA products from Asia to Europe.We decreased our absolute Scope 3 emissions from the category purchased goods and services by 30%from 2017 to 2023,our core suppliers used 22%of renewable energy and almost 62%of the polyester used in our products is recycled.In Human Rights,we made the payment of a fair wage a bonus relevant topic for PUMAs own staff and continued to track the payment of wages at our core suppliers.For our core supplier Tier 1 factories,the average payment is 12.7ove minimum wage.222,933 factory workers received training on sexual harassment and 83,089 were paid a living wage on average.Our PUMA employees donated 57,000 working hours to community engagement work and we continued to focus on diversity and inclusion,for example by increasing the percentage of women on our management board to 50%and by becoming a signatory of UN Women Empowerment Principles(UNWEPs).Finally,we appointed a Human Rights Officer and worked on a Human Rights Handbook for our employees to be published in 2024.In Biodiversity,we continued to partner with the Fashion Pact and Textile Exchange and supported the publication of a biodiversity landscape report for our industry.To ensure that the leather used for PUMA products does not contribute to deforestation,we joined the call to action launched by the Leather Working Group and Textile Exchange to source all bovine leather from deforestation-free supply chains by 2030 or earlier.Since 2022,almost all tanneries used for PUMA leather products have been certified by the Leather Working Group.For paper and cardboard,99.4%are either FSC-certified and/or recycled,to avoid any link to deforestation.PUMA Annual Report 2023 Sustainability 34 AWARDS AND RECOGNITIONS Our sustainability efforts continued to be recognised in several external rankings and recognitions.In 2023,PUMA maintained its triple-A rating from MSCI,achieved a“good”rating from the critical consumer labeling organisation“Good on You”,and achieved the highest score in the Platform Financials for Living Wages benchmark report and Corporate Human Rights Benchmark for our industry,and maintained an A rating from CDP.PUMA once again topped the FTSE4Good sector ranking.We received a prime rating from ISS and were included in the Corporate Knights Global 100 Most Sustainable Companies list for the third year in a row,leading the textiles and clothing peer group.PUMA also had the highest score among all sports brands in the S&P Corporate Sustainability Assessment.At the same time,we continued to receive critical feedback in reports issued by Stand Earth on the use of biomass as a replacement for coal in our supply chain,the Changing Markets Foundation on the dependence on oil as a raw material for synthetic fibres and components,Labor Behind the Label on working conditions in Pakistan,and Clean Clothes Campaign and Action Aid on the wage gap during the COVID-19 pandemic in Cambodia.We consider these critical remarks as we develop our sustainability standards,process and strategy.PUMA Annual Report 2023 Sustainability 35 PUMAS FOREVER.BETTER.SUSTAINABILITY STRATEGY Sustainability remains an integral part of the strategic priorities for PUMA under the leadership of our CEO Arne Freundt and our CSO Anne-Laure Descours.Our FOREVER.BETTER.Sustainability Strategy is based on our 10FOR25 targets,which were introduced in 2019 following an extensive materiality analysis and stakeholder dialogue.In 2023,we updated our materiality analysis in preparation for our new target cycle until 2030.The results confirm that the areas of Human Rights,Circularity,and Climate Action(including Biodiversity)were ranked as a high priority.Until the end of our 10FOR25 targets period,we will still report on the 10 target areas to improve our sustainability performance:Human Rights,Climate Action,Circularity,Products,Water and Air,Biodiversity,Plastics and the Oceans,Chemicals,Health&Safety as well as Fair Income.For each of these target areas,which reference the related United Nations Sustainable Development Goals(SDG),we have defined a minimum of three concrete targets,as well as key performance indicators to follow the progress we have made.With our FOREVER.BETTER.Sustainability Strategy,we continue our path to fully integrate sustainability into all our core business functions.Sustainability targets are part of the bonus arrangements for every member of our global leadership team,from the CEO to Team Heads.PUMAs Code of Conduct and our vendor compliance programme,which were introduced more than 20 years ago,are still the basis for any contractual relationship with manufacturers globally and remain the foundation of our responsible sourcing strategy and programme.We revised the Code in 2023 and will publish the new version in 2024.PUMA Annual Report 2023 Sustainability 36 SUSTAINABILITY ORGANISATION AND GOVERNANCE STRUCTURE PUMAs sustainability organisation is structured and governed in multiple ways:At the Supervisory Board level,with a Sustainability Committee.In 2023,we had several meetings to discuss the PUMA action plan related to the Corporate Sustainability Reporting Directive(including our plan to conduct a double materiality assessment in 2023).We had a deep dive discussion into Human Rights including PUMA work on fair income,responsible purchasing practices,the implementation plan of the German Supply Act and critical feedback received through NGO reports regarding factories working conditions.We also had a deep dive discussion into circularity,including PUMA programmes and projects update,and into Climate actions including our 2030 decarbonisation pathway plan.At the Management Board level,the responsibility for sustainability is assigned to the Chief Sourcing Officer(CSO).-There were several Management Board meetings in 2023 with dedicated sustainability updates and decision on topics like the 2022 sustainability target status and 2023 action plan,PUMAs action plan related to the German Supply Chain Act and Corporate Sustainability Reporting Directive(including our plan to conduct a double materiality assessment in 2023),new minimum wage negotiation development in Bangladesh and PUMAs position,circularity programmes and projects status and our 2030 decarbonisation pathway plan.-PUMAs CEO,the Chair of the Supervisory Board and the Works Council all participated in our materiality assessment,which will lay the foundations of our new Sustainability Strategy for 2030.-Our CSO has a monthly meeting with the Sustainability Leads for corporate and supply chain sustainability.Topics include Human Rights,Health and Safety,and chemical programmes,as well as climate and water projects in the supply chain.At the Functional Heads level,with an Executive Sustainability Committee.-The Executive Sustainability Committee comprises of all Functional Heads of the company,such as the People&Organisation,Sourcing,Finance,IT,Marketing,Risk Management,Investor Relations,Retail,Logistics and Legal Affairs.The committee met twice in 2023 to provide an update on sustainability programmes and approved the 2023 Sustainability Bonus Targets.At the Product level,with a Cross-Functional Business working group and monthly updates on PUMAs more sustainable product strategy and execution.At the Subsidiary level with nominated Sustainability Leads for each PUMA subsidiary(quarterly updates on PUMA Sustainability Strategy and performance,best practice sharing from individual subsidiaries).At the Sustainability Experts level,with a corporate sustainability department and a supply chain sustainability department.At the Legal and Compliance level,with a Human Rights Officer.In December 2023,PUMA appointed PUMA General Counsel Corporate Governance&Compliance as Human Rights Officer.The Human Rights Officer shall monitor PUMAs risk management system,risk analysis relating to Human Rights and compliance with Human Rights due diligence regulations.PUMA has a Health and Safety Committee that operates in the headquarters and conducts quarterly meeting.This committee regularly reviews existing reports on known health and safety risks,conducts frequent health and safety inspections and exchanges documentation on health issues and risks.The Global Director People&Organisation,who is part of the Health and Safety Committee,informs the Management Board of PUMA SE about relevant health and safety matters at least quarterly.PUMA Annual Report 2023 Sustainability 37 G.01 SUSTAINABILITY ORGANISATION CHART SUSTAINABILITY PERFORMANCE-RELATED REMUNERATION At PUMA,we link performance criteria in the remuneration of all leaders globally with clear and defined sustainability targets.The variable annual performance bonus is based on the achievement of PUMAs FOREVER.BETTER.Sustainability Strategy targets.All PUMA leaders globally,from the CEO to the Team Head level,have clearly defined sustainability targets as part of their annual performance bonus.These targets are aligned with PUMAs FOREVER.BETTER.Sustainability Strategy and focus on our 10FOR25 sustainability target areas:Human Rights,Climate Action,Circularity,and Health and Safety.The targets cover 10%of the overall bonus for members of the Management Board and 5%for other leaders globally.G.02 REMUNERATION CRITERIA BY WEIGHT 90%For management board95%5%For other leaders globallyESG relatedindicatorsFinancial indicatorsPUMA Annual Report 2023 Sustainability 38 T.01 2023 BONUS TARGETS Area Percentage of Bonus Corporate&Subsidiaries Target Sourcing&Supply Chain Target Human Rights 1.25%(2.5%)All PUMA employees are paid a living wage;2 hours community engagement per FTE No zero tolerance issues prevailing at year end 180,000 workers training on women empowerment Climate Action 1.25%(2.5%)30%of all cars in PUMAs car fleet hit the EU Taxonomy definition of a low-emission car (50%recycled or certified material 90%of our Footwear contains at least one component made of recycled or certified material Increase use of recycled polyester(Apparel and Accessories)to 75%by 2025 Relates to United Nations Sustainable Development Goal 12 KPIs:Percentage of Apparel and Accessories with 50%recycled or certified material Percentage of Footwear with at least one recycled or certified component Percentage of recycled polyester used in Apparel and Accessories The PUMA Environmental Profit and Loss Account(EP&L)attributes more than 50%of our environmental impact to material and raw material production.Against this background,we have decided to prioritize the large-scale use of certified or recycled raw materials.In our 10FOR25 strategy,we have set 100%targets for the raw materials of cotton,polyester,leather,and cardboard.In addition to measuring the use of recycled or certified materials,we also determine the percentage of all products made of such materials.As defined in our PUMA Sustainability Index,or S-Index,S-Index-approved apparel or accessories products contain at least 50rtified or recycled materials by weight.For footwear,we currently measure S-Index conformance by including one or more main components*made from certified or recycled materials.In 2021 we rolled out an e-learning toolkit on our PUMA S-Index for the PUMA family.The training allows designers,developers,and product managers to understand which materials qualify as more sustainable,how the PUMA S-Index is calculated,and which certifications need to be in place to externally communicate on a product level.In 2023,85%of our product by volume met our S-Index definition.We are on track to meet our goals of 90%for 2025.*Main component in the upper includes the visible upper and its components,linings,sockliner,and strobel as the only non-visible component.They can be made of textile,leather,synthetic(PU)or TPU.It excludes trims such as eyelets,laces,counters,decorations,etc.Main components in the bottom includes outsoles,midsoles,and insoles.They can be made of Rubber,PU,TPU,EVA.It excludes trims and decorations.PUMA Annual Report 2023 Sustainability 166 T.44 CERTIFIED OR RECYCLED PRODUCTS Product Category Styles 2023 Volume 2023 Target 2025 Apparel with at least 50rtified or recycled material 77cessories with at least 50rtified or recycled material 20%*90%Footwear with at least one certified or recycled component 89%Total 75%*Excluding products from stichd;for further details on the reporting scope please refer to the Scope of the Report section.In 2023 we continued to develop and design our collections and individual styles using recycled materials.Highlights include the use of our RE:FIBRE technology in our Teamsport jerseys.The jerseys made with RE:FIBRE are made from at least 95%of recycled textile waste and other used materials made of polyester.We also continued our Downtown collection from Sportstyle and accessories.The different styles in Downtown are made using 20-30%recycled cotton,while the accessories are made from at least 20%recycled content.Another highlight includes the scaling of our Caven shoe,which is made with at least 20%recycled materials in the upper and at least 10%recycled materials in the bottom.Our Downtown collection exceeded 1 million pieces in 2023 and we produced 3 million Caven shoes for the Spring Summer and Autumn Winter collections in 2023 combined.PUMA Caven contains at least 20%recycled content in the upper and 10%recycled content in bottom of the shoe.PUMA Annual Report 2023 Sustainability 167 PRODUCT LIFE CYCLE ASSESSMENT We continued the Life Cycle Assessment(LCA)studies of our product portfolios in 2023.The outcomes of an LCA act as a quantifiable measure of our efforts towards embedding sustainability in our products by exploring ways to make our product value chains safer,cleaner and more sustainable.It also encourages innovation in our products and processes so that we can meet increasing social and business expectations regarding sustainability and transparency.Sphera,a leading consulting organisation in the field of LCA,conducted LCA studies to consider all of the elements of the life cycle,from the overall manufacturing including supply of material and energy carriers through to the end of life,when analysing the environmental performance of the products.The LCAs were performed as per ISO 14040 and ISO 14044 requirements.A third-party critical review panel was commissioned to peer review the work and ensure compliance with the mentioned standards.LCA OF TWO PRODUCTS We completed a screening LCA study for two of our top products,the PUMA POPCAT 20 sandals,and the PUMA Smash v2L shoes,to map the environmental footprint of these products across their entire value chains(cradle to grave),excluding the consumer use phase.This helped us to understand the hotspots in the value chain(the maximum impacts in terms of climate,energy and water),and to identify sustainable options in various phases to improve the products environmental footprint.The results of the analysis can be summarised as follows:G.30 GLOBAL WARMING POTENTIAL 49.07i.61.37!.38%0.29%0.23%9.94%8.78%Sandals POPCAT20Shoes SMASH V2LManufacturingRaw MaterialEnd of LifeUse PhaseShoe PUMA SMASH V2 L,gross weight 0.955 kg/pair Sandal PUMA POPCAT 20,gross weight 0.381 kg/pair PUMA Annual Report 2023 Sustainability 168 For the POPCAT20 sandals,the global warming potential(GWP)in kg CO2e was mainly influenced by raw materials which include polyester fabric,chemicals etc.(49.07%),manufacturing energy(40.37%)and End of Life(9.94%).Ethylene Vinyl Acetate(EVA)and PU Synthetic are the major contributing materials.For the SMASHv2L shoes,the global warming potential(GWP in kg CO2e)was mainly influenced by materials which include body material,parts and components(69.61%),manufacturing energy(21.38%),and end-of-life(8.78%).Polyester fabric and rubber are the major contributing materials.Footwear usually does not require extensive cleaning during its lifetime,and hence the impact of the consumer use phase is negligible.Therefore,the GHG emissions of the use phase from both of the footwear is not considered.However,the end-of-life phase includes reuse,recycling,incineration,and landfilling based on European scenarios,which contributes to GWP impacts of 9.94%for the POPCAT20 sandals and 8.78%for the SMASHv2L shoes.G.31 PRODUCT ENVIRONMENTAL FOOTPRINT1-2 1 Primary energy is the energy that is harvested directly from natural resources:coal,oil,natural gas and uranium.2 Blue water is water that has been sourced from surface or groundwater resources and is either evaporated or incorporated into a product.For the POPCAT20 sandals,the total global warming potential is 1.61 kg CO2e.The total primary energy demand is 32.36 MJ with major contributions from ethylene vinyl acetate(EVA)(60.60%)and PU Synthetic(11.48%).The total blue water consumption is 31.02 kg with major contributions from the raw material PU Synthetic blend(51.85%)which contains 52%recycled polyester and 48%polyurethane.The remaining contribution comes from other materials,chemicals,electricity and fuel consumption.For the SMASHv2L shoes,the total global warming potential is 4.61 kg CO2e.The total primary energy demand is 90.38 MJ with major contributions from the polyester fabric(30.04%)and rubber(22.04%).The total blue water consumption is 41.33 kg with major contributions from PU-coated leather(33.41%).POPCAT 20 sandals have a significantly smaller(65%)carbon footprint than SMASH v2L shoes.One reason for this is the lower net weight of POPCAT 20,which is 60%lower.Looking at the carbon footprint of materials,in the case of POPCAT 20,64.5%of climate impact comes from the Ethylene Vinyl Acetate(EVA)while for Smash V2L,the majority of the impact comes from polyester and rubber,which accounts for 65.4%of the carbon footprint of the raw material of the product.This indicates that low-carbon material such as EVA has also contributed to the lower carbon footprint of POPCAT 20.Looking at energy consumption during 1.614.61SandalsPOPCAT20ShoesSMASHv2LClimate Changekg CO2e/product32.3690.38SandalsPOPCAT20ShoesSMASHv2L31.0241.33SandalsPOPCAT20ShoesSMASHv2LPrimary Energy Demand(Net)MJ/productBlue Water Consumptionkg/productPUMA Annual Report 2023 Sustainability 169 production,POPCAT 20 consumed 52%less electricity than SMASH v2L.This can be attributed to the lower net weight and the simplicity of the POPCAT 20 product design.Though the SMASH v2L has a larger carbon footprint than the POPCAT 20,it is much smaller(4.61 kg CO2e)when compared to previously conducted LCAs of footwear products in 2021 i.e.the Future Rider Play on (9.49 kg CO2e)and Velocity Nitro(7.6 kg CO2e).Both the Future Rider Play on and Velocity Nitro have a lower net weight of 0.78 kg and 0.72 kg as compared to the SMASH v2L which has a net weight of 0.955 kg/pair.The SMASH v2L is made of recycled materials such as recycled polyester,recycled PU,and recycled rubber along with recycled packaging materials and the quantity of leather used is much lower,which explains the lower carbon footprint when compared to the Rider Play on and Velocity Nitro.The key takeaways from the LCA study are,to make future footwear products lighter,increase the usage of low-impact materials such as recycled polyester or recycled PU and reduce the use of high-impact materials such as virgin PU and virgin polyester.The supply chain for footwear products is complex and involves multiple stages such as raw material extraction,processing,finishing,assembly,distribution and end of life.The LCA study is used to understand the value chain environmental impacts of our products.PUMA intends to use the outcomes of the study to raise internal awareness and improve the products environmental footprint by increasing the use of more sustainable materials(recycled or biosynthetic),improving resource efficiency,optimizing energy use,promoting renewable energy in the value chain,and enhancing the circularity of our products.COMPARATIVE LCA VIRGIN POLYESTER VS.PET RECYCLED POLYESTER VS.RE:FIBRE POLYESTER PRODUCTS In 2023,PUMA engaged Sphera,Inc.to conduct a comparative Life Cycle Assessment(LCA)of three types of sports jerseys made from virgin polyester,PET recycled polyester and RE:FIBRE,in our Turkey supply chain.The RE:FIBRE process uses mainly polyester material from factory offcuts,faulty goods and used clothes.PET recycled polyester comes from PET plastic bottles.The LCAs were performed using the“cradle to grave”approach.The objective was to quantify the environmental impacts associated with the production of these three types of jerseys using the LCA approach.The products studied were:The scope of this study includes raw material sourcing and extraction,transportation of raw materials to the manufacturing location,manufacturing of the jersey products,product distribution,product use phase and end of life(EoL)of product and packaging.PET recycled polyester jersey Net weight 0.964 kg(88%Mechanically Recycled Polyester and 12%Virgin Polyester)RE:FIBRE polyester jersey Net weight 0.904 kg(57%Chemically Recycled Polyester,34%Mechanically Recycled Polyester,and 9%Virgin Polyester)Virgin polyester jersey Net weight 1.316 kg(100%Virgin Polyester)PUMA Annual Report 2023 Sustainability 170 The LCA study indicates that per kg,the PET recycled polyester jersey has the smallest carbon footprint(13.19%lower as compared to virgin polyester jersey)among the three products compared in the study.Whereas,per kg,the RE:FIBRE polyester jersey has a 7.31%lower Global Warming Potential(GWP)impact when compared to the virgin polyester jersey.The RE:FIBRE polyester jersey has 57%chemically recycled fibre which has a higher GWP impact as compared to mechanically recycled fibre but a lower one than virgin recycled fibre.The total primary energy demand also exhibits a similar trend,due to same factor as the carbon footprint.The PET recycled polyester jersey and RE:FIBRE Polyester Jersey are 16.15%and 12.13%lower respectively per kg than the virgin polyester jersey.The LCA study also indicates that,the water consumption per kg of PET recycled polyester jersey and RE:FIBRE polyester jersey is 1.10%and 2.82%higher than per kg value of the virgin polyester jersey.Although textile-to-textile technology currently has a larger environmental footprint than mechanical recycling,through the RE:FIBRE programme,PUMA is keen to address the challenge of textile waste via a long-term solution for recycling.The technology also looks to diversify the fashion industrys main source of recycled polyester in garments to make it less reliant on clear plastic bottles.We also believe that this technology has room to become more energy efficient in future.Managing waste has become a necessity,which is why PUMA is ramping up its investment into resource-efficient manufacturing processes in a move to reduce textile waste.Textile waste build-up in landfills is an environmental risk.Rethinking the way we produce and moving towards a more circular business model is one of the main priorities of our Sustainability Strategy.To help make the technical process of RE:FIBRE more digestible for the everyday consumer who wants to know more,PUMA has created a RE:FIBRE process explainer video,which can be accessed here.The four-step process of RE:FIBRE:Collect and Sort:collecting and sorting textile waste and other previously wasteful materials.Shred and Mix:shredding and mixing the collected materials Dissolve,Filter and Polymerize:Dissolving the shredded polyester and removing dyes through a chemical recycling process.Melt,Spin,Knit and Sew:The melting makes the newly produced polymers ready to be spun and sewn into shape to create good as new RE:FIBRE fabric which can be recycled again and again.PUMA Annual Report 2023 Sustainability 171 G.32 ENVIRONMENTAL FOOTPRINT OF POLYESTER JERSEYS1-2 1 Primary energy is the energy that is harvested directly from natural resources:coal,oil,natural gas and uranium.2 Blue water is water that has been sourced from surface or groundwater resources and is either evaporated or incorporated into a product.COMPARATIVE LCA OF 3 TYPES OF COTTON FABRIC PUMA engaged Sphera to conduct a comparative Life Cycle Assessment(LCA)of one kilogramm of 100%virgin piece dyed cotton fabric,75/25 virgin/undyed recycled piece dyed cotton fabric and 75/25 virgin/coloured recycled piece dyed cotton fabric.Piece dyed fabric is fabric made of grey yarns which are dyed,and is different to yarn dyed fabric:a fabric that is knitted using dyed yarn.LCAs are performed using the“cradle to gate”approach.Since this is the“cradle to gate”approach,consumer use phase and fabric end-of-life impacts for the cotton fibre products were not considered in this LCA study.The main objective of the study is to quantify the environmental impacts associated with the production of these fabrics across various life cycle stages of the manufacturing process,including the supply of raw materials and energy carriers.The primary data considered for the study was collected from three PUMA suppliers stretched across two regions,Bangladesh(two factories)and Turkey(one factory).The data collected includes data for all the production processes such as collection and pre-processing,yarn spinning,knitting and inspection,pre-treatment,dyeing,compacting and drying.The LCA study indicates that for one kg of 75/25 virgin/undyed recycled piece dyed cotton fabric,the carbon footprint is 5.83%smaller compared to the 100%virgin piece dyed cotton fabric.This change was mainly influenced by the inclusion of 25%undyed recycled cotton material.For 1 kg of 75/25 virgin/coloured recycled piece dyed cotton fabric,the carbon footprint was smaller by 13%when compared to the 100%virgin piece dyed cotton fabric.This change was mainly influenced by the inclusion of 25%coloured recycled piece dyed cotton fabric.When comparing these three fabrics,the environmental impacts of 75/25 virgin/coloured recycled piece dyed cotton fabric were found to be the lowest.This is due to the usage of 25%recycled yarn which is recovered from a coloured fabric and hence requires fewer chemicals and less energy during the dyeing process.22.4619.4920.81Climate Changekg CO2e/kg of product606.31508.39532.79964.28974.88991.49Primary Energy Demand MJ/kg of productBlue Water Consumptionkg/kg of productGWPPEDBWCPET Recycled Jersey Virgin Polyster Jersey RE:FIBRE Polyester Jersey PUMA Annual Report 2023 Sustainability 172 G.33 ENVIRONMENTAL FOOTPRINT OF COTTON FABRICS Additionally,it was found that the most significant carbon footprint impact is related to the conventional dyeing of fabric followed by the impacts of cotton cultivation and yarn spinning.Primary energy demand is largely driven by the cultivation of cotton,followed by conventional dyeing of fabric.Water consumption is largely driven by cotton cultivation followed by conventional dyeing,compacting and drying processes.In the study,we also evaluated the environmental impacts of different types of dyeing technologies such as conventional and Pad-Steam dyeing processes for the three types of fabrics.The Pad-Steam process is a textile finishing technique used to apply chemicals or dyes to fabric.It is a combination of two steps:padding and steaming.This process is employed to achieve uniform coloration,improved fabric properties,and enhanced performance characteristics.This study was conducted at a factory located in Turkey that uses both technologies.Conventional dyeing for knitted products is typically a batch process in which the fabric is loaded along with water,chemical and dyestuffs and processed for a fixed number of hours based on the type of fabric.Whereas,Pad-Steam dyeing is a continuous dyeing process,in which the fabric is dyed by immersing the fabric in the dye solution for a few seconds,immediately pressed through a roller and then steamed.Pad-Steam dyeing is more resource-efficient as compared to conventional dyeing.This was further corroborated by our LCA study.Pad-Steam dyeing was found to have a smaller environmental footprint than conventional dyeing.It was observed that the Pad-Steam dyeing process has 81.9%less energy and 80.5%less water consumption as compared to the conventional dyeing process.It was found that Pad-Steam dyeing for 100%virgin piece dyed cotton fabric has a 34.8%smaller carbon footprint as compared to conventional dyeing.The corresponding figure for 75/25 virgin/undyed recycled piece dyed cotton fabric was 36.9%and 25.02%for 75/25 virgin/coloured recycled piece dyed cotton fabric.Similar trends were also observed for primary energy demand and water consumption.The LCA study clearly indicates that the inclusion of recycled cotton fabrics has a smaller environmental footprint and hence is to be promoted for future product development.However,there are currently technological limitations surrounding increasing recycled cotton to more than 25%in a cotton fabric mix.This calls for a focus on future innovation in this area.Furthermore,our suppliers could adopt better dyeing technologies such as the Pad-Steam dyeing process which has a smaller environmental footprint.8.678.167.53Climate Changekg CO2e/kg of Fabric190.81170.42160.201,216.26942.48912.84Primary Energy Demand MJ/kg of FabricBlue Water Consumptionkg/kg of FabricGWPPEDBWC75/25 Virgin/Undyed RecycledPiece Dyed Cotton FabricVirgin Piece DyedCotton Fabric 75/25 Virgin/Coloured RecycledPiece Dyed Cotton FabricPUMA Annual Report 2023 Sustainability 173 MATERIAL ORIGIN Mapping and assessing risk and impact practices in the lower tiers of the supply chain helps us to identify opportunities for improvement.COTTON In 2023,we sourced approximately 34,000 tons of cotton.To reach our 100%targets for certified or recycled cotton,we require our suppliers to only source cotton from farms that are licensed or certified as having good farming and human rights standards,or recycled cotton.96%of the cotton used in PUMA products comes from the USA,Brazil,Australia,India,Bangladesh,Vietnam,Indonesia and Turkey.LEATHER In 2023,we sourced approximately 3,500 tons of bovine leather.We are working on improving the traceability of the leather we use by recording the traceability score of our leather manufacturers certified by the Leather Working Group.The leather used in PUMA footwear mainly comes from the USA(61%),Argentina(27%),Australia(6%)and Brazil(5%).We also monitor our LWG(Leather Working Group)medal-rated tanneries traceability performance.Most suede tanneries work with agents and intermediaries besides direct tanneries to guarantee a stable sourcing supply.Suede is a byproduct of the full-grain leather business.This creates a challenge to full traceability.This explains why our suede leather LWG tanneries have a worse traceability performance than full-grain LWG tanneries.We aim to increase all of our LWG medal-rated tanneries traceability performance over time.MATERIAL CONSUMPTION DATA G.34 CERTIFIED OR RECYCLED MATERIALS DEVELOPMENT1-2 1 Cotton and polyester including apparel and accessories material(including trims)2 Proliferation for 2023 based on actual data in January-September 2023 and previous data October-December 2022 As in previous years,a significant percentage of our materials can be attributed to cotton either from the Better Cotton Initiative,recycled or organic cotton,to polyester that is either bluesign or OEKO-TEX-certified,recycled or bio-based polyester,and to leather sourced from Leather Working Group(LWG)-certified tanneries or recycled leather.In addition,we only use down feathers certified by the Responsible Down Standard and 84%of our man-made cellulosic(MMCF)is made by green shirt-rated MMCF suppliers with a proven track record on sustainability based on the Hot Button report from the NGO Canopy.0102030405060708090100201520162017201820192020202120222023YearCottonPolyesterCardboardLeatherPUMA Annual Report 2023 Sustainability 174 Therefore,more than 87%of our apparel,40%of our accessories and 93%of our footwear products are already classified in line with the definition in our PUMA Sustainability Index.Coverage and calculations are more complex for footwear because all of our shoes are made from several components.The main materials we use are polyester,polyurethane,rubber,leather and nylon.In line with our earlier targets,we have achieved 99.7%coverage of leather sourced from LWG-certified tanneries.In 2023,99.2%of the cotton used came from certified or recycled sources,as did 85%of our polyester.We hardly used wool in 2023(6,566 kg).Nevertheless,we see an increased number of factories certified in line with the Responsible Wool Standard(RWS).We organised a RWS training for our in-scope suppliers in June 2023,and the positive results were shown by the six RWS-certified factories in our supply chain.We aim to reach 100rtified wool in 2025.T.45 DEVELOPMENT OF CERTIFIED OR RECYCLED MATERIAL USAGE*Cotton Apparel Accessories Footwear Total Better Cotton 90.6#.2%8.0.3%Recycled 8.6.7%1.6%8.6%Organic 0.3%0.3%0.3%Conventional 0.6Y.7.5%0.9%Polyester Apparel Accessories Footwear Total Recycled 68.4).3V.5a.8%Oekotex/bluesign 30.3T.5%8.1#.3%Sorona 0.1%0.2%0.1%Conventional 1.2.25.2.8%Manmade cellulosics Apparel Accessories Footwear Total Green Shirt-rated fiber producers*82.4r.7overo 12.7%0.7.3%Conventional 4.90.0.3.0%Polyamide(nylon)Apparel Accessories Footwear Total Recycled 26.4.2%2.0.3%Oekotex/bluesign 70.88.2.9F.9%Conventional 2.8%1.6.23.8%PUMA Annual Report 2023 Sustainability 175 Leather Apparel Accessories Footwear Total LWG medal-rated tannery 99.96.7%Recycled 0.04%0.04%Conventional 100.0%0.22%Rubber Apparel Accessories Footwear Total Synthetic 34.7R.6.9.0%Natural 65.32.5%1.2%1.9%Recycled 15.0%4.9%5.1%PU Apparel Accessories Footwear Total Recycled 2.4%1.5%2.4%2.4%Oekotex/bluesign 93.4%0.8%Water-based 0.02%1.1%1.0%Bio-based 0.4%0.4%Conventional 4.3.48.1.4%Down Apparel Accessories Footwear Total RDS certified 1000%*Figures include trims and exclude licensee production as well as production from stichd.For further details on the reporting scope,please refer to the Scope of the Report section.*Green Shirt-rated fiber producers,as set by the annual Canopy Hot Button report,encourage existing fiber suppliers to commit to CanopyStyle and a Canopy Audit.T.46 CERTIFIED OR RECYCLED MATERIALS BY PRODUCT DIVISION*2023 2025 target Apparel Certified or recycled cotton 99.40rtified or recycled polyester 98.80rtified or recycled MMCF 95.10rtified or recycled PU 95.7%NA Accessories Certified or recycled cotton 40.30rtified or recycled polyester 83.80rtified or recycled MMCF 0.00rtified or recycled leather 0.00rtified or recycled PU 1.5%NA PUMA Annual Report 2023 Sustainability 176 Footwear Certified or recycled cotton 9.50rtified or recycled polyester 64.80rtified or recycled MMCF 0.70rtified or recycled leather 1000rtified or recycled PU 3.9%NA L&P paper/cardboard products*Recycled and/or FSC-certified 99.40%*Figures include trims and exclude licensee production as well as production from stichd.For further details on the reporting scope,please refer to the Scope of the Report section.*Including outer cardboard boxes,which were excluded in previous years.In 2023,the total number of GRS/RCS certified factories has increased to 159 from 145 in 2022.This indicates a higher uptake of recycled material due to the launch of more sustainable products in our product mix.In 2023,we saw an increased number of factories certified by the Responsible Wool Standard.T.47 NUMBER OF FACTORIES WITH CERTIFICATION1 Number of factories certified GRS/RCS GOTS OCS RDS RWS LWG Apparel&Accessories Tier 1 and Tier 2 128 30 23 6 6 NA Footwear Tier 1 and Tier 2 31 0 1 NA 1 NA 32 Gold Leather Tanneries 4 Silver 1 GRS:Global Recycling Standard,RCS:Recycled Claim Standard,OCS:Organic Content Standard;GOTS:Global Organic Content Standard;RDS:Responsible Down Standard,RWS:Responsible Wool Standard,LWG:Leather Working Group.PUMA Annual Report 2023 Sustainability 177 BIODIVERSITY TARGET DESCRIPTION:Support the industry in setting a science-based target for biodiversity 100%cotton,leather and down procured from certified sources(shared target)Zero use of exotic skins and hides Relates to United Nations Sustainable Development Goals 14 and 15 The worlds biodiversity experts agreed to conserve 30%of the worlds land and oceans by 2030.Biodiversity is also inextricably linked to climate change.Consequently,we have dedicated one of our 10FOR25 sustainability target areas to biodiversity.Most of PUMAs biodiversity impact is based in the supply chain,particularly to the usage of agricultural raw materials.However,we also include biodiversity checks in our annual environmental data collection for our own offices,stores and warehouses around the globe.BIODIVERSITY POLICY As part of the Fashion Pact,we are committed to supporting the development of science-based targets related to biodiversity.In 2021 we published the PUMA biodiversity policy and animal welfare policy-signed off by our Board of Management-to create a framework for our approach to biodiversity and animal welfare.These policies are available for download on our website.This includes our commitments:as a supporting partner of the CanopyStyle initiative,to only source our viscose from Green Shirt-rated suppliers in order to protect endangered forests and species.to source the leather used in PUMA products solely from manufacturers who implement industry best practice standards of environmental management and traceability,such as the leather working group.to source all our paper and paper-based packaging from recycled sources and/or Forest Stewardship Council-certified sources.PUMA acted as a partner of Canopys Pack4Good initiative to collectively reduce any risk of sourcing from ancient and endangered forests by 2022 and promoting next-generation solutions.At PUMA we care for the welfare of animals.We do not use animal products which originate from animals that have been treated inhumanely.Therefore,we aim to implement high welfare and traceability standards and have published an Animal Welfare Policy.PUMA consults animal protection organisations on a regular basis to review our policies and actions.As a sign of our commitment to animal welfare,we joined the Fur Free Retailer programme and phased out the use of kangaroo leather in 2023.PUMA Annual Report 2023 Sustainability 178 BIODIVERSITY IN OUR OWN OPERATION We checked via our annual environmental reporting campaign and confirmed that none of our PUMA sites are located within a protected area.We have identified one site in South Africa,as being located next to a protected area,which holds a rare species of the plant,Renosterveld Finbos.This site is an office location,and is fenced off from the protected area,so any negative impact on these plants can be ruled out.There are green roofs which offer additional habitats for insects as well as wildflower meadows and beehives on our headquarters in Herzogenaurach,as well as on our(outsourced)German central logistics centre.BIODIVERSITY IN OUR SUPPLY CHAIN Many species,including plants,animals,bacteria and fungi are being threatened with extinction due to human activities such as deforestation,putting Earths biodiversity at risk.Apparel supply chains are directly linked to soil degradation,conversion of natural ecosystems and waterway pollution.Two-thirds of apparel shoppers say that limiting the impact on climate change is now more important to them now than before COVID-19(McKinsey:Biodiversity The next frontier in sustainable fashion).PUMA is a signatory to the Fashion Pact,a global initiative of companies in the fashion and textile industry(ready-to-wear,sport,lifestyle and luxury),all committed to a common core of key environmental goals in three areas mitigating global warming,restoring biodiversity and protecting the oceans.Biodiversity loss and climate change are interdependent and mutually reinforcing.For example,protecting forests could help reduce greenhouse gas emissions.In turn,the rise of global temperatures increases the risk of species becoming extinct.In 2019 PUMA published its science-based emissions target(SBT)with the SBT Coalition and joined the Fashion Pact.In 2023 an updated and 1.5 degree aligned science-based emissions target was approved for Scope 1 and 2 by SBT Coalition.Please see the Climate section of this report to find out about our climate action and progress.T.48 SUSTAINABLY SOURCED NATURAL MATERIALS Sub-targets 2023*2022*2021 Target 2025 Science Based Target(SBT)Fund Biodiversity Landscape Report Fund Biodiversity Landscape Report Joined Fashion Pact activities on biodiversity SBT set Cotton(BCI*and/or recycled)99.2.90%Leather(LWG-certified tanneries)99.70.90%Down(RDS-certified)100000%Sustainably sourced viscose/MMCF 8480rdboard and paper(FSC and/or recycled)99.4%*99.4%*99%(product packaging supply chain)100%*Including trims and excluding licensee production*Better Cotton Initiative(BCI)principle:Biodiversity and Land Use is one of the seven Better Cotton Principles and Criteria.Management practices address identifying and mapping biodiversity resources,identifying and restoring degraded areas,enhancing populations of beneficial insects,ensuring crop rotation and protecting riparian areas.*Including outer cardboard Most of the negative impact on biodiversity comes from three stages in the value chain raw material production,material preparation and processing,and end of life.PUMA Annual Report 2023 Sustainability 179 To mitigate the risk of biodiversity loss due to the production process,we address environmental pollution risk through our targets and supplier programmes related to climate,chemicals,water and air.In 2021 we developed roadmaps for water and waste,which can be found in the Water and Air,and Circularity sections of this report.In 2022 we developed a biodiversity roadmap using the Fashion Pact Biodiversity Strategy Tool Navigator that is in line with SBTN recommendations.At cotton farming level,Regenerative Agriculture practices aim to reduce the impact of production on soils and promotes soil health by restoring the soils organic carbon.Through our partnership with Better Cotton,we support regenerative cotton farming practices.BCI farmers have to follow these two principles,among others:Care for the health of soil:This principle requires farmers to develop a Soil Management Plan.The plan should include practices that contribute to maintaining and enhancing soil structure and soil fertility,and continuously improving nutrient cycling.Enhance biodiversity and use land responsibly:This principle requires Better Cotton farmers to adopt a Biodiversity Management Plan to conserve biodiversity on and around their farm.This plan includes regenerative farming practices such as ensuring crop rotation,which helps with soil regeneration.BIODIVERSITY ROADMAP Scope:Cotton,Leather,Rubber,Paper,MMCF,Synthetics,Wool Below are some key focus areas for the coming years.Some measures were implemented in 2022 and 2023 and are covered in this report.Raise awareness:We see the need to raise awareness internally and will be developing an e-learning on biodiversity for our staff.We also see the need to increase the awareness of our consumers.We aim to maintain transparency to keep a strong relationship with stakeholders while providing information about biodiversity actions.In 2022,PUMA sponsored the Biodiversity Landscape Analysis Report as an opportunity to foster collaboration and knowledge-sharing in biodiversity.Together with Textile Exchange,Conservation International and the Fashion Pact,the Biodiversity Landscape Analysis Report aims to provide a common reference point on the topic of biodiversity in the textile industry,and to offer concrete pathways for brands and retailers to deepen their engagement.The report,which was published in 2023 intends to help companies of all sizes and maturities to begin or continue their biodiversity journey.Knowledge of impact:We will explore traceability tools and conduct impact assessments,starting with leather and rubber.We collect material and packaging consumption data on an annual basis for the country of origin.For example,only a small percentage of the total leather used in PUMA products originates from South America,where deforestation is occurring at a rapid pace.Our EP&L identifies how the environmental impact is distributed along our value chain,for example,land use change per country,material type and tier level.The potential financial impact on land use was estimated to be approximately 100 million in our 2023 EP&L.Internal action:We will define a KPI to be included in a supplier scorecard(environmental and chemical)and set biodiversity targets as well as traceability targets,starting with leather.We set goals to reach 100%cotton,leather,viscose,paper packaging and down-procured from certified sources in 2025.Both cotton farming and cattle ranching require extensive land use and are known to reduce biodiversity,99.2%of cotton used in PUMA products is BCI or recycled cotton.99.7%of the leather used in our foot-wear is sourced from Leather Working Group(LWG)medal-rated tanneries.Leather traceability is a first step towards reducing deforestation.We monitor our LWG medal-rated tanneries traceability performance and have joined the LWG Traceability working group.We partner with the NGO,Canopy,a Canadian non-profit organisation with the mission to protect the worlds forests,species and climate,and to help advance indigenous communities rights.We aim to ensure that our sourcing of man-made cellulosic materials(such as viscose)as well as paper and cardboard,does not contribute to de-forestation.99.4%of our paper packaging is either recycled and/or FSC-certified.We commit to sourcing PUMA Annual Report 2023 Sustainability 180 100%of our viscose from suppliers committed to reducing the risk of sourcing from ancient and endangered forests.In 2023,84%of viscose was sourced from Green Shirt-rated suppliers.We hardly used wool(6,566 kg in 2023),but we have initiated Responsible Wool Standards certification.We aim to reach 100rtified responsible wool by 2025.Collaboration and partnership:PUMA joined the Fashion Pact,a global coalition of companies in the fashion and textile industry that is committed to stopping global warming,restoring biodiversity and protecting the oceans.PUMA joined the Fashion Charter,and committed to sourcing 100%of priority materials as preferred materials by 2030(material for which no natural ecosystems are converted or deforested).In 2021 we engaged with Canopy,who helped us develop our policy on forest protection.We also engaged with Canopys initiatives:CanopyStyle and Pack4good.Through these initiatives,we started investigating the next generation of raw materials with a focus on biobased materials,such as wheat straw,as a partial substitute for paper in our shopping paper bags.BIODIVERSITY RISK ASSESSMENT In 2023,we conducted a biodiversity risk assessment for our key raw materials such as cotton,polyester and leather.For cotton and polyester,we used the Materials Impact Explorer tool provided by Textile Exchange.For leather,we used the Biodiversity Risk and Impact Dashboard of Fashion Pact.PUMA is currently taking steps to mitigate biodiversity risks and address environmental pollution risks through our targets and supplier programmes related to the climate,chemicals,water and air.We evaluated the environmental risk of rubber using the EiQ platform from Elevate.EiQ is a data-driven supply chain Environmental,Social,and Governance(ESG)due diligence platform used by businesses to enhance ESG risk management.The environmental risk encompasses water use,non-GHG air pollutants,terrestrial ecosystem use,soil pollutants,solid waste and water pollutants.We also mapped our sourcing of these materials by country.For cotton and polyester,we mapped our material consumption by country of origin using the Materials Impact Explorer tool to evaluate the potential impact on biodiversity in terms of changes in the state of nature(quality or quantity)which may result in changes to the capacity of nature to sustain social and economic functions.We also evaluated the risk of dependency in terms of environmental assets and ecosystem services that an organisation relies on to function.The dependency risk rating for recycled cotton and recycled polyester is not applicable as per the tool used.The outcome of the assessment is summarised below.The risk profile of a few countries from which PUMA is sourcing cotton and polyester is not available in the tool.However,such countries represent less than 5%of our sourcing volume for cotton and 13%for polyester.As a next step,we will look at a collaborative approach and join programmes with third-party initiatives to understand governance challenges.Cotton:In 2023,we sourced 63%of cotton from the USA,followed by Brazil(15%)and Australia(8%).These three countries have high a risk rating for potential impact.4%of cotton is sourced from India which a very high-risk country.In terms of dependency risk,the USA,Brazil and Australia are categorised as high-risk countries,whereas India is categorised as a very high-risk country.We have required our suppliers to source only cotton grown in farms that are licensed as having good farming and human rights standards or recycled cotton from factories that are either Global Recycled Standard(GRS)or Recycled Claim Standard(RCS)certified in 2025.PUMA is taking steps to mitigate the biodiversity risks associated with the cotton sourcing.These include the adoption of BCI cotton,increased usage of recycled cotton,focusing on innovation to increase the share of recycled cotton in our products,conducting Life Cycle Assessment of products and materials to evaluate PUMA Annual Report 2023 Sustainability 181 environmental impact in different lifecycle stages and engaging with textile exchange to stay informed on industry best practices.We collect material consumption data on an annual basis along with the country of origin and require our suppliers to keep all the supportive documentation at disposal.We have also established an on-going due diligence programme with our partner laboratory in Germany where we regularly test samples of cotton finished garments before shipment.This further strengthens traceability and control across our supply chain,from the raw material to the finished products.Through our partnership with Better Cotton,we support regenerative cotton farming practices.Better Cotton Soil Health principles require farmers to develop a Soil Management Plan.The plan should include practices that contribute to maintaining and enhancing soil structure and soil fertility,and continuously improving nutrient cycling.Better Cotton Biodiversity principles require Better Cotton farmers to adopt a Biodiversity Management Plan to conserve biodiversity on and around their farms.This Plan includes regenerative farming practices such as ensuring crop rotation,which helps with soil regeneration.Biodiversity loss and climate change are interdependent and mutually reinforcing.Protecting forests,for example,could help reduce greenhouse gas emissions.Through our partnership with Better Cotton,we also support cotton farmer producers for climate-friendly practices,Better Cotton has set the goal of reducing greenhouse gas emissions by 50%per ton of Better Cotton lint produced by the end of the decade.In 2023,the share of BCI cotton was 90%and recycled cotton made up 8.6%of all cotton sourced by PUMA.Polyester:We sourced 79%of our polyester from China in 2023,followed by Taiwan 9.2%and Vietnam 7.4%.We sourced both virgin polyester and recycled polyester from China,whereas we sourced only recycled polyester from Taiwan and Vietnam.China has a very high-risk rating in terms of the potential impact of virgin polyester.Recycled polyester is rated as medium risk irrespective of country of origin by the Textile Exchange tool.In terms of risk related to dependency,China,Turkey,South Korea,Japan and Indonesia are rated as very high-risk countries for virgin polyester whereas the USA and Germany are considered as high-risk countries.However,apart from China,we source a negligible volume(around 1%)from high,and very high-risk countries.We have required our suppliers to source only polyester-certified to Bluesign/Oekotex,or recycled polyester from factories that are either Global Recycled Standard(GRS)or Recycled Claim Standard(RCS)certified in 2025.PUMA has joined the Textile Exchange polyester challenge,since our 2025 goal of 75%recycled polyester is aligned with this challenge.While most of our recycled polyester to date has been made from PET bottles,PUMA launched the innovative RE:FIBRE programme,and can repurpose collected textile waste and other used materials to create new textiles.We engaged our core fabric manufacturing plants in energy efficiency programmes and are helping them to transition to 25%renewable energy processing in 2025.We monitor and report chemical discharges,and work to eliminate pollutant chemicals.In 2023,we sourced a bio-based,high-performance polyester fibre known as Sorona,which constitutes 0.11%of our total polyester consumption.Sorona contains over 20%bio-based carbon,which helps reduce the environmental impact without sacrificing quality and performance.Sorona is produced using a fermentation process which utilizes corn sugar as the main ingredient.Leather:The Fashion Pact Dashboard allows us to assess overall risk in terms of biodiversity loss and land use area.However,biodiversity risk specific to leather usage by a brand or company cannot be evaluated by using this dashboard.We plan to explore a more specific tool for leather in future.PUMA Annual Report 2023 Sustainability 182 In 2023,we sourced 61%of our leather from the USA,followed by Argentina(27%),Australia(6%)and Brazil(5%).The risk assessment indicates that the USA has a risk rating of very high for land use impact and high risk for biodiversity loss,while Argentina has a very high-risk rating for land use impact and a medium risk rating for biodiversity loss.Australia has a medium-risk rating for both impact categories while Brazil has very high-risk rating for both impact areas.PUMA is taking several steps to mitigate the biodiversity risks associated with leather sourcing.These include sourcing leather from LWG-rated tanneries,setting goals for sourcing deforestation-free leather,and focusing on innovation in the development of recycled and other bio-based alternatives.We engage with Fashion Pact,Textile Exchange and the Leather Working Group to remain updated about industry best practices.We have committed to sourcing all the bovine leather used in our products from verified deforestation-free supply chains by 2030 or earlier launched by global non-profits Textile Exchange and the Leather Working Group.The initiative aims to create equitable,transparent,and deforestation-free leather supply chains.The cross-sector initiative is aimed at galvanizing brands into action to end the deforestation and conversion of natural ecosystems linked to leather sourcing.In doing so,it looks to protect wildlife habitats and biodiversity,preserve carbon stocks to mitigate climate change,and protect human rights.Close to 100%of the leather that PUMA currently sources comes from Leather Working Group-certified tanneries.This means that the leather used in PUMA products comes from manufacturers who are working to implement industry best practices of environmental management and traceability.PUMA currently monitors its LWG medal-rated tanneries upstream traceability performance.However,around 76%of the leather used at PUMA is suede,a byproduct of the full-grain leather business.The challenge faced currently by PUMA and others in the industry is that most suede tanneries work with agents and intermediaries alongside direct tanneries,to guarantee a stable supply which creates a challenge to have full traceability at the cattle ranch level.Our innovation team has worked to address the technological limitations of a shoe designed for composting and launched the RE:SUEDE experiment.In 2022,500 participants were asked to wear their RE:SUEDEs for six months before returning them to PUMA for the next stage of the experiment.A total of 412 pairs of worn RE:SUEDEs were returned to PUMA and sent to our industrial composting partner Valor Composting a family business that takes a different approach to waste.We discovered that it is possible to turn the RE:SUEDE into Grade A compost under specific industrial conditions provided by Ortessa.RE:SUEDE is mainly made up of zeolite-tanned suede leather,hemp fibres,biodegradable TPE and organic cotton.The zeolite tanning process is an innovative approach to in tanning chemicals,which use mineral zeolite and is free from toxic substances such as chrome,heavy metal and aldehyde.We will continue to innovate with our partners to determine the infrastructure and technologies needed to make the process viable for a commercial version of the RE:SUEDE,including a take-back scheme,in 2024.Synthetic Rubber:We sourced,74%of our synthetic rubber from China,followed by Vietnam 14%and South Korea 4%.China and South Korea are high-risk countries,while the risk profile for synthetic rubber from Vietnam is not available on the EiQ platform.High risks are Greenhouse Gas emissions,water use and solid waste.We have not yet mapped the manufacturing plants supplying synthetic rubber to our outsole manufacturers.As part of our 10FOR25,we work on developing recycled materials as alternatives to rubber.In 2023,5%of synthetic rubber was recycled.We engage our strategic outsole suppliers in Higg FEM(environmental performance tool measurement which includes energy use and greenhouse gas emissions,water use,wastewater,emissions to air and waste management)and work with them to eliminate pollutant chemicals.PUMA Annual Report 2023 Sustainability 183 Natural Rubber:In 2023,we sourced 29%of natural rubber from Vietnam,followed by Brazil 25%,Pakistan 13%,and Thailand 5%.Vietnam is categorised as an extreme risk country,while risk profiles for natural rubber from Brazil,Pakistan and Thailand are not available on the EiQ platform.The main high risks are water use and impact on ecosystem.In 2023,only 2%of the rubber used in our products was natural rubber.We aim in future to only source FSC certified rubber.FSC certification include adopting standards to maintain,conserve,and/or restore the ecosystem and environmental values of managed forests and avoid,repair,or mitigate negative environmental impacts.G.35 PUMA CDP FOREST SCORE PUMAs CDP Forestry score improved from C in 2021 to B-in 2022.Until the end of January,2024,we retained our B-score.PUMAs rating is better than the average performance of the sector(textile and fabric goods)which has an average rating of C.The overall global average rating stands at C.For more information,please visit the CDP website.T.49 E-KPIS-PAPER1-4 *Including paper bags,office paper and cardboard consumption*Including outer cardboard boxes 1 PUMA figures include PUMA owned or operated offices,warehouses and stores.Includes our own production sites in Argentina.All other production is outsourced to independent supplier factories,some warehouse operations are outsourced to independent logistics providers.Franchised stores are excluded.2 PUMA production figures include core Tier 1 supplier factories,Apparel,Footwear&Accessories(54 factories)and core Tier 2 supplier factories,Leather,PU and Textiles(40 factories).3 Data includes extrapolations or estimates where no real data could be provided.4 Methodological changes over the last three years have influenced results.C2020C2021B-2022Paper(tons)2023 2022 2021 2020 2019 2017%Change 2023/2022%Change 2023/2017 Paper and cardboard consumption PUMA*5,374 5,021 4,152 2,638 2,281 2,756 7rtified or recycled paper and cardboard consumption PUMA 4,911 4,393 3,306 1,848 1,818 2,025 123%Percentage of certified or recycled paper consumption 91pt%Paper and cardboard consumption from PUMA production(shoe boxes,hangtags)25,602*30,656*19,670*18,538 14,863 14,129-16.5.2%Percentage of certified or recycled paper and cardboard consumption from PUMA production 99%*99%*88%*990%n/a PUMA Annual Report 2023 Sustainability 184 ENVIRONMENTAL KEY PERFORMANCE DATA The PUMA Environmental Profit and Loss Account,or EP&L,calculates the environmental impact of PUMAs activities in financial terms across six categories from raw material production to the PUMA store.While the EP&L is not a precise measurement tool,it helps to show the categories and stages of the value chain in which the impact is greatest and therefore gives a good indication of where we should focus our efforts.The EP&L methodology,was developed in 2011 by PWC and Truecost,and later refined by Kering with the help of PWC.It mainly relies on material input and spending data.Over the last years,we have added primary data for our Tier 1 and Tier 2 suppliers and developed specific EP&L emission factors for major materials used,such as Better Cotton.However,we are still in the process of fully aligning our EP&L methodology for Tiers 3 and 4 with internal and external standards.As a result,the table below differs from our Scope 3 emission calculation in the Climate section and also results in a high water value for Tier 3 due to some wet processing for leather and polyester being attributed to Tier 3.We will continue to work on the alignment of methodologies to strengthen the EP&L as a valuable risk assessment and information tool.G.36 EP&L RESULTS 2023 Air pollutionGHG emissionLand useWasteWater useWater pollutionTier 0OwnoperationsTier 1ProductmanufacturingTier 2ComponentmanufacturingTier 3Raw materialprocessingTier 4Raw materialproduction2%9(H%TotalEP&L Value 2023:415 million103!%40%PUMA Annual Report 2023 Sustainability 185 G.37 EP&L TREND 2020 2023 From our EP&L results,we can conclude that the production(48%)and processing of raw materials(28%)is responsible for the vast majority of the environmental impact from a process point of view,while greenhouse gas emissions(33%),water pollution(22%)and land use(21%)are responsible for over half of all environmental impact measured by the EP&L in terms of impact categories.This confirms our strategy of transitioning to the use of low-impact materials at scale,while focusing on the reduction of greenhouse gas emissions across our supply chain.The EP&L trend over the last years shows that the EP&L value is growing slower than sales.This means that while the overall impact was growing,we were able to reduce the EP&L value relative to sales.In 2023,we achieved an absolute reduction.PRODUCT/MATERIAL-RELATED E-KPIS We have been measuring the average environmental key performance indicators(E-KPIs)from Textile and Leather manufacturing(Tier 2)and Apparel and Footwear manufacturing(Tier 1)since 2017.In 2023,the Greenhouse Gas emissions KPIs reduced across the product divisions,both Tier 1 and Tier 2,except for the footwear division,where it almost remained stable(increase by 0.2%)as compared to 2020.CO2 emissions per piece of garment reduced by 23.2%;per square metre of leather produced,CO2 emissions have reduced by 40.7%and per ton of textile produced,CO2 emissions reduced by 9.2%.This was mainly achieved due to various climate actions initiated as described in the report.The participation of core suppliers in cleaner production and renewable energy programmes,installation of rooftop solar projects,switching from coal to biomass,and the purchase of RECs are the main contributor for these reductions achieved in Greenhouse Gas emissions.In 2023,water consumption per pair/square metre reduced for footwear by 21.5%and 4.9%for textile as compared to the baseline of 2020 mainly due to the implementation of water efficiency measures including water recycling plants by a few textile mills towards the end of 2022.However,the water KPI increased for apparel by 9.4%,and for leather by 11.7%.For apparel,production reduced by 15%as compared to 2020(which is 33%reduction from 2022).Most of the apparel factories use water for domestic purposes and hence water consumption depends on the number of workers.In 2023,the market environment and increased inventory levels resulted in a need for more cautious procurement from 44153054941501,0002,0003,0004,0005,0006,0007,0008,0009,00010,00001002003004005006007008002020202120222023EP&L ValueRevenuePUMA Annual Report 2023 Sustainability 186 our suppliers,so the number of workers in core apparel factories decreased by 9%and production fell by 15%resulting in higher water consumption per piece of apparel as compared to 2020.Out of five leather factories,two were new core factories and have not participated in resource efficiency programmes.One of the tanneries in China has relatively high water consumption as they process raw hide in-house,whereas other leather tanneries process wet blue leather(tanned leather,but not dried,dyed nor finished).Also,one tannery in Vietnam started tracking and reporting rainwater usage in 2023.In 2023,production waste to landfills decreased by 87.4%for apparel and by 64.7%for the footwear division as compared to the 2020 baseline.This is mainly due to the adoption of better waste disposal practices by our suppliers and being able to achieve diversion from landfill.We also observed that factories were able to track and report waste data more accurately.T.50 FOOTWEAR E-KPI RESULTS(TIER 1)Value 2023 2022 2021 2020 2019 2018 2017 Change 2020-2023 Number of suppliers Energy/pair(kWh)1.63 1.36 1.41 1.31 1.30 1.25 1.40 24.8! CO2/pair(kg)0.75 0.7 0.68 0.74 0.96 0.93 1.00 0.2%Water/pair(L)11.8 9.6 11.9 15.1 15.2 12.3 14.5-21.5%Waste/pair(g)122 134 141 145 127 109 116-15.6%Waste to landfills/pair(g)8.36 12.3 19.0 23.7-64.7%T.51 APPAREL E-KPI RESULTS(TIER 1)Value 2023 2022 2021 2020 2019 2018 2017 Change 2020-2023 Number of factories Energy/piece(kWh)0.58 0.52 0.55 0.56 0.57 0.57 0.72 4.5 CO2/piece(kg)0.17 0.19 0.20 0.22 0.24 0.26 0.31-23.2%Water/piece(l)5.03 3.83 4.23 4.60 4.39 4.20 7.58 9.4%Waste/piece(g)60.7 58.2 62.3 54.3 56.3 46.5 44.0 11.8%Waste to landfills/piece(g)0.33 2.66 2.40 2.64-87.4%T.52 LEATHER E-KPI RESULTS(TIER 2)Value 2023 2022 2021 2020 2019 2018 2017 Change 2020-2023 Number of factories Energy/SqM(kWh)7.37 7.55 6.46 7.05 8.19 8.65 9.10 4.5%5 CO2/SqM(kg)1.61 2.34 1.89 2.72 3.21 3.16 3.39-40.7%Water/SqM(L)76.4 56.9 60.9 68.3 74.7 90.20 91.80 11.7%Waste/SqM(kg)0.67 0.60 0.50 0.68 0.78 0.85 1.56-1.4%PUMA Annual Report 2023 Sustainability 187 T.53 TEXTILES E-KPI RESULTS(TIER 2)Value 2023 2022 2021 2020 2019 2018 2017 Change 2020-2023 Number of factories Energy/ton(kWh)14,320 13,122 13,394 13,049 12,636 13,387 13,679 9.72 CO2/ton(T)4.06 4.54 4.58 4.47 4.37 4.45 4.45-9.2%Water/ton(m3)98.3 98.5 98.7 103 106 123 119-4.9%Waste/ton(kg)276 289 121 78.9 62.1 70.6 300 250.0%For tables on E-KPI results,the values for November and December 2023 were estimated by employing the Exponential Smoothing(ETS)algorithm in Microsoft Excel,utilizing data from January to October of 2023.This approach was chosen after comparing it to alternative methods,considering its performance against actual historical data,specifically in terms of deviation from the actual values in percentage terms.The ETS method displayed both higher accuracy and higher precision compared to other methods,such as averaging the last 10/12 months or multiplying the estimated production by the average KPI(per production unit)from the 12 months of data spanning from November 2021 to October 2022.PUMA Annual Report 2023 Sustainability 188 REPORTING IN ACCORDANCE WITH THE EU TAXONOMY REGULATION TAXONOMY OBJECTIVES The Taxonomy Regulation(EU)2020/852(in the following“the Taxonomy”)entered into force on 22 June 2020.The purpose of this regulation is to provide a definition of what constitutes a sustainable economic activity and to redirect capital flows into companies that are aligning their business models towards such sustainable economic activities.To achieve this goal,companies must report on the proportion of“environmentally sustainable”revenues,investments(capital expenditure)and operating expenses.The focus of the Taxonomy lies on 6 environmental objectives:Climate change mitigation Climate change adaptation Sustainability and protection of water and marine resources Pollution prevention and control Protection and restoration of biodiversity and ecosystems Transition to a circular economy The Taxonomy has identified eligible economic activities that substantially contribute to each of these environmental objectives.Linked to these eligible activities are technical screening criteria as well as do no significant harm criteria and minimum safeguards that define whether the activity is considered sustainable or not(aligned).Delegated Regulation(EU)2021/2178 as of July 6,2021 on the climate objectives(climate change mitigation(Annex I)and climate change adaptation(Annex II)(“the Climate Delegated Act”),was published in the Official Journal on December 9,2021 and entered into force on January 1,2022(EU)2021/2139).Further delegated acts for the remaining objectives were published in 2023,namely EU 2022/1214(Complementary Climate DA),EU 2023/2485(amending EU 2021/2139),EU 2023/2486(targets three to six),C(2023)3850(Amended Climate DA)and C(2023)3851 Environmental DA(targets three to six).DISCLOSURE REQUIREMENTS FOR NON-FINANCIAL UNDERTAKINGS According to Article 2 of the Climate Delegated Act and Article 8 of the Taxonomy any undertaking subject to the Non-Financial Reporting Directive(NFRD)must provide information on“environmentally sustainable”revenues,investments(capital expenditure)and operating expenses(OpEx).According to Article 10 of the Climate Delegated Act undertakings must disclose the proportion of Taxonomy-eligible and Taxonomy non-eligible economic activities in their total turnover,capital expenditure and operational expenditure.The eligibility of an activity implies that an activity is included in the Climate Delegated Act.Whether an activity is Taxonomy-eligible or not says nothing about the sustainability of that activity.Being Taxonomy-eligible is merely an indication that a certain activity makes a substantial contribution to one of the six environmental objectives of the Taxonomy.From January 1,2023,the disclosure must also include information on taxonomy alignment,meaning only activities that are included in the“environmentally sustainable share”of the three performance indicators.An economic activity is environmentally sustainable if it:makes a significant contribution to the achievement of one or more environmental goals(significant contribution,SC)PUMA Annual Report 2023 Sustainability 189 does not result in significant harm to one of more of the environmental objectives(do no significant harm,DNSH)is carried out in compliance with a defined minimum level of protection(minimum safeguards,MS)and complies with technical screening criteria(TSC)of Annex I and Annex II.TAXONOMY-ELIGIBILITY OF PUMAS ECONOMIC ACTIVITIES IN RESPECT TO THE ENVIRONMENTAL OBJECTIVES OF THE EU TAXONOMY The technical screening criteria in Annex I and Annex II of Delegated Regulation(EU)2021/2139 of June 4,2021 for the first two environmental objectives,namely climate change mitigation and climate change adaptation,do not list any business activities that are linked to the production and sale of footwear,apparel and accessories.This means that PUMAs business activities so far do not qualify as contributing substantially to climate change mitigation or climate change adaptation.Further technical screening criteria were published as Annexes I,III and IV of Delegated Regulation(EU)2023/2486(supplementing EU 2020/852)of June 27,2023,for the remaining environmental objectives,namely sustainable use and protection of water and marine resources,pollution prevention and control as well as restoration of biodiversity and ecosystems.Likewise,these do not list any business activities that are linked to the production and sale of footwear,apparel and accessories.For the remaining environmental objective published as Annex II,the transition to a circular economy,activities related to apparel are listed,but are limited to sales generated by services such as repair,remanufacturing or refurbishment,preparation for reuse,sale of second-hand goods,or product as a service business models,none of which are not part of PUMA current revenue generating activities.As mentioned in the Circularity section of this report,PUMA and its partners are piloting fibre to fibre recycling technology and take-back systems.However,those activities have not generated any significant Taxonomy-eligible or aligned sales under the definition of Annex II and had a project status in 2023.Therefore,PUMAs business activities in this regard are not considered Taxonomy-eligible(so far).Since PUMA does not have any economic activities related to nuclear power or power generation from gas,PUMA will not report the related standard forms from the Delegated Act(EU 2022/1214).ELIGIBLE CAPITAL EXPENDITURE PUMA understands that the Taxonomy and the Climate Delegated Act as well as the Environmental Delegated Act including its Annexes nonetheless requires non-financial undertakings with non-Taxonomy eligible economic activities to report on the part of the capital expenditure related to the purchase of output from Taxonomy-aligned economic activities and individual measures enabling target activities to become low-carbon or to lead to greenhouse gas reductions.In this regard PUMA reviewed so-called cross-cutting activities that are not directly related to PUMAs primary business activity and are not revenue-generating for PUMA but still are of relevance to support PUMAs sustainability efforts.Taxonomy-eligible capital expenditure could be identified with regard to“Transport”and“Real Estate Activities”.The key figures are determined based on Delegated Regulations(EU)2020/852,2021/2139 and 2021/2178 as well as 2023/2385 and 2023/2086 in conjunction with the accounting policies to be applied to the consolidated financial statements.To avoid double counting,expenditure has been allocated to only one economic activity.PUMA Annual Report 2023 Sustainability 190 In 2023 PUMA made investments in several buildings,including:A new solar PV station in Germany(planned completion in 2024)New charging stations in Germany Office space in Argentina The technical screening criteria of Annexes I and II define a taxonomy-aligned investment in buildings only for those buildings that are ranked among the top 15%of their regional building stock in terms of Primary Energy Demand(PED).Since there is no precise definition of this 15%,for example in terms of area covered or primary energy demand per m2,and as the rental of buildings is not material to PUMAs business performance in terms of CO2 emissions,we have decided to report the Taxonomy-aligned investment in buildings for 2023 as zero.This does not mean that PUMA is not investing in lowering CO2 emissions from its own entities.As described in the Climate section of this report,our Scope 1 and 2 emissions have been reduced by 85%compared to our baseline in 2017,mainly through green electricity tariffs or renewable energy attribute certificates.In 2023 PUMA also invested in charging stations for electric cars,which do fall under the taxonomy alignment criteria for climate mitigation.The total investment in these charging stations was 241 TEUR(2022:79 TEUR).Furthermore,PUMA started to invest in additional solar PV capacity at its headquarters in Germany.The investment in 2023 came to 262 TEUR(no investment in 2022).As part of PUMAs 10FOR25 sustainability targets,PUMA is transitioning its car fleet to more sustainable transport vehicles.Therefore,in 2023 PUMA invested in the lease of 92 low or zero emission vehicles(2022:64 vehicles).Unlike buildings,the technical screening criteria for CO2 emissions for taxonomy alignments are clearly defined as below 50 g CO2/km.We can confirm that 92 cars added to our car fleet are Taxonomy-aligned with the technical screening criteria based on their CO2 emission footprint,equalling an investment of over 2,000 TEUR(2022:1,521 TEUR)Considering the do-no-significant harm criteria of tires for passenger cars,not all those cars can be considered as fully Taxonomy-aligned,as many of the standard tires used for our new electric cars from Tesla,Volkswagen,Hyundai,Mercedes and BMW do not fulfil the criteria for noise emissions.As a result the reported Taxonomy-aligned investment in vehicles for the year 2023 is 408 TEUR(2022:372 TEUR).The total capital expenditure(IAS 16,38 and IFRS 16)of the PUMA Group amounts to 599,874 TEUR for the year 2023(2022:669,382 TEUR).The eligible capital expenditure related to“Transport”amounts to 7,930 TEUR(2022:5,427 TEUR)and the amount related to“Real Estate Activities/Other”is 336,500 TEUR(2022:376,996 TEUR).The Taxonomy-aligned capital expenditure from investment in solar PV,low or zero emission cars and charging stations for electric cars was 910 TEUR(2022:372 TEUR).ELIGIBLE OPERATIONAL EXPENDITURE PUMA understands that the Taxonomy and the Disclosure Delegated Regulation(EU 21/2178)nonetheless asks non-financial undertakings with non-Taxonomy eligible activities to report on the part of the operational expenditure related to the purchase of output from Taxonomy-aligned economic activities and individual measures enabling the target activities to become low-carbon or to lead to greenhouse gas reductions.PUMA Annual Report 2023 Sustainability 191 Due to the nature of our business model,which is the design,development,marketing and sale of footwear,apparel and accessories,the eligible operational expenditure is not material in the context of the environmental objectives of the Taxonomy,therefore the numerator of our taxonomy-eligible operational expenditure is zero.For the denominator,Article 2,Section 1.1.3.1.of Annex 1 the Climate Delegated Act asks for reporting on the total operational expenditure derived from the categories“research and development,building renovation measures,short-term lease,maintenance and repair and any other direct expenditures related to the day-to-day servicing of assets of property,plant and equipment by the undertaking or third party to whom activities are outsourced that are necessary to ensure the continued and effective functioning of such asset.”The total operational expenditure from these categories amounts to 113.4 TEUR(2022:103.6 TEUR)for the 2023 financial year.OUTLOOK At PUMA,we will continue the transition of our car fleet to low or zero emission vehicles in those countries where the charging infrastructure can support running an electric car fleet.We also plan to continue investing in te renewable energy capacity of the buildings we own.In addition,we will explore the activities listed under“Transition to a circular economy”to assess their technical and financial viability over the next years.PUMA Annual Report 2023 Sustainability 192 Proportion of turnover from products or services associated with Taxonomy-aligned economic activities disclosure covering year 2023 Substantial contribution criteria DNSH criteria(Does Not Significantly Harm)Economic Activities Code Turnover Proportion of turnover Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Minimum Safeguards Proportion of Taxnomy-aligned(A.1)or eligible(A.2)turnover,year 2022 Category enabling activity Category transitional activity Currency()%Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N%E T A.TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities(Taxonomy-aligned)Taxonomy-aligned environmentally sustainable activities performed by PUMA 0 0 N/EL N/EL N/EL N/EL N/EL N/EL n.a.n.a.n.a.n.a.n.a.n.a.n.a.0 Turnover of environmentally sustainable activities(Taxonomy-aligned)(A.1)0 0 0 0 0 0 0 0 n.a.n.a.n.a.n.a.n.a.n.a.n.a.0 Of which enabling 0 0 0 0 0 0 0 0 n.a.n.a.n.a.n.a.n.a.n.a.n.a.0 Of which transitional 0 0 0 0 0 0 0 0 n.a.n.a.n.a.n.a.n.a.n.a.n.a.0 A.2 Taxonomy-eligible but not environmentally sustainable activities(not Taxonomy-aligned activities)Taxonomy-eligible environmentally sustainable activities performed by PUMA 0 0 N/EL N/EL N/EL N/EL N/EL N/EL n.a.n.a.n.a.n.a.n.a.n.a.n.a.0 Turnover of Taxonomy-eligible but not environmentally sustainable activities(not Taxonomy-aligned activities)(A.2)0 0 0 0 0 0 0 0 n.a.n.a.n.a.n.a.n.a.n.a.n.a.0 PUMA Annual Report 2023 Sustainability 193 Substantial contribution criteria DNSH criteria(Does Not Significantly Harm)Economic Activities Code Turnover Proportion of turnover Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Minimum Safeguards Proportion of Taxnomy-aligned(A.1)or eligible(A.2)turnover,year 2022 Category enabling activity Category transitional activity Currency()%Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N%E T A.Turnover of Taxonomy eligible activities(A.1 A.2)0 0 0 0 0 0 0 0 n.a.n.a.n.a.n.a.n.a.n.a.n.a.0 B.TAXONOMY-NON-ELIGIBLE ACTIVITIES Turnover of Taxonomy-non-eligible activities 8,601,699,000 100 TOTAL 8,601,699,000 100 PUMA Annual Report 2023 Sustainability 194 Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities disclosure covering year 2023 Substantial contribution criteria DNSH criteria(Does Not Significantly Harm)Economic Activities Code CapEx Proportion of CapEx,2023 Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Minimum safeguard Proportion of Taxonomy aligned(A.1)or eligible(A.2)CapEx,2022 Category enabling activity Category transitional activity Currency()%Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N%E T A.TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities(Taxonomy-aligned)Activity 1:Installation,maintenance and repair of charging stations for electric vehicles in buildings(and parking spaces attached to buildings)(7.4)F42,F43,M71 240,000 0.04 Y Y N/EL N/EL N/EL N/EL Y n.a.n.a.n.a.n.a.n.a.Y 0.01 E Activity 2:Installation,maintenance and repair of renewable energy technologies(7.6)F42,F43,M71 262,000 0.05 Y Y N/EL N/EL N/EL N/EL Y n.a.n.a.Y Y n.a.Y 0 E Activity 3:Transport by motorbikes,passenger cars and light commercial vehicles(6.5)N77.11 408,000 0.07 Y Y N/EL N/EL N/EL N/EL Y Y n.a.Y Y n.a.Y 0.04 E CapEx of environmentally sustainable activities(Taxonomy-aligned)(A.1)910,000 0.16 0.16 0.16 0 0 0 0 Y Y n.a.Y Y n.a.Y 0.05 Of which enabling 910,000 0.16 0.16 0.16 0 0 0 0 Y Y n.a.Y Y n.a.Y E Of which transitional 0 0 0 0 0 0 0 0 n.a.n.a.n.a.n.a.n.a.n.a.n.a.T PUMA Annual Report 2023 Sustainability 195 Substantial contribution criteria DNSH criteria(Does Not Significantly Harm)Economic Activities Code CapEx Proportion of CapEx,2023 Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Minimum safeguard Proportion of Taxonomy aligned(A.1)or eligible(A.2)CapEx,2022 Category enabling activity Category transitional activity Currency()%Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N%E T A.2 Taxonomy-eligible but not environmentally sustainable activities(not Taxonomy-aligned activities)Activity 1:Acquisition and ownership of buildings(7.7)L68 335,998,000 60.01 EL EL N/EL N/EL N/EL N/EL 56.31 Activity 2:Transport by motorbikes,passenger cars and light commercial vehicles(6.5)N77.11 7,522,000 1.34 EL EL N/EL N/EL N/EL N/EL 0.77 CapEx of Taxonomy-eligible but not environmentally sustainable activities(not Taxonomy-aligned activities)(A.2)343,520,000 61.36 61.36 61.36 0 0 0 0 57.09 A.CapEx of Taxonomy eligible activities(A.1 A.2)344,430,000 61.52 61.52 61.52 0 0 0 0 57.13 B.TAXONOMY-NON-ELIGIBLE ACTIVITIES CapEx of Taxonomy-non-eligible activities 215,444,000 38.48 42.87 TOTAL 559,874,000 100 PUMA Annual Report 2023 Sustainability 196 Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities disclosure covering year 2023 Substantial contribution criteria DNSH criteria(Does Not Significantly Harm)Economic Activities Code OpEx Proportion of OpEx,2023 Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Minimum safeguard Proportion of Taxonomy aligned(A.1)or eligible(A.2)OpEx,2022 Category enabling activity Category transitional activity Currency()%Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N%E T A.TAXONOMY-ELIGIBLE ACTIVITIES A.1 Environmentally sustainable activities(Taxonomy-aligned)Taxonomy-aligned environmentally sustainable activities performed by PUMA 0 0 N/EL N/EL N/EL N/EL N/EL N/EL n.a.n.a.n.a.n.a.n.a.n.a.n.a.0 OpEx of environmentally sustainable activities(Taxonomy-aligned)(A.1)0 0 0 0 0 0 0 0 n.a.n.a.n.a.n.a.n.a.n.a.n.a.0 Of which enabling 0 0 0 0 0 0 0 0 n.a.n.a.n.a.n.a.n.a.n.a.n.a.0 Of which transitional 0 0 0 0 0 0 0 0 n.a.n.a.n.a.n.a.n.a.n.a.n.a.0 A.2 Taxonomy-eligible but not environmentally sustainable activities(not Taxonomy-aligned activities)Taxonomy-eligible environmentally sustainable activities performed by PUMA 0 0 N/EL N/EL N/EL N/EL N/EL N/EL 0 OpEx of Taxonomy-eligible but not environmentally sustainable activities(not Taxonomy-aligned activities)(A.2)0 0 0 0 0 0 0 0 0 A.OpEx of Taxonomy eligible activities(A.1 A.2)0 0 0 0 0 0 0 0 0 PUMA Annual Report 2023 Sustainability 197 Substantial contribution criteria DNSH criteria(Does Not Significantly Harm)Economic Activities Code OpEx Proportion of OpEx,2023 Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Climate change mitigation Climate change adaptation Water Pollution Circular Economy Biodiversity Minimum safeguard Proportion of Taxonomy aligned(A.1)or eligible(A.2)OpEx,2022 Category enabling activity Category transitional activity Currency()%Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y;N;N/EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N%E T B.TAXONOMY-NON-ELIGIBLE ACTIVITIES OpEx of Taxonomy-non-eligible activities 113,400,000 100 TOTAL 113,400,000 100 PUMA Annual Report 2023 Sustainability 198 INDEX FOR COMBINED NON-FINANCIAL REPORT AND GRI CONTENT This report constitutes a separate combined non-financial report in accordance with Sections 289b to 289e and 315b,315c in conjunction with Sections 289c to 289e of the German Commercial Code(HGB).This consolidated combined non-financial report consists of the Sustainability and Culture subsections in the Our Peoplesection as well as“Compliance Management System”and“Corporate Social Responsibility”in the chapter“Corporate Governance Statement in accordance with Section 289f and Section 315d HGB”.The reporting period covered is from January 1,2023 to December 31,2023.No restatements of information have been made in this report.We have provided separate reports for PUMA SE and the PUMA Group within the“Our People”section only.Separate reporting of other sustainability data would not add any meaningful new information or value and would require significant additional resources,so we have omitted it here.Information about PUMAs business model is set out in the Financial section of this Annual Report.We have not identified any most significant non-financial performance indicators according to Article 289c,section 3,number 5 of the German Commercial Code(HGB).PUMA engaged KPMG AG Wirtschaftsprfungs-gesellschaft to perform a“limited assurance”audit of the combined sustainability report with a focus on accordance with the German CSR Implementation Act(CSR-RUG).Since 2003 PUMAs sustainability reports are based on the guidelines of the Global Reporting Initiative(GRI),which developed detailed and widely recognised standards on sustainability reporting.PUMA SE has prepared this report with reference to the GRI Standards GRI 1:Foundation 2021.This option enables us to report on the impacts related to our economic,environmental,social and governance performance.It includes topics that are material to PUMAs business and our key stakeholders,and that constitute our sustainability targets.These targets have been systematically developed in accordance with the feedback from PUMAs stakeholders.PUMA Annual Report 2023 Sustainability 199 GENERAL DISCLOSURES Location Pages GRI 2:General Disclosures 2021 2-1 Organisational details Commercial activities and organisational structure 214 2-2 Entities included in the organisations sustainability reporting Scope of the Report 48 2-3 Reporting period,frequency and contact point Index for combined non-financial report and GRI content,Imprint 198 2-4 Restatements of information Index for combined non-financial report and GRI content 198 2-5 External assurance Limited assurance report of the independent practitioner regarding the separate non-financial group report 205 2-6 Activities,value chain and other business relationships Commercial activities and organisational structure;Sourcing 214,220 2-7 Employees Our People;Employees 16,222 2-9 Governance structure and composition Description of the working practices of the management board and the supervisory board 254 2-10 Nomination and selection of the highest governance body Description of the working practices of the management board and the supervisory board 254 2-11 Chair of the highest governance body Description of the working practices of the management board and the supervisory board 254 2-12 Role of the highest governance body in overseeing the management of impacts Sustainability organisation and governance structure;Description of the working practices of the management board and the supervisory board 36,254 2-13 Delegation of responsibility for managing impacts Sustainability organisation and governance structure 36 2-14 Role of the highest governance body in sustainability reporting Sustainability committee 8 2-15 Conflicts of interest Diversity concept for the supervisory board 254 2-16 Communication of critical concerns Risk and opportunity report 255 2-17 Collective knowledge of the highest governance body Compensation System https:/ 2-19 Remuneration policies Description of the working practices of the management board and the supervisory board 254 2-20 Process to determine remuneration Description of the working practices of the management board and the supervisory board.Compensation System https:/ 254 PUMA Annual Report 2023 Sustainability 200 Location Pages GRI 2:General Disclosures 2021 2-21 Annual total compensation ratio Description of the working practices of the management board and the supervisory board.Compensation Report https:/ 254 2-22 Statement on sustainable development strategy CEO Letter;Foreword 5,31 2-23 Policy commitments https:/ 2-24 Embedding policy commitments PUMAs FOREVER.BETTER.Sustainability Strategy;Human Rights 35,53 2-25 Processes to remediate negative impacts Human Rights 67-78 2-26 Mechanisms for seeking advice and raising concerns Compliance management system 254 2-28 Membership associations Stakeholder outreach 38-41 2-29 Approach to stakeholder engagement Stakeholder outreach 38-41 2-30 Collective bargaining agreements Human Rights at own entities 53 MATERIAL TOPICS Location Pages 3-1 Process to determine material topics Most material aspects 42-44 GRI 3:Material Topics 2021 3-2 List of material topics Most material aspects 42-44 ANTI-CORRUPTION Location Pages 3-3 Management of material topics Relevant disclosures of c
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2023 Sustainability and Social Impact Report3 A Note From Our CEO4 About Us6 Materiality:Identifying PriorityAreas7 Our Approach:evoluSHEIN 8 Targets and Aspirations9 2023 ESG Highlights EQUITABLE EMPOWERMENT 12 Enable Self-Expression for All12 Putting Customers First:Our Commitment to Inclusivity14 Provide Access to Talent14 Uncovering Top Global Talent14 Clear Pathways to Growth15 Nurturing Feelings of Belonging16 A Culture of Shared Safety Responsibility17 Improve Lives in Communities17 Our Commitment to Human Rights18 Supply Chain Governance23 Empowering Our Suppliers23 Marketplace Seller Governance24 Empowering Communities WeReach24 Supplier Community Empowerment Program26 SHEIN X Designer Incubator Program:Discover,Design,Empower28 SHEIN Cares COLLECTIVE RESILIENCE 31 Decarbonize Our Supply Chain 31 Our Carbon Footprint 34 Source Responsible Materials 34 An Established System for Quality and Safety35 Quality and Durability35 Chemical Safety36 Sourcing Lower-Impact Materials37 evoluSHEIN by Design 39 Protect Biodiversity and Animal Welfare 39 Material Traceability39 Making a Commitment to Our Forests39 Animal WelfareWASTE-LESS INNOVATION 42 Optimize Resource Efficiency42 Tech-Driven Waste Reduction42 Conserving Water 43 Design Circular Systems 43 Building a Circular Ecosystem 44 Circular Production44 Engaging on Circularity45 Keeping Clothing in Circulation Longer45 Extended Producer Responsibility46 Accelerate Sustainable Innovation 46 The Test-and-Scale Approach46 Innovation at SHEIN48 ESG Governance Approach49 Responsible Business Practices50 United Nations Sustainable Development Goals52 Disclaimer and Forward-Looking Statements53 External AssuranceINTRODUCTIONPEOPLEPLANETPROCESSGOVERNANCEANNEXABOUT THIS REPORT Assurance for select information,to the limited assurance standard,by an external independent assurer as per International Standard on Assurance Engagements(ISAE)3000.Our commitment to the Ten Principles of the UN Global Compact and our progress against these principles.Welcome to our third annual Sustainability and Social Impact Report,where we share:Our environmental,social and governance(ESG)goals,progress and performance metrics for financial year 2023(Jan.1,2023 to Dec.31,2023).A detailed account of how our evoluSHEIN roadmap drives our environmental and social impact initiatives and how we are evolving for the future.Select information reported with reference to the Global Reporting Initiative(GRI)2021 Standard for certain report sections.Additional context,where relevant,is provided in our GRI Index.Table of ContentsINTRODUCTION A Note From Our CEOAbout UsMateriality:Identifying Priority AreasOur Approach:evoluSHEINTargets and Aspirations2023 ESG HighlightsPEOPLE PLANETPROCESSGOVERNANCE ANNEX22023 SUSTAINABILITY AND SOCIAL IMPACT REPORTA Note From Our CEOI am honored to present SHEINs third annual Sustainability and SocialImpact Report.As my team and I reviewed our progress this year,it prompted us to deeply reflect on the impact we have on the world aroundus.At SHEIN,our mission is to make the beauty of fashion accessible for all.However,we recognize that producing affordable apparel and delivering it quickly to our customers all over the world comes with significant challenges that we,along with the rest of the industry,must address.I am proud of our teams efforts to date in mitigating our environmental impact and promoting positive social change,but we acknowledge that we are still early in this journey and have much to improve.This report demonstrates our serious commitment to these responsibilities,which is backed by our dedication of substantial resources to addressing our biggest challenges.We are just getting started.SHEINs on-demand business model gives us a strong foundation to bring technology and efficiency to the traditional retail sector.Our technology-driven supply chain helps to reduce inventory waste,a critical driver for us to offer affordable prices to consumers.We strive to instill a mindset of waste minimization across our partner ecosystem,from initial design to the final product.We believe this on-demand model is not only our competitive advantage for delighting consumers but also key to mitigating our environmental impact.Since launching our evoluSHEIN social and sustainability strategy,we have taken fundamental steps in 2023 to drive progress towards our targets,enhance our governance systems,and build a network of partners to support our sustainability journey.Looking ahead,two areas will continue to be particularly critical for our team:further improving supply chain governance,and managing our carbon footprint,particularly in our Scope 3 emissions.On supply chain governance,we have continued to strengthen programs for both enforcement and empowerment.As signatories of the UN Global Compact(UNGC),we support the Ten Principles focused on human rights,labor,environment,and anti-corruption,and expect our suppliers to share our commitment to such principles.To address labor and human rights risks,we have tightened standards under our Supplier Code of Conduct and SHEIN Responsible Sourcing(SRS)Policy,and stepped up our supplier audit program,in partnership with third-party verification agencies,to ensure that our suppliers comply with our standards.Balancing remediation and penalization,we have supported our suppliers with training to address compliance risks within their operations,while taking the firm but necessary step to terminate working relationships where warranted.We also continue to invest in programs that support our suppliers in continually improving the wellbeing of their workers,their families,and their communities.On our carbon footprint and impact on the environment,we have continued our efforts to manage our impact across our value chain,and advance our circularity ambitions,leveraging our technological edge.We work directly with our suppliers to transition to renewable energy and implement more efficient processes to reduce energy,water and chemical usage,as well as with our logistics partners to offer more green options in last-mile delivery.We are using more responsible materials in our garments and packaging,and are engaged in research to scale the use of textile-to-textile recycled polyester and water-saving processes in our supply chain.We are also engaging more of our customers in circularity,by expanding our circular platforms and programs to more geographies.Our work in 2023 has laid the groundwork for further improvements in the years ahead.Since then,we have already made progress establishing our ESG external advisory board,expanding our SHEIN X independent designer program,and announcing a significant Circularity Fund that will accelerate our sustainability progress while supporting other innovative start-ups in the UK and Europe ecosystems.While we are still in the early stages of our journey,we have a strong foundation and will build on the momentum from each accomplishment,no matter how modest.We are committed to getting better every day and will remain anchored by the fundamentals in our evoluSHEIN roadmap.Our goal is to build a resilient business that contributes to a more equitable and sustainable future for all.Sky Xu,CEO,SHEININTRODUCTION A Note From Our CEOAbout UsMateriality:Identifying Priority AreasOur Approach:evoluSHEINTargets and Aspirations2023 ESG HighlightsPEOPLE PLANETPROCESSGOVERNANCE ANNEX32023 SUSTAINABILITY AND SOCIAL IMPACT REPORT Just over a decade ago,SHEIN was launched with the mission to make the beauty of fashion accessible to all.SHEIN has since established a truly global presence,serving customers in more than 150 countries from key centers of operation including Brazil,China,Ireland,Singapore and the USA.SHEIN is all about offering the products people want at more affordable prices.Our product offerings are ever evolving to meet the diverse needs and preferences of our customers,as we aim for every customer who visits our platform to feel seen,included and valued by finding products that express their individuality.We have a full range of products under SHEIN and our sub-brands1(collectively,“SHEIN-branded”products),covering womens,mens and childrens apparel,footwear,cosmetics and home productcategories.With the launch of our integrated marketplace across select markets in 2023,we are,for the first time,also enabling third-party sellers to list items on our site,supporting them in reaching customers globally.16,000 employees worldwide24,600SHEIN X designers and artists empowered20offices globallyApproximately5,800contract manufacturers31 Refers to sub-brands that SHEIN directly controls.We also license some brands owned by us to external parties and have limited control over the usage of these brands.2 Refers to full-time employees across all countries who signed an employment contract directly with SHEIN.3 DefinedasTier1suppliersoffinishedSHEIN-brandedproducts holding direct procurement contracts with SHEIN entities.languages available on the SHEIN app and website20markets served150Approximately49%of employees are under 30 years oldApproximately55%of employees and 40%of senior management are womenAbout UsINTRODUCTION A Note From Our CEOAbout UsMateriality:Identifying Priority AreasOur Approach:evoluSHEINTargets and Aspirations2023 ESG HighlightsPEOPLE PLANETPROCESSGOVERNANCE ANNEX42023 SUSTAINABILITY AND SOCIAL IMPACT REPORTOn-Demand Business ModelWe analyze demand signals from the way users engage with our app or website,and use these insights to make the products we know our customers want,when they want them.We continuously monitor and track the gap between existing stock and projected customers needs to understand where and when we need to procure additional units.This digitalized process ensures that we obtain the appropriate number and types of products from our suppliers based on our customers orders.By adopting an on-demand business model,we strive to offer diverse products at accessible prices,while also seeking to reduce inventory waste left over from unsold products in SHEINs warehouses.For more details on our business model,please visit .Elevating Customer Experience,Empowering BusinessesIn May 2023,we announced the launch of our global integrated marketplace,hosting local and international third-party sellers on our site alongside SHEIN brands.This new marketplace is set to enhance the customer experience,providing access to an increased variety of products and improved logistics,with shorter delivery times and lower costs.Our integrated platform also empowers small and independent businesses to grow,connecting them with our extensive global customer base and equipping them with the tools to succeed.Sellers can leverage SHEINs social media and marketing expertise,gain access to real-time market insights and utilize SHEINs global logistics and distribution ecosystem for order fulfillment.They can also participate in our AcceleraSHEIN seller-empowerment program,which offers weekly training sessions and workshops conducted by professional consultants and unlocks incentives like product showcases and traffic boosts.INTRODUCTION A Note From Our CEOAbout UsMateriality:Identifying Priority AreasOur Approach:evoluSHEINTargets and Aspirations2023 ESG HighlightsPEOPLE PLANETPROCESSGOVERNANCE ANNEX52023 SUSTAINABILITY AND SOCIAL IMPACT REPORTA materiality assessment serves as a strategic compass,identifying areas of risk and opportunity and guiding companies through the most appropriate strategy for their organization.SHEINs approach to sustainability and social impact is guided by our ongoing efforts to understand and address specific ESG issues that impact our organization and the key stakeholders in our ecosystem.We first conducted a double materiality assessment in 2022 with BSR,which informed our annual reporting for the year and the development of our evoluSHEIN roadmap.During 2023,we leveraged Datamaran,a cloud-based software analytics platform,to undergo an updated materiality assessment process that leveraged machine learning to analyze material issue trends in the ESG reports of similar companies.We also conducted a survey involving SHEINs senior leadership,company operational teams and external ESG groups including business partners and civil society representatives,and incorporated these stakeholders views on key ESG-related issues with impact to the company into our assessment.The findings from the 2023 materiality assessment,together with the strategic pillars and key priorities in our evoluSHEIN roadmap,have guided SHEINs social and sustainability work in 2023,and informed our disclosures in this annual report.SHEIN will continue to update and refine our materiality assessment process in the coming years to better align our social and sustainability goals to emerging trends and ensure that our efforts are focused on our most significant areas of material impact.Materiality:Identifying Priority AreasIMPACTONTHEBUSINESSIMPACTONSTAKEHOLDERSLOW PRIORITYLOW PRIORITYHIGH PRIORITYHIGH PRIORITYPhysical&sociopolitical risksSelling practices&product labelingAccess&affordabilityCommunity relationsResponsible consumption&productionManagement of local impactsEmployee diversity&inclusionEmployee health&safetyNatural capitalAir emissionsEcological impactsEnergy managementGHG emissionsWaste&hazardous materials managementTransition to renewables&alternative energies Water&wastewater managementSourcing efficiency&managementTransparencyAnti-competitive behaviorBusiness model resilienceInnovation&technologyGovernance structures&mechanismsEthical corporate behaviorHuman rightsLabor practicesCustomer practicesProduct&service safety&qualityCustomer privacy&data securityManagement of the legal®ulatory environmentClimate change risks&managementSOCIALKEYENVIRONMENTALGOVERNANCEKEEP UNDER OBSERVATIONCONTINUE/EXPAND INTERNAL EFFORTSCOMMUNICATE INTERNALLYDEVELOP STRATEGY&COMMUNICATE EXTERNALLYProduct design&lifecycle managementGraphic from DatamaranINTRODUCTION A Note From Our CEOAbout UsMateriality:Identifying Priority AreasOur Approach:evoluSHEINTargets and Aspirations2023 ESG HighlightsPEOPLE PLANETPROCESSGOVERNANCE ANNEX62023 SUSTAINABILITY AND SOCIAL IMPACT REPORTAccelerating the Evolution Towards a Desirable Future Accessible to All Our mission is clear to bring inclusive and affordable fashion to everyone,regardless of culture,gender,age,body type,ability or economic status.We believe our three-pillar ESG strategy,the evoluSHEIN roadmap,will be critical in getting us there while also guiding us towards a more desirable and sustainable future.Our evoluSHEIN roadmap represents a comprehensive strategy for delivering positive impact across key social,environmental and governance issues,and making continual improvements across our value chain.The roadmap is designed to address the critical challenges facing the wider fashion industry,as well as ESG areas that present the most material risks and opportunities for SHEIN and stakeholders within our ecosystem.Building on three strategic pillars:Equitable Empowerment(People),Collective Resilience(Planet)and Waste-Less Innovation(Process),our evoluSHEIN strategy anchors our commitment to being a responsible corporate citizen,improving lives in the communities we reach and protecting the environment we all share.Our Approach:evoluSHEINFOR ALLDECARBONIZE OURSUPPLY CHAINENABLE SELF-EXPRESSIONPROVIDE ACCESSTO TALENTIMPROVE LIVESIN COMMUNITIESINTRODUCTION A Note From Our CEOAbout UsMateriality:Identifying Priority AreasOur Approach:evoluSHEINTargets and Aspirations2023 ESG HighlightsPEOPLE PLANETPROCESSGOVERNANCE ANNEX72023 SUSTAINABILITY AND SOCIAL IMPACT REPORTOUR PEOPLE PILLAR:EQUITABLE EMPOWERMENTOUR PLANET PILLAR:COLLECTIVE RESILIENCEOUR PROCESS PILLAR:WASTE-LESS INNOVATIONTargets and AspirationsPeople are at the center of everything we do.Wherever our business has an impact,we strive to empower our customers,employees,brand partners,suppliers and members of the larger global community to achieve their full potential.We have set aspirations that empower these stakeholders to hold us accountable to be a:Preferred brand for customer self-expression.Top-ranked employer for employee talent.Preferred brand partner for creative talent collaborations.Preferred responsible purchasing partner for suppliers.Responsible corporate citizen that improves lives in the communities we reach.Through collective action,we strive to decarbonize our supply chain,source responsible materials and protect biodiversity and animal welfare.Our operational teams and supply chain partners are working to reduce the environmental footprint of our products and facilities,guided by the following goals:Reduce our greenhouse gas(GHG)emissions(Scope 1,2 and3)by 25%by 2030.Reach net-zero emissions by no later than 2050,in line with the Science Based Targets initiative(SBTi)Net-Zero Standard.Use electricity only from renewable sources for operations directly managed by SHEIN by 2030.Source 100%forest-safe viscose and paper-based packaging for SHEIN-branded products by 2025.Ensure all packaging sourced for SHEIN-branded products contains 50%preferred materials4 by 2030.Transition 31%of the polyester used for SHEIN-branded products to recycled polyester by 2030.Source 50%of SHEIN-branded products through our evoluSHEIN by Design initiative by 2030.We are committed to continually improving our processes to reduce waste and enable a circular future.This means designing systems that help close the loop on todays linear processes and using our rapid test-and-scale methodology to drive sustainable innovation in our own operations and in the industry.We have set goals to drive these alternative businessmodels:Engage the majority of SHEINs customers in circularity by 2025.Become a global leader in rescuing deadstock materials from becoming waste.Establish a fully circular textile supply chain by 2050 in alignment with our World Circular Textiles Day commitment.4 Preferred materials used for packaging are recycled polyethylene and paper packaging not sourced from Ancient and Endangered Forests(for more information on Ancient and Endangered Forests,please refer to Canopys Forest Mapper).INTRODUCTION A Note From Our CEOAbout UsMateriality:Identifying Priority AreasOur Approach:evoluSHEINTargets and Aspirations2023 ESG HighlightsPEOPLE PLANETPROCESSGOVERNANCE ANNEX82023 SUSTAINABILITY AND SOCIAL IMPACT REPORTPEOPLEPLANETPROCESS51.6MWof solar capacity installed or being installed across 41 supplier sites,and 43.6MW installed across seven SHEIN warehouses.438,000metric tons of emissions potentially saved through localization strategy and green logistics projects.Up to US$155Mcommitted over five years towards the“Equitable Empowerment”pillar of our evoluSHEIN roadmap.US$50 million for emerging designers under our SHEIN X Designer Incubator Program.US$70 million for our suppliers through the Supplier Community Empowerment Program(SCEP).US$35 million for social impact activities supporting women,young people and the underprivileged.10supplier facilities equipped with childcare centers to support workers and their families.165worker families supported with financial assistance through our SHEIN Spotlight Program.11%of our fiber portfolio5 for SHEIN-branded products consisted of recycled polyester and forest-safe viscose.16.2%of packaging used for SHEIN-branded products contained at least 50%GRS-certified recycled PE plastic or was made of forest-safe paper.Nearly46,000 metric tons of emissions reduced through energy-efficiency projects at 28 supplier sites,with over 217 water-and energy-efficiency improvement measures.170,000training hours across approximately 3,500 training sessions to support professional development of SHEIN employees.2023 ESG Highlights14of our facilities are undergoing industrial waste recycling projects.Two facilities also underwent Zero Waste to Landfill certification in 2023.4.2Munique users registered on SHEIN Exchange,with over 115,000 pre-loved items listed.Nearly 20,000meters of deadstock fabric rescued through partnership with Queen of Raw.290,000m3 of water and 32,600 MWh of electricity estimated to have been saved through digital thermal transfer printing,amounting to over 60,000 metric tons of emissions reduced.101,000kg of textile-to-textile recycled polyester fabric utilized in SHEIN-branded apparelproducts.5 ThisreferstothetextilesdesignatedbySHEINforusebycontractmanufacturers.2,000global artists and designers launched products and collections through SHEIN X Designer Incubator program in 2023.3,990on-site SHEIN Responsible Sourcing audits conducted on China-based suppliers in 2023.SRS audits conducted on 2,796 contract manufacturers that represent approximately 95%of SHEIN-branded products by procurement value in 2023.INTRODUCTION A Note From Our CEOAbout UsMateriality:Identifying Priority AreasOur Approach:evoluSHEINTargets and Aspirations2023 ESG HighlightsPEOPLE PLANETPROCESSGOVERNANCE ANNEX92023 SUSTAINABILITY AND SOCIAL IMPACT REPORTOUR THREE STRATEGIC PRIORITIES:Improve Lives in Communities Provide Access to Talent Enable Self-Expression for All EQUITABLE EMPOWERMENTPROCESSPEOPLEPLANETEquitable Empowerment underlies our commitment to improve the lives of our ecosystem partners;it is a catalyst for building more sustainable,inclusive and resilient communities and societies.INTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEX102023 SUSTAINABILITY AND SOCIAL IMPACT REPORTWe recognize true progress can only be achieved when all individuals,regardless of their backgrounds,have proper access to opportunities and resources.In striving for equitable empowerment,we are committing to serve every customer,regardless of their socioeconomic status,geographic location,body shape or style preference.We also acknowledge that each person working at SHEIN holds potential and we seek to provide a safe and stimulating environment for them to grow professionally.Equitable empowerment also means creating conditions for our ecosystem partners to thrive.We believe that every individual has the right to economic advancement,and we work to provide a global platform for our brand and creative partners to access economic opportunities while being treated fairly and respectfully.This commitment makes us accountable and drives our work towards a more inclusive global community.Our ApproachOur three strategic priorities for driving impact are to:Enable Self-Expression for All Provide Access to Talent Improve Lives in Communities Aligning our actions with these three areas enables us to contribute to a more equitable industry,helping to uplift people and communities across our SHEIN ecosystem.By opening access and creating diverse opportunities,we harness a broad spectrum of talents and perspectives to drive our innovation and growth while maintaining integrity,inclusivity and respect for all.Why It Matters112023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXOur mission is to ensure customers everywhere have access to affordable means of self-expression,regardless of culture,gender,age,body type,ability or economic status.Putting Customers First:Our Commitment to Inclusivity At SHEIN,we attract and nurture a customer community that is passionate about self-expression.With an agile,on-demand business model,we help customers curate a diverse,vibrant wardrobe that lets them wear what they want,when they want it.With our products and services available online in more than 150 countries globally and a mobile app and website available in 20 languages we are well placed to meet our customers wheretheyare.For All BudgetsBy leveraging our agile supply chain to keep SHEINs unsold inventory rate low,and the cost advantages of being an e-commerce retailer without brick-and-mortar stores,we have been able to offer fashion and lifestyle products to consumers at affordable prices.A Style for EveryoneWe want every customer who visits our platform to feel seen,included and valued.Its the driving force behind our commitment to ensure the SHEIN shopping experience respects and represents customers in all their diverse dimensions.We apply a customer-centric,variety-over-volume approach,leveraging real-time insights and customer engagement to identify trends and offer styles that suit a range of tastes.Clothing for Every Body TypeWe believe everyone should have access to clothing that makes them feel good.In 2023,we made various updates to our product lines based on customer review feedback to advance inclusivity.For example,we increased localized size displays on our website,establishing SHEIN sizes for Brazil,Mexico,Spain,France,Japan and Singapore to help more of our global customers find the right size for them.Based on after-sales customer feedback,we continue to adapt styles for womens,mens and childrens clothing.This includes adjusting mannequin body shapes for mens clothing,maternity wear and underwear,so more customers can better relate to the body shapes represented.DESIGNING FOR INCLUSIVITY6 Includes Curve,Maternity,Extended Sizes,SHEIN Tall,SHEINFitandManfinityUnisex.Alternative fit collections6 Traditional fit collections22x 23Enable Self-Expression for AllUsing mannequins that represent varying body types and sizes helps SHEINs designers create size-inclusive designs that fit well.This is especially important for form-fitting styles like clothes from our GLOWMODE activewear brand.122023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXOver the last four years,SHEIN has proudly partnered with Dress for Success Greater London,a London-based affiliate of Dress for Success Worldwide.Dress for Success Greater London is dedicated to empowering women to achieve financial independence by providing professional clothing and styling,interview coaching and ongoing support once they rejoin the workplace.Securing employment starts with making a great first impression.Thats why,through this collaboration,we are working to make a real difference to the lives of women from positions of disadvantage,equipping them with the perfect outfits and tools needed to feel confident in interviews.Through the collaboration with SHEIN,Dress for Success Greater London has been able to carry out inspiring work offering specialized client appointments,career-development days and pop-up shops all tailored towards boosting womens confidence as they search for a job.Eighty percent of Dress for Success Greater Londons clients go on to secure employment.Since the start of the partnership,SHEIN has donated over 110,000 to Dress for Success,helping over 400 women.In 2023,in addition to a donation of 45,000,we also worked closely with Dress for Success to launch a bespoke curve collection to enable Dress for Success to provide professional clothing for clients with a variety of body types and sizes.Now even more women can access an affordable range of professional clothes,helping to boost their opportunities and achieve their career goals.In 2023,SHEIN collaborated with Dress for Success Greater London on a dedicated capsule curve collection specially crafted for women ranging from UK sizes 16 to 24.SHEIN designed a new curve collection and capsule wardrobe,donating 1,000 pieces to style our curvier clients and raising theirself-confidence.Our analysis of our client numbers and trends showed that an increasing number of women are within the curvier range,and the partnership with SHEIN responded to this by providing an impactful community investment to ourwomenaspartofourempowermentprogram.Juanita Ingram,Founder and Chair of the Board of Trustees,Dress for Success Greater LondonEMPOWERING WOMEN THROUGH FASHION132023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXWe offer development and career-growth opportunities to our employees around the world,respecting all cultures,abilities and lifestyles.To empower our people to reach their full potential,we need to equip them with the necessary resources and training to advance in their careers while nurturing a safe working environment.We also support our people in defining and achieving personal career goals.Uncovering Top Global Talent SHEIN has a diverse,young and talented pool of over 16,000 employees globally.We believe in the limitless potential of every employee and recently updated our employer value proposition to reflect this,adopting“Live Your Possible”as our slogan.We are committed to creating an environment in which employees can boldly realize their creative ideas,continually explore new career opportunities and embrace challenges.These comprised 170K training hoursOur multichannel recruitment strategy,coupled with a diverse range of university collaborations and graduate and internship programs,allows us to cultivate a robust talent pipeline and nurture the next generation of global business leaders and professionals.We hired new employees from 17 nationalities in 2023,and at least 30 different nationalities were represented within our global workforce for the year.7 We also provide opportunities for young talent to thrive across various levels of the organization employees under 30 make up 49%of our global workforce8 and comprise 5%of senior management,17%of middle management9 and 52%of other employee levels.Clear Pathways to GrowthAt SHEIN,continuous improvement is a core value.Through both offline training sessions and our online learning management system,the SHEIN Academy,we provide flexible learning resources to bolster our talent development and business empowerment efforts.In 2023,SHEIN invested approximately US$2.36 million in training and upskilling initiatives for our employees.We organized approximately 3,500 training sessions covering nearly 16,000 employees across our global offices,with a cumulative total of 170,073 training hours and an average of 11 training hours per person.SHEINs holistic performance system,utilizing objective-setting methodologies for goal alignment twice a year,drives engagement and recognizes exceptional performance with promotions and rewards.Our compensation plan,ensuring fair global salaries and accompanied by performance-based bonuses,is reviewed annually to maintain competitiveness and support employee wellbeing.This compensation is supported by an extensive leave policy,accommodating various life situations,including annual,sick,parental care,bereavement,unpaid and special leaves.Career growth at SHEIN includes biannual promotions for grade progression and career advancement to maintain fairness and objectivity.In 2023,over 5,100 of our employees across the globe received promotions and corresponding salary adjustments.Provide Access to Talent7 It is not mandatory for SHEIN employees to provide their nationality information to the company.8 Analysisondiversitymetrics(e.g.,ageandgender)includesonlyemployeesfromBrazil,China,Ireland,SingaporeandtheUSA,whichareourkeycentersofoperation.Employeesfromthesefivecountriesaccountfor93%ofourtotalemployeenumbersglobally.9 Senior management refers to department heads and above,while middle management comprises other team leaders within departments with supervisory responsibilities.28,892hours for newcomer orientation and training17,147hours for general competencies workshops(e.g.,communications,problem-solving,presentation skills)41,439hours for leadership development courses82,595hours for technical skills upgrading(e.g.,marketing,data analysis,customer service,warehouse management,supplier management)142023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXNurturing Feelings of Belonging We are dedicated to fostering an inclusive work environment where all team members feel encouraged to thrive.Employee EngagementOur in-house-developed platform LINK serves as an employee engagement tool,gathering real-time feedback from our global workforce.Through this,employees can answer a daily voluntary question about their experience with SHEIN.The questions cover dimensions such as working relationships with peers and supervisors,performance and development,corporate culture,working environment and overall job satisfaction.The responses,which are aggregated at team level to preserve respondents anonymity and ensure a safe environment for sharing of feedback,are then provided to managers,along with actionable insights for managers to enhance their employees experiences.We piloted LINK across several countries in 2023,and gathered a total of over 920,000 survey responses.Based on the results collated through our LINK Dashboard,SHEIN conducted over 40 workshops for managers across our global offices,with action planning to address key areas of feedback such as performance management,leadership,communication and collaboration,and job fit.Fostering a Culture of Respect SHEINs inclusive talent management system strives to facilitate equal access to learning,development and advancement opportunities,regardless of nationality,race,religion,ethnicity,age,gender,gender identity and expression,sexual orientation,family background,marital status or other personal characteristics.We believe everyone should feel safe in their workplace,and this is embedded in our Global Code of Ethics(CoE),which prohibits any form of harassment or discrimination.We deliver comprehensive employee training on related company policies and maintain a global communications channel for reporting concerns and complaints,with all reports directed to SHEINs human resources and internal audit departments for review and follow-up.Gender EqualitySince we were founded back in 2012,SHEIN has been an active advocate for women in leadership.In fact,two of our four founders are women,and today,women comprise approximately 55%of our workforce,nearly 40%of senior management and approximately 56%of middle management.At SHEIN,we take several measures to achieve pay equity,including committing to transparent pay practices,conducting regular pay analysis against global market standards and making job listings gender-neutral.We conduct regular pay reviews of employee compensation,including to ensure that decisions on pay are not biased based on gender or other personal characteristics.Disability InclusionSHEIN strives to support employees with disabilities and has implemented various measures to ensure an inclusive environment,starting with our corporate offices in the USA,Brazil and Canada.These include creating physically accessible workplaces,providing accessible parking,offering flexible work arrangements,SHEINs inclusive work environments encourage engagement among all team members and create opportunities for them to thrive.developing individual accommodation plans,fostering open communication,restructuring job roles and offering mental health support.These initiatives aim to accommodate diverse needs and encourage all employees to thrive in the workplace.152023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXA Culture of Shared Safety ResponsibilityKeeping our people safe and healthy is paramount and is a principle we embed throughout our operations.We offer annual health checkups,business insurance,various employee resource groups and a flexible,collaborative work environment to enhance employee wellbeing and experience.Our Workplace Health and Safety Statement guides all work-related health,safety and environment(HSE)measures across every SHEIN warehouse,distribution and supplier manufacturing facility,and corporate office.The statement details our HSE approach and responsibilities to stakeholders,in line with our CoE.We adopt a range of risk management measures and interventions to protect workplace health and safety at SHEIN-operated facilities.These include monthly cross-departmental safety inspections,regular safety meetings and reporting channels for employees to flag potential safety hazards.In 2023,across all our warehouses in China,10 we also enhanced several initiatives targeted at improving fire safety:Fire emergency plans:Reviewed evacuation plans to achieve evacuation of all workers within three minutes;conducted evacuation drills at every warehouse.Fire alerts:Upgraded personal digital assistant(PDA)terminals with added functionality to push fire emergency notifications to all workers devices and facilitate quicker evacuation response.Volunteer fire brigades:Established volunteer firefighting brigades to cover all warehouses,with each brigade equipped with its own fire station as a base for operations(e.g.,training,rescue operations).Risk-based monitoring:Identified key areas of vulnerability with the highest risk of fire safety accidents,and institutionalized more frequent inspections of these areas by the warehouse safety managers.In 2023,we also worked with our third-party verification agencies,TV Rheinland and Openview,to conduct comprehensive SHEIN Responsible Sourcing(SRS)audits of 16 SHEIN-operated facilities in China under our SRS program including 15 warehouses and the Center of Innovation for Garment Manufacturing(CIGM)in Guangzhou.All 16 performed well,receiving a grade of either A or B,and we continue to remain diligent in upholding strong social and environmental standards in our facilities.The CIGM is certified with the ISO 45001 health and safety management standard and ISO 14001 environmental management systems standard by SGS.To find out more about the SRS program and how we conduct SRS audits,see page 19.SHEINs range of risk management measures and interventions create conducive work environments and promote a culture of workplace health and safety at SHEIN-operated facilities globally.10 SHEIN operated 21 warehouses in China in 2023,all located in Guangdong province.162023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXRespecting human rights is notonly critical for our long-term business success;its a fundamental responsibility.Across all our operations,we are committed to treating individuals fairly and ethically.Our companys global operations impact many lives every day.We have a responsibility to leverage that scale to uphold and advance human rights through responsible business practices.This is enabled by key policies for SHEIN employees and our supply chain,including our CoE,Supplier Code of Conduct(SCoC),SHEIN Supplier Responsibility Standards and SHEIN Responsible Sourcing(SRS)Policy.As SHEIN and the wider fashion industry works to realize increasingly robust ethical standards,we also aim to meet the various expectations of governments,investors,civil society and customers.Our Commitment to Human Rights SHEINs approach to human rights is guided by our Human Rights Policy,developed in line with the United Nations Guiding Principles Reporting Framework and covering several of the issues highlighted in our materiality matrix(seepage6).By identifying and evaluating risks,we prioritize the most relevant actions so that people and communities can exercise their fundamental human rights.We recognize the importance of mitigating risks to worker wellbeing through robust policies,defined grievance mechanisms and clear remediation processes,relying on third-party verification to support our efforts.To address key social challenges in the fashion industry,we work closely with suppliers on enhancing their performance clearly communicating supply chain policies and investing in training,compliance enforcement and workplace improvement programs.Read more about how we empower our suppliers at page 23.Improve Lives in Communities172023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXSupply Chain GovernanceBusinesses do not succeed alone;to achieve our vision,SHEIN works with a large network of global suppliers.11 With our scale,SHEIN is fully committed to managing our supply chain responsibly,and to supporting our suppliers in further improving working conditions in their facilities.Using industry best practices and guidance from regulators,we have developed and implemented a robust set of supply chain management policies and programs.Through these mechanisms,we enforce stringent requirements on our suppliers to comply with health and safety,labor and social welfare,and environmental standards,as well as applicable laws and regulations.Supplier Code of ConductWe expect suppliers to share our commitment to human rights.SHEIN is a signatory to the UN Global Compact(UNGC)and supports the Ten Principles focused on human rights,labor,environment and anti-corruption.To work with SHEIN,all suppliers must sign and agree to abide by our SCoC.The SCoC is informed by the core conventions of the International Labour Organization(ILO)and the United Nations Universal Declaration of Human Rights(UDHR)and prohibits the use of forced labor and child labor,wages and working hours abuses,and employee discrimination and harassment,among other issues.It is periodically updated to ensure continued relevance against a backdrop of changing supply chain conditions and evolving regulatory requirements.By signing the SCoC,suppliers also agree to hold their third-party labor agents or brokers and subcontractors to these samestandards.11 ThesupplychainpoliciesandprogramsdescribedwithintheSupplyChainGovernancesectionapplytoTier1andTier2suppliersofproductsundertheSHEINbrandanditssub-brands.Tier1suppliers,alsoknownas“contractmanufacturers,”aresuppliersoffinishedSHEIN-brandedproductsholdingdirectprocurementcontractswithSHEINentities.Tier2suppliersinclude,withoutlimitation,suppliers of textiles,packaging and other accessories for use by contract manufacturers.In 2023,we strengthened SCoC language regarding the prohibition of forced labor by specifying unacceptable labor practices such as collecting recruitment fees and requiring workers to surrender government-issued identification.We also detailed clearer restrictions on subcontracting to tighten oversight of suppliers upstream partners and mitigate risks;it is now specified in our policy that suppliers shall not subcontract,partially subcontract or assign provision of products,services,rights and obligations to a third party without prior written consent of SHEIN.We also updated our assessment checklist for supplier audits to assess our suppliers compliance with this requirement.Supplier Responsibility StandardsThe SCoC is complemented by a set of comprehensive Supplier Responsibility Standards,which we published in 2023.This document details the standards we expect from suppliers across our global supply chain in areas such as labor rights,health and safety,environment and ethics.These standards were developed with reference to internationally recognized standards such as the ILO conventions,UDHR,and UN Guiding Principles on Business and Human Rights.We have a range of policies in place to support workers across the supply chain and prioritize their wellbeing.For example,we have clear policies on workers freedom of movement and right to leave employment,as well as to have at least one day off every seven days,in alignment with ILO standards.To further enhance the worker experience,we also have detailed disclosures on grievance mechanisms and provisions on special protection for women in the workplace.SUPPORT TRAINING AND UPSKILLINGINVEST IN FACILITIES ENHANCEMENTSPROMOTE WORKER AND COMMUNITY WELLBEINGEmpowermentEnforcementESTABLISH STRICT COMPLIANCE REQUIREMENTSENFORCE RISK-BASED SUPPLY CHAIN AUDITSVALIDATE REMEDIATION AND CORRECTIVE ACTIONSUPPLIER ENGAGEMENT182023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXSHEIN Responsible Sourcing(SRS)PolicyWe continue to enforce supplier compliance through our SRS Policy,which establishes clear definitions and penalties for violations of SHEINs SCoC.Within our SRS Policy,all new suppliers must submit to an SRS audit assessment as part of the onboarding process with SHEIN.Prospective suppliers that receive the lowest SRS audit grade are notapproved to work with SHEIN.Existing suppliers are subject to full on-site SRS audits on an annual basis thereafter,depending on and prioritized based on a risk assessment that takes into account the suppliers order volume with SHEIN as well as previous SRS grades.Failure to cooperate with these SRS audits will result in termination.These SRS audits are typically conducted without prior notice,ensuring that the SRS auditors assessment captures the reality of working conditions at the facility.Suppliers are assessed based on an extensive assessment checklist that evaluates their compliance with SHEINs SCoC and SRS Policy.Aswell as interviewing their workers,SRS auditors require that suppliers provide supporting documentation such as payslips and employment records.Nearly all SRS audits are conducted by third-party verification agencies.In 2023,the agencies we worked with were Bureau Veritas,Intertek,Openview,SGS,TV Rheinland and QIMA,all of which are member firms of the Association of Professional Social Compliance Auditors(APSCA).Individuals from these firms must be APSCA certified and submit documentary proof of certification beforecarrying out SRS audits.SHEIN also has a team of in-house SRS auditors who undergo training developed by TV Rheinland and attend courses on labor topics (e.g.,anti-forced labor and anti-child labor)through the UNGC Academy and ILO Academy.Addressing SRS Audit FindingsIn all cases,suppliers receive a copy of their SRS audit report together with a set of remediation suggestions to facilitate improvements.Suppliers who perform well on SRS audits and receive an A or B grade can be considered for additional incentives;these include expanded training access and opportunities to supply for our evoluSHEIN by Design product initiative.On the other hand,suppliers discovered to have committed the most severe violations under our framework,i.e.,Immediate Termination Violations(ITVs)or Immediate Remediation Violations(IRVs),and who are consequently assigned the lowest grade of E,are dealt with very seriously.Under our latest SRS Policy,first published in October 2023 and subsequently updated with refinements to our nomenclature for severe violation categories for greater clarity,12 suppliers found with ITVs face immediate termination of their business relationship with SHEIN.Suppliers found with IRVs are required to remediate their practices within a strict timeline of 30 days,or likewise face termination.Those who correct their violations in line with SHEINs requirements are allowed to resume business with us,but we do not tolerate repeat offences,and suppliers that are rated E for two consecutive SRS audits will also be terminated.Representative from QIMA conducting SRS audit of supplier facility in Dongguan City,Guangdong province.12 We renamed the most severe violation categories in our frameworkto“ImmediateTerminationViolations”(ITVs)and“ImmediateRemediationViolations”(IRVs).Withthis renaming,we aim to provide greater clarity to both our suppliers and external stakeholders on the penalties and actions taken by SHEIN for any violations within the twocategories.Thedefinitions,criteriaandpenaltiesforviolations that had been established remain the same.192023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXBalancing Remediation and PenalizationSince October 2023,we have applied a firmer stance against severe violations identified through SRS audits.Immediate Termination Violations(ITVs)ITVs are the most severe violations in contravention of SHEINs compliance requirements,including ethics and transparency issues(e.g.,bribery and refusal to cooperate with SRS audits),forced labor and child labor.For such violations,our approach prior to October 2023 was to immediately suspend orders from the supplier and give them 30 days for remediation,failing which SHEIN would terminate our business relationship with them.Now,however,we will immediately proceed to terminate the business relationship with the supplier upon discovering the violation.Immediate Remediation Violations(IRVs)IRVs are serious violations that warrant urgent rectification in order for SHEIN to continue our business relationship with the suppliers.These include other labor violations(e.g.,failure to pay minimum wage),workplace health and safety issues,and serious environmental pollution.For such violations,our previous approach was to issue a warning letter if the violation was not resolved within 30 days,suspend orders if it was not resolved within 60 days and only terminate the business relationship if the supplier failed to take action within 90 days.Now,however,suppliers only have 30 days for remediation,failing which they will be terminated.We previously focused on educating our suppliers and giving them an opportunity for remediation before termination.As suppliers are generally not exclusively contracted by SHEIN,this benefits the wider fashion ecosystem by instilling standards and best practices across the supply chain.It also helps to protect workers and their livelihoods.As our supply chain and suppliers have matured over time,we believe that we should now take a stricter stance on severe violations.Nevertheless,even for suppliers that SHEIN has decided to terminate,we send them action plans with guidance on how to remediate their identified ITVs/IRVs,so as to educate and empower the suppliers to take steps to improve conditions in their facilities.We will continue to carefully balance remediation and penalization and ensure our supply chain governance approach is calibrated to protect workers and their rights.By attending the training,I have not only improved my SRS rating,but have also learned technical skills to better manage my factory and achieve sustainablegrowth.Mr.Wang,a supplier who attended the SHEIN Supplier SRS Management Specialist Certification Workshop in August 2023The remediation process for such severe violations is managed through a“Corrective Action Plan”module on our digital supplier management system,through which we record and monitor suppliers implementation of required rectification measures.Overseeing the SRS SHEINs ESG operations team provides monthly updates on SRS audit findings to key members of our executive leadership,including our Executive Chairman and CEO.This ensures consistent high-level oversight over the implementation of our compliance programs.Capacity BuildingSHEIN makes significant efforts to strengthen awareness of our SRS Policy among suppliers and equip them with tools and knowledge to act responsibly in compliance with our requirements.In 2023,we organized 133 group workshops and 276 one-on-one training sessions,with participant numbers totaling over 5,200.13 Through these interactive sessions,suppliers sharpen their understanding of SHEINs supply chain governance policies,learn best practices for compliance with local labor laws and gain a better understanding of compliance risks in their own operations.They also deepen their knowledge on specific topics such as wages and working hours,fire safety and occupational health and safety.While the SRS program is managed by our ESG team,we also train employees from other departments,such as procurement,on key supply chain actions to inspire a culture of shared responsibility.We conducted a total of 20 such training sessions for SHEIN employees in 2023,with 674 participants in total.1413 Some suppliers attended multiple workshops and training sessions.14 Some employees attended multiple training sessions.202023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEX2023 SRS Audit InsightsWe continue to expand our supplier audit coverage in line with a risk-based sampling approach that prioritizes SHEINs largest suppliers by procurement value.We also conduct additional SRS audits on selected subcontractors,to verify that our contract manufacturers are enforcing our compliance requirements through their supply chain.In 2023,a total of 3,990 on-site SRS audits were conducted on suppliers and subcontractors based in China.15 92%of these SRS audits were performed by third-party verification agencies.3,365 SRS audits were conducted on 2,796 contract manufacturers that represent approximately 95%of SHEIN-branded products by procurement value in 2023.16 The other 625 SRS audits were of textile suppliers,packaging suppliers and subcontractors of our finished goodssuppliers.We are pleased to report better performance on SRS audits overall in 2023.Based on annual SRS audits conducted,the proportion of SRS audits where suppliers or subcontractors received an A or B grade increased from 18%in 2022 to 29%in 2023,while the proportion of audits where suppliers or subcontractors received a D or E grade decreased from 35%in 2022 to 20%in 2023.A total of five suppliers were terminated by SHEIN in 2023 for contravening our SRS Policy.Three were terminated for failing to remediate violative practices identified through SRS audits,one was terminated for refusing to undergo SRS audits and one was terminated for receiving two consecutive E grades.The table to the right discloses further details on the ITVs and IRVs that were identified through our annual SRS audits of existing suppliers and subcontractors in China.17 All ITVs and IRVs identified in 2023 have either been remediated within required timelines or resulted in the termination of SHEINs business relationship with the supplier,in line with the prevailing SRS Policy at the time.As we diversify our manufacturing supply chains to Brazil and Trkiye,we are progressively implementing SRS audits in those countries as well.In Brazil,we contracted a third-party agency to conduct a total of 218 SRS audits from October to December 2023.We will continue to expand our SRS audit and remediation programs in Brazil and Trkiye in 2024.2023 ANNUAL SRS AUDIT FINDINGS FIGURES REPRESENT THE PROPORTION OF ANNUAL SRS AUDITS WHERE EACH VIOLATION TYPE WAS FOUND20222023IRV categories(%of total annual SRS audits where this IRV was identified)Co-Located Living/Working Spaces:Dormitories are located in the same building as the production workplace or warehouse4.5 0.4Wage Violations:Supplier is paying employees under the local minimum wage,or delayed payment of wages to employees2.3 0.5Emergency Exit Violations:Presence of locked emergency exits in the workplace,warehouse or dormitoryInsufficient emergency exits in the production workshop,warehouse or dormitory2.14.20.30.2Workplace Safety Hazards:Falling risk,signs of structural damage to the building or other risks to worker safetyCharging electric vehicles or their batteries inside the production workshop,warehouse or dormitoryEmployees smoking or using open flames in production workshop or warehouseDirect or flue-type gas water heaters are used in employee dormitories 0.7 0.52.20.4 0.1 0.10.10.1Environmental Hazards:Illegal disposal of hazardous waste,discharging of untreated wastewater or discharging of waste gas 0.1 0.0ITV categories(%of total annual SRS audits where this ITV was identified)Age Violation:The presence of workers or persons in the workplace under the statutory working age 0.3 0.1Involuntary Labor:All forms of coercion(e.g.,requirement to pay deposits to start work,confiscation of workers documents)0.1 0.0Attempted Bribery:Offering bribes to SRS evaluators 0.1 0.0Supplier refuses SRS audit0.24,6002,00020Partnership With Fashion Institute of Design&Merchandising(FIDM)In 2023,we started SHEIN X Project Launchpad in partnership with FIDM in Los Angeles,setting up a new scholarship program and curriculum for FIDM students giving them the opportunity to create a five-to 10-piece collection to be sold on our platform.Through the 20-week curriculum,these students gained insights into the production and business side of the fashion industry and got a head start on their careers,without some of the barriers aspiring designers typically face.Like any SHEIN X designer,students also earned commission and kept ownership of theircreations.First SHEIN X Design Summit in April 2023,with over 250 SHEIN X designers invited to network and engage with industry leadersFirst SHEIN X collections under evoluSHEIN by Design in September 2023SHEIN X designers from Brazil,Ireland,Japan,Mexico,Poland,South Africa,the UK and the USA at a showcase of their creations during the SHEIN Global Reception in Singapore in September 2023.262023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXA Chicago native,Kaori Semaj is the designer behind SHEIN X GAUTII.Since he joined the SHEIN X program in 2021,he has launched four collections,with his latest dropping in October 2023.Kaori,who aims to bring concepts such as opulence and grandeur to functional everyday silhouettes,draws influence from nature,art,various cultures and the performative nature of fashion.One of his favorite parts about working with SHEIN is the ability to offer his designs at a more affordable price point.“My interest in the SHEIN X program stemmed from my belief in what collaboration can offer,”said Kaori.“I looked at the collaboration as an opportunity to gain experience working with a large brand,and an opportunity to see how a successful brand balances creativity and practical business concepts.”French designer Mathilde Lhomme emerged as one of 10 winners of a SHEIN X competition in 2021.Three years later,shes still part of the SHEIN family.After having struggled to break into the fashion industry as an independent designer,and losing her job during the COVID-19 pandemic,Mathilde found SHEIN X to be an invaluable platform to inject new momentum into her career.It empowered her to bring her creative visions to life and launch her own collections,reigniting her passion for fashion.In 2022,Mathilde was given the opportunity to showcase her designs at the SHEIN X Runway Show organized during Paris Fashion Week.A year later,she was invited to visit SHEINs headquarters in Singapore,meeting and learning from designers from all over the world.Mathilde continues to grow and develop her skills with SHEIN,and through the masterclasses and activities planned by SHEIN,expanded her industry network.She has also found the courage to start her own business and is working on developing her own clothing brand.Ihadtofightforyearstofindmyplaceinthefashionworld in Paris,coming from theFrenchcountryside.Before SHEIN X,I have only worked for others,never for myownideas.TheSHEINteam helped me to bring my ideas into reality without ever questioning my vision offashion.Iwillbeforevergrateful to SHEIN for believing in me and continuing to support me!Mathilde LhommeFROM DREAM TO REALITYTHE POWER OF COLLABORATION Working with SHEIN has been such a blessing in many ways.Ivebeengiventheopportunitytosharemyvisionandmyworkwithcustomersonaglobalscale.Asaluxurydesignbrand,many of my independent works are too expensive for the everydayconsumer.ThroughtheSHEINXprogram,Ivebeenabletosharemyworkandmybrandwithsomanymorepeople.Myfollowersandfanbasehavegrowntremendously.Kaori Semaj272023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXSHEIN CaresWe want to amplify our impact,working closely with global communities to deliver positive change for the world.SHEIN Cares is our philanthropic commitment to supporting important causes and organizations in the communities where we live and operate.Throughout 2023,weve partnered with various organizations worldwide,finding creative ways to support their missions through global and in-country cash and in-kind donations,collaborations on awareness campaigns and co-organizing community support activities.In 2023,we spent over US$4 million on causes related to empowering aspiring designers,promoting womens empowerment and gender equality,supporting the holistic development of our children,alleviating poverty and protecting biodiversity.As announced in September 2023,SHEIN will set aside up to US$35 million over the next five years to expand or fund new global or in-country social impact activities,focusing on creating opportunities for women,youth and disadvantaged communities to access their full potential.Theillustration on the right highlights some of ourimpact initiatives across our global community in2023.United KingdomWe sponsored the Football for Change Charity Gala,bringing together soccer stars and business leaders to support educational and employment programs,uplifting youths from neighborhoods in the UK affected by low educational attainment and high levels of youth unemployment.Saudi ArabiaIn collaboration with Charitable Society of Autism Families,we donated over US$106,000 to support rehabilitation programs for 20 children with autism,launched a dedicated SHEIN X collection with 50%of sales proceeds donated and raised US$124,000 to benefit children with autism and their families.FranceIn support of Pink October,SHEIN donated 20,000 to French association RoseUp,which provides information and daily support to women suffering from all types of cancer.We also launched a special SHEIN X RoseUp collection to raise money and organized a photoshoot for women recovering from cancer.United StatesWe partnered with Girls Inc.of Greater Indianapolis,donating US$100,000 to support young womens academic and social development.This included supporting their 2023 STEM summer camp,offering local high school girls opportunities in real-life career settings.GermanySHEIN donated 15,000 to support the operations of Fellkinder in Not e.V.,a nonprofit animal welfare organization carrying out neutering operations,food and material donations,medical treatment and adoption programs.SingaporeIn September 2023,at SHEINs global headquarters,we pledged up to S$6.4 million to advance education opportunities for lower-income students.This includes collaborating with universities and nonprofits to provide bursaries,digital upskilling programs,internships and workshops for professional development.BrazilSHEIN collaborated with Central nica das Favelas,an organization supporting social assistance and community development in favelas,to amplify its natural disaster response,donating a total of 6,200 pieces of clothing.MexicoTo support children with cancer and other serious related illnesses,we partnered with the Asociacin Mexicana de Ayuda a Nios con Cncer and Fundacin Dr.Sonrisas to co-organize activities that bring cheer to terminally ill children and emotional and mental health support workshops for caregivers.282023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLE:EQUITABLE EMPOWERMENTEnable Self-Expression for All Provide Access to TalentImprove Lives in CommunitiesPLANETPROCESSGOVERNANCE ANNEXCOLLECTIVE RESILIENCEFor SHEIN,collaboration across our shared ecosystem is of paramount importance.Its what enables us to meet the needs of the present without compromising our future.OUR THREE STRATEGIC PRIORITIES:Protect Biodiversityand Animal Welfare Decarbonize Our Supply Chain Source Responsible Materials PROCESSPEOPLEPLANETINTRODUCTION PEOPLEPLANET:COLLECTIVE RESILIENCE Decarbonize Our Supply ChainSource Responsible MaterialsProtect Biodiversity and Animal WelfarePROCESSGOVERNANCE ANNEX292023 SUSTAINABILITY AND SOCIAL IMPACT REPORTFactoring long-term sustainability into our practices is crucial for the sake of our planet.Prioritizing Collective Resilience across our business and supply chains,we continue to invest in solutions to mitigate climate change challenges and future-proof our value chain.Our ApproachOur three strategic priorities for driving impact are to:Decarbonize Our Supply Chain Source Responsible Materials Protect Biodiversity and Animal Welfare Together,addressing these priority areas helps us uphold environmental integrity and tackle critical global challenges.Decarbonization efforts help combat climate change by reducing GHG emissions;responsible sourcing helps to protect ecosystems and communities by promoting preferred supply chain practices;and incorporating conservation efforts helps protect natural resources and biodiversity.Why It MattersImage credit:Andy Wright Photography.302023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLEPLANET:COLLECTIVE RESILIENCE Decarbonize Our Supply ChainSource Responsible MaterialsProtect Biodiversity and Animal WelfarePROCESSGOVERNANCE ANNEXWe are working to mitigate climate change both within our operations and in collaboration with our suppliers towards our target of reducing emissions(Scope 1,2 and 3)by 25%by 2030.20 Setting science-based targets and partnering with third-party experts in the process ensures that we set clear goals and have a concrete strategy to achieve them.We collaborate with industry experts to quantify and monitor climate impacts across each stage of our value chain sourcing,production and processing of materials,product assembly,in-house operations,logistics and end-of-life product management.Particularly,our work with Intertek has been instrumental in understanding our GHG emissions and setting appropriate reduction targets.It also helps us track and measure our progress and conduct scenario analyses to drive fact-based decision-making.CATEGORYDESCRIPTION2022(metric tons CO2e)2023(metric tons CO2e)SCOPE 1Fossil fuel combustion,CH4 fugitive,HFCs fugitive and CO2 fugitive in our direct operations3,7817,514SCOPE 2Market-based emissions from purchased electricity2219,50525,788SCOPE 3 GHG Protocol CategoriesTransportation and DistributionTransportation of products to and between SHEIN facilities and to customers,and of returns3,234,5396,354,029Business TravelTransportation of employees to business-related activities1,0115,356Purchased Goods and Services Supply chain emissions of SHEIN-branded products and consumables in operations;purchased data services5,853,37610,209,730Capital GoodsTangible and intangible assets purchased60,92475,847Waste Generated in Operations Industrial waste generated in SHEIN-operated warehouses3526,045Decarbonize Our Supply ChainOur Carbon FootprintValue chain analysis has shown most of our emissions occur outside of our direct operations.Scope 3 emissions make up nearly all of our carbon footprint,with less than 1%attributed to Scope 1 and 2.Scope 3 emissions arise primarily from supply chain,transportation and other activities outside SHEINs direct control.Our absolute emissions grew from 9.17 million metric tons of CO2e in 2022 to 16.68 million metric tons of CO2e.In 2023,our business continued to experience strong growth,and our operations diversified with the introduction of SHEIN Marketplace.21 We recognize that we still have much more work to do on our climate mitigation journey and are committed to driving progress.We continue to take steps to demonstrate greater accountability in our decarbonization journey.In 2022,we completed a study of our 2021 emissions and announced our ambition to reduce GHG emissions across our value chain by 25%by 2030.In 2023,we committed to setting near-term targets with the Science Based Targets initiative(SBTi).We will submit our targets for SBTis validation in 2024 and are partnering closely with well-known consultants in the industry,including Anthesis,to ensure that we have a detailed and practical roadmap towards decarbonizing our value chain.We are also reviewing the scope of our climate ambitions and will commit to reach net-zero emissions by no later than 2050,in line with the SBTi Net-Zero Standard.20 Our2030near-termemissionsreductiontargetiswithreferencetoabaselineyearof2023,inlinewithSBTisguidancetochoosethemostrecentyearforwhichdataisavailable,andwhichisrepresentativeofourbusiness activity.21 Wecontinuetoimprovetheaccuracyofourcarbonaccountingasweprogressinourjourney.In2023,refinementsmadetoourmethodologyincluded:(a)expandingourinventorytoincludeallSHEIN-operatedsitesworldwide;(b)expandingthescopeofourinventory,toincludeintra-warehousetransportationandotherconsumablesinadditiontopackaging;and(c)refiningourdatacollectionandcalculationmethodology.22 Location-basedScope2emissionswere91,505metrictonsofCO2e in 2023.312023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLEPLANET:COLLECTIVE RESILIENCE Decarbonize Our Supply ChainSource Responsible MaterialsProtect Biodiversity and Animal WelfarePROCESSGOVERNANCE ANNEXReducing SHEINs Direct ImpactOur Scope 1 and 2 emissions account for only a small proportion of total emissions and are mainly linked to electricity usage.We are implementing programs to better manage and reduce the electricity we use in our offices and warehouses,as well as expand our use of renewable energy.In 2023,SHEIN used a total of 165,206 MWh of electricity across the operations that we directly manage globally.23 Seventy-two percent of this was from renewable sources,up from 68%in 2022.Were on track to achieving our target of having 100%of the electricity used in operations directly managed by SHEIN from renewable sources by 2030.Key Initiatives in 2023:We installed 43.6MW of capacity in seven of our warehouses,which generated 3,953 MWh of electricity,reducing 2,255 metric tons of CO2e.We carried out energy-efficiency improvement projects in three representative SHEIN facilities,namely a warehouse in Zhaoqing,our SHEIN office in Guangzhou and the SHEIN CIGM in Guangzhou,which helped us develop energy-efficiency recommendations for such facilities.We are switching from procuring heptafluoropropane fire extinguishers to IG-541 or dry powder extinguishers,with 99%lower emissions,for all our data centers.Reducing SHEINs Indirect ImpactWe acknowledge that,with over 99%of our emissions coming from Scope 3,we must collaborate with our suppliers and other value chain partners to address these areas.Significant work remains,but we have launched several programs in 2023 to support our suppliers in their decarbonization journeys.In partnership with Apparel Impact Institute(Aii),we initiated Clean by Design(CbD)projects,which focus on improving process efficiencies to reduce energy,water and chemical usage and waste generated in the manufacturing process.These projects,implemented across 28 supplier sites,collectively introduced 217 improvement actions,saving 14,046 MWh of electricity and nearly 46,000 metric tons of CO2e per year.We also promote the adoption of rooftop solar energy in our supply chain,establishing partnerships to design customized solarization plans for our suppliers.These are complemented by cash incentives to encourage adoption by our suppliers.We also reached out to over 300 suppliers to share about rooftop solar alternatives.As of end 2023,31 suppliers have installed and 10 suppliers are in the process of installing photovoltaic solar panels for their factories,totaling 51.6MW of solar capacity.These solar panels generated 21,290 MWh in electricity,reducing CO2e by 12,140 metric tons.24In 2023,we began exploring initiatives to reduce emissions in our logistics and transportation operations.For example,in Europe,we introduced lower-impact delivery options,offering self-pickup options for our customers so that they may collect their purchases from a pickup point instead of opting for doorstep delivery,which is estimated to have saved 19,468 metric tons of CO2e across eight countries.By working with logistics partners who use electric cars and hybrid or natural gas vans,we saved 54,614 metric tons of CO2e across six countries in Europe.We are also building partnerships with suppliers in Brazil and Trkiye to bring production closer to key consumer regions,and expanding the number of warehousing facilities globally in countries such as the USA and Poland.This nearshoring and onshoring strategy will help us to reduce delivery times,shipping costs and our Scope 3 carbon footprint.In nearshoring inventory,we managed to shift more air transportation to sea and ground modes for routes to Europe and the USA,saving us 49,578 metric tons of CO2e.In localizing procurement,we significantly reduced air transportation distance,resulting in an emissions reduction of 314,805 metric tons of CO2e.2523 Thisincludesspecificfacilitieswherewewereunabletotrackelectricityconsumption,forwhichtheelectricityconsumptionof other similar facilities was used as proxy.24 We use a shifted reporting year to account for solar energy use by our supply chain,covering the period from September 2022 to August2023.OurGHGemissionsaccountingandreportingarealignedwiththeGHGProtocol.25 ThepotentialemissionreductionsfromtheinitiativestoreduceemissionsinourlogisticsandtransportationoperationswereestimatedworkingwiththeCarbonTrust,basedonavailableinformationandassumptions.322023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLEPLANET:COLLECTIVE RESILIENCE Decarbonize Our Supply ChainSource Responsible MaterialsProtect Biodiversity and Animal WelfarePROCESSGOVERNANCE ANNEXSHEIN Supplier in Zhongshan CityUnder the CbD initiative,SHEINs team of specialists helped a supplier based in Zhongshan City devise a customized blueprint to improve energy efficiency,recommending measures tailored to their unique needs.These measures include establishing a condensate-reuse system,enhancing air-conditioning systems,steam pipe insulations and lighting management,and introducing energy-saving sewing machines.This helped the supplier realize 12.58%in water savings and 16.16%reduction in GHG emissions,and employees also reported significantly improved workshop conditions,especially on warmer days.CLEAN BY DESIGN PARTNERINGOUR SUPPLIERS IN THEIR ENERGY TRANSFORMATIONSHEIN Supplier in Guangzhou City While one of the suppliers SHEIN works with in Guangzhou had explored energy-transformation initiatives previously,it did not achieve much success.With SHEINs help,the supplier installed new,more efficient boilers and improved steam leakage management in boiler rooms,fine-tuned steam pressure levels and insulated steam pipelines,strengthened lighting management and refurbished standardized workshops.Within just six months,the supplier achieved a 13.93%reduction in electricity use,resulting in cost savings that could be reallocated to staff training or team-building initiatives.Through the collaboration with SHEIN,this SHEIN supplier was able to progress rapidly in their green transition journey.By fitting workspaces with LED lights,suppliers are able to eliminate common issues with incandescent bulbs such as harsh lighting and low-frequency hum.LED lights like these use less energy than incandescent bulbs,last longer and offer higher-quality light output than incandescent bulbs.332023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLEPLANET:COLLECTIVE RESILIENCE Decarbonize Our Supply ChainSource Responsible MaterialsProtect Biodiversity and Animal WelfarePROCESSGOVERNANCE ANNEXSourcing responsible materials means incorporating materials that meet our performance,quality and safety standards and materials that have a lower environmental impact.Were committed to identifying and using material solutions that can address bothexpectations.Sourcing responsible materials starts with the fundamentals:quality and safety.It continues with the responsibility to provide more product options manufactured from materials with lower environmental impact.SHEINs approach includes:Taking guidance from industry regulations and best practices to develop product quality and safety standards.Hiring experts to help establish and manage compliance protocols.Conducting training for both internal staff and suppliers on best practices for compliance.Requesting suppliers to provide up-to-date product quality and safety documentation.Conducting material and finished product testing for harmful and restricted substances and quality control in partnership with third-party experts and independent labs.Accelerating the adoption of preferredmaterials.An Established System for Quality and Safety During 2023,we introduced a quality monitoring and control(QMC)system for SHEIN-branded apparel products.The system covers the full product lifecycle,from design and development,through production and inbound sales,to after-sales processing.Such oversight enables us to better manage risks related to product compliance and safety.Throughout the year,we conduct inspections to ensure suppliers are compliant with our quality standards.To ensure that risks are identified and resolved as soon as possible,we take a risk-based approach,considering suppliers industry experience and historical data.Where apparel products are found to be noncompliant with SHEINs quality and safety standards,we take necessary actions as relevant.These can include removing products from sale,returning bulk goods to suppliers,reducing orders and imposing fines on suppliers.Moving forward,we will continue to improve the QMC system to ensure greater compliance with SHEINs quality and safety standards.Source Responsible Materials342023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLEPLANET:COLLECTIVE RESILIENCE Decarbonize Our Supply ChainSource Responsible MaterialsProtect Biodiversity and Animal WelfarePROCESSGOVERNANCE ANNEXQuality and Durability SHEIN adopts rigorous targets for the continual improvement of apparel product quality,drawing on standardized testing and customer feedback to guide our efforts.We have established internal standards for material factors like tear strength,pilling and color fastness,and require our textile suppliers to submit updated quality test reports for these factors.Our Product Quality team has developed protocols for testing compliance with our standards for any apparel products entering SHEINwarehouses.During 2023,we continued finding ways to improve apparel longevity.Based on customer reviews,we undertook efforts to source higher-performing zippers.We optimized and integrated our zipper supply chain,consolidating procurement activities to focus on three carefully selected companies whose products met our standards for high performance.Our surveys,which encompassed over 3,500 customers in six markets,show that customers do get good use out of our garments the majority of our customers surveyed reported that they generally wear SHEIN items over 10 times,with one-third of surveyed customers wearing their SHEIN items over 30 times.Chemical SafetyResponsible apparel products need to be designed with safety in mind.At SHEIN,we are building compliance control processes that uphold chemical and physical safety standards.SHEIN engages with industry experts to reinforce current practices for managing product compliance.We also maintain a Restricted Substances List(RSL),which imposes restrictions on per-and polyfluoroalkyl substances(PFAS),taking guidance from international standards and regulations including but not restricted to:The Apparel and Footwear International RSL Management(AFIRM)Group.Registration,Evaluation,Authorisation and Restriction of Chemicals(REACH).The Stockholm Convention and Aarhus Protocol on Persistent Organic Pollutants(POPs).Other relevant national and regional regulations.In 2023,we updated our RSL for materials so that it remains up to date with revised PFAS regulations.We also developed and launched a Manufacturing Restricted Substances List(MRSL)for materials used in manufacturing,compiling prohibited chemical substances that are often used in dyes,additives and finishing agents.SHEINs suppliers must agree with and ensure their raw materials,semi-finished and/or finished products meet our apparel product safety requirements.Additionally,our policies and procedures require fabric suppliers to provide test reports and Certificates of Conformance attesting to their compliance with our standards.Suppliers found to have manufactured noncompliant products may face penalties that include fines or having their apparel products removed from sale.Before being listed for sale,SHEIN-branded childrens clothing must also undergo several safety risk assessments to ensure that relevant standards for hazardous substance control are met.The design and production of SHEIN-branded childrens clothing are governed by our Childrens Clothing Safety Standards an internal document that takes guidance from European standards.Meeting Customer Expectations As a customer-focused business,we are in conversation with our customers constantly about what they like,what works and how we can improve.Customer feedback is gathered through our online platform in the form of product page comments,as well as through our customer service team.Any quality-related comments are passed to the quality and safety department to be addressed in a timely manner.This helps us to maintain a level of customer satisfaction in SHEIN-branded products.In 2023,the global proportion of negative reviews on our products(i.e.,three stars or less)decreased from 3.3%in 2022 to 2.6%,which is a 21.9%improvement.Based on reviews from customers in the USA,UK,Germany and France in 2023,customer product satisfaction averaged 97.4%SHEINs Quality Dojo in our CIGM provides free training to employees and suppliers on best practices in quality control and testing techniques,awarding a certification of completion for the course.352023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLEPLANET:COLLECTIVE RESILIENCE Decarbonize Our Supply ChainSource Responsible MaterialsProtect Biodiversity and Animal WelfarePROCESSGOVERNANCE ANNEXSourcing Lower-Impact Materials SHEIN is a member of Textile Exchange a global nonprofit driving beneficial impacts on climate and nature across the fashion,textile and apparel industry by guiding a growing community of brands,manufacturers and farmers towards more purposeful production along the supply chain.We look to their guidance as we develop our preferred fiber strategy and accelerate our sourcing of lower-impact materials.Recycled PolyesterPolyester accounts for the majority of SHEINs fiber portfolio,which makes the transition to recycled polyester a vital step in our decarbonization journey.With recycled polyester accounting for 7.9%of polyester directly sourced for SHEIN-branded products in 2023,we are moving steadily towards our goal to transition 31%to recycled polyester by 2030.Man-Made Cellulosic Fibers(MMCFs)When sourced responsibly,MMCFs(including viscose,modal,lyocell and acetate)hold a significant opportunity for sustainable,regenerative and circular fiber production at an affordable price.To help us make progress in this fiber category,we look to Canopy,an independent,solutions driven nonprofit organization,to identify Ancient and Endangered Forest-friendly suppliers and lower-impact fiber inputs and provide resources for taking collective action with supply chain partners and industry peers.In 2023,we made good progress on our goals,sourcing 60%of our viscose fabrics from“green shirt”rated producers.26 This includes utilizing 6,800kg of Lenzing TENCEL Modal fabrics each of which contain at least 30%Lenzing TENCEL Modal fibers in the creation of SHEIN garments in 2023.TENCEL Modal fibers are made from wood,a natural raw material,sourced from controlled or certified origins meeting Forest Stewardship Council(FSC)or Programme for the Endorsement of Forest Certification(PEFC)standards,following the stringent guidelines of 26 According to Canopys 2023 HotButtonReport.27 ThischartprovidesthefiberbreakdownbyweightfortextilesdesignatedbySHEINforusebycontractmanufacturers.28 In 2023,we switched the 6C garment polybags used in 2022 to 5.5C garment polybags.SHEINs Fiber Portfolio27Polyester75.7%Recycled polyester6.0%Cotton9.9%Viscose8.0%Forest-safe viscose5.0%Spandex3.6%Polyamide2.4%Other fiber categories(including linen,acrylic and metallics)0.3%the Lenzing Wood and Pulp Policy.For its highly responsible sourcing practices helping to protect Ancient and Endangered Forests,Lenzing has been recognized as one of the best performing companies worldwide in Canopys Hot Button Report in 2023.CottonWe have invested substantial resources to ensure cotton is sourced responsibly,and our policies and procedures require the submission of chain-of-custody documentation for SHEIN-branded cotton products to ensure traceability of raw cotton used.This is supported by our proprietary Traceability Management System that integrates supply chain documentation and information from fabric and finished product suppliers,such as certificates of raw material origin,export/import documents and purchase orders.We also look to third-party cotton sample testing to verify origin for SHEIN-branded products.Yarn and fabric samples are collected by independent third-party agencies and sent to Oritain,a global leader in isotopic analysis and cotton testing,for independent testing and origin verification.Packaging In pursuit of our goal to have 50%preferred materials in all our packaging for SHEIN-branded products by 2030,we are increasing use of recycled plastic and paper-based packaging.Since August 2022,nearly all express delivery packages procured for goods shipped to Europe have comprised 50%Global Recycled Standard(GRS)-certified recycled polyethylene(PE)plastic.In addition,all garment polybags procured for goods under our evoluSHEIN initiative and MOTF and Cozy Cub sub-brands have been designed to use 100%GRS-certified recycled PE plastic.in 2023.Overall,the proportion of packaging procured that contained at least 50%preferred materials increased from 4.1%in 2022 to16.2%Keeping in line with the specific regulatory requirements of each country we serve,SHEIN also ensures our packaging is properly labeled to help customers responsibly dispose of it.For example,all packaging bags are marked with the plastic type to support better waste separation.We have also included additional logos to support recycling efforts in line with regulations:the French Triman logo,Spanish Green Dot and Italian environmental label.In 2023,we started to use thinner garment polybags for our SHEIN-branded products,which are each 1.34 g lighter than the earlier type of polybag used.28 This comprised over 60%of our garment polybags for SHEIN-branded products in 2023.We are also using FSC-certified paper-based packaging for twoof our sub-brands.362023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLEPLANET:COLLECTIVE RESILIENCE Decarbonize Our Supply ChainSource Responsible MaterialsProtect Biodiversity and Animal WelfarePROCESSGOVERNANCE ANNEXAs demand grows from customers and the wider apparel industry for responsible,circular production practices,we consider it our duty to champion this evolution designing and sourcing with a goal to mitigate our environmental footprint and empower stakeholders across the communities we serve and operate in.How do we do this?By:Using preferred materials with a lower carbon footprint compared to conventional equivalents.Finding creative ways to repurpose textile surplus from cutting scraps to rescued deadstock fabrics from other fashion brands otherwise destined for landfill or incineration tooptimize and conserve resources.Shipping products in packaging containing more sustainable content,such as recycled PE.Encouraging conservation of water and energyresources.Seeking to utilize more facilities powered by renewable energy.Its also why we created evoluSHEIN by Design,a product initiative aimed at accelerating the use of responsible materials and manufacturing processes.For a garment to be recognized as an evoluSHEIN by Design product,it must meet our evoluSHEIN Standard.The standard specifies that qualifying garments must include a minimum of 30%preferred materials i.e.,recycled polyester,forest-safe viscose and rescued deadstock and be manufactured by suppliers who have achieved an above-average rating on their SRS audit(i.e.,A or B in our current grading scale)conducted by an accredited third party or be certified to an independent third-party standard that includes criteria for social compliance(e.g.,SA8000,GRS).Products are then shipped with packaging comprising preferred materials.In 2023,approximately 2.2%of SHEIN-branded products made with textiles designated by SHEIN were produced in accordance with our evoluSHEIN Standard.This progress was a combined effort from internal design teams and external brand partners,including fashion influencers,IP partners and SHEIN X designers who took up the mantle of incorporating sustainable design principles into their collections.We will continue this push for more responsible and circular production practices,and work with our ecosystem of partners towards sourcing 50%of SHEIN-branded products through our evoluSHEIN by Design initiative by 2030.evoluSHEIN by DesignIn 2023,SHEIN worked with six US-based SHEIN X designers,handpicked based on their passion for sustainable fashion,to launch evoluSHEIN by Design collections.b y D e s i g n372023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLEPLANET:COLLECTIVE RESILIENCE Decarbonize Our Supply ChainSource Responsible MaterialsProtect Biodiversity and Animal WelfarePROCESSGOVERNANCE ANNEXSUSTAINABLE,INCLUSIVE FASHIONLauren Flagg,founder of Obviously Vintage and graduate of the Art Institute of Raleigh-Durham,champions sustainable fashion.Hailing from North Carolina,she launched her brand in 2018,inspired by nostalgic 1980s and 90s designs and her earlier years spent thrifting and repurposing clothes.Her clothing line incorporates recycled fabric both for the clothes themselves and for their packaging.After five years of running her business locally,Lauren was one of the six US-based designers in the initial cohort selected to join our evoluSHEIN by Design initiative.This brings global exposure for Laurens sustainable pieces not only across SHEINs website,but also to her own independent brand.I went from making one of one piece to having fullcollectionsonSHEINsworldwide e-commerce site.Itchangedmylife.Iwouldspotmyownpiecesbeing worn at events,someone doing a get ready with me on Instagram and even doing clothing hauls withmypieces.Lauren Flagg,Founder,Obviously Vintage382023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLEPLANET:COLLECTIVE RESILIENCE Decarbonize Our Supply ChainSource Responsible MaterialsProtect Biodiversity and Animal WelfarePROCESSGOVERNANCE ANNEXAddressing our impact on the environment means digging deeper into our value chain to track down potential risks to natural ecosystems.It requires making a conscious effort to take responsibility beyond our own operations to protect biodiversity and uphold animal rights.Material TraceabilityBefore we can address our impacts,we need to understand where and how they occur at different points across the supply chain.Accurately tracing our operations impacts on biodiversity and animal welfare requires identifying and understanding the sources of our materials.To do so,we are undertaking efforts to strengthen supply chain coordination and collaboration with external organizations,across non-governmental organizations(NGOs),public authorities and testing certification bodies.SHEIN has partnered with TV Rheinland to develop our proprietary Traceability Management System,aimed at tracing material quality and verifying sustainable material sources along our supply chain.Through integration with SHEINs digital supplier management system,SHEINs policies and procedures require suppliers to reconstruct their physical supply chain in digital form,uploading documentation to track the flow of materials.This includes chain of custody documentation,test reports and transaction certifications for raw materials used.SHEIN also conducts routine sampling of yarn,fabrics and finished products,in partnership with independent testing labs in different markets,to verify the efficacy of our material traceability system and to help ensure the materials used in our products comply with the required product quality standards in the markets we operate in.Making a Commitment to Our ForestsIn 2022,SHEIN became a signatory to the CanopyStyle and Pack4Good initiatives,joining forces with Canopy to reduce the fashion industrys contribution to deforestation and degradation.Canopy works with its brand partners and local allies to protect these irreplaceable forest ecosystems that support rich biodiversity of life and the livelihoods of many Indigenous communities.To protect these vital Ancient and Endangered Forests,we have committed to:Transition all directly sourced MMCFs to come from sources that do not endanger vital ancient forests by 2025.Transition all paper-based packaging to forest-safe sources and prefer the use of recycled content by 2025.Accelerate next-generation fiber solutions.Promote forest conservation.Protect Biodiversity and Animal WelfareAnimal WelfareWe seek to offer vegan-friendly and cruelty-free product options to our customers and are committed to promoting the importance of animal welfare within our supply chain.SHEINs Animal Welfare policy follows the“Five Freedoms”laid out by the World Organisation for Animal Health,namely freedom:From hunger,malnutrition and thirst From heat stress or physical discomfort From pain,injury and disease To express normal patterns of behavior From fear and distress 392023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLEPLANET:COLLECTIVE RESILIENCE Decarbonize Our Supply ChainSource Responsible MaterialsProtect Biodiversity and Animal WelfarePROCESSGOVERNANCE ANNEXWASTE-LESSINNOVATIONInnovation is what will propel the fashion industry towards a more sustainable and ethical future.We look to embed circularity principles and resource-saving technologies into our operations to enable a future where we can close theloop.PROCESSPEOPLEPLANETOUR THREE STRATEGIC PRIORITIES:Accelerate Sustainable Innovation Optimize Resource Efficiency Design Circular Systems INTRODUCTION PEOPLEPLANET PROCESS:WASTE-LESS INNOVATIONOptimize Resource EfficiencyDesign Circular SystemsAccelerate Sustainable InnovationGOVERNANCE ANNEX2023 SUSTAINABILITY AND SOCIAL IMPACT REPORT40By seeking innovative solutions,we can significantly decrease our environmental footprint and preserve our planet and its resources.Transforming how we produce and manage resources at all stages across the entire value chain,and empowering our customers to come along on this journey,will help us close the loop in the fashion industry.Our ApproachOur three strategic priorities for driving impact are to:Optimize Resource Efficiency Design Circular Systems Accelerate Sustainable Innovation We are optimizing efficiency along the value chain to conserve resources,leaning on circular systems of product reuse,refurbishing and recycling to minimize the environmental impact of our consumption patterns.At the same time,we are accelerating sustainable innovation by testing and scaling effective solutions to drive positive change in the fashion industry.Why It Matters412023 SUSTAINABILITY AND SOCIAL IMPACT REPORTINTRODUCTION PEOPLEPLANET PROCESS:WASTE-LESS INNOVATIONOptimize Resource EfficiencyDesign Circular SystemsAccelerate Sustainable InnovationGOVERNANCE ANNEXWe constantly seek to enhance efficiency throughout our value chain,conserving essential resources like water,energy and raw materials.By minimizing consumption and waste,we ensure that we use only what is necessary.Tech-Driven Waste ReductionWaste of resources from overproduction is a systemic challenge that the retail sector faces.Acknowledging this problem,our innovative on-demand business model strives to minimize waste from the start,which also reduces costs for customers.Utilizing small-batch ordering based on trend research and direct feedback,SHEIN seeks to maintain consistently low unsold inventory rates.Additionally,our digital supplier management system equips our partners with real-time insights,to aid in more accurate production planning and minimize resource wastage.Conserving Water Water is an essential resource at every stage of the apparel value chain,and we are committed to optimizing its use within our supply chain.Many of our suppliers already use closed-loop water treatment and reuse processes that help reduce water consumption.We also invest in research and development of manufacturing technology and production processes that consume less water,and encourage our suppliers to adopt these practices.Our CbD projects for supplier facilities,implemented in collaboration with Apparel Impact Institute,have also targeted improving water efficiency.Our projects in 2023 are estimated to have saved around 1 million cubic meters of water.In 2023,over 52%of directly sourced printed fabric utilized digital thermal transfer printing(DTP),which is a zero-water-waste printing method verified by Bureau Veritas.The DTP initiative is estimated to have saved over 290,000 cubic meters of water and over 32,600 MWh of electricity compared to traditional screen-printing in 2023,which also results in a reduction of 60,524metric tons of CO2e.SHEIN is also working with suppliers to increase adoption of cool transfer denim printing technology,which uses innovative high-fixation ink in place of conventional indigo colorants.This method was verified by Bureau Veritas in October 2023 to use 70.5%less water than traditional denim apparel washing methods.This also provides our designers with more flexibility to create designs with a variety of colors and style accents,since they can print the pattern onto the denim fabric directly using a digital printer.SHEIN has integrated the cool transfer denim production process into our agile supply chain,allowing our suppliers to produce innovative denim designs in a more water-efficient manner.Optimize Resource EfficiencyCLEANBYDESIGNSUPPORTING WATER CONSERVATION SHEIN Supplier in Zhaoqing CityThrough the CbD initiative,with the support of SHEINs team of experts,a SHEIN supplier in Zhaoqing City enhanced their motor energy efficiency and switched to energy-efficient machinery like dyeing machines,shaping devices and air compressors.They also developed a system to monitor and mitigate water and stream runoff and leaks and pioneered research into energy-conserving,short-duration dyeing processes.This not only reduced their energy footprint,but also resulted in a 19.7%reduction in water usage.SHEIN Supplier in Foshan CityWith SHEINs experts assessing and evaluating production methods and providing technical support,our supplier in Foshan City managed to achieve an 18.2%reduction in water usage and a 15.4%reduction in wastewater discharge by
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1Sustainability Report 2023Sustainability Report 2023Now.Next.Beyond.2Sustainability Report 2023Contents1 A Message from Our CEO2 About Mobileye2.1 Mobileye Values and DNA 2.2 Key Milestones 2.3 Key Company Metrics 2.4 Paving the Road to Autonomous Driving An Overview of Our Solutions 3 Alignment with the UN Sustainable Development Goals(SDGs)4 About This Report5 Our ESG Journey5.1 ESG Focus Areas6 Creating Meaningful Impact through Innovation6.1 Promoting Safe Mobility Our solutions put safety first Mobileyes Safety Methodology for AVs6.2 Quality and Product Stewardship Quality Management System and Governance Quality Partnerships Elevating Cybersecurity6.3 Data Privacy and Cybersecurity at Mobileye Data Protection Data Privacy Policies Data Privacy and Cybersecurity Training7 Our People and Communities7.1 Focus on Employee Wellbeing 7.2 Employee Engagement and Team Building7.3 Talent Development and Promoting Professional and Personal Growth Fostering Excellence and Rewarding Performance7.4 Our Employees7.5 Fostering Diversity,Equity and Inclusion in our Workforce7.6 Engaging with Our Communities8 Operating Responsibly8.1 Working Towards a Sustainable Future Waste and Water Management Managing Our Carbon Footprint8.2 Employee Health and Safety9 Responsible Business and Governance9.1 Promoting Ethical Business Practices9.2 Fair Employment Anti-Corruption and Anti-Bribery Reporting Ethics Grievances Ethics Training9.3 Responsible Supply Chain Management 9.4 Responsible Mineral Sourcing9.5 Corporate Governance Board of Directors10 Appendices10.1 Appendix 1:SASB Index10.2 Appendix 2:Forward Looking StatementsCareer Development at Mobileye3Sustainability Report 2023A Message from Our CEO1Sustainability Report 20234Sustainability Report 20231 A Message from Our CEOA Message from Our CEOMore than two decades ago,I founded Mobileye on the belief that computer vision technology could help prevent automobile crashes and save lives.From that simple idea,a new automotive product safety category was born.In the 17 years since we shipped our first product,more than 170 million vehicles have been equipped with Mobileyes life-saving technology.And during that time,our purpose has evolved and widened from collision avoidance to fully autonomous driving and a spectrum of products in between.While the core of our business today is making human driven cars safer,we are working tirelessly to bring about a future of autonomously driven vehicles.Its a future where everyone has access to mobility services.Where congestion is seen only in history books.Where we get hours of time back in our days because we are not focused on driving.And its my sincere hope that its a future where autonomous vehicles can reduce vehicle-related injuries and fatalities in a transformative way.In this 2023 Mobileye Sustainability Report,we unveil our ESG strategy as a public company for the first timeour efforts to create a safer,more sustainable world,enabled by our world-class employees.We recently completed our new Global Headquarters which we were proud to unveil as LEED Platinum,one among only a handful of other corporate developments of its kind in Israel we intend to progress on this journey and lead by example.Since Mobileye pioneered Advanced Driver Assistance Systems(ADAS),many companies have joined the pursuit of collision avoidance and autonomous driving technologies.But Mobileyes approach is different.We believe and always have that our technology must be affordable,so everyone can benefit.We believe it must be best-in-class so consumers will demand it.We believe technology that targets accident prevention should work on the vast majority of roadways not just cities and well-traveled highways.These concepts of scalability and 5Sustainability Report 2023Amnon.1 A Message from Our CEOavailability add to the complexity of the problems were working to solve.But we believe they are crucial to avoid the“science experiment trap”that entangles so many technology startups struggling to move from prototype to mass production.By doing the hard work now,we can more easily move from the lab to the streets.And our approach is working;we are actively working with more than 50 automakers,and Mobileyes ADAS technology has been installed in hundreds of makes and models of vehicles worldwide.We started small with a single monocular camera and computer vision algorithms to enable a machine to“see”and“interpret”the environment as humans do.We are nearly 4,000 employees strong,with operations in eight countries.We have built complex artificial intelligence software and silicon solutions.Our technology has been deployed in over 170 million vehicles,with their precious cargo of drivers and passengers benefitting from our industry-leading ADAS technology.By 2030,we expect Mobileye driver assistance systems to be deployed in millions more vehicles globally.We believe that we are positioned to deliver advanced ADAS and autonomous driving solutions that promise a step change in automotive safety and more efficient transportation,including both Mobileye-powered mobility-as-a-service vehicles and consumer owned autonomous driving vehicles.And Mobileye will be well on the way to delivering the future I first envisioned more than two decades ago.I am incredibly proud of the work weve done so far,but there is much to do to make road accidents and fatalities a thing of the past while delivering the transportation systems of the future.I have made these challenges my purpose and remain all in on the opportunity and the challenge.6Sustainability Report 20232About Mobileye2.1 Mobileye Values and DNA 2.2 Key Milestones 2.3 Key Company Metrics 2.4 Paving the Road to Autonomous Driving An Overview of Our Solutions Sustainability Report 20237Sustainability Report 20232 About MobileyeAbout MobileyeMobileyes Story-Now.Next.Beyond.-Bringing the benefits of self-driving tech to everyone,everywhereMobileye is a leader in the development and deployment of Advanced Driver Assistance Systems(“ADAS”)and autonomous driving technologies and solutions.Since its founding in 1999,Mobileye has been harnessing world-renowned expertise in computer vision,artificial intelligence,mapping,and data analysis.We pioneered ADAS technology more than 20 years ago and have continuously expanded the scope of our ADAS offerings,while leading the evolution to autonomous driving solutions.1 The sections of this“About Mobileye”company profile are derived from our 2023 Annual Report on Form 10-K and speak as of February 23,2024,unless another date is indicated,are truncated and summary in nature,and do not reproduce exactly or in full the disclosures from that report.For a full discussion of Mobileyes business,financial results,and the topics addressed in this company profile,please review our 2023 Annual Report on Form 10-K.8Sustainability Report 2023Our VisionMobileye was founded on a simple but radical idea:a single,inexpensive sensor,the camera,could be the basis for life-saving technology.Millions of vehicles later,Mobileye continues to lead the mobility revolution by harnessing world renowned,road-proven expertise in computer vision applications,machine learning and artificial intelligence-based software,mapping,purpose-built hardware,and data analysis.Our Mission Our mission is to bring the safety and convenience benefits of self-driving tech to everyone,everywhere.Our cost-efficient and scalable technology enables a complete portfolio of ADAS and self-driving system autonomous vehicle(“AV”)solutions that are set to define the continued evolution of automotive safety and autonomous mobility.2 About Mobileye9Sustainability Report 2023Mobileye Values and DNA2.1 About Mobileye-Mobileye Values and DNADiscovering solutions that often seem unlikely or impossible.Until they arent.Outside the Bounding BoxPioneering the future without losing sight of today and tomorrow.Now.Next.Future.Coding a new reality while working in an understated way,as a team.Live the Dream.Stay Humble.Valuing life above all other considerations.Save LivesEnabling accessible mobility and protecting the environment.CareCreating the autonomous future,step by step.Evolution as RevolutionTackling and solving the toughest challenges facing the industry using our technology.Geek ProudValuing each persons individual contribution,knowing each can make an outsized impact.Never Too Small10Sustainability Report 2023Key Milestones2.2 About Mobileye-Key MilestonesMobileye founded19991 millionth EyeQ chip shippedMobileye goes public on NYSE at$5.3B valuationMobileye in 160 car models across 25 automakersMobileye acquired by Intel for$15.3BMobileye begins crowd sourcing map data globallyMobileye goes public again on NASDAQ with a$16.7B valuation AV testing on three continents 100 millionth EyeQ shipped2007First EyeQ chip shipped201220142015201720182022202111Sustainability Report 2023MunichKoblenzDusseldorfParisJerusalemHaifaPetach TikvahTel AvivTokyoBeijingShanghaiNingboDetroitNew York CityAV Testing&Development SitesOfficesKey Company Metrics 2.3 About Mobileye-Key Company Metrics 2 Including local country,year,and other vehicle model variationsAs of December 30,2023,our solutions had been installed in over 800 vehicle models2 and our System-on-Chips(“SoCs”)had been deployed in approximately 170 million vehicles FY23 revenue$2.1BMore than 50 Original Equipment Manufacturers(OEMs)worldwide for implementation of our ADAS solutions37.4 million EyeQ System-on-a-chip(SoC)and SuperVision systems shipped in 2023334 U.S.patents,And 48 European patents,as of December 30,2023Global reach with operations in:Jerusalem,Tel Aviv,Detroit,Dusseldorf,Munich,Tokyo,Beijing and Shanghai.Over 3,700 employees operating across eight countries12Sustainability Report 20232.4 About Mobileye -Paving the Road to Autonomous Driving Paving the Road to Autonomous DrivingMobileye is leading the evolution from assisted to autonomous driving.Advanced driver-assistance systems(ADAS)is a term for technological features that make driving safer,easier,or more comfortable.ADAS systems This category includes all basic driver assistance functions,such as Autonomous Emergency Braking(“AEB”)and Lane Departure Warning(“LDW”).The driver is still responsible for the overall task of driving,while the system supports the human driver.This refers to premium driver assistance functions that allow the driver to experience hands-free driving while the driver must still monitor the vehicle.The system controls the driving function within a specified Operational Design Domain(“ODD”)without the need for the human driver to monitor driving.If the ODD is exceeded and the driver does not reassume control,the system is capable of performing a Minimum Risk Maneuver(“MRM”)and safely stopping at the roadside.When no human driver is present,e.g.,in a robotaxi,the monitoring role of the in-cabin human is replaced by a teleoperator who can intervene to resolve non-safety-related situations.use sensors,like cameras and radar,as well as accompanying software to proactively detect and elicit responses to various driving conditions,aiding drivers in situations like lane keeping,blind spot monitoring,collision avoidance and Mobileye has defined four levels of autonomy,analogous to the five levels of autonomous driving:more.Essentially,ADAS aims to reduce human error,prevent against distraction,improve road safety,and pave the way for autonomous driving vehicles,which will allow operation of vehicles without the direct control of the driver.HANDS-ON/EYES-ONHANDS-OFF/EYES-ONHANDS-OFF/EYES-OFFNO DRIVER13Sustainability Report 2023 1 Front Camera:100/1.7MP|120 8MP 1xEyeQ 4M/5M/6L 1 Front Camera:100/1.7MP|120 8MP 1xEyeQ 4M/5M/6L REM Cloud 6 Cameras:-2 Long-Range Cameras 8MP(Front&Rear)-4 Short-Range Cameras 3MP 5 Radars REM Cloud DMS Required ECU based on 1 x EyeQ 6HBase Driver AssistSurround Driver AssistOur portfolio of solutions are built upon a comprehensive suite of purpose-built software and hardware technologies designed to provide the capabilities needed to make the future of ADAS and autonomous driving a reality.These technologies can be harnessed to deliver mission-critical capabilities at the edge and in the cloud,advancing the safety of road users,and revolutionizing the driving experience and the movement of people and goods globally.An Overview of Our SolutionsHANDS-ON/EYES-ONCloud-Enhanced Driver Assist HANDS-ON/EYES-ONHANDS-OFF/EYES-ONMobileyes Base Driver Assist,powered by our purpose-built EyeQ system-on-chip,brings our Advanced Driver Assistance Systems to millions of vehicles on the road today.Our EyeQ SoC provides drivers with basic safety features covered by front facing sensing,such as collision warning,lane departure warnings,pedestrian and cyclist collision warning,headway monitoring and warning,speed limit indicator,and blind spot detection.Mobileye Cloud-Enhanced Driver Assist leverages crowdsourced data from millions of Mobileye-equipped vehicles around the globe every day,providing high-level localization through continuously updated information about the driving scene.It provides a safer,smoother,and more natural driving experience marking a software defined leap in ADAS performance with no need for additional hardware.Building on our ADAS expertise and the core of our single-camera Cloud Enhanced product offering,we offer the ability to meet expanded late-decade active safety requirements through the utilization,analysis,and processing of additional surround perception sensors.Additionally,the product offers hands-off,eyes-on functionality for the Highway ODD by adding features like Automatic Lane Change,Front and Rear Collision Avoidance,Traffic Jam Assist,and a Highway Pilot function up to 130 KPH with the fidelity of a six camera,up to five radar sensor suite.2.4 About Mobileye -Paving the Road to Autonomous Driving*Sensor configurations above are illustrations of camera array reference diagrams and do not include all relevant sensor types by product category.14Sustainability Report 2023Mobileye SuperVisionMobileye ChauffeurMobileye Drive 11 Cameras:-7 Cameras 8MP -4 Short-Range Cameras 3MP 1 Front Radar(optional)REM Cloud DMS Required ECU-2 x EyeQ 6H The next generation of driver-assist hands-free but eyes-on.Mobileye SuperVision is our most advanced driver-assist system on the market and the bridge to consumer AVs.It is designed to handle standard driving functions across various road types,offering the“hands-off”navigation capabilities of an autonomous vehicle under certain ODDs,while still requiring the driver to pay full attention and keep eyes on the road.Derived from our AV research and development,Mobileye SuperVision leverages surround vision and more to offer a bridge to autonomous capabilities.11 Cameras:-7 Cameras 8MP -4 Short-Range Cameras 3MP Surround Radars(Highways only)or Surround Imaging Radars (Highways Rural Arterial Roads)1 Front Lidar REM Cloud DMS Required ECU-3 x EyeQ 6H 11 Cameras:-7 Cameras 8MP -4 Short-Range Cameras 3MP Surround Imaging Radars 1 Front Lidar REM Cloud DMS Required ECU-4 x EyeQ 6H Mobileye Chauffeur is our geographically scalable hands-off/eyes-off solution for consumer vehicles in a gradually expanding ODD,combining computer vision technology with surround imaging radars and front lidar.It is a self-driving system designed to turn a human-driven vehicle into an consumer AV automated driving system and thus reduce the human error factor.13 Cameras:-9 Cameras 8MP -4 Short-Range Cameras 3MP Surround Imaging Radars Lidars REM Cloud ECU-4 x EQ 6HMobileye Drive is our end-to-end self-driving system that enables automakers,public transportation companies,and transportation network operators to offer a no-driver solution for robotaxis,ride-pooling,public transport,and goods delivery.Our turnkey self-driving solution offers a more advanced ODD that can turn various vehicle configurations and services autonomous.Already being integrated,and in the development,testing and validation stages in autonomous public transit,autonomous goods delivery,and autonomous mobility-as-a-service across industries and around the globe.HANDS-OFF/EYES-ONHANDS-OFF/EYES-OFFDRIVERLESS SERVICES2.4 About Mobileye -Paving the Road to Autonomous Driving*Sensor configurations above are illustrations of camera array reference diagrams and do not include all relevant sensor types by product category.15Sustainability Report 20232.4 About Mobileye -Paving the Road to Autonomous Driving Technology Building BlocksLeveraging decades of experience as a technology leader for sensing and perception solutions for the automotive industry,our efforts are focused on building highly scalable and cost-efficient autonomous solutions.Our technology platform,which includes our software and hardware intellectual property,is based on five key technology pillars:Highly advanced,road-tested,cutting edge artificial intelligence that controls perception(computer vision,radar processing,lidar processing),driving policy/decision-making,and vehicle control.These technologies have evolved from years of leadership in execution and production of our mission critical software and purpose-built EyeQ family of SoCs to deliver on-edge,life saving active safety systems across millions of vehicles world-wide for more than a decade;Compound AI SystemsNext Generation Imaging RadarsA solution targeted to reduce the need for multiple lidar sensors,combined with a single front-facing lidar sensor in the redundant sensor configuration of the future.This enables our goal of building a cost-effective fully autonomous driving-system;REM A high-precision mapping system,our Road Experience Management(“REM”),that generates maps to support autonomous vehicles from crowdsourced data that is uploaded and analyzed in the cloud from REM-equipped production ADAS solutions that are deployed on vehicles on the road;Our compound AI structure includes multiple levels of redundancies both within the computer vision stack,the fusion of mapping with real-time perception,and the fusion of independent world-views produced by separate vision and radar/lidar based sub-systems.This high-level fusion structure is governed by a Primary/Guardian/Fallback structure which can handle“majority-rule”as well as binary discrepancies.This technology approach enables our goal of building a fully autonomous driving-system that can be validated as safer than human-driven vehicles and deployed in a cost-efficient manner;Systematic Redundancy Responsibility-Sensitive Safety(“RSS”)Framework,which has continuously been optimized since it was first published in 2017,is used by international bodies that are currently developing standards with respect to the safety of AVs.This acts as an explainable safety methodology to govern the AI-based decisions of the system.These five pillars form the core of our highly versatile and customizable platform which we intend to deploy with progressively increasing functionality to enhance our market leading ADAS solutions and lead the evolution to autonomous driving solutions.16Sustainability Report 2023Our technologies are driving the advanced driver assistance systems(ADAS)and autonomous vehicles(AV)fields towards the future of mobility enabling self-driving vehicles and mobility solutions,powering industry-leading advanced driver assistance systems and delivering valuable intelligence to optimize mobility infrastructure.2.4 About Mobileye -Paving the Road to Autonomous Driving 16Sustainability Report 202317Sustainability Report 2023Alignment with the UN Sustainable Development Goals(SDGs)3Sustainability Report 202318Sustainability Report 20233 Alignment with the UN Sustainable Development Goals(SDGs)Alignment with the UN Sustainable Development Goals In 2015,the United Nations Member States defined 17 Sustainable Development Goals(“SDGs”).The SDGs are a blueprint aimed to achieve a better and more sustainable future by 2030.They outline the actions required to create sustainable growth and a better future,including ending poverty,tackling climate change,and fighting inequality and injustice.As an innovator,Mobileye aims to develop pioneering solutions which make safe mobility technologies broadly accessible.19Sustainability Report 2023Reducing road accidents and fatalities Driving innovation in mobility solutions Promoting safer cities Fostering the technological talents of the future By prioritizing safety through innovative driver-assistance systems,we contribute to road safety,and to reducing accidents and fatalities.Our technology improves the health and well-being of drivers,passengers,and other road users.Mobileyes pioneering developments in autonomous vehicle technologies address emerging mobility challenges,while also enhancing the development of autonomous vehicle technology infrastructure in our ecosystem.Our systems generate vast amounts of data that can be used to analyze traffic patterns,identify high-risk areas,and implement safety interventions,while also helping to optimize the planning of city infrastructure,and improve traffic flow efficiency.This facilitates the development of smart cities.In addition,we are developing shared autonomous transportation solutions which can help to reduce road congestion,and provide mobility options for those who are unable to drive.Through collaboration with local academic institutions and organizations,Mobileye supports the next generation of technology innovators.We extend our professional expertise to various communities and create more opportunities for tech education.We have identified the following SDGs in which we believe we can have a significant impact:3 Alignment with the UN Sustainable Development Goals(SDGs)20Sustainability Report 2023About This Report4Sustainability Report 202321Sustainability Report 20234 About This ReportAbout This Report Mobileye is proud to release its first Sustainability report as an independent company,marking an important step in our sustainability journey.This report underscores our commitment to societal and environmental responsibility and lays the groundwork for future initiatives and goals.Our dedication to sustainability is demonstrated in our commitment to publish annual Sustainability reports that will transparently communicate our progress in enhancing sustainability practices.This years report presents an introduction of the environmental,economic,and social impacts of our autonomous mobility technology and of our operations.Adhering to leading non-financial disclosure standards,this report follows the Sustainability Accounting Standards Board(SASB)guidelines for the Auto Parts industry and Software&IT Services,selectively applying standards relevant to our business as detailed in the appendix.Covering Mobileyes worldwide operations,this document provides a detailed account of our 2023 activities and their impacts.Any figures included are true to December 30,2023 unless otherwise stated and any discrepancies between this report,Mobileyes 2023 Annual Report on Form 10-K defer to the latters authority.We eagerly invite and appreciate your feedback on this report and our sustainability efforts.For comments,questions,or clarifications,please feel free to reach out to Dan Galves,Chief Communications Officer at Your insights are invaluable as Mobileye continues to navigate its path toward a more sustainable and responsible future.21Sustainability Report 202322Sustainability Report 2023Our ESG Journey5.1 ESG Focus Areas5Sustainability Report 202323Sustainability Report 20235 Our ESG JourneyOur ESG JourneyIn 2023,we embarked on our ESG journey,to implement environmental,social and governance practices which align with our vision of improving safety,efficiency,and accessibility of transportation.This year served as a foundational period in which we defined our areas of focus and established initial processes and baseline measures against which to assess future progress.24Sustainability Report 2023We conducted a dedicated analysis to identify and prioritize areas of focus for our sustainability efforts according to our business objectives and the expectations of the industry in which we operate.This process included analysis of our main stakeholders,i.e.,our customers,our investors,employees,regulators and other governmental entities,to align our ESG activities with their expectations.ESG Focus Areas5.1 Our ESG Journey-ESG Focus AreasESGEnvironmental managementResponsible sourcing of raw materialsEnergy and GHG emissions managementResponsible supply chain managementEmployee health and safetyHuman rights and working conditionsGovernance and ethicsWe structured the focus of our ESG activities around these key areas:25Sustainability Report 2023Creating Meaningful Impact through Innovation6.1 Promoting Safe Mobility Our solutions put safety first Mobileyes Safety Methodology for AVs6.2 Quality and Product Stewardship Quality Management System and Governance Quality Partnerships Elevating Cybersecurity6.3 Data Privacy and Cybersecurity at Mobileye Data Governance Data Privacy Policies Data Privacy and Cybersecurity Training6Sustainability Report 202326Sustainability Report 20236 Creating Meaningful Impact through InnovationCreating Meaningful Impact through InnovationGuided by a mission to make the safety and convenience benefits of self-driving technology accessible to all,Mobileye offers a comprehensive portfolio of ADAS and AV solutions.The Companys vision,rooted in its original belief that a single camera could revolutionize safety technology,has made it a leader in the mobility revolution.Leveraging expertise in computer vision,machine learning,and data analysis to enhance automotive safety and autonomous mobility,Mobileye strives to positively impact peoples everyday routines and contribute to solving safety challenges.27Sustainability Report 202327contribute to an improvement in driver behavior over time.While ADAS plays a central role in automotive safety today,we envision a future of mobility guided by a path to fully autonomous vehicles.The advent of AVs holds promise for a future where human error,a major factor in road accidents,is significantly reduced.Our journey to fully autonomous vehicles involves developing an autonomous driving solution capable of navigating any environment,with verifiable decision-making processes and actions.Achieving full autonomy demands substantial data,a robust technology platform,compliance with global regulatory standards,and cost-effective production to enable scale challenges that are essential drivers of our ongoing development and product roadmap.Promoting Safe Mobility Mobileye is at the forefront of developing and implementing cutting-edge ADAS and autonomous driving technologies.Our ADAS technologies include applications such as forward collision warning,lane departure warnings,pedestrian and cyclist collision warning,headway monitoring and warning,intelligent speed assist,and blind spot monitoring.These safety features alert drivers to potential hazards and in the event of a detected collision,can automatically employ safeguards like autonomous emergency braking.Our solutions are AI-powered vision systems,which consist of sensors,such as cameras and in some cases integrate radar and lidar,paired with software,which utilize algorithms and artificial intelligence techniques to interpret visual data captured by these sensors.This enables real-time data exchange and accurate identification of objects and ultimately complete environmental perception,including pedestrians,lane markings,and traffic signs.Our technologys complete environmental perception facilitates smoother traffic flow and reduces the likelihood of accidents.Vehicles equipped with collision avoidance systems,which are derived from and a part of ADAS technologies,have demonstrated a measurable track record of reducing collisions.A summary report on real-world benefits of crash avoidance technologies by the Insurance Institute for Highway Safety(“IIHS-HLDI”),shows that vehicles fitted with advanced driver assistance and the accompanying applications provide an advantage over vehicles without the system.According to their extensive research,forward collision warning systems experienced a 27crease in front-to-rear collisions alone,and when paired with automatic braking the reduction of crashes was 50%.Vehicles equipped with lane departure warnings saw a 21%reduction in single vehicle side-swipe and head-on crashes.These reductions contribute to preventing injuries and fatalities.Beyond the direct savings from collision prevention,driving with a collision avoidance system has proven to lower fuel consumption,thus reducing fuel expenditures and contributing to the reduction of emissions associated with fuel combustion.Moreover,studies indicate that these systems 6.1 Creating Meaningful Impact through Innovation-Promoting Safe MobilitySustainability Report 202328Sustainability Report 2023Our solutions put safety first6.1 Creating Meaningful Impact through Innovation-Promoting Safe MobilityBase Driver AssistPowered by our purpose-built,on-windshield EyeQ SoC devices and our expertise in computer vision,our core ADAS solutions are found in millions of vehicles.They enable automotive manufacturers to improve vehicle safety by providing real-time detection of road:users,geometry,semantics,and markings to provide safety alerts and emergency interventions.This translates to collisions avoided,injuries prevented,and lives saved.Cloud-Enhanced Driver AssistMobileye has defined a new category of ADAS with Cloud-Enhanced Driver-Assist enabled by our REM mapping technology.Cloud-Enhanced Driver-Assist leverages crowdsourced ground data from millions of Mobileye-equipped vehicles across the globe,providing high level accuracy localization via continually updated information about the driving scene.Enhancing the existing single-camera system with crowdsourced data offers comprehensive in-path assist functionality that enables better performance and compliance even in complex or challenging circumstances.This advanced functionality,relying on data from prior human driving activity on those roads to anticipate and adapt,enhances comfort and safety.Surround Driver AssistBuilding on our ADAS expertise and the core of our single-camera Cloud Enhanced product offering,we offer the ability to meet expanded late-decade active safety requirements through the utilization,analysis,and processing of additional surround perception sensors.Additionally,this product offers hands-off,eyes-on functionality for the Highway ODD by adding features like Automatic Lane Change,Front and Rear Collision Avoidance,Traffic Jam Assist,and a Highway Pilot function up to 130 KPH with the fidelity of a six camera,up to five radar sensor suite.Mobileye SuperVisionThe classic definition of“supervision”is watching over someone or something to ensure everything is done properly and safely.It also speaks to the quality of possessing extraordinary capabilities of sight,which our surround camera configuration brings to the table.Equally important however,is that this is an ADAS system,so it still requires human oversight meaning eyes on the road at all times,even if the drivers hands are off the wheel.Derived from our AV research and development,Mobileye SuperVision leverages surround vision,REM,and RSS to offer autonomous capabilities within a limited ODD.True to the name,it increases safety for human-driven vehicles by utilizing a 360-degree computer-vision led safety cocoon to offer advanced driver-assist features such as front&rear collision avoidance,highway and traffic jam assist,point-to-point automated navigation,evasive maneuver assist,and more.Mobileye ChauffeurMobileye Chauffeur is a self-driving system designed to turn a human-driven vehicle into an eyes-off/hands-off system in a gradually expanding ODD,from highway only to more advanced ODDs.It represents the evolution towards more secure and scalable autonomous driving for passenger cars.Built on the robust foundation of Mobileye SuperVision,it is our most sophisticated consumer technology stack yet,and takes another step to reducing the human error factor in road safety with a powerful compute platform,and added redundancies via our vertically integrated technology pillars REM,RSS,and True Redundancy from high-fidelity hardware.Mobileye DriveOur fleet-focused,turnkey self-driving solution for various vehicle and network configurations that can turn a public transit operators service or transportation network companies vehicle platform,autonomous in a more advanced series of ODDs.Already being integrated in autonomous public transit,autonomous goods delivery,and autonomous mobility-as-a-service across industries and around the globe.The approach Mobileye takes to safety and validation is intended to allow Mobileye Drive to meet global safety standards and is designed to be safer than human-driven vehicles.29Sustainability Report 20236.1 Creating Meaningful Impact through Innovation-Promoting Safe MobilityMobileye has a comprehensive safety methodology for AVs,which focuses on both perception and driving policy to optimize safety:The Perception system involves the AVs capabilities to interpret the environment around it.Errors in perception are straightforward to identify(e.g.,failure to detect a vehicle in front)and can be measured directly.The Driving Policy aspect handles decision-making based on the perceived environment,which requires a“what would happen next”type of reasoning,which can be subjective.So,there is no clear definition of“error”,but rather it is open to interpretation or judgement.The Perception System and the Driving Policy,require different approaches to ensure safety,with different measures of success.For the Perception System,there is a clear monotonic relation between“safer AV”and“better AV”.That is,the fewer Perception errors the system will make,the“safer”and“better”the AV will be.For Driving Policy,being“safer”does not always mean being“better”.To make this point clear,consider for example a residential road,with parked vehicles on both sides.Since a pedestrian might run into the road,the“safest”AV system would drive very slowly,making sure that even if a child with an electric bike moving extremely fast suddenly entered the road,the AV would manage to brake in time.However,such exceptionally slow driving would also be disruptive to other road users.Driving safely requires endless decisions balancing the magnitude and likelihood of risks.We argue that perception failures and Driving Policy failures should be treated differently,and that a clear definition of failure is necessary that includes both what is considered a failure,and the acceptable frequency of failure-the Mean-Time-Between-Failure(“MTBF”)rates.Mobileyes Safety Methodology for AVs30Sustainability Report 20236.1 Creating Meaningful Impact through Innovation-Promoting Safe MobilityThose two goals are achieved by Mobileyes Responsibility Sensitive Safety(RSS),our model supports the achievement of extremely high MTBF by addressing two critical challenges:1)Removes the need to predict human behavior by understanding the“worst case”scenario as a baseline of safe decision-making;and 2)To be proactive through a rules-based approach of reasoning,in essence“what would happen next”,RSS sets boundaries.Then,in order to have a“useful”Driving Policy,a framework of reasonable setting assumptions are set,which establishes a set of parameters that formalize the norms of safe human driving.We define a Perception error as one that inevitably leads to a crash.Given that high fidelity perception iscorrelated to low frequency of failure(or,high MTBF),we employ the following principles in designing our systems for road safety with the aim of achieving zero events:Open-loop(offline)validation of perceptual components(like vehicle and pedestrian detection)allows us to harness data collection of ADAS customer functions over billions of miles.And the True Redundancy principle to enhance perception accuracy.By creating redundancy in perception,by enabling two separate and independent systems,the likelihood of“missing”an object or a failure due to challenging environmental conditions is dramatically reduced since the systems serve as a backstop for each other.1Road Experience Management(REM)provides highly detailed and accurate high-definition maps for our products that aid in the understanding of the environment.Achieving zero MTBF events requires first removing the need for a“what would happen next”decision,which,inevitably requires predicting human behavior-a task we believe is unwieldy.Also,to create a formal setting through which the spectrum of“safety”versus“usefulness”can be defined and decided upon.23Principles in designing our systems for road safety 31Sustainability Report 20236.2 Creating Meaningful Impact through Innovation-Quality and Product Stewardship Quality and Product Stewardship With a vision to make roads safer,it is crucial to begin with the safety and quality of our products themselves.Our products are designed and manufactured specifically for automotive applications,which requires compliance with the stringent requirements of the industry and the high expectations of our customers,who often demand far beyond mere“compliance”on the safety specifications of their products.Moreover,with millions of users around the world relying on our systems daily,maintaining high quality is our commitment to them and the expectation we have for ourselves.By maintaining a steadfast focus on quality,we aim to build trust with our customers and deliver solutions that exceed their expectations.The quality of our products is a top priority throughout every stage of development,from serving as a key criterion for how we select our partners in manufacturing and development,to maintaining a robust quality management system.Once our products reach users,we offer our customers support and services to swiftly respond to performance issues or malfunctions.Through our logging,debugging,updating and deploying processes,we ensure that in the rare event of an issue,we can quickly identify problems and support to resolve the issue.Our quality management system is designed to exceed industry compliance frameworks,and is built to support customer specifications and contractual requirements as well as broader industry best-in-class standards.This includes certifications,audits,and reports for specific topics as well as overarching certification of our quality management system as a whole.Automotive industry safety standards such as ISO 26262,ISO 21448,ISO/SAE 21434 and ASPICE guide us in defining product requirements from development to deployment.Since Mobileye sits at the intersection of automotive and software,we are also committed to data privacy and cybersecurity standards as detailed below.To oversee and synchronize quality and product stewardship,we have a clear quality management system built in line with and externally certified to ISO 9001:2015 Quality Management System.Key Certifications Guiding Quality Control at Mobileye2015-Quality Management SystemAutomotive Software Process Improvement and Capability Determination2017-Competence of testing and calibration laboratories TISAX Cybersecurity and Data Protection labels administered by ENXISO 9001:ASPICE-level 2:ISO/IEC 17025:Information Security Management StandardISO27001:Information Security Management for Cloud ServicesPrivacy Information Management StandardRoad vehicles Functional safetyISO27017:ISO27701:ISO26262:32Sustainability Report 2023Quality Management System and GovernanceQuality management at Mobileye rests on a commitment to quality by all employees and we work to instill this sense of responsibility throughout the organization.Clear policies and procedures are in place for all stages of our operations from procurement to providing support once products are in use.To enable our partners to maintain the required product safety standards,there are clear manuals in accordance with ISO 26262 which provide guidelines for integration of our systems including listing possible safety issues and response protocols.Our dedicated Quality Team provides the necessary professional support for developing and implementing these processes,as well as performing periodic audits,both internally at Mobileye and of our partners,to identify any required corrections and maintain accountability.Finally,external audits,either voluntarily undertaken or in response to customer requirements provide a valuable outsider point-of-view,making us better and strengthening trust.With a view to continuous improvement,department heads set quality goals for their departments.Related KPIs are monitored and reported so that attention is kept where it needs to be to manage performance and achieve the goals.Quality Partnerships Our products are designed and manufactured specifically for automotive applications after extensive validation tests under stringent automotive environmental conditions.Achieving the standards we expect begins with the right business relationships,especially when it comes to manufacturing.We collaborate with the leading suppliers of semiconductor devices for automotive applications,in manufacturing,design,and research and development.That is why our quality process includes action items like testing,quality assurance,customer care,failure analysis and manufacturing standards.We hold our suppliers to the same standards we hold ourselves and incorporate requirements relating to product quality and management in supplier selection and engagement.Suppliers are required to produce official certifications such as IATF 16949:2016,ISO 9001:20 15 or equivalent,and undergo periodic screening,and audits.For certain critical suppliers,on-site audits are conducted before finalizing engagements and are conducted at least annually throughout the engagement.For more on how we work with suppliers,see the section on responsible supply chain management on page 61.Elevating CybersecurityOperating in the automotive industry means our software is held to particularly high standards,especially amidst the escalating complexities of cyber threats and regulatory demands within the industry.We adhere to stringent testing protocols and internationally recognized standards to fortify the reliability and resilience of our software solutions.Additionally,our adherence to and certification pursuant to frameworks such as TISAX(Trusted Information Security Assessment Exchange)further demonstrates the robustness of our cybersecurity efforts,including with respect to data protection our cybersecurity and confidentiality practices,crucial for building trust among our customers and stakeholders.Mobileyes TISAX certification is rated“very high protection needs”(Assessment Level 3),which requires the most thorough and in-depth audit for the certification.TISAX Assessment Level 3 certification consists of data privacy and cybersecurity controls(including data protection and privacy)as well as physical security controls3.Through continuous monitoring,routine audits,and proactive risk mitigation strategies,we aim to effectively mitigate potential vulnerabilities,safeguard sensitive data,and cultivate a culture predicated on security and trust within our digital ecosystems.6.2 Creating Meaningful Impact through Innovation-Quality and Product Stewardship 3 Mobileyes TISAX certification is scoped and valid for our Israeli sites(Mobileye Global Headquarters in Jerusalem,and our offices in Israel)as well as our two main German locations in Koblenz and Munich.Our Information Security policies and controls cover Mobileye globally,through central management,governance and control.For physical security aspects,the TISAX covers the sites included in the scope described above due to variance in site security concept.33Sustainability Report 20236.3 Creating Meaningful Impact through Innovation-Data Privacy and Cybersecurity at MobileyeMobileye enhances driving safety and smart mobility through innovative technologies for advanced driver assistance systems and autonomous driving.Since data is foundational to achieving this,central to our activities is the responsible management of data.We collect,store and otherwise process data,including personal information,for the routine running of the Company and development.We are committed to safeguarding the privacy and security of this data and are guided by the highest standards of compliance with legal,regulatory,and contractual requirements.To operate our business and provide our services and/or complete transactions requested and authorized by our customers.This data is primarily related to employees,contractors,candidates,leads,customers,partners,and other similar individuals.1To develop,test and validate our technology,products and services.This data is collected in either an anonymized manner or in a passive or incidental manner.2Data is stored in both cloud and on-site systems and is administered and protected by a suite of security mechanisms(for example,using third-party Cloud Security Platform Management tools,or other locally managed state-of-the-art security tools).Certified and externally audited to international standards such as ISO 27001,ISO 27701,ISO 27017,along with the TISAX cybersecurity and data protection labels administered by ENX,our cybersecurity management practices are designed to ensures robust protection of the data that we store and otherwise process.We process data for two main uses:Data Privacy and Cybersecurity at Mobileye33Sustainability Report 202334Sustainability Report 20236.3 Creating Meaningful Impact through Innovation-Data Privacy and Cybersecurity at MobileyeData Protection To ensure consistent application of data privacy and cybersecurity principles and measures,efforts are coordinated across the organization with clear roles,responsibilities and communication lines.Data privacy management at Mobileye is led by our Chief Information Security Officer(CISO)and Data Protection Officer(DPO),with the DPO reporting to our CISO and our CISO in turn reporting to our Chief Operating Officer.The Privacy Forum,headed by the DPO serves as a steering committee,together with Mobileyes legal department,to oversee Mobileyes data privacy program and ensure its relevance and effectiveness.Our data protection framework encompasses periodic reviews of our cybersecurity policies and defining roles and responsibilities across departments and stakeholders,extending to supplier relations and vendor risk management.Our dedicated cybersecurity team,comprising technical security experts trained in relevant data privacy laws and regulations,helps ensure continuous compliance and readiness,which is reinforced by regular third-party technical penetration tests and risk assessments.Additionally,we maintain a corporate resilience framework to address key security objectives.This encompasses incident response,crisis management,and disaster recovery,bolstering our readiness to mitigate security challenges swiftly and effectively.Data Privacy PoliciesTransparency is a cornerstone of our data privacy policy,which outlines the types of information we collect and process,its usage,and sharing practices.We seek to allow users meaningful control over their personal data,as required by law,including the ability to rectify inaccuracies.Our data privacy practices include the following measures:All information is housed using security measures designed to prevent unauthorized access or data loss.Encryption safeguards sensitive data at rest,in transit,and during usage.Our infrastructure utilizes multiple layers of defense mechanisms,including firewalls,proxy services,and load-balancers,bolstering resilience against cyber threats.Continuous monitoring by our 24/7 Security Operations Center helps ensure a swift response to security incidents,underpinning our commitment to incident response,business continuity,and disaster recovery across all service platforms.Personal information is managed according to the privacy policy that is published in clear English on our website,and we strive to adhere to the relevant laws and regulations on data privacy in all jurisdictions in which we operate.This includes providing users with clear information on how they can request that their personal information be changed or deleted in accordance with applicable legal requirements.Data Privacy and Cybersecurity TrainingTo empower our workforce with the necessary knowledge and skills for protecting sensitive information,we invest in comprehensive data privacy and cybersecurity training and awareness programs.In 2023,our employees completed a total of 4,199 training hours in data privacy and cybersecurity.These encompass interactive modules,workshops,and both virtual and in-person sessions,tailored to various roles and seniority levels.Our employees undergo data privacy and cybersecurity training during onboarding and receive regular updates on emerging threats and regulations.In addition,we have appointed privacy champions in different departments,who are trained to monitor data privacy compliance in their respective departments.This proactive approach,coupled with our internal reporting mechanisms,is designed to enable us to swiftly identify and mitigate vulnerabilities and adhere to high industry standards.35Sustainability Report 2023Our People and Communities7.1 Focus on Employee Wellbeing 7.2 Employee Engagement and Team Building7.3 Talent Development and Promoting Professional and Personal Growth Fostering Excellence and Rewarding Performance7.4 Our Employees7.5 Fostering Diversity,Equity and Inclusion in our Workforce7.6 Engaging with Our Communities7Sustainability Report 202336Sustainability Report 20237 Our People and CommunitiesOur People and CommunityMobileyes passionate,experienced,and dedicated employees are at the heart of the Companys success.We prioritize our employees professional and personal development as well as their wellbeing.We value a diversity of opinions and strive for a diverse and inclusive team.Strengthening the communities in which we operate is important to us and Mobileye invests resources in various social causes and initiatives.37Sustainability Report 20237.1 Our People and Communities-Focus on Employee WellbeingFocus on Employee WellbeingAt Mobileye,prioritizing the wellbeing and welfare of our employees is fundamental.Our wellbeing activities are designed to be accessible,meeting the diverse needs of our employees and promoting workforce resilience.We prioritize employee wellbeing through a comprehensive suite of health and wellness initiatives.These range from supplementary medical insurance for our employees and their families,health and fitness activities,onsite fitness facilities and sponsorship of a variety of cultural activities and wellness programs.We also have agreements with a number of banks and credit card companies which offer our employees various benefits.In addition,we promote our employees health and comfort by investing in ergonomic equipment and solutions.In addition to the standard ergonomic equipment,further equipment adjustments are provided for employees in line with their specific needs and consultation with an ergonomic equipment expert is available on-site monthly.We seek to celebrate lifes milestones with our employees by offering thoughtful gifts that recognize their achievements and milestones.Whether its a birthday,anniversary,wedding,or the birth of a child,we strive to make each occasion special.We work to ensure that all employee concerns and complaints are addressed promptly and fairly and that employees feel safe to report any violation or concern.We provide multiple channels for employees to voice their grievances,including direct communication with supervisors and designated HR representatives as well as an established Whistleblower Hotline.These mechanisms are designed to protect employees from retaliation and provide a safe space for them to express their concerns regarding workplace issues.We are committed to thoroughly investigating all grievances,maintaining confidentiality as appropriate,and taking appropriate action to address the root causes and prevent future occurrences.“Mobilife”is our digital portal for employees where they can easily access all available benefits for employees,including health and pension benefits and special gifts.38Sustainability Report 2023The October 2023 events in Israel affected many of our employees.Many had to evacuate their homes,others mourned the loss of loved ones,and all employees in Israel were exposed to significant levels of stress.In response,our HR teams swiftly implemented various initiatives to support employee wellbeing and resilience.These measures included creating dedicated forums for employees to share experiences,establishing memorial pages,and providing avenues for mutual assistance.We offered psychological counseling to employees and their family members and developed a customized support program for employees called to reserve duty and their families.Six workshops were organized for employees to provide tools for coping with crisis,uncertainty and stress,and help strengthen resilience.Specific training was offered to managers supporting them in navigating the challenges of managing their teams through the crisis.Furthermore,we launched an employee donation program to aid affected communities,thereby amplifying our societal impact.120,000 NIS was donated through this program in addition to the five million NIS budgeted to crisis response through direct and indirect donations.Our efforts were aimed at maintaining team morale,ensuring business continuity,and supporting our employees and their families during this challenging time.387.1 Our People and Communities-Focus on Employee WellbeingSustainability Report 202339Sustainability Report 20237.2 Our People and Communities -Employee Engagement and Team BuildingEmployee Engagement and Team BuildingAt Mobileye,we believe that employee engagement plays a pivotal role in driving innovation and retaining top talent.We encourage our employees to contribute ideas and solutions,engage in cross-functional team collaborations,provide learning opportunities,and lead a collaborative work environment that fosters creativity and autonomy.We place an emphasis on team cohesion and engagement and offer our teams various team-building activities ranging from workshops,group exercises,and outdoor adventures to boost morale,improve communication,increase productivity and cultivate a positive work culture.In our offices,we work to foster a collaborative and open environment,creating common workspaces which are designed to serve as versatile spaces for team meetings and employee interaction.Our new Global Headquarters in Jerusalem houses multiple common spaces,serene outdoor areas,a gym,lounge areas and dining halls,and is specially designed to create interactions between the different business units.40Sustainability Report 20237.3 Our People and Communities -Talent Development and Promoting Professional and Personal GrowthTalent Development and Promoting Professional and Personal GrowthAt Mobileye,we believe our people are our most valuable asset,crucial to our success.Were committed to creating a top-tier work environment that enhances skill development,nurtures talent,and boosts retention.Prioritizing continuous learning,we offer professional development to foster a culture of growth and innovation.Our talent management strategy equips our team for the future,providing training on industry best practices and technological trends.To ensure our strategy for employee development is effective and responsive,we consistently review technological requirements and trends to serve as an additional resource for curriculum development and to ensure our team remains at the forefront of innovation.We also collect managers feedback through various focus groups aimed at identifying key challenges and our teams latest training needs.This latter is achieved by appointing an HRBP(Human Resources Business Partner)representative in each department,ensuring a clear channel for communication and feedback.Hours of Training Completed by Employees by Topic Tech Training Employee Development TrainingHours of Training Completed by Employees by Type36dd6velopment Mandatory41Sustainability Report 20237.3 Our People and Communities -Talent Development and Promoting Professional and Personal GrowthOur employees have various training opportunities and platforms at their disposal,including self-paced learning with access to the largest online course providers,live lectures and workshops led by top industry experts,onsite and online,which cover a wide range of technological and non-technological topics.In 2023,training topics ranged from software development,cybersecurity,safety courses and culture and language courses.Our voluntary and mandatory training courses contribute to the growth and effectiveness of our employees,enabling them to excel in their roles while meeting organizational objectives.Mobileye invests in diverse learning modalities,providing employees of all levels with online and in-person learning experiences.Our employee training encompasses both voluntary and mandatory training.This allows employees to pursue their interests and career goals as well as ensure that they are up to date with the most recent professional skills and that they comply with organizational policies as well as industry regulations and standards.By investing in employee development and leadership pipelines,Mobileye cultivates a culture of continuous learning and innovation that contributes to talent retention and excellence,positioning the Company for long-term success in a competitive industry.Employee Training Hours by Role 202323w%Managers Non managersReflecting the global,multicultural nature of the Company,we also offer cultural appreciation and language courses,which equip our employees with the skills necessary to meet the needs of our diverse customer base.In 2023 we offered eight such courses to our employees.42Sustainability Report 202342Fostering Excellence and Rewarding PerformanceWe take a proactive approach,conducting regular employee performance evaluations,which rely on clear performance criteria and communication to ensure fairness and transparency throughout the evaluation process,and foster employee development and motivation.This allows our managers to recognize employee strengths,identify areas for improvement,and align performance with company objectives.We place an emphasis on providing employees with constructive feedback and on creating goal-setting opportunities which empower employees to grow professionally and contribute effectively to the companys success.Pay adjustment decisions are based on talent measurement,market pay bands,and Mobileyes pay philosophy.These processes spread over 6-8 months annually and are monitored and recorded.All pay adjustments are subject to official approval procedures.7.3 Our People and Communities-Talent Development and Promoting Professional and Personal Growth2023 employee training highlights:Mobileye provides an average of 6.54 hours of training per employee Mobileye conducts routine employee performance assessments to reinforce fair pay and compensation.Managers at Mobileye undergo dedicated training on employee evaluation and are sup-ported in every step in the process by our HRBP team.In 2023,2,407 employees underwent performance assessments,which constitutes 73%of eligible employees.4 This includes the basic training provided to our employees globally and training provided to our employees in Israel,who constitute 91%of our workforce.We are working to expand the scope of our data collection to include our other locations.Sustainability Report 202343Sustainability Report 20237.4 Our People and Communities-Our EmployeesOur EmployeesApproximately 3,700 employees globally,as of December 30,2023.Of our global workforce,we have a high concentration of our employee base in technical roles.At our Headquarters,approximately 83%are focused on R&D and productization,which drives cross-functional synergies across the organization.Employees by country of operation as of December 30,202391%2%2%1%4%ISRAELUSAGERMANYJAPANCHINA44Sustainability Report 20237.4 Our People and Communities-Our EmployeesGender Diversity at Mobileye:Men WomenGender Diversity by Role-2023 77y!#%Technical Roles Management PositionsSenior Management Men Women74&reer Development at MobileyeIn response to the rapid evolution of our industry and the diverse skill sets required,we offer career development tracks that are dynamic and multifaceted.Each development track is focused on enabling employees to make a significant impact on our business,promote innovation,broaden expertise,and explore different areas within the Company.Each employee is linked to a specific career track,which is compatible with their professional affiliation and criteria,career aspirations,performance,and skills.Our career development tracks encompass technical and non-technical roles,recognizing the diverse talent and contributions of all employees.Employee and Manager are each involved in all career development decisions,which are made in alignment with the Companys strategic objectives and the individuals readiness for advanced technical responsibilities.Further such decisions take into account the appropriate mentorship and support required throughout an employees career progression.45Sustainability Report 20237.5 Our People and Communities -Fostering Diversity,Equity and Inclusion in our Workforce 45Reflecting the global,multicultural nature of the Company,we also offer cultural appreciation and language courses.Fostering Diversity,Equity and Inclusion in our Workforce We believe that a diverse workforce fosters a culture of creativity and innovation,allowing us to draw from a broad spectrum of ideas,perspectives,and solutions.We strive to cultivate an inclusive culture where everyone feels valued,respected,and empowered and aim to promote equitable opportunities and fair treatment for all employees.This contributes to a culture of engagement and cooperation,where diverse voices are heard and valued at all levels of the organization.Our HR department works with the various business units to promote equal opportunities and prevent discrimination in the work environment.We maintain a zero-tolerance policy towards any form of discrimination based on race,gender,age,sexual orientation,disability,religion,or any other protected characteristic,and protect employees who report concerns or participate in investigations.We work to prevent discrimination in the workplace and take immediate action to address and resolve any instances of discrimination.In 2023,no claims relating to discrimination were reported.We track any allegations,conduct thorough investigations and follow-up with appropriate resolution and remediation actions.Under 30 Ages 30-50 Over 50Our workforce age breakdown69 FSustainability Report 2023 5 Employee ethnic diversity data was not available for 2023 as this information is not collected and employees were not required to disclose it.7.5 Our People and Communities-Fostering Diversity,Equity and Inclusion in our Workforce 2023 Diversity Highlights5:26%women in global workforce 23%women in technical roles21%women in management positions17%women in senior management positions46Sustainability Report 202347Sustainability Report 2023The Perfect People for the Job:Employing People on the Autistic SpectrumOver the past eight years we have maintained a meaningful partnership with SHEKEL,an Israeli non-profit organization that advocates for the inclusion of individuals with disabilities.In the framework of this project,SHEKEL members who are individuals on the autism spectrum,are integrated in Mobileyes workforce,harnessing their unique talents to improve our operations significantly.Their critical work in refining our algorithms is essential to our mission of reducing automobile accidents.The SHEKEL team meticulously labels and classifies data for our algorithms,demonstrating exceptional attention to detail and protocol adherence vital for our safety-critical technology.The program also fosters their social and interpersonal growth,ensuring their success in the workplace and highlighting the indispensable contributions of diverse talents.7.5 Our People and Communities-Fostering Diversity,Equity and Inclusion in our Workforce Watch the story of Eli,a member of this team at Mobileye48Sustainability Report 20237.6 Our People and Communities-Engaging with Our Communities We take pride in our commitment to fostering positive change in the communities in which we operate,taking action to empower communities,enhancing educational opportunities,and enhance resilience through partnerships.Our community contributions are structured around three main pillars:Philanthropic Donations:We actively support a wide array of initiatives through donations to nonprofits enriching communities and fostering development.In 2023,we allocated$1,120,851 to numerous non-profit organizations and social causes,supporting a diverse range of initiatives,including in education,healthcare,and various welfare causes.Engaging with Our Communities Employee Engagement and Philanthropy:Mobileye has established a cause-matching program that doubles the impact of our employees charitable contributions to their preferred causes.This initiative not only broadens our philanthropic reach but also reinforces our employees bonds with their communities through active participation.Demonstrating remarkable generosity,our employees have contributed over$400,000 which,through our matching program,resulted in a collective donation of over$800,000 to various causes including welfare,education,and healthcare.Education Healthcare Community relief Military Veterans Tech education for underrepresented communities Sport Universities Welfare Matching employee donations1%3%2%2%4%49%Our 2023 philantrophic donations44%1ISustainability Report 20237.6 Our People and Communities-Engaging with Our Communities Partnerships and Educational Outreach:Mobileye maintains dynamic collaborations with several non-profit organizations,focusing particularly on educational initiatives aimed at bridging gaps and creating access to high-tech careers for diverse sectors of society.These collaborations include:Fostering Inclusion with Kama-tech:We work with Kama-tech,a non-profit aimed at integrating ultra-Orthodox women and men into the high-tech industry.By hosting a unique bootcamp,led by our EVP of the EPG software group and mentored by our employees,we provide participants with hands-on training and exposure to the high-tech environment,preparing them for successful careers in this dynamic field.Championing Gender Equality:Mobileye has a longstanding partnership with Queen B,a non-profit that addresses the gender gap in technology through comprehensive computer science training programs tailored for girls and young women.By hosting workshops led by our team members,we offer participants insights into the challenges and opportunities for women in tech,fostering a supportive community and encouraging the next generation of female tech leaders.Supporting Community and Education with PyCon Israel:Our annual sponsorship of PyCon Israel,a conference devoted to the Python programming language and its ecosystem,reflects our commitment to the professional development of the tech community.Featuring lectures by Mobileyes experts,we provide attendees with a glimpse into our cutting-edge technologies and the minds driving our innovations.Supporting Our Community in Times of Hardship In the wake of the unprecedented terror attacks by Hamas on October 7,2023,we established a five million NIS relief fund($1,363,370)and we also launched Mobilizing for Israel,a campaign focused on raising funds for those who continue to be impacted by the conflict.These funds have provided essential supplies like shelter,food,clothing,equipment,and medicine to families in the conflict zone,those injured,displaced individuals,and elderly residents unable to leave their homes.A dedicated team was established to coordinate these efforts so they are directed where they could be of most use.Approximately half of this fund was distributed addressing immediate needs,with the remaining half of this budget aimed at long-term solutions,including community rehabilitation through housing,education,and additional resources.Viewing our employees as key partners in philanthropy,Mobileye invited them to propose ideas for sustained support of war victims.We are committed to continuing our support for those affected by the ongoing war.The dedicated team both proactively identified organizations on the ground to support of their efforts,and responded to direct requests or appeals made to Mobileye by community representatives regarding immediate needs.These were answered donating both funds and in-kind donations,mostly of electronic equipment.Donations were approximately evenly split between the two donation streams.50Sustainability Report 2023Operating Responsibly88.1 Working Towards a Sustainable Future Waste and Water Management Managing Our Carbon Footprint8.2 Employee Health and SafetySustainability Report 202351Sustainability Report 20238 Operating ResponsiblyOperating ResponsiblyThe Company is committed to responsible operations and is laying the foundation to effectively improve its operational eco-efficiency.An integral part of this commitment is safeguarding our employees health and safety and actively implementing comprehensive measures and protocols designed to protect our workforce.We review and aim to adhere to local laws and regulations relating to employee health and safety.52Sustainability Report 20238.1 Operating Responsibly-Working Towards a Sustainable FutureIn 2023,Mobileye started taking steps to improve an already-solid framework for environmental management across its operations.We recognize the importance of laying the groundwork for our sustainability efforts and are focused on conducting thorough assessments of our environmental impact,identifying areas for improvement,and implementing strategies aimed at enhancing our environmental performance.Our commitment to environmental sustainability drives our initiatives for responsible environmental management,emphasizing the central role of our daily operations in fostering a sustainable future.These efforts were audited by a third party and in early 2024 we were certified with ISO 14001:2015:Environmental management systems.Working Towards a Sustainable Future53Sustainability Report 20238.1 Operating Responsibly-Working Towards a Sustainable FutureWaste and Water ManagementWasteReducing waste is part of minimizing our environmental impact.Through our company-wide,multi-office waste management program,we seek to implement initiatives such as waste separation,recycling programs,and responsible disposal practices.Mobileye employs a comprehensive recycling program.In our Israel offices,we recycle cardboard,paper,electronic waste,and batteries.Mobileye collaborates with certified recycling partners designed to ensure that a wide range of materials and disposable items,including paper,packaging and drink bottles,metals,wood,and electronics,are collected,and recycled responsibly and in accordance with local regulations.Our employees are actively engaged in these efforts through awareness campaigns,encouraging them to adopt sustainable practices.In 2023,our recycling efforts further expanded to include recycling of cardboard,paper,electronic waste,and batteries.We encourage employees to separate recyclable materials at designated collection points throughout our facilities which are then collected and disposed by local recycling services.6 Data for our Japan offices waste generation was not available in 2023.Our US offices are in shared office buildings where waste is collected and recycled for all suites together,not allowing for individual office measuring of waste generation and recycling.We recognize the importance of waste measurement as a tool for assessing our environmental performance and identifying opportunities for improvement.In 2023,we began taking further steps to establish a solid framework for waste measuring across our operations,set a baseline for progress over time and promote informed decisions to optimize our waste management practices.In 2023,our offices6 in Israel,Germany,and China recycled 28 tons of wasteRecycled Waste 2023 Cardboard Paper Electronic waste Plastic34c%1%0.22TSustainability Report 2023WaterWhile our operations are not water-intensive compared to certain industries,our approach to water management is rooted in a commitment to efficiency,conservation,and responsible use across all aspects of our operations.By implementing water-efficient technologies,such as low-flow fixtures,sensor-based faucets,and water-efficient appliances,we strive to reduce water consumption across our operations.Our LEED Platinum certified Global Headquarters in Jerusalem has advanced water-saving mechanisms in place for reuse of HVAC water,cooling tower blowdown and reverse osmosis systems for flushing and irrigation.We have also implemented efforts in the Global Headquarters in Jerusalem to reduce potable water use.Nearly half of the Global Headquarters in Jerusalems outdoor space is vegetated and is irrigated using recycled condensed HVAC water.Managing Our Carbon FootprintAt Mobileye,we want to do our part to mitigate climate change and we understand the importance of reducing our environmental impact.In 2023,Mobileye took steps to measure its greenhouse gas(GHG)emissions as part of our commitment to sustainability.We focused on Scope 1 and Scope 2 GHG emissions,encompassing both direct emissions from sources owned or controlled by the Company and indirect emissions from purchased electricity consumption.By assessing our emission sources,including energy usage,fuel consumption,and fleet operations,we gained a preliminary understanding of our carbon footprint.This way,we set the stage for future progress and innovation.Our water consumption in 2023 was 14,504 m2023 GHG Emissions7Scope 1 emissions(MTCO2-e)49,300Scope 2 emissions(MTCO2-e)14,115Total scope 1 and 2 emissions(MTCO2-e)63,415GHG emission intensity/$1M revenue(MTCO2-e/$1M revenue)30.20GHG emission intensity by number of employees8 168.1 Operating Responsibly-Working Towards a Sustainable Future2023 GHG Emissions(MTCO2-e)49,300 78,115 22%Scope 1 Scope 27 In 2023,data on energy and fuel consumption was available for our operations in Israel,the USA(in the states of NY and Michigan),Germany and China.8 Excluding Mobileyes 20 employees in Japan since emission data is not currently available for Japan55Sustainability Report 2023Innovative Sustainability at Mobileyes Global Headquarters in JerusalemMobileyes Global Headquarters in Jerusalem which also serves as our primary R&D hub,has been distinguished with the LEED Platinum rating by the U.S.Green Building Council(“USGBC”),and is one of only seven buildings across Israel to receive LEED Platinum rating to date.Spanning 130,000 square meters with ten floors above-ground and seven below,our facility houses over 2,500 employees.We prioritized environmental sustainability in its design,which is reflected in our choice of 100%recycled steel for construction and in our landscaping,which features vegetation irrigated with recycled HVAC water.8.1 Operating Responsibly-Working Towards a Sustainable FutureThe Global Headquarters in Jerusalem feature other innovations such as water-cooled chillers for HVAC,external fins and blinds to reduce solar radiation,along with an energy-efficient underground data center,leading to a 68%reduction in energy usage.We also encourage eco-friendly transportation through electric vehicle charging stations,ample bicycle parking,and proximity to public transportation.Additionally,our headquarters is equipped with advanced eco-efficiency systems for environmental performance monitoring,underscoring our dedication to creating a clean,sustainable work environment.55To foster a culture of environmental awareness within our team,we actively involve our employees in Earth Day activities each year,reinforcing our collective commitment to sustainability.This not only enhances our environmental efforts but also strengthens our teams dedication to making a positive impact on the planet.Sustainability Report 202356Sustainability Report 2023At Mobileye,we actively incorporate safety best practices,fostering a culture of awareness and cooperation across our operations.Our health and safety programs are designed to foster compliance with all local laws and regulations involving work safety,standards,and procedures in the countries in which we operate.We strive for zero occupational injuries and safety incidents in all our global sites,and implement measures aimed at mitigating health and safety risks.Our Global EHS Policy,overseen by our Vice President of Operations and Chief Operations Officer,embodies our approach to Health and Safety.Our team includes dedicated departmental and onsite Safety Trustees,who serve as the liaison to the Companys EHS management and are responsible for supervising and implementing safety protocols and addressing any safety concerns or hazards that may arise.8.2 Operating Responsibly-Employee Health and SafetyEmployee Health and Safety(EHS)We have set safety audit protocols that involve inspections of equipment,facilities,and work practices,as well as reviews of documentation such as safety procedures and incident reports which enable continuous improvement of performance and processes.Emergency preparedness is paramount,with comprehensive plans in place for various scenarios,including fire,medical emergencies,hazardous materials,and natural disasters.Mobileyes EHS department conducts periodic health and safety risk assessments to identify and evaluate potential hazards within the workspace,considering their impact and likelihood of occurrence.In 2023,we conducted a safety risk assessment that targeted key risks,including those associated with equipment and machine use and maintenance,handling of various materials including hazardous substances,fire protocols,slip and fall hazards,lifting and carrying objects,labs and workshop safety.More than 2,490 safety training hours completed by employees and contract workers4 recordable incidents leading to minor work-related injuries recorded for employees1 recordable incident leading to minor work-related injuries recorded for a contract worker0 severe work-related injuries and fatalities were recorded in 20232023 Health and Safety Highlights:We prioritize employee training and engagement to uphold our commitment to creating a safe and healthy work environment.Our EHS training,both mandatory and voluntary,includes an e-learning platform and in-person training on multiple topics,including safe driving in test vehicles,safe machine operation,lab work safety,general safety,and more.Additionally,we maintain a culture of open communication and proactive reporting,which encourages employees to promptly report any safety concerns or incidents to management for swift resolution and continuous improvement.In early 2024,the Company completed the process of obtaining an ISO 45001 certification,a global standard for Occupational Health and Safety management system.57Sustainability Report 2023Responsible Business and Governance 9.1 Promoting Ethical Business Practices9.2 Fair Employment Anti-Corruption and Anti-Bribery Reporting Ethics Grievances Ethics Training9.3 Responsible Supply Chain Management 9.4 Responsible Mineral Sourcing9.5 Corporate Governance Board of Directors9Sustainability Report 202358Sustainability Report 20239 Responsible Business and Governance Responsible Business and Governance Mobileye is committed to operating its business with integrity and transparency.The Company ensures robust and structured governance mechanisms and ethical business practices which adhere to the interest of its stakeholders and enhance management competencies.59Sustainability Report 2023Promoting Ethical Business Practices Although we are results driven,how we achieve these results is just as essential to our mission.Therefore,integrity and ethical conduct are the foundation to our long-term success.We emphasize transparency,honesty and otherwise upholding ethical standards in our interactions with other employees,our customers,suppliers,business partners,shareholders and community.Our Code of Business Conduct(the“Code”),which is available on our website,establishes the ethical standards for our directors,officers,employees,and representatives,ensuring that our values are reflected throughout our operations and value chain.We also expect our suppliers to comply with the Code,in addition to all applicable laws and regulations.The Code outlines our expectations regarding ethical behavior,integrity,and professionalism and covers a range of topics,including compliance with laws and regulations,conflicts of interest,confidentiality,diversity and inclusion,and proper use of Company resources.By adhering to the principles outlined in the Code,our employees and other relevant stakeholders demonstrate their commitment to upholding the Companys values and contributing to a positive work environment conducive to ethical decision-making and long-term business success.Mobileyes Nominating and Corporate Governance Committee(“NGC”)reviews and reassesses the Code,and recommends to the Board of Directors any changes the NGC deems appropriate.The NGC also oversees compliance with the Code.9.1 Responsible Business and Governance-Promoting Ethical Business Practices 60Sustainability Report 2023Fair Employment9 This covers our Global operations,however there are regional differences which follow localized,customary standards.We are working on expanding the scope of reporting on our employee benefits in our other locations.Mobileye is committed to fair employment and compensation,and we offer our employees healthcare coverage,retirement plans,paid time off,parental leave,and professional development opportunities9.We want our employees to be fairly compensated for their efforts,to support their sense of worth and job satisfaction,and foster a positive work environment where they can thrive both personally and professionally.We oversee our global benefit initiatives conscientiously,guaranteeing adherence to local rules and regulations.We honor the freedom of association and recognize employees rights to join or form trade unions and engage in collective bargaining.As of December 31,2023,none of Mobileyes employees were members of employee unions or covered by collective bargaining agreements.Anti-Corruption and Anti-Bribery We adhere to a zero-tolerance approach towards corruption and bribery,underlining our profound commitment to ethics and integrity.Our anti-corruption and anti-bribery policies which are 9.2 Responsible Business and Governance-Fair Employmentoutlined in the Code,are designed to comply with international anti-corruption laws,cover all organizational tiers,and extend to all third parties with whom we do business.Reporting Ethics Grievances We encourage and expect our team members to report any concerns regarding violations of our Code,other Company policies,or applicable laws.Our Whistleblower Policy ensures a swift review and appropriate action for all reports,creating a safe environment for our employees to uphold our ethical standards without fear of retaliation.To facilitate this,we provide several reporting channels:Mobileye does not tolerate retaliation against anyone who in good faith reports possible violations of law,the Code,or other Company policies or procedures,questions on-going or proposed conduct,or participates in an internal investigation.This is a fundamental principle at our Company,ensuring that employees are encouraged to report any instances of misconduct or unethical behavior without fear of retaliation.Ethics TrainingRecognizing the critical role that our employees play in the realization of our ethical objectives,we have developed and implemented a comprehensive ethics training program.This initiative is designed not just to educate our workforce about the principles that guide our business conduct but also to empower them to apply these principles in their daily activities.All team members are required to acknowledge receipt of and agree to our Code of Business Conduct and to undergo training providing an overview of the Code,identifying ethical violations and the relevant reporting channels.In addition,all the employees undergo sexual harassment prevention training.In 2023,we had an average of 1 hour of ethics training hours per employee.Training was provided in a virtual format through our learning management system.Direct Managers:Employees may report concerns to any manager,from direct supervisors to division heads.Designated Departments:Employees may ask questions of,or report concerns to Company departments that specialize in handling such issues,e.g.,Human Resources,Legal,or Information Security.Dedicated Communication Channels:Employees facing legal policy issues have access to a dedicated email and a confidential Whistleblower Hotline,managed by a third party,for anonymous reporting online or by phone.61Sustainability Report 2023Responsible Supply Chain Management At Mobileye,we are dedicated to implementing transparent and accountable supply chain management practices,which promote risk mitigation,regulation compliance,and minimizing adverse social and environmental impacts.As a leading technological company,we recognize that the choices we make in sourcing materials and working with suppliers directly impact product quality,reputation,and ethical standards.We prioritize partnering with suppliers and manufacturers who share our dedication to delivering high-quality products and upholding ethical standards throughout the supply chain.We work toward ensuring that our suppliers adhere to the highest standards of quality assurance,delivering products that meet or exceed customer expectations.Thus,we place an emphasis on selecting suppliers who meet rigorous standards for product quality,reliability,and consistency.These include international quality certifications such as ISO9001,ISO14001,and ISO45001,RoHS and REACH compliance,Conflict Minerals compliance,and more.Our expectations regarding quality,ethical behavior,integrity,environmental aspects and responsible business practices are outlined in our Purchase Order Terms and Conditions,and we require our suppliers to agree to these commitments.Suppliers are screened using various processes including on-site audits in some cases.The screening is intended to check possible law violations,corruption,fraud or inclusion in sanctions lists,as well as ethics and quality parameters,and other factors such as:country of operation,technology level,product classification,entity type,etc.There is also ongoing monitoring of performance and status of suppliers to maintain the standards we expect throughout our operations.We also screen customers and the parties involved in facilitating trade to ensure that our products and technology do not go to prohibited end-users.The Trade Team assess the risk level and generate post screening recommendations regarding engagement with the screened entities.9.2 Responsible Business and Governance-Responsible Supply Chain Management 62Sustainability Report 2023Responsible Mineral Sourcing As is the case with many products manufactured for the electronic technologies industry,Mobileye products contain extracted minerals and metals which are integral for their operation.Some of the materials integrated in our products could originate from conflict-affected regions and as such,might aggravate human rights violations.Therefore,we seek to implement due diligence processes and engage closely with our suppliers and manufacturers to trace the origin of minerals and verify adherence to internationally recognized standards such as the OECD Due Diligence Guidance,with which Mobileyes minerals sourcing program is in alignment.In addition,prompted by growing concerns about additional human rights violations beyond the scope of Dodd-Frank10,Mobileye has evolved its responsible minerals program and related due diligence practices 10 Dodd-Frank Section 1502:In 2012,the U.S.Securities and Exchange Commission(SEC)adopted rules mandated by the conflict minerals disclosure provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.These rules require publicly traded companies to report annually on the source and chain of custody of conflict minerals in products manufactured by the Company.to address minerals originating from Conflict-Affected and High-Risk Areas(CAHRAs).Our Responsible Minerals Sourcing Policy outlines our commitment to responsible material sourcing and the requirements from our suppliers.Mobileye conducts reasonable country of origin inquires(RCOI)pursuant to the framework disclosed in our Conflict Minerals Report on Form SD,filed each year with the U.S Securities and Exchange Commission(SEC).Since 2014,Mobileyes RCOI has included a supply chain survey using the Conflict Minerals Reporting Template(CMRT).The supply chain surveys request our suppliers to identify the smelters and refiners and countries of origin of the conflict minerals in products they supply to us.As of May 1,2024,Mobileyes suppliers survey found that 99%of the reported smelter and refiner facilities are either conformant to or have begun participating in a responsible mineral assurance program,such as the Responsible Mineral Assurance Process(RMAP)and Responsible Mineral Initiative(RMI)cross-recognized programs.We continue to monitor and track smelters and refiners which we have identified as not being conformant to a responsible mineral assurance program or not having begun participating in such a program.We and other RMI member companies encourage such smelters and refiners to become conformant to a responsible mineral assurance program,and may remove non-conformant suppliers from our supply chain if necessary.This is a critical component in our efforts to build ethical and socially responsible supply chains for our Company.For additional information,please see our Responsible Mineral Sourcing Policy and our Conflict Minerals Disclosure and Report filed on Form SD as of May 30,2024.9.3 Responsible Business and Governance-Responsible Mineral Sourcing 63Sustainability Report 2023Corporate GovernanceLed by the CEO and overseen by the Board of Directors,our operations follow our Corporate Governance Guidelines,affirming our dedication to ethical practices and transparency.Board of Directors Mobileyes Board of Directors adheres to the Companys Corporate Governance Guidelines,underscoring the importance of responsible and strategic decision-making.Comprised of individuals from diverse backgrounds in business,hi-tech,government,and finance,our Board of Directors engages in extensive strategic oversight of our CEO and senior management.Our Corporate Governance Guidelines and Charter for the NGC detail the thorough process for evaluating director candidates.The Board values the importance of diversity in fostering board effectiveness and advancing the 9.4 Responsible Business and Governance-Corporate Governance long-term interests of stockholders.Accordingly,the Board includes directors with a broad array of backgrounds,including in experience,expertise,gender,and race or ethnicity.The Nominating and Corporate Governance Committee is crucial in this process,periodically reviewing and recommending criteria for Board membership to ensure each director meets our high standards and governance goals.In 2023,Mobileyes Board of Directors consisted of eight Directors,four of whom were Independent Directors.Key Director Metrics 2023:Total number of Board membersNumber of Women DirectorsNumber of Independent DirectorsDirectors from Diverse Ethnic BackgroundsAverage Director tenureIndependent Chair of the BoardAverage attendance of directors as a group at Board and committee meetings during 20238112121134No97%over 1 year1411 In 2024,the number of directors of the Board has since been increased to 9.12 As of June 2024,there are 3 women directors on the Board.13 As of June 2024,there are 2 directors on the Board from Diverse Ethnic Backgrounds 14 Mobileye became a public company in late October 2022 and most of the Board members have been appointed for approximately 14 months as of December 30 2023.64Sustainability Report 2023Promoting Board Effectiveness We foster a culture of education and self assessment to assist our Board in being responsive to the evolving needs of our stakeholders and the dynamic industry landscape as well as in providing effective oversight over management of the Company.Newly appointed Board members receive orientation and education about the Company,its business and financial operations,and the functioning of the Board.Directors participate in continuing education opportunities to explore critical topics affecting the Company and its industry overall,such as sessions on regulation of the Companys industry,the Companys business in key countries and regions,and the Companys technology.The Chair of our NGC develops and leads our Boards annual self-evaluation of the Boards and each committees performance and effectiveness.Our inaugural self-evaluation process in 2023 consisted of a written questionnaire that was completed by each director as well as one-on-one interviews conducted by the Chair of the NGC with each director.The Chair of the NGC then presented the aggregate results of the evaluation as well as his analysis to the full Board,and led the discussion by the Board of the 2023 self-evaluation results.The Boards annual self-evaluation process provides the Board and management with valuable insight regarding areas where the Board believes it functions effectively and,more importantly,areas where the Board believes it can improve its effectiveness and oversight.For additional information,please see our Corporate Governance Guidelines,2023 Proxy Statement.Governance Committees Mobileyes Board has appointed three committees,each of which are composed of directors with relevant expertise,overseeing specific aspects of the Companys governance.In 2023,Mobileyes Board had three committees:the Audit Committee,the Compensation Committee,and the Nomination and Corporate Governance Committee.Each committees duties and responsibilities are set forth in their respective charters,which can be found in the Governance section of Mobileyes Investor Relations website.Please also refer to Mobileyes 2023 Proxy Statement for further information.9.4 Responsible Business and Governance-Corporate Governance 64Sustainability Report 202365Sustainability Report 202310Appendices10.1 SASB Index10.2 Forward Looking StatementsSustainability Report 202366Sustainability Report 202310.1 AppendicesAppendix 1:SASB IndexAuto PartsSustainability Disclosure Topics&Accounting MetricsTopicMetricCategoryUnit of MeasureCodeReferenceEnergy Management(1)Total energy consumed,(2)percentage grid electricity and(3)percentage renewableQuantitativeGigajoules(GJ),Percentage(%)TR-AP-130a.1113,236 In 2023,data on energy and fuel consumption was available for our operations in Israel,the USA(in the states of NY and Michigan),Germany and China.Waste Management(1)Total amount of waste from manufacturing,(2)percentage hazardous,(3)percentage recycledQuantitativeMetric tons(t),Percentage(%)TR-AP-150a.1page 53Product Safety Number of recalls issued;total units recalledQuantitativeNumberTR-AP-250a.1N/ADesign for Fuel Efficiency Revenue from products designed to increase fuel efficiency or reduce emissionsQuantitativePresentation currencyTR-AP-410a.1N/AMaterials Sourcing Description of the management of risks associated with the use of critical materialsDiscussion and Analysisn/aTR-AP-440a.1Page 61-62In its inaugural Sustainability Report,Mobileye is reporting according to its assigned Auto Parts industry standard,and according to the Software&IT Services standard.Mobileye is a software company and adding the Software&IT Services standard helps us provide a more accurate representation of our activities.67Sustainability Report 2023Auto PartsSustainability Disclosure Topics&Accounting MetricsTopicMetricCategoryUnit of MeasureCodeReferenceMaterials EfficiencyPercentage of products sold that are recyclable QuantitativePercentage(%)TR-AP-440b.1N/APercentage of input materials from recycled or remanufactured content QuantitativePercentage(%)TR-AP-440b.2N/ACompetitive Behavior Total amount of monetary losses as a result of legal proceedings associated with anticompetitive behavior regulationsQuantitativePresentation currencyTR-AP-520a.1NoneActivity MetricsActivity metrticCategoryUnit of MeasureCodeNumber of parts produced QuantitativeNumberTR-AP-000.APage 11Weight of parts produced QuantitativeMetric tons(t)TR-AP-000.BN/AArea of manufacturing plantsQuantitativeSquare meters(m)TR-AP-000.CNot applicable to company activity10.1 Appendices68Sustainability Report 2023Software&IT ServicesSustainability Disclosure Topics&Accounting MetricsTopicMetricCategoryUnit of MeasureCodeReferenceEnvironmental Footprint of Hardware Infrastructure(1)Total energy consumed,(2)percentage grid electricity and(3)percentage renewable QuantitativeGigajoules(GJ),Percentage(%)TC-SI-130a.1267,732 In 2023,data on energy and fuel consumption was available for our operations in Israel,the USA(in the states of NY and Michigan),Germany and China.(1)Total water withdrawn,(2)total water consumed;percentage of each in regions with High or Extremely High Baseline Water Stress QuantitativeThousand cubic meters(m),Percentage(%)TC-SI-130a.2Page 54Discussion of the integration of environmental considerations into strategic planning for data center needs Discussion and Analysisn/aTC-SI-130a.3Page 54Data Privacy&Freedom of ExpressionDescription of policies and practices relating to behavioral advertising and user privacy Discussion and Analysisn/aTC-SI-220a.1Page 33-34Number of users whose information is used for secondary purposes QuantitativeNumberTC-SI-220a.2Page 33-34Total amount of monetary losses as a result of legal proceedings associated with user privacy QuantitativePresentation currencyTC-SI-220a.3Page 33-3410.1 Appendices69Sustainability Report 2023Software&IT ServicesSustainability Disclosure Topics&Accounting MetricsTopicMetricCategoryUnit of MeasureCodeReferenceData Privacy&Freedom of Expression(1)Number of law enforcement requests for user information,(2)number of users whose information was requested,(3)percentage resulting in disclosure QuantitativeNumber,Percentage(%)TC-SI-220a.4Not applicable to company activityList of countries where core products or services are subject to government-required monitoring,blocking,content filtering,or censoring Discussion and Analysisn/aTC-SI-220a.5Not applicable to company activityData Security(1)Number of data breaches,(2)percentage involving personally identifiable information(PII),(3)number of users affected QuantitativeNumber,Percentage(%)TC-SI-230a.1page 33-34Description of approach to identifying and addressing data security risks,including use of third-party cybersecurity standards Discussion and Analysisn/aTC-SI-230a.2page 33-3410.1 Appendices70Sustainability Report 2023Software&IT Services
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Annual and Sustainability Report 2023H&M GroupContentsCEO letter .6H&M Group at a glance .10H&M Group at a glance .11Key figures .12Sales and stores per region .13Highlights 2023 .14Our business idea .16Our omni-model .17Stores .17Online .18Our culture and values .19Customer in focus .20Fashion and design .21Circular customer journeys .22Our brands .24New Growth&Ventures .30Innovation .31Initiatives for an improved customer experience .32Demand-driven supply chain .34Customer demand-driven production .35Towards recycled,regenerative and responsibly sourced materials .36Reducing greenhouse gas emissions .37Social impact across our value chain .38Logistics and distribution .39Packaging .40Collaboration and partnership .42Administration report including Corporate Governance report and sustainability.44Administration report .45Corporate governance report .52TCFD climate risk analysis .75Sustainability impact areas and performance .80Financial reports.94Group statements .94Parent company statements .101Notes to the financial statements .105Signing of the annual report .132Auditors report .133Key financial performance measures .138The H&M share .141Annual general meeting .142Calendar .142Some words and phrases used in this report .143Contact details .14432CEO LETTERSTATUTORY ANNUAL REPORTCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSH&M GROUP AT A GLANCEHow we reportThis document is H&M Groups Annual and Sustainability Report detailing our financial and non-financial performance in the year from 1 December 2022 to 30 November 2023(the 2023 financial year).It includes comments from our CEO and a description of the business,followed by our statutory annual report.The Administration Report on pages 45-93 includes our Corporate Governance report(pages 52-79)and information on sustainability impact areas and performance(pages 80-93).This is followed by our Financial Report on pages 94-131.Our Annual and Sustainability Report complies with the applicable Swedish and EU legislation and the International Financial Reporting Standards(IFRS)adopted by the EU and is prepared in accordance with the Swedish Annual Accounts Act.Building on our long experience in sustainability reporting,we are evolving our approach in preparation for the Corporate Sustainability Reporting Directive(CSRD),which requires companies to adhere to the new European Sustainability Reporting Standards(ESRS)coming into effect.For example,we are conducting a detailed gap analysis,transitioning our materiality assessment process,and integrating more sustainability content into our Annual and Sustainability Report.We have also been reporting in line with the Task Force on Climate-Related Financial Disclosures(TCFD)for several years,which further supports our preparedness.Our TCFD disclosure can be found as a part of the Administration Report on pages 75-78.We complement our Annual and Sustainability Report with the Sustainability Disclosure,which provides additional detailed information on our sustainability strategy,policies,goals and programmes and our performance against our long-term ambitions.It describes the key activities that support progress towards these ambitions,alongside our learnings and plans.The Sustainability Disclosure complies with external reporting frameworks such as the Global Reporting Initiative(GRI)and the UN Guiding Principles Reporting Framework.More detail on individual topics can be found in our latest Sustainability Disclosure at in other locations linked from relevant places in this report.45CEO LETTERSTATUTORY ANNUAL REPORTCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSH&M GROUP AT A GLANCEFurther steps towards our climate goalsOur investments in innovation mean we are taking important steps on our journey towards circularity.We are continually working to develop our business model in order to add profitable growth while at the same time reducing our energy consumption,increasing the percentage of renewable energy and reducing our climate footprint,so that we can contribute to a more sustainable fashion industry.For example,we continued to increase the percentage of recycled or sustainably sourced materials in the collections,reaching a level of 85 percent in 2023.Our goal is for 100 percent of our materials to be made from recycled or sustainably sourced materials by 2030.Our sustainability initiatives also provide the group with long-term business opportunities.By building strategic partnerships with important actors and creating growth through various innovative methods,such as circular business models,we can continue to give our customers unbeatable value and enable them to have a more sustainable lifestyle.In addition to our investments,we provide financial support to projects that contribute to reducing greenhouse gas emissions throughout the value chain.Our climate goals are set high and results show that we reduced greenhouse gas emissions by 22 percent in 2023.This takes us even closer to our science-based targets that include a 56 percent reduction1 in greenhouse gas emissions by 2030 being among the most ambitious in our industry.For the twelfth year in a row H&M Group has been included in the Dow Jones Sustainability World Index and the Dow Jones Sustainability Europe Index.H&M Group scored best-in-class in several areas including human rights,climate strategy,greenhouse gas emissions and materiality analysis.1)Refers to science-based targets for own operations(scope 1 and 2)and for the companys entire value chain(scope 3)and excludes the use of sold products.The baseline is 2019.Allocation to HIPI am very proud of what we have achieved together and I am deeply impressed by the strong passion,teamwork and entrepreneurial spirit shown by all our colleagues.I would like to thank all our colleagues throughout H&M Group for fantastic commitment over the past year.Our strong culture with our shared values has been an important factor in our ability to drive improvements within the business.It is pleasing to note that the increase in full-year profits means we can allocate a further SEK 177 million to the H&M Incentive Program,for all H&M group employees.OutlookDespite the uncertainties in the world around us,H&M Group stands strong with a robust financial position,strong cash flow and improved profitability.Our financial strength and long-term perspective enable us to continue to develop the customer offering in order to deliver unbeatable value to our customers.We are closely monitoring the geopolitical developments in the world around us and how these affect our operations.In the current situation we are taking measures to minimise impact on the companys product availability,freight costs and stock levels.With a strong customer focus,committed colleagues and an increased pace of investment we see good conditions for continued profitable and sustainable growth in 2024.Helena Helmersson,CEO up to 31 January 2024H&M Hennes&Mauritz AB2023 In 2023 we continued to see an uncertain world with geopolitical and macroeconomic challenges.Despite this,we made progress in all our growth areas and took further steps towards our long-term goals.Our continued focus on cost control and profitability resulted in strong cash flow.We continued to invest in the customer offering and the shopping experience for all our unique brands in order to meet our customers needs and exceed their expectations.We drove further improvements in the supply chain,the cost and efficiency programme was implemented and the external factors that influence purchasing costs increasingly returned to normal.All this led to a stronger gross margin.Our Portfolio Brands COS,Monki,Weekday,&Other Stories and ARKET continued to develop well.Sales at COS,ARKET and Weekday developed particularly strongly over the year,and these brands are contributing more and more to the groups profitability development.Thanks to our focus on cost control,profitability and increased inventory productivity,cash flow improved and is financing greater reinvestment in the business above all,within our store portfolio and supply chain.2023 was another year that for many consumers was marked by lower purchasing power because of high inflation and high interest rates.Despite this,our net sales in comparable markets increased in relation to 2022.In a situation of high inflation where household living costs are rising significantly it has been more important than ever to offer customers the best value for money.Despite challenges in the world around us,H&M Group stands on robust foundations.Our focus is on creating further conditions for increased sales,for example through our increased initiatives in respect of the store portfolio and the supply chain.This is an important component for achieving our long-term goals.We are fully focused on H&M and are continually developing the brand,the customer offering and the shopping experience while at the same time integrating the channels further.Since we temporarily closed our stores in Ukraine in February 2022 we have maintained a close dialogue with various stakeholders.In November 2023 we were able to gradually reopen most of our stores in the country.Stronger customer offering and customer experienceWe offer fashion that makes it possible for everyone to express their personal style,since our business concept is to offer the best combination of fashion,quality,price and sustainability.Speed and flexibility continue to be important going forward,particularly in the supply chain,for the purpose of securing a broad assortment and increasing availability in all channels.Our initiatives in areas such as tech and AI are a significant factor in our work to always have the right product in the right place at the right time and at the right price.Combined with more efficient processes this increases our precision and thereby contributes to more sustainable use of resources.Through our continued initiatives to integrate the two channels we are ensuring both good product availability and a convenient customer experience,so that customers can meet us when,where and how they wish.In our digital store we are constantly testing ways to make the shopping experience even more inspiring.Many of the things we are testing to elevate and upgrade the presentation of our products are now being gradually rolled out to more markets in 2024.The physical stores continue to be incredibly important and in 2024 we are stepping up the pace of investment in the existing stores to further elevate the shopping experience.We are ensuring that we have the right store with the right format in the right place.Our stores,which are in prime locations,are a major asset where we meet our customers every day.Customers appreciate this accessibility and being able to try on clothes and be inspired.The store portfolio has now reached a level where there will be fewer closures going forward while at the same time new stores will be opened.For 2024 we plan to open around 100 new stores and to close around 160.Despite resulting in a net decrease of around 60 stores,the changes in the portfolio will start to make a positive contribution to H&M Groups sales.Looking back at 2023Before summing up 2023 I would like to start by saying that after four intensive years as CEO of H&M Group,I decided to step down from my role as CEO at the end of January 2024.Following my decision the board of directors appointed Daniel Ervr as the groups new CEO.I hand over to Daniel feeling confident that,along with all our colleagues,he will ensure that the company will continue to take steps toward our goals and develop H&M Groups brands and business models.With strong leadership and a broad understanding of the business,Daniel is a good role model for our values and our ability to create customer value.Helena Helmersson67CEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTI feel very proud to be leading H&M Group as its new CEO.It is the commitment,work on continual improvement,passion for fashion and high sustainability ambitions of all our colleagues that makes the company unique.My journey with H&M began 18 years ago.Since then I have had various roles within the group,having been responsible for merchandising at H&M in Germany and the US,country manager for H&M Sweden,purchasing manager for H&M and responsible for H&M women and men.I have gained valuable experience from each of these roles,particularly within sales.In my most recent role as head of the H&M brand,together with our teams I have been fully focused on improving H&M,strengthening the customer offering and giving our customers unbeatable value.We have a strong business concept,a unique reach with our physical and digital stores and the opportunity for a direct relationship with customers through our strong brands.Our customer offering fashion and quality at the best price in a sustainable way is more relevant than ever.At the same time,customers expectations are changing fast and it is important that we adapt in line with this.Throughout the incredible journey of growth that the company has been on since it started in 1947 we have been keen to maintain our corporate culture and the entrepreneurial spirit on which the company was founded.Our values,creativity and salesmanship are at the heart of the process of creating the best customer offering.By focusing on the customer we can further leverage this potential to meet increasing expectations,while at the same time continuing to strengthen our brands.Despite continued uncertainties in the world around us,with geopolitical and macroeconomic challenges,we see many opportunities.The market our industry serves is large,growing and fragmented.I look forward to continuing our journey as one of the worlds leading fashion companies along with our fantastic colleagues.With the plan we have established we are now better prepared than ever to take further steps towards our long-term goals.Daniel Ervr,CEO since 31 January 2024H&M Hennes&Mauritz ABCEO letter from Daniel ErvrThe companys new CEO Daniel Ervr is optimistic about the future,with a continued focus on profitable and sustainable growth and on leading the change to a circular fashion industry.Daniel Ervr89CEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORT34billion SEK in cash flow from operating activitiesAllocation of 177million SEK to H&M Incentive Program(HIP)for all employees85%recycled or sustainably sourced materials in our commercial goods,including 25%recycled materials64%of leadership positions within our operations are held by womenSEK 236billion in net sales, 6%vs.202222%reduction in scope 3 greenhouse gas(GHG)emissions under our science-based target against a 2019 baseline113billion SEK profit after financial items78markets and 60 online markets143,000employees (101,103 full time equivalent)1)Excluding use-phase emissions.Around 30%online sales as a share of the groups net totalH&M Group at a glanceH&M Group at a glance.11Key figures.12Sales and stores per region.13Highlights 2023.14Our business idea.16Our omni-model.17 Stores.17 Online.18Our culture and values.191011H&M GROUP AT A GLANCECEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSSTATUTORY ANNUAL REPORTDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSCEO LETTERSales and stores per regionNET SALES 2023(SEK M)NET SALES 2022(SEK M)NEW STORES(NET)DURING THE YEARNUMBER OF STORES30 NOV 2023The Nordics21,30720,128-10389Western Europe79,04971,452-281,051Eastern Europe19,63321,991-6475Southern Europe31,18628,611-15608North&South America53,78550,990 5745Asia,Oceania&Africa31,07530,381-421,101Total236,035223,553-964,369Excluding Russia,Belarus and Ukraine,sales in eastern Europe had an increase for the full-year 2023 of 15 percent in SEK and 5percent in local currencies.Sales were temporarily resumed in Russia from August until November 2022.Development in eastern Europe should be seen in light of the fact that H&MGroups operations in Russia and Belarus have been fully wound down since 30November 2022.Operations in Ukraine were paused from the end of February 2022 and 7 stores in the country were reopened during November 2023.Key figures1 DECEMBER30 NOVEMBER202320222021Net sales,SEK m 236,035223,553198,967Change net sales from previous year in SEK,% 6 12 6Change net sales previous year in local currencies,%-1 6 12Operating profit,SEK m14,5377,16915,255Operating margin,%6.23.27.7Profit after financial items,SEK m13,0106,21614,300Profit after tax,SEK m8,7233,56611,010Cash and cash equivalents,SEK m26,39821,70727,471Stock-in-trade,SEK m37,35842,49537,306Average number of shares outstanding,thousands11,629,0971,649,8471,655,072Earnings per share,SEK15.352.166.65Cash flow from operating activities,SEK m33,94924,74544,619Dividend per share excluding own shares,SEK26.506.506.50Return on equity,.76.419.2Total number of stores4,3694,4654,801Average number of employees101,103106,522107,3751 DECEMBER30 NOVEMBERGOAL202320222021Climate:solute reduction in GHG emissions (scope 1 and 2)compared with 2019 baseline.-56%by 2030-24-10-22Climate:solute reduction in GHG emissions (scope 3)3 compared with 2019 baseline.-56%by 2030-22-15-10Climate:%renewable electricity in own operations100%by 2030949295Commercial goods:%of recycled or sustainably sourced materials used Total100%by 2030858480 Sustainably sourced-606162 Recycled30%by 202550%by 20302523181)Before and after dilution,excluding own shares.2)Dividend which was decided and paid during the year.3)Excluding indirect use-phase emissions.For definitions and explanations in this report,see pages 138-140 and 143.1213H&M GROUP AT A GLANCECEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSSTATUTORY ANNUAL REPORTFashion Transparency IndexH&M Group ranked sixth out of 250 fashion brands and retailers reviewed by Fashion Revolutions 2023 Fashion Transparency Index,with a score of 71 percent.The group achieved 100 percent in the governance section.Stand.earth Fashion ScorecardH&M Group ranked first in the Stand.earth Fossil Free Fashion Scorecard 2023,an analysis of 43 fashion brands.The assessment was made with a focus on the companies environmental and climate impact.Textile Exchange Material Change IndexH&M Group was identified as one of six overall leaders of 130 participating companies in the 2023 Material Change Index,based on the companys submitted data to the Materials Benchmark programme.H&M Group was one of two companies that received a level 4(leading)score on all three sections Business Integration,Circular Economy,and Impact Areas.Worlds Top Companies for WomenForbes ranked H&M Group seventh out of 400 in their top companies for women.The highest score was in the leadership category(the number of women on the executive board and board of directors),where H&M Group ranked in the top 1 percent of all companies assessed on this topic.Climate impactH&M Group achieved a 22 percent reduction in scope 3 emissions from a 2019 baseline.In addition,a 29 percent reduction in electricity intensity in H&M Group stores from a 2016 baseline exceeded the groups 25 percent goal seven years early,contributing to the reduction in scope 1 and 2 emissions.Supporting renewable electricityH&M Group continues to promote electrification and increase the availability of renewable electricity in the supply chain.One example is H&M Groups plan to invest in Bangladeshs first offshore wind farm in collaboration with other industry players through the Global Fashion Agenda(GFA).Second-hand platform SellpyMajority-owned Sellpy is one of the biggest providers of second-hand fashion in Europe across 24 markets and continues to have a strong sales development.Green bondH&M Group issued its first EUR 500 million green bond with a maturity of eight years.The proceeds will be allocated towards investments in eligible projects under the categories Circular economy,Green buildings,Renewable energy,Energy efficiency and Sustainable water&wastewater management.H&M Studio celebrates 10yearsH&M launched the autumn collection with a pop-up store during Paris Fashion Week 2023.The first H&M Studio limited-edition collection was launched in 2013 and from 2023 multiple limited-edition collections will be done with several drops per season.Designer collaborations with House of Mugler and RabanneThe Mugler H&M collection launched in May featured a mix of new and classic signature looks,such as remakes from the fashion houses archives.The Rabanne H&M collection that was released in November consisted of women and menswear in glittering paillettes,metallic dresses,shoes and accessories as well as an exclusive H&M HOME collection.H&M BeautyH&M Beautys first flagship store opened its doors in Oslo and a second one followed in the same city.H&M Beauty also re-launched its in-house developed make-up collection which has been very well received.New marketsH&M opened its first stores in Albania alongside new online markets in Ecuador and Vietnam.ARKET opened its first stores in Estonia and Switzerland,and in December 2023 in Latvia.Mexico became a new store market for COS when it opened its first flagship store,and&Other Stories opened its first store in Switzerland.Highlights 2023H&M launched on JD.comH&M took an important step in expanding its presence in China by launching a flagship store on JD.com,the markets largest online retailer.This is aimed at maximising digital presence and ensuring greater accessibility for customers.H&M MoveH&M Move launched Move Together,a community programme with the objective to remove barriers for young people of moving together.The programme promotes sports by offering multi-sport activities for free to youths from socioeconomic vulnerable contexts.H&M Move also initiated a collaboration with legendary football player Zlatan Ibrahimovic as a brand mover and launched the collection Selected by Zlatan.Dow Jones Sustainability IndicesH&M Group was included in the Dow Jones Sustainability World Index for the 12th year running.In 2023,the group reached a score of 58/100,with highest possible or best-in-class scores in climate-related management strategies and human rights assessment.H&M Group was also listed in the Dow Jones Europe Index and included in the S&P Global Sustainability Yearbook.COSCOS successfully upgraded its assortment and strengthened its positioning in the premium segment.COS returned to the New York Fashion Week to present its Autumn Winter collection at the Classic Car Club Manhattan.1415H&M GROUP AT A GLANCECEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSSTATUTORY ANNUAL REPORTOur omni-modelAll our brands and ventures ensure that our offering is relevant and responsive to the latest trends,so we continuously meet our customers ever-increasing expectations.Wherever,whenever and however our customers around the world want to meet us,we offer a convenient and inspiring experience whether in our stores or via digital touchpoints such as our websites,apps,social media and digital marketplaces.We are focusing our expansion on omni-channel growth by continuing to integrate our digital and physical channels,which interact and strengthen each other.By offering a range of channels to facilitate a seamless,holistic customer journey,we ensure greater product availability,as well as building long-term,value-creating relationships.We are continuing to roll out services such as click&collect and online returns in store,along with more digital services that make it easy for customers to enjoy our full assortment of products regardless of channel.StoresOur stores at the best locations welcome customers around the world every day providing a shopping and fashion destination where people can find inspiration and explore their style and creativity.The stores play a vital role where customers can experience our brands.Customers tell us that they appreciate the stores for proximity,availability and the opportunity to try on clothes,create looks and find their perfect fit.We continuously develop our store portfolio to ensure that we have the right store with the right format in the right place,including flagship stores that we continue to prioritise for an enhanced presentation,inspiration and experience.By digitalising the in-store experience and providing omni-services,we increase both convenience and product availability.As we continue to grow and integrate physical and digital channels,we are ensuring that we have a well-balanced,healthy and relevant store portfolio in each market.H&M Groups contracts allow around a third of leases to be renegotiated or exited each year.In 2023,we opened 101(91)new stores and closed 197(427)stores.This resulted in a net closure of around 96 stores.We had 4,369 stores in 78 markets at the end of the 2023 financial year.Most openings are in growth markets,while closures are mainly in established markets.In some markets our products are sold via franchise partners.The store portfolio has reached a level of fewer closures going forward while at the same time new stores will be opened.H&M plans to open its first store as well as online in Brazil in 2025.Our business ideaFashion and design are our passion.With several clearly positioned brands,businesses and ventures each with their own unique identity we meet our customers ever-increasing expectations and diverse needs.All our brands share the same longstanding commitment to offer our customers the best combination of fashion,quality,price and sustainability,and to give unbeatable value.Together they provide a wide and varied range that inspires customers around the world to express their own personal style.H&M Group and its franchise partners are represented in 78 markets,where the largest brand H&M has stores in 77 markets and is online in 60 markets,making us one of the worlds leading fashion retailers.Our business consists mainly of sales of clothing,accessories,footwear,cosmetics,home textiles and homeware through our brands and ventures.Our brands are H&M which includes H&M HOME,H&M Move and H&M Beauty and the Portfolio Brands consisting of COS,Weekday,Monki,&Other Stories,ARKET,Afound and Singular Society.The group also consists of New Growth&Ventures,which includes our investment arm H&M Group Ventures,Sellpy,Looper Textile Co.and Creator Studio.Every decision we make is driven by our desire to create the best offering and experience for our customers.To meet evolving expectations,we continue to improve our customer offering,as well as integrate our digital and physical channels,and create an even more demand-driven supply chain.For our business and communities to thrive within planetary boundaries,we aim to decouple financial growth from the use of finite natural resources.H&M Groups goal is that by 20301 at the latest it will double sales while at the same time halving its greenhouse gas emissions in line with our targets,which have been verified by the Science Based Targets initiative(SBTi).1 The combination of financial strength and long-term approach enable us to continue to invest in improvements to the customer offering and experience,as well as in innovations across the value chain including technical development,materials and new business models.United by our values,we have an ambition to lead the change towards a more sustainable and circular fashion industry.Building on our long history of actively working with sustainability,we are well positioned to make more sustainable choices accessible for the many.As a global company,we work to contribute to an industry-level systemic shift,alongside addressing our own impacts in key areas,including climate,resource use,water and oceans,biodiversity and land,and decent work and sustainable communities(social impact).These areas are deeply interconnected,requiring a holistic view to address them read more in our Sustainability Disclosure at baseline for the sales goal is 2021,while the baseline for reducing greenhouse gas emissions is 2019.H&M Groups goal is to reduce its greenhouse gas(GHG)emissions in absolute figures by 56 percent by 2030(baseline 2019)in accordance with the Science Based Targets initiative(SBTi).This includes scope 1,2 and 3 GHG emissions,and is excluding indirect emissions from use of sold products.We use our resources and influence as a global fashion company to scale systemic industry-wide change.This includes supporting increasing levels of disclosure across our sector.Transparency enables accountability and comparability,and empowers customers to make more informed decisions about the products they buy.Read more about how we work to increase transparency on page 53 and in our Sustainability Disclosure at AND PARTNERSHIPSTATUTORY ANNUAL REPORTH&M GROUP AT A GLANCECEO LETTERDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSOur culture and valuesH&M Groups unique company culture is shaped by our shared values.They define who we are,what we stand for and how we act to create environments where people and businesses thrive.At the end of the 2023 financial year,around 74 percent of H&M Group employees were women and 26 percent were men.1 In leadership roles,such as store and country managers,women represented 64 percent and men 36 percent.The average number of employees in the group,converted into full-time positions,was 101,103,of which 10,281 were employed in Sweden.We are for everyone,but everyone is unique.Therefore,we strive to have diverse and inclusive teams so we can better understand our customers needs and perspectives.This helps us to create relevant customer offerings and contribute to a more inclusive world through our products and marketing.Fundamental respect for the individual sits at the heart of our business.This applies to everyone involved in and impacted by our value chain,and includes aspects such as fair wages and working hours,a safe workplace,freedom of association,and the opportunity to develop and grow.Minimum employment standards and social policies applied across our operations and supply chain support good working conditions in safe and healthy environments.This value-driven way of working dates back to when our company was founded and continues to guide us today.Our shared values help us stay curious and engaged,and contribute to an open,dynamic and down-to-earth culture where people collaborate and discover new ways to deliver great customer value.Our aim is always to be a fair,equal and attractive employer.From the very start,we trust our colleagues with great responsibility and encourage them to make the most of development opportunities across our brands and functions.Significant internal development opportunities make it possible to explore a wide variety of roles,contribute to different parts of the organisation and continually grow with our business.We encourage our leaders to be role models who empower,challenge and support their teams to make a difference.As a global company with employees across 177 nationalities,we represent a rich variety of different cultures and backgrounds.This is a key business strength for us,as it brings a wealth of diverse knowledge,experience and perspectives that enable creativity and innovation.We actively work to cultivate inclusive,welcoming workplaces where everyone is encouraged to be themselves and respect others for who they are.1)At H&M Group we recognise that gender is not binary and that gender identities exist between and outside of male and female.We keep investigating how we can adapt our systems to be more inclusive of all genders,while also complying with local laws and regulations.Meanwhile we will continue to report on the data we have available today.All our brands have well-developed online operations.H&M has a presence in 60 online markets.COS,Weekday,Monki,&Other Stories and ARKET offer global selling,which enables customers in around 70 additional markets to shop online.The exact number of markets that have this service varies between brands.Several of our brands can also be found on various external marketplaces.COS entered the Mexican market with a first flagship store in Mexico City during August 2023.The store design focuses on circularity in both materials and design and encompasses materials such as bamboo wardrobes,recycled plastic display cases and a rail system made with recycled aluminium.The concept has been created so it can be maintained,repaired,and repurposed,demonstrating the brands commitment to a circular built environment.For example,all our stores have RFID(Radio Frequency Identification),where items can be located quickly,to get precise information on availability and size options.Stores are also an important part of the supply chain,especially in relation to last-mile options customers can combine physical shopping with omni-services such placing an order online and picking it up in a store,checking if items are available,or returning a purchase made online in store.By adapting how we use our stores and combining different service offerings,we aim to always offer a smooth and flexible shopping experience that meets evolving customer expectations.We build,furnish and operate our stores in line with our sustainability goals.Our focus is to reduce greenhouse gas emissions and resource use at every stage from construction to fitting out and maintenance.The majority of our stores(91 percent)are equipped with LED lighting,which contributes to the reduction of electricity use per square meter with 29 percent compared to the base year 2016,surpassing our target of a 25 percent reduction seven years early.OnlineOur online and physical stores complement one another and strengthen our customer offering.Alongside increased integration of both channels to offer a seamless experience,we are continually enhancing the online experience for our customers.We are making it easier for customers to find items they love through improvements to our product exposure capabilities,and to find items they want to keep with personalised fit and sizing recommendations.We are also improving the ease and efficiency of the return experience with the continued roll-out of digital returns and online returns in store.We are continuing our initiatives for digital growth,including constantly updating the online environment for all our brands.To make the shopping experience even more inspiring in our digital store,we are testing several new initiatives,for example to improve presentation of how the products can be used and styled.Many of the tests to lift and upgrade the presentation are being rolled out gradually to more markets in 2024.1819COLLABORATION AND PARTNERSHIPSTATUTORY ANNUAL REPORTCUSTOMER IN FOCUSCEO LETTERDEMAND-DRIVEN SUPPLY CHAINH&M GROUP AT A GLANCEThis starts with our brands design and buying functions,each of which brings together designers,pattern makers and buyers from around the world with a shared passion for fashion and craftsmanship.These teams draw inspiration from the latest styles and trends,to create high quality collections that have the right mix of basics and the very latest fashions.New ideas come from influences as diverse as art,science,nature,travel,films,art exhibitions,fashion shows and street style.Our customer focus combined with our long experience in creative,trend-led design,help us to create what our customers want and to inspire them always with the ambition to deliver value beyond the price they pay.We offer good quality products that are made to last and can be enjoyed time and time again.Technologies such as 3D design and virtual showrooms enhance the creativity of our in-house designers.We increasingly harness the power of artificial intelligence(AI)to optimise how many products to make,where to sell them and when.Aligning supply with customer demand is good for our customers,our business and the environment.This process supports our ambition to shift to a circular ecosystem across Fashion and designOur aim is to make fashion and design accessible to everyone in a way that is good for people,the planet and our business.our value chain from designing products that are created to last and made of safe,recycled,regenerative or sustainably sourced materials,to product development,production and customer use,reuse and recycling.We are expanding our range of initiatives to ensure products continue to circulate for longer.For example,ARKET ARCHIVE is a new platform for second-hand ready-to-wear shoes,accessories and childrenswear from ARKET,in partnership with Archive,a leading technology platform for branded resale.Sellpys new Upcycled platform offers limited collections created by upcyclers,artists and designers.Meanwhile,H&M HOME now offers preowned interior pieces from both its own and other brands,allowing customers to mix and match used pieces with current seasonal items.Customer in focusFashion and design.21Circular customer journeys.22Our brands.24New Growth&Ventures.30Innovation.31Initiatives for an improved customer experience.322021CUSTOMER IN FOCUSCEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTWe offer customers inspiration on how to prolong the life of their garments through care and repair initiatives.To support maximising product life,we offer repair services at some of our stores and provide guidance and products to help customers repair their clothes.Customers have the option to experience fashion,while enabling products to continue to circulate through our brands range of rental and reuse services.Sellpy has grown into a broad digital platform for second-hand fashion and other products,and is today operating in 24 markets.With its vision of enabling everyone to consume and live in a more circular way,Sellpy has created a unique service that makes it easy for people to buy and sell second-hand items.We offer our in-store garment collecting programme worldwide to our customers.Our aim is to ensure the collected products are sorted for the most suitable outcome,be that reuse as product,reuse as material or recycling.In our Sustainability Disclosure(at share more about our work to ensure that collected textiles are taken care of responsibly either to be reused as a product,sold as second-hand or recycled.Circular customer journeysWe are optimising our business so that we use fewer resources,while at the same time building a circular ecosystem that ensures products and materials circulate at their highest value and generates diversified revenue streams.Achieving more with less is key to building a resilient business,and our aim is to accomplish this by working towards circular offerings across our entire value chain including products,supply chains and customer journeys supporting our efforts to work for longevity rather than one-off transactions.In response to customers growing interest in circular fashion,we are also offering services that extend the life of the garments even further enabling products to circulate and resources to be kept in use for as long as possible.Design is the first step in this process.The decisions we make at this stage determine the materials and processes we use,the expected lifetime of products we create for each assortment,and the potential for those products to be repaired,reused or recycled.Our aim is to use the design process to select materials and processes that reduce negative impacts and support a long product life through multiple users before enabling the product to be fed back into the supply chain for recycling into new fibres.We test and invest in innovative services that span the whole product lifecycle.These include garment rental,second-hand,remake,repairs,alterations,garment collecting for textile reuse and recycling,and preferred delivery options1 all to help customers make well-informed choices,while creating new revenue streams and supporting our sustainability goals.1)Modes of transport including 100 percent biofuel,electric and zero-emissions vehicles.A zero-emissions vehicle is one that does not emit exhaust gas or other pollutants when operational.USERCARE AND REPAIRREUSEREPURPOSERECYCLEOpen loop downcyclingClosed loop recycling:textile-to-textileProductMaterialCustomer-facing circular business modelsCircular business models enable a product to circulate many times between users or customers.A product may be repaired,reused as a product(for example via a second-hand purchase),reused as materials and remade into a new product,or recycled.Recycling can return materials to the fashion ecosystem(closed loop)or send them for use as resources in another industry(open loop).2223CUSTOMER IN FOCUSCEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTThe new brand H&M Move,launched worldwide in August 2022,is embarking on the bold mission to liberate activewear and get the whole world and everybody moving,however they move.The brand offers a more accessible vision of sport by reframing it as movement,celebrating the fact that everyone on the planet is already a mover,moving in a multitude of ways.H&M Move aims to equip the world with stylish and functional activewear that will support movers of all abilities and skills to move comfortably and confidently.H&M Move offers collections for women,men and children online and in around 2,400 stores at dedicated areas within H&M HOME is a design-driven interior brand offering fashion-forward dcor and accessories for every room and style.The assortment ranges from high-quality bed linen and timeless dinnerware to diverse textiles,furniture and lighting.Contemporary style and attention to quality and detail are at the brands core.By merging modern design and quality with sustainability and affordable prices,H&M HOME enables interior lovers across the world to create a personal and modern space a place to feel at home.H&M HOME was launched online in 2009.Today,it is available in most H&M online markets,through standalone H&M HOME concept stores,and at shop-in-shops in H&M MoveOur brandsEach of our clearly positioned fashion brands has its own unique identity,shopping experience and its own look.Together they complement and strengthen each other all to offer customers unbeatable value.H&M is a fashion brand dedicated to liberating fashion for the many.It is committed to making fashion accessible to all through our business idea:fashion and quality at the best price in a sustainable way.H&M offers a broad range of styles for different personalities,preferences,body types,ages,gender identities,occasions and cultures.Customers can express themselves through the brands diverse,fashionable and current assortment,which includes everything from unique designer collaborations and functional sportswear to affordable wardrobe essentials,beauty products and accessories.H&M has 3,872 stores in 77 markets and is available online in 60 2425CUSTOMER IN FOCUSCEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTLaunched in 2013,&Other Stories offers fashion-loving women a wide range of shoes,bags,accessories,beauty and ready-to-wear all equally important for the whole look.&Other Stories inspires women to create their own personal style and expression.The ateliers design diverse collections with great attention to detail and quality,always with modern femininity in mind.&Other Stories has 72 stores in 25 markets and online stores in 32 markets.The brand also delivers to more markets via global selling through online channels as well as external Monki is a vibe:friendly,playful,bold and empowering.Monki draws inspiration from those who bravely express their style and creativity without the filter of conventions and aims to be a catalyst for others to do the same.Founded in 2006,64 concept stores offer the Monki in-real-life experience across 15 markets and M currently ships to 29 markets,and via global shipping and external platforms to additional COS offers a wardrobe of ready-to-wear and accessories for a life well dressed.Rooted in luxury design and compelling fashion movements,the collection pays meticulous attention to sustainable craftsmanship,quality and a superior colour palette that transcends time.The creative soul of the brand is visualised through original storytelling,seasonal runway shows and contemporary culture to create an experience beyond the expected.COS has 245 stores in 47 physical markets and online stores in 38 markets.The assortment is delivered to additional markets via global selling through online channels and is also available on external Weekday is a street fashion and lifestyle brand pushing the boundaries of everyday dressing.It is a collective,a platform for expression cultivating the creative generation in the search of hypeworthy inspiration,new styles,and emerging cultural trends.Launched in 2002,Weekday offers a unique retail experience and a carefully curated mix of jeans,womens,mens and accessories assortments.Weekday has stores in 14 countries and currently ships to 29 markets.The brand also delivers to additional markets via global selling through online channels as well as external 2627CUSTOMER IN FOCUSCEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTSingular Society is a new and innovative membership-based brand that offers premium products at the price they cost to make.Founded in 2020,Singular Societys ambition is to help change the way retail operates,and to offer an alternative to the traditional way of consuming no markups,no shortcuts and transparent pricing and product information.Singular Society is currently shipping to the EU and has a flagship store in Stockholm.singular-New concept All In Equestrian,launched at the end of 2023,offers a contemporary and functional collection of apparel for riders.All In Equestrian is a natural continuation of H&Ms long history of sponsorship in the equestrian world bringing the deep knowledge and passion to dress both top athlete riders and the broader horse community.All In Equestrian is available online in 12 European ARKET is a modern-day market and lifestyle destination offering essential products for men,women,children and the home,as well as a New Nordic vegetarian caf.The wide assortment of fashion,food,scents,beauty and functional home items is curated to simplify good choices and provide inspiration for a more beautiful everyday life.The first ARKET store opened in London in 2017 and today ARKET has 30 stores in 14 markets across Europe and Asia.ARKET is available online in 31 markets and ships to more via global selling through online channels.It is also available on selected external Launched in 2018,Afound is a digital outlet,offering deals on fashion,beauty and interior furnishings for all.Believing that quality and style never go out of fashion,Afound does not produce anything new.Instead,the fashion outlet carefully selects products from past and present collections of top brands and offers them at a discount.In this way,Afound can ensure great garments find new homes and the outlets customers can score a great deal.As of 2023,Afound is present online in Sweden,the Netherlands,Germany,Austria,Denmark,Norway and F2829CUSTOMER IN FOCUSCEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTInnovationSystemic change is essential to achieve the transformation required for a more sustainable fashion industry.Our size and reach provide a significant opportunity to influence the wider industry,and to scale the infrastructure and innovation required for this shift.We invest in innovation,from the research and development stage through to widescale use.Our focus is on business models,materials and processes that will help us decouple our revenue from resource use,improve the resilience of our business and supply chain,and empower our customers to be part of our industrys transformation.Our investments in innovation also support our commitment to respect human rights by contributing to more favourable environmental conditions for communities and people.Our innovation hub,The Laboratory,researches and tests new circular business models and other areas of strategic importance to our business.To rise to the various sustainability and business opportunities and challenges facing our company requires disruptive innovation and the testing and scaling of new ideas.Our Circular Innovation Lab supports early-stage innovations through to commercial production,and integrates these across our organisation and supply chain.Within New Growth&Ventures we fund new and developing technologies that,for example,improve customer experience,enable a circular fashion industry and support our sustainability goals.Our investment goal is in line with our sustainability goals and supports the long-term growth of H&M Group.We are looking for investments and technologies that benefit the entire industry and for innovative companies that have the potential to scale up.This also enables a more circular future and supports entrepreneurship in the fashion industry.H&M Foundations Global Change Award is one of the worlds largest challenges for early-stage innovation to transform fashion.It aims to select,support and scale impactful innovations that help reduce the fashion industrys negative impact on the environment.We invested in Rubi,a former H&M Foundation Global Change Award winner that creates man-made cellulosic fibres from industrial CO2 emissions.Supported by the Circular Innovation Lab,Rubi is working to produce the first batches of fibre for evaluation within H&M Groups supply chain.H&M Move partnered with LanzaTech to launch a capsule collection using captured carbon emissions.H&M Foundation.Recycled leather from leather scraps.Pictures from the HKRITA lab.New Growth&VenturesH&M Group also consists of New Growth&Ventures which creates new revenue streams and business models through a variety of strategic partnerships and investments that complement the groups business.The aim is not only to invest in early-stage businesses but also in healthy businesses that can scale quickly and in partnerships,thereby engaging with customers in new ways that add value,create additional growth,contribute to sustainable development and generate new learnings.Examples of our ventures are Sellpy,Looper Textile Co.and Creator Studio.Looper TextileIn 2023,we launched Looper Textile Co.,an independent joint venture with Remondis that provides local municipalities and retailers with solutions to extend the useful life of unwanted garments via reuse and recycling.This is part of our work to invest in progress around key processes,visibility,and technology,which increase the likelihood of extending the useful life of unwanted Creator StudioCreator Studio is a global platform for merchandise design and production.With an easy-to-use platform,lean production process,made-to-order digital printing and e-commerce integration,Creator Studio aims to lower the barriers for creators to offer good quality SellpyFounded in 2014,Sellpy has grown into a broad digital platform for second-hand fashion and other products.With its vision of enabling everyone to live in a more circular way,Sellpy has created a unique service that makes it easy for people to buy and sell second-hand items.H&M Group has been the majority owner of Sellpy since 2019,and the company has been consolidated in the H&M Group accounts since Q1 2023.Following its 2021 expansion into 22 European markets,Sellpy is currently available in 24 markets,including S3031CUSTOMER IN FOCUSCEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORT H&Ms customer membership programme.Members receive personal fashion offers and services for an inspirational and more convenient shopping experience.Other benefits include rewards for bringing in clothes for H&Ms garment collecting,attending exclusive events and receiving other offers.More payment options.H&M members can pay now or later through the H&M app,whether shopping in store or online.Digital receipts are offered to customers in the H&M app so they can keep track of their receipts in one place and refer to their past purchases easily and accessibly.Available in most markets.Visual search.Image recognition provides recommendations and suggestions for styling and matching items based on pictures customers have taken and been inspired by.Next day delivery and express delivery continue to be rolled out in more markets.Preferred delivery options.In some selected markets,customers can opt to receive and return items using a bicycle delivery service.Combined with using biogas vehicles from the logistics centre to the bicycle delivery service,this reduces greenhouse gas emissions compared to conventional delivery options.Other preferred delivery options are offered in different markets,and they continue to be rolled out.Find in store.On seeing an item online,customers can use their mobile to find it quickly and easily in the size they want in physical stores,as well as online.Scan&buy.Customers can scan the QR code on a product in store to find and buy the item online in the size and colour they want.Click&collect allows customers to pick up online purchases in store.Online returns in store allows customers to return online purchases in physical stores without any charges.Rate&review allows customers to rate and review their purchases.RFID(Radio Frequency Identification)is used to help customers locate items quickly and easily with real-time information on an items availability and size options.Self-service checkouts offer customers a convenient payment alternative.Self-checkout has been much appreciated by customers and is being rolled out to more markets.Instagram.In the US,H&M customers can shop directly from Instagram posts and reels and receive notifications when H&M releases new collections.Rental in store offers customers the opportunity to rent garments.Available in select H&M stores in the UK,the Netherlands,Sweden,Germany,and Belgium.Smart mirrors in fitting rooms.Mirrors that recognise products brought inside the fitting room and offer personalised product and styling recommendations,or additional sizes and colours.Available in select countries.Buy online,pick-up in store allows customers in the US to shop online from the assortment in a select number of physical stores and pick up the purchase in store.Digital returns.Customers in select markets can register their H&M returns online or through the H&M app without having to fill out paper forms in the parcel.Mobile payment in stores allows customers to checkout from anywhere in the store via a staff members handheld device.Initiatives for an improved customer experienceCustomer behaviour is changing rapidly,and we work continually on improvements to offer customers the best possible experience.Here are some examples of ongoing initiatives some are pilots in a few markets,while others are rolled out in most of our markets:3233CUSTOMER IN FOCUSCEO LETTERCOLLABORATION AND PARTNERSHIPDEMAND-DRIVEN SUPPLY CHAINH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTSTATUTORY ANNUAL REPORTCOLLABORATION AND PARTNERSHIPTo ensure we deliver the best customer offering and an elevated experience across all sales channels at the right time,we focus on maintaining an efficient and demand-driven supply chain,which can react quickly to trends and ever-changing customer demands.Our value chain includes the full range of activities required to plan,design,source,process and manufacture,transport,sell,use,reuse and recycle our products.Within that,we describe the part of the value chain that covers production,logistics and distribution as our supply chain.The groups supply chain is built on long-term strategic partnerships,mutual trust and fair purchasing practices.We maintain a close dialogue with our suppliers through our production offices located in the different sourcing markets.Together,we continually work on improving our products and addressing environmental and social impacts in our supply chain.We invest in our supply chain to optimise the flow of goods with a focus on maximising customer satisfaction.Speed,availability,cost efficiency and accuracy are decisive key factors for achieving this.By using AI and data across the whole supply chain,we can improve precision in our quantification,allocation,pricing,and local relevance contributing to leaner production and a more sustainable use of resources.As a global company it is vital to have an efficient and demand-driven supply chain that enables us to quickly adjust volumes,sales channels and markets based on changes in customer demand and unexpected events.We work to reduce lead times and optimise the customer experience by using Customer demand-driven productionOur work creating a reverse supply chain focuses on retrieving garments from our customers and products from our supply chain and feeding them back into new reuse or recycling streams as valuable resources.During the year,we further integrated this work into our supply chain and handled flows such as faulty products and material from our garment collecting programme.efficient distribution systems and highly automated logistics centres.A large part of our environmental footprint occurs in the supply chain particularly in fabric manufacturing and processes like dyeing and washing,which are often energy-and water-intensive.We are combining disruptive innovations with process improvements to develop a long-term,holistic plan for production processes with a focus on reducing energy,water and chemical consumption.We also make funding available to supplier factories to invest in the technologies and processes needed to reduce energy demand and replace fossil fuels.1Read more about our supply chain management on pages 80-81.1)For more information see note 1 to the financial statements,Accounting principles.We continuously engage with our customers to meet and exceed their needs and expectations,providing a strong and relevant offering with the best combination of fashion,quality,price and sustainability.Demand-driven supply chainCustomer demand-driven production.35Towards recycled,regenerative and responsibly sourced materials.36Reducing greenhouse gas emissions.37Social impact across our value chain.38Logistics and distribution.39Packaging.403435DEMAND-DRIVEN SUPPLY CHAINCEO LETTERCOLLABORATION AND PARTNERSHIPCUSTOMER IN FOCUSH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTReducing greenhouse gas emissionsFor our business and communities to thrive within planetary boundaries,we aim to decouple financial growth from the use of finite natural resources.By 2030 at the latest,H&M Group aims to double revenue while at the same time halving its greenhouse gas emissions in line with our targets,which have been validated by the Science Based Targets initiative(SBTi):Reduce our absolute scope 1 and 2 GHG emissions by 56 percent by 2030,against a 2019 baseline.Reduce absolute scope 3 GHG emissions by 56 percent1 by 2030,against a 2019 baseline.Reach net-zero by 2040.2To reach these goals,we are working to reduce our own climate impacts,anticipate the risks climate change presents to our people,company and stakeholders,and invest in climate action beyond our value chain to safeguard our planet and our business.Our climate work is closely linked to our efforts to reduce impacts on water resources,biodiversity and land use,and our efforts to support human rights such as health,livelihoods,land rights and access to water.We joined Frontier,an advanced market commitment for permanent carbon removal,to support the scaling of this emerging sector which we need to balance out the maximum residual 10 percent of our emissions after we have achieved our 2040 emission reduction target.Since joining in April,we have entered into offtake agreements a contract to buy permanent carbon removals once they are delivered directly with four different companies.3Further decarbonisation initiativesIn partnership with DBS bank,H&M Group has initiated a financing programme that allows suppliers to access green loans.This is the first of its kind and contributes to energy efficiency and the decarbonisation of the apparel sector.Read more about our work with suppliers to decarbonise our supply chain in our Sustainability Disclosure at electricity in BangladeshH&M Group is continuing to work for electrification and to increase access to renewable electricity in the supply chain.One example is our plan to invest in Bangladeshs first offshore wind project,in a joint initiative with other actors in our industry.The collaboration was initiated by Global Fashion Agenda(GFA)and the project will be developed in partnership with Copenhagen Infrastructure Partners(CIP).This important step accelerates the transition of Bangladeshs renewable energy market and makes a major contribution to the decarbonisation of the apparel sector as a whole.Within our operations and supply chain,we focus on:Energy efficiency:We are reducing energy use across our whole value chain including our own operations and logistics activities and throughout our supply chain.Renewable energy:Alongside working to source 100 percent renewable electricity in our own operations,we engage with partners and suppliers to increase their use of renewable electricity,heat and steam.We are an RE100 member company and follow the RE100 standards.Circularity:We invest in and work to scale circular systems across our business including our products,supply chains and customer journeys.These efforts are central to reducing our GHG emissions,as they reduce our dependence on virgin materials and enable the decoupling of revenue from resource use.To catalyse wider change,we advocate for policy that aims to limit global temperature rise to 1.5C and support legislation that accelerates the decarbonisation of our value chain.Even after the greatest possible reduction of GHG emissions across our value chain,a certain percentage of unavoidable emissions will remain.Therefore,we also invest in solutions to remove carbon dioxide from the atmosphere.Read more about how we work to reduce GHG emissions in our Sustainability Disclosure at indirect GHG emissions from use of sold products.We have in the past been engaging with the SBTi to identify a credible mitigation approach that would enable setting a high integrity target for indirect use-phase emissions.The engagement has not yet resulted in a way forward,but will be renewed once the current revision of the GHG Protocol is finalised(likely in 2025).2)Target boundary includes 100%of scope 1 and 2 emissions,and 100%of minimum boundary scope 3 emissions(which excludes indirect emissions from use of sold products).3)For more information see note 1 to the financial statements,Accounting principles.Towards recycled,regenerative and responsibly sourced materialsThe fashion industry is reliant on materials for products,packaging,and the built environment.It is important we choose the right materials to reach our circularity,climate and nature goals,and to decouple virgin resource use from business growth.Our goal is for 100 percent of our materials to be either recycled or sustainably sourced by 2030(in 2023 we achieved 85 percent),including 30 percent recycled materials by 2025 and a new ambition for 50 percent recycled materials by 2030.Through H&M Group brands,our Circular Innovation Lab and the investment arm H&M Group Ventures,we invest in and scale new materials,technologies and production processes.Companies in our portfolio of investments include for example Infinited Fiber Company,Keel Labs,Rubi,Smartex and TreeToTextile.These investments contribute to building our circular ecosystem,reduce resource use and support our customer offering.The ability to keep products and materials circulating at their highest value is a key step towards reaching a circular fashion industry.We engage in industry-wide collaboration to support H&M Group Ventures invested in Infinited Fiber Company to increase the production capacity of its flagship plant and develop a full-scale plant.Its Infinna solution man-made cellulosic fibres(MMCF)produced from recycled cotton waste will help reduce our dependence on virgin cotton.the development of necessary infrastructure,to help both gather and channel feedstock and convert this into usable material.Read more about how we work with material choices in our Sustainability Disclosure at in material and process innovationGreen investmentsCircular Innovation LabH&M Group VenturesStrategic scale up plans in our supply chainH&M Group LaboratoryProduct R&D team scouting and sourcingH&M Foundation1/Global Change Award1)The H&M Foundation is a global non-profit foundation dedicated to finding,funding and accelerating solutions for a socially inclusive and planet positive textile industry.The Foundation is privately funded by the Stefan Persson family founders and main owners of the H&M Group.STAGES OF THE INNOVATION JOURNEYCommercialisation gapTechnology gapEARLY STAGEResearchDEVELOPMENT STAGEPrototyping,developing a minimal viable product,pilotsCOMMERCIALISATION STAGERamp up,reaching competitive pricing,growthLEVEL OF FINANCING TYPICALLY AVAILABLEH&M GROUP LEVERSInvesting in innovation is a core part of our strategy that we dedicate significant resources to across H&M Group.We take a holistic approach,with the aim to support promising innovators through the common gaps in funding that occur at the development and commercialisation stages.We work with innovators at the start of their journey through our investment arm H&M Group Ventures and our Circular Innovation Lab read more on page 31.H&M Foundation also supports fashion innovation at an early stage.To help bridge the commercialisation gap we continually support innovators to discuss material volume requirements with our brands and connect them closely to our supply chain network.Our brands make strategic plans and commitments with our supply chain.Our Green Investment arm engages at all stages of the innovation journey to fulfil our sustainability objectives through a cost-impact effective investment strategy.3637DEMAND-DRIVEN SUPPLY CHAINCEO LETTERCOLLABORATION AND PARTNERSHIPCUSTOMER IN FOCUSH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTLogistics and distributionTogether with our investments within technology and AI,our logistics centres are an important part of our omni-model.Across our global network we continue to improve our existing global logistics network to cater for an optimal product flow which includes flexibility and speed between sales channels,enabling improved availability.Our warehouses are a combination of state-of-the-art facilities and smart building management with features including photovoltaic panels,rainwater harvesting and biological sewage systems,to lower environmental impact.By optimising transport solutions,we can both deliver on our customers expectations and reduce our GHG emissions.We focus on selecting efficient equipment,filling transport units to their maximum level to reduce the number of units required,and tracking and analysing data to measure GHG emissions reductions.We work solely with ocean carriers that are verified in accordance with the Clean Cargo Working Group protocol.In selected markets our customers can choose their preferred delivery options.This includes mechanisms such as receive and return items using a bicycle delivery service,by foot,electric vehicles or vehicles powered by biogas or Hydrotreated Vegetable Oil(HVO)from the logistics centre.These options help to reduce GHG emissions compared to conventional delivery options.We are continually testing and developing new options,as well as scaling initiatives to more markets.Through membership of initiatives such as the Smart Freight Centre,we drive the environmental agenda to reduce GHG emissions and promote responsible transports.Social impact across our value chainOur business engages people worldwide including colleagues in our stores,warehouses and offices,workers manufacturing our garments,farmers producing raw materials such as cotton and wool,and many more.We are committed to respecting their rights and use international frameworks and principles to identify their needs,minimise risks,and manage our impact responsibly.We align our work with the International Labour Organizations(ILO)Fundamental Principles and Rights at Work.It is also informed by the ILOs definition of decent work,our Human Rights Policy and the UN Guiding Principles for Business and Human Rights,among others.We adopt a systematic approach to human rights and environmental due diligence the ongoing process we use to identify,prevent,mitigate and remedy potential and actual negative impact on people,while leveraging opportunities to advance their rights.Read more on pages 66-70.To safeguard the rights of those in our supply chains,we focus on health,safety and wellbeing,labour rights and industrial relations,and compensation,benefits and social protection.The principles of inclusion and diversity are embedded across these three pillars,to support equal opportunity for all and ensure no one faces discrimination.We pay special attention to the needs and experience of women workers to create gender equal workplaces.Read more about how we work with social impact in our Sustainability Disclosure at continue to create positive impact for people,we mapped our activities across the value chain to evaluate potential risks to human rights,and opportunities to advance our sustainability goals.This allowed us to develop a new People Impact Tool and use the UN Guiding Principles framework to prioritise our actions based on likelihood and severity,in order to deliver the highest potential for positive impacts on people.3839DEMAND-DRIVEN SUPPLY CHAINCEO LETTERCOLLABORATION AND PARTNERSHIPCUSTOMER IN FOCUSH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTPackagingOur products need to be protected when travelling between our suppliers,customers,distribution centres and stores,yet packaging is a significant global contributor to resource consumption and waste.We are addressing this challenge holistically and through activities,goals and partnerships connected to packaging reduction,design,material and end-of-life.We are committed to lowering the environmental impact of our packaging.Our strategy is built on the key principles from the Ellen MacArthur Foundation(EMF):eliminate waste and pollution,circulate products and materials(at their highest value),and regenerate nature.Currently,our packaging is made from 79 percent recycled or sustainably sourced materials and we have reduced plastic packaging volume by 55 percent from our 2018 baseline.Our packaging goals support our wider climate,materials and circularity goals.We focus on reducing our environmental footprint caused by packaging by optimising the overall packaging used,tackling plastic pollution,and increasing the share of recycled and sustainably sourced materials.Read more in our Sustainability Disclosure at sustainability goalsClimate 2030:Reduce absolute scope 1 and 2 greenhouse gas(GHG)emissions by 56 percent(baseline 2019).2030:Reduce absolute scope 3 greenhouse gas(GHG)emissions by 56 percent(baseline 2019).Water&oceans 2030:Reduce absolute total freshwater use by 30percent(baseline 2022).Biodiversity&land 2025:100 percent wood and wood-based material in products and packaging to come from either Forest Stewardship Council(FSC)certified sources or be made of recycled material.Resource use 2025:30 percent of our materials to be recycled.2030:100 percent of our materials1 to be either recycled or sustainably sourced.2030:aim for 50 percent of our materials to be recycled.Social impact Ongoing:Safe&inclusive workplaces for all.Ongoing:All sites have access to remedy.Review our performance against our sustainability goals on pages 80-88.More detail is available in our Sustainability Disclosure at all shell materials of commercial goods.4041DEMAND-DRIVEN SUPPLY CHAINCEO LETTERCOLLABORATION AND PARTNERSHIPCUSTOMER IN FOCUSH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTCollaboration and partnershipCollaboration between stakeholders throughout our industry is vital to reach our goals,and to tackle complex and interconnected challenges in the industry that require a shared commitment to progress.By driving the agenda together,we can enhance transparency,accountability and performance.We collaborate with our business partners,experts,innovators,challengers,customers,communities,policymakers and many more.Our stakeholders represent or are themselves rights holders and affected stakeholders.These are individuals or groups that have interests that are or could be affected by H&M Groups activities.We regularly engage with our stakeholders to determine our most material issues the areas in which we have the most impacts,risks and opportunities.Read more about our materiality assessment process on pages 66-69.Open and constructive dialogue and collaboration with others within and outside our industry is an important part of our everyday operations.By exchanging diverse perspectives,we are challenged to do better and stay relevant so we can keep providing our customers with unbeatable value and new ways to enjoy fashion.Dialogue drives transparency,which is a prerequisite for accountability.We also engage with policymakers to help shape a legislative environment that will support a more sustainable fashion sector.Read more about our partnerships and collaborations at Move and Sport Without Borders have joined forces to empower young people with opportunities through sport.Part of H&M Moves community programme,Move Together,this two-year partnership is set to provide 2,500 young people in Sweden with meaningful activities during PE lessons,after school,and during school holidays.Another two-year partnership between H&M Move,Zlatan Ibrahimovic and Laureus Sport for Good Italy aims to engage 2,000 youths from vulnerable socioeconomic contexts in which the risk of social exclusion,bullying and school dropout is high.The collaboration promotes sports as a means of inclusion and education by offering free multi-sport activities in Milan,Rome,Palermo and Naples,starting with free summer camps.Collaboration and partnership4243COLLABORATION AND PARTNERSHIPSTATUTORY ANNUAL REPORTCEO LETTERDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSH&M GROUP AT A GLANCEAdministration report including Corporate Governance report and sustainabilityThe Board of Directors and the Chief Executive Officer of H&M Hennes&Mauritz AB(publ),556042-7220,domiciled in Stockholm,Sweden,hereby submit their annual report and consolidated accounts for the financial year 1 December 2022 to 30 November 2023,hereinafter referred to as the 2023 financial year.Any references made to“H&M”,“H&M Group”,“the H&M group”and“the company”in this Administration Report refer hereinafter to H&M Hennes&Mauritz AB(publ).BUSINESSH&M Group is a customer-focused,creative,value-driven,responsible fashion and design company.All the groups brands share a passion to make great fashion and design available to everyone in a more sustainable way.The business consists mainly of sales of clothing,accessories,footwear,cosmetics,home textiles and homeware to consumers.Sales take place through digital and physical channels,which are increasingly being integrated to provide customers with a smooth and inspiring experience regardless of where,when and how they choose to meet us in stores,on the brands websites,in digital marketplaces or via social media.In some markets,the brands products are sold via franchise partners.The group consists of the brand H&M which includes H&M HOME,H&M Move and H&M Beauty and the Portfolio Brands consisting of COS,Weekday,Monki,&Other Stories,ARKET,Afound and Singular Society.Each of the groups brands has its own unique identity.Together they complement each other and offer a variety of trends and styles at various price points for fashion,beauty,accessories and homeware.The group also consists of New Growth&Ventures,which includes the investment arm H&M Group Ventures,Sellpy,Looper Textile Co.and Creator Studio.The aim for the growth area is to create new revenue streams and contribute to future growth for H&M Group.Opportunities to complement H&M Groups customer offering and take steps towards its sustainability goals are created through a variety of strategic partnerships and investments.The aim is not only to invest in early-stage businesses but also in partnerships and in healthy businesses that can scale quickly,thereby engaging with customers in new ways that add value,create additional growth,contribute to sustainable development and generate new learnings.This is creating opportunities to test new business models and new solutions faster,as well as enabling the scale-up and commercialisation of recycled and sustainably sourced materials.Through its investment arm,the group invests in start-ups and promotes entrepreneurship related to,for example,circularity in fashion and retail.Investments have been made in minority-owned companies such as Smartex,Kintra Fiber and Colorifix.H&M Group makes fashion and design accessible to everyone in a way that is good for the business,while reducing negative impacts on the planet.The brands are working to shift to more circular business models for their products and services and are increasing the percentage of recycled and sustainably sourced materials in their collections.Administration reportEach brand has its own design and buying function consisting of people with diverse backgrounds,experiences and skills,which is key to producing relevant and inspiring collections for their particular customer group.H&Ms central design and buying function creates its collections mainly in Stockholm,while COS for example has its design and buying function in London.Afound has a different business model.It is a marketplace for products from previous and current seasons both from external brands and H&M Groups own brands which are discounted to provide a new opportunity to attract customers.Creator Studio is a B2B service offering on-demand print services,enabling external brands and content creators to use H&M Groups supply chain to produce their own merchandise for sale.Sellpy is an e-commerce platform for second-hand sales with a businessmodel that makes it easy for customers to buy and sell used items.Looper Textile Co.is an independent joint venture with Remondis that provides local municipalities and retailers with solutions to extend the useful life of unwanted garments via reuse and recycling.For more information see pages 16-30.Comment on resultsFor many consumers the year was marked by lower purchasing power because of high inflation and high interest rates.Despite this,net sales increased in comparable markets in relation to the previous year.The improvement work in the supply chain and continued normalisation of the external factors that influence purchasing costs resulted in a stronger gross margin.A good operational cost control combined with the cost and efficiency programme that was initiated during the fourth quarter 2022 made it possible for decreased selling and administrative expenses in local currencies.The programme is expected to result in annual savings of around SEK 2 billion once fully implemented.Information concerning exposure to Russia,Belarus and Ukraine On 24 February 2022,H&M Group paused sales in Ukraine as a consequence of Russias invasion.On 2 March 2022,all sales in Russia and Belarus were also paused.On 18 July 2022,H&M Group announced that it had decided to begin winding down the business in Russia in a responsible manner.Sales were temporarily resumed between August and November 2022.By 30 November 2022,all 172 H&M Group stores in Russia had been permanently closed.The business in Belarus,where there were three stores,had also been wound down by this date.In the fourth quarter 2023,cash flow was not impacted by the winding down of the business and cumulative payments in 2023 amounted to around SEK 1.0 billion.The one-time cost for Russia charged to the full-year result for 2022 amounted to SEK 1,751 million.In November 2023,the company began the process of reopening its stores in Ukraine.As at 30 November 2023,seven stores were open in this market.The company continues to monitor developments in Ukraine closely,and the safety of Administration report 45Corporate governance report 2023 52 TCFD climate risk analysis 75 Sustainability impact areas and performance 80Financial reports 94 Group income statement 94 Consolidated statement of comprehensive income 94 Group balance sheet 96 Group changes in equity 98 Group cash flow statement 100 Parent company income statement 101 Parent company statement of comprehensive income 101 Parent company balance sheet 102 Parent company changes in equity 103 Parent company cash flow statement 104Notes to the financial statements 105Signing of the annual report 132Auditors report 1334445CEO LETTERDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTCOLLABORATION AND PARTNERSHIPcolleagues and customers will always be the first and foremost priority.Direction and targetsIn 2023,H&M Group continued to implement its business plan,which aims to deliver long-term profitable growth in a more sustainable way.The business plan is based on the companys ongoing transformation,of which the companys sustainability and digital transformation objectives form a part.These objectives are to continue improving the customer offering for all brands,to build long-term and value-creating customer relationships,to offer an inspiring experience delivered through further integration of digital and physical channels,to continually adapt the supply chain so that it is increasingly efficient and based on demand,and to add more revenue streams based on new emerging business models and innovations.In line with H&M Groups goal of a strong capital structure with good liquidity and financial flexibility,the objectives are designed to support sound finances,while enabling continued freedom of action for growth and investment.Moving successfully towards these objectives is expected to result in long-term profitable growth,while at the same time reducing the companys climate impact.H&M Groups goal is that by 2030 at the latest it will double sales while at the same time halving its greenhouse gas emissions.The baseline for the sales goal is 2021,while the baseline for reducing greenhouse gas emissions is 2019.In 2023 the company has taken important steps towards its long-term goals.Profitability is to exceed 10 percent over time and the ambition is to achieve this for full-year 2024.Profitability refers to operating profit in relation to sales.H&M Groups target to increase sales by 1015 percent per year with continued high profitability remains a long-term target.1Expansion through integrated channelsH&M Groups expansion is taking place with a focus on increased omni-channel sales.Customers want to be able to shop and be inspired where,when and how they choose in stores,on the brands own websites,on digital marketplaces and on social media.Albania became a new store market for H&M in 2023.In the first half of the year,H&M opened online in Ecuador and Vietnam,as well as beginning a collaboration with S in South Africa.H&M was launched on two new marketplaces:JD.com and,via franchise,on N.ARKET opened its first stores in Estonia and in Switzerland during the financial year,while in December the first store in Riga,Latvia also opened.Mexico became a new store market for COS when it opened its first flagship store,while&Other Stories opened its first store in Switzerland.Both&Other Stories and COS opened on I in Australia and New Zealand during the year.At the same time,Monki expanded its presence on Z by adding a further market when it launched in Hong Kong.In the 2023 financial year,H&M Group opened 101(91)stores and closed 197(427)stores,making a net decrease of 96(336)stores.The group had a total of 4,369(4,465)stores as at 30 November 2023,of which 282(288)were operated by franchise partners.The breakdown of the stores is as follows:3,872(3,947)H&M,245(259)COS,64(78)Monki,72(71)&Other Stories,53(54)Weekday,30(25)ARKET,and 33(31)H&M HOME.2 In 2024,the company is stepping up the pace of investment in existing stores to provide an even more inspiring experience while also securing its store portfolio for continued profitability and growth.In 2024,ARKET will open its first stores in Spain,Italy and Poland.H&M Group continuously renegotiates a large number of leases,which also involves rebuilds and adjustment to the number of stores and amount of store space to ensure it has the best store portfolio in each market.H&M Groups contracts allow around a third of leases to be renegotiated or exited each year.The store portfolio has reached a level of fewer closures going forward,while at the same time new stores will be opened.For 2024,the plan is to open around 100 new stores and close around 160 stores,making a net decrease of around 60 stores.These portfolio changes will start to make a positive contribution to H&M Groups sales.Most of the openings will be in growth markets,while the closures will mainly be in established markets.EmployeesH&M Groups business is characterised by a fundamental respect for the individual.The company is committed to treating all employees equally,with respect and dignity,and to empowering them to be who they want to be.Everyone working for H&M Group should expect fair compensation and benefits,to work in healthy,safe and inclusive workplaces free from discrimination,and the right to freedom of association.H&M Groups values have guided employees since the day the company was founded,and continue to support the business today.The groups culture,values,and empowering leadership are actively and consciously integrated throughout the entire organisation.This supports the mindsets and behaviours needed to stay ahead and remain relevant,and helps to attract and develop people who have the right competences and ambition to grow with the company.To stay successful and competitive,H&M Group creates customer value by having a clear direction,adapting to a constantly changing world and acting fast.The companys continuous development includes advancing digitalisation,utilising new technologies,securing the right competences,simplifying the organisational structure and establishing more efficient ways of working.The average number of employees in the group as at 30 November 2023,converted into full-time positions,was 101,103(106,522),of which 10,281(10,447)were employed in Sweden.Of this average number of employees,around 74 percent were women.Of those in leadership positions within the company,such as store managers and country managers,64 percent were women.EVENTS AFTER THE CLOSING DATEOn 31 January 2024,Helena Helmersson chose to leave the CEO role and H&M Group,and the board of directors appointed Daniel Ervr,responsible for the brand H&M,as new President and CEO of H&M Group with immediate effect.On 25 February 2024 the board of directors of Re:NewCell AB,one of the H&M Groups investments made via New Growth&Ventures,announced their decision to file for bankruptcy.Re:NewCell AB was declared bankrupt by the Stockholm District Court on 26 February 2024.The H&M Groups shareholding as at 30 November 2023 amounted to SEK 34 m and is included in the balance sheet item Other shares and interests.In December 2023 the H&M Group issued a loan of SEK 45 m to Re:NewCell AB.On 6 March 2024 it was announced that the H&M group and Vargas Holding launch Syre,a new venture to scale textile-to-textile recycled polyester.The H&M group has secured an offtake agreement with Syre worth a total of USD 600 million over seven years,covering a significant share of the H&M groups long-term need for recycled polyester,which is currently primarily sourced from rPET bottle-to-textile.ARTICLES OF ASSOCIATION,ANNUAL AND GENERAL MEETINGDetailed information on H&M Groups articles of association,the constitution of the Board of H&M Hennes&Mauritz AB and its annual general meeting(AGM)can be found on pages 52-66.NUMBER OF SHARES AND MAIN SHAREHOLDERSAt the end of the 2023 financial year,H&M had 225,356 shareholders.The total number of shares in H&M is 1,629,686,837,of which 194,400,000 are class A shares with 10 votes per share and 1,435,286,837 are class B shares with one vote per share.Following implementation of the resolution passed by the annual general meeting on 4 May 2023 the 25,385,163 class B treasury shares repurchased during 2022 as part of H&M Groups buyback programme were cancelled.The Board of Directors decided to utilise the authorisation granted by the 2023 annual general meeting and in September 2023 began a SEK 3 billion share buyback programme.As at 30 November 2023 a total of 7,138,790 B shares in H&M had been repurchased for a sum of SEK 1,123 million and the programme was completed on 1 March 2024.It is intended that the shares repurchased will be cancelled through a resolution at the 2024 annual general meeting.As at 30 November 2023 the number of shares outstanding,excluding own shares,is 1,622,548,047.In the 2023 financial year a dividend of SEK 10,577 million was distributed.H&M Groups largest shareholder is Stefan Persson and family,who via Ramsbury Invest AB hold all the class A shares,which represent 57.5 percent of the votes,as well as 708,744,122(653,093,901)class B shares,representing 21.0(19.2)percent of the votes.In addition,the family privately own 36,400,289 class B shares.This means that as of 30 November 2023,Stefan Persson and family privately and via Ramsbury Invest AB represent 79.7(77.3)percent of the votes and 57.7(53.4)percent of the total number of shares.Ramsbury Invest is thus formally the parent company of H&M Hennes&Mauritz AB.Ramsbury Invest AB is owned by Stefan Persson and family,and primarily by Stefan Persson.Karl-Johan Persson is also a shareholder in Ramsbury Invest AB.CORPORATE GOVERNANCE REPORTIn line with forthcoming regulatory changes such as the Corporate Sustainability Reporting Directive and to ensure a more harmonised Annual and Sustainability Report,H&M Group has elected to integrate reporting on corporate governance into the Administration Report,the report can be found on pages 52-79.The Corporate Governance report will Five year summary202320222021202020193Net sales,SEK m236,035223,553198,967187,031232,755Operating profit,SEK m14,5377,16915,2553,09917,346Operating margin,%6.23.27.71.77.5Profit after financial items,SEK m13,0106,21614,3002,05217,391Earnings per share,SEK45,35 2,166,650,758,12Cash flow from operating activities per share,SEK420.8415.0026.9615.6517.51Return on equity,.76.419.22.223.3Equity/assets ratio,&.327.933.431.347.4Average number of employees101,103106,522107,375110,325126,376For definitions of key performance measures see page 138-140.1)The baseline for the sales goal is 2021.H&M Groups goal is to reduce its greenhouse gas emissions in absolute figures by 56 percent by 2030(baseline 2019)in accordance with the Science Base Targets initiative(SBTi).Profitability refers to operating profit in relation to sales.2)Concept store H&M HOME is also available through shop-in-shop in 433 H&M stores.3)Excluding IFRS 16 4)Before and after dilution,excluding own shares.4647CEO LETTERDEMAND-DRIVEN SUPPLY CHAINCUSTOMER IN FOCUSH&M GROUP AT A GLANCESTATUTORY ANNUAL REPORTCOLLABORATION AND PARTNERSHIPalso be available as a standalone document at FOR REMUNERATION OF SENIOR EXECUTIVESThe annual general meeting held on 6 May 2021 adopted the following guidelines for remuneration of the senior executives.The guidelines cover remuneration to the CEO,remuneration to board members(aside from board fees)and remuneration to other senior executives.Senior executives means members of the executive management team apart from the CEO.The executive management team comprises the individuals who report directly to the CEO.The long-term variable remuneration,which applies only to the executive management team including the CEO,will be measured over a five-year period in order to reward long-term value creation for H&M.How the guidelines contribute to the companys business strategy,long-term interests and sustainabilityThe H&M groups business plan aims to deliver long-term,sustainable and profitable growth.The business plan builds on the companys ongoing transformation work and is illustrated by a number of objectives to which the companys sustainability efforts and digital transformation contribute.These objectives are to continue improving the customer offering for all the brands,to build long-term and value-creating customer relationships,to offer an inspiring experience with integrated digital and physical channels,to adapt the supply chain so that it is faster and more flexible based on demand,and to add more revenue streams based on new emerging business models and innovations.Moving successfully towards these objectives is expected to result in finances remaining sound and sustainable,in accordance with the H&M groups target of a strong capital structure with good liquidity and financial flexibility,allowing continued freedom of action for growth and investments.The board considers it important that senior executives are paid competitive remuneration at a market level,as regards both fixed and variable compensation,based on responsibilities and performance.To work successfully according to the companys business plan and safeguard the companys long-term interests the company needs to be able to recruit,motivate and retain talented,committed employees.Senior executives shall be compensated at what are considered by the company to be competitive market rates,based partly on industry comparisons.Levels of compensation shall be based partly on the significance of the duties performed,i.e.the ability to affect the overall development of the group,and partly on the employees competencies,experience and performance.Together these decide the level of remuneration for the individual concerned.Over time,the largest portion of the remuneration shall consist of the fixed basic salary.The forms of compensation shall motivate senior executives to do their utmost to ensure the good financial and sustainable development of the H&M group.Types of remunerationThe total remuneration may consist of the following components:fixed basic cash salary short-term variable remuneration long-term variable remuneration pension benefits other benefitsFixed basic cash salarySenior executives shall have a fixed basic cash salary that is at a market level based on each positions significance for the company as a whole.The fixed basic cash salary shall reflect the individuals area of responsibility,competencies and experience and requires the individual to work in a committed manner at a high professional level.Variable remunerationThe variable remuneration may consist of a short-term and a long-term portion.There shall be a clear link between the level of performance-based variable remuneration paid and the H&M groups financial and sustainable development.Senior executives variable remuneration shall therefore depend on the fulfilment of targets.The targets shall aim to promote the H&M groups development in both the short and the long term.Short-term variable remuneration:Fulfilment of targets shall be measured over a period of one year.The short-term variable remuneration shall be based on fulfilment of targets in the following areas:The H&M groups total sales;The H&M groups total operating profit;fulfilment of the objectives in the various areas of the business plan,which include sustainability;and assessment of leadership and compliance with values.For the last two performance parameters it is the individuals performance within their own area of responsibility that is assessed.For the financial targets,the assessment is to be based on the most recent financial year.The board of directors is responsible for this assessment in the case of short-term variable remuneration to the CEO.In the case of short-term variable remuneration to other senior executives,the CEO is responsible for the assessment.Each of these four predetermined performance parameters has equal weighting,i.e.each represents a quarter of the total target fulfilment.However,there is a threshold value for the second parameter,i.e.operating profit,which means that if this value is not reached then no short-term variable remuneration will be paid regardless of target fulfilment for the other three parameters.The short-term variable remuneration,which at individual level is based on the extent to which the persons duties and position influence the overall development of the group,may amount to 0-3 months salary,0-6 months salary or 0-12 months salary.Monthly salary refers to fixed basic cash salary.If the target levels set by the board are fulfilled,half of the maximum remuneration in each range shall be paid.To receive a payment in the higher part of the range within the set framework,therefore,the predetermined target levels are required to be exceeded.Half of the remuneration payment shall be invested in H&M shares that must be held for at least three years.Each year the board will set target levels for each of the four performance parameters for the coming year.Long-term variable remuneration:The long-term variable remuneration shall be based on target fulfilment measured over five financial years starting from the current 2021 financial year and ending at the close of the 2025 financial year.This period,i.e.1 December 2020 30 November 2025,is known as the measurement period.The long-term variable remuneration which shall apply only to the executive management team including the CEO,totalling 15 individuals shall be based on fulfilment of targets within the following areas:The H&M groups total sales;The H&M groups total operating profit;fulfilment of the objectives in the various areas of the business plan in total,which include sustainability;and assessment of leadership and compliance with values.Each of these four predetermined performance parameters shall have equal weighting,i.e.each represents a quarter of the total target fulfilment.For the long-term variable remuneration the assessment of the financial targets shall be based on a summing up of the past five financial years,with fulfilment of the annual target levels in the short-term arrangement i.e.within sales and profit forming the basis for target fulfilment in the long-term arrangement.For the other two performance parameters i.e.fulfilment of the business plan,and leadership and compliance with values an overall assessment is to be made of the total for the H&M group for the entire measurement period.After the measurement period has ended the board is responsible for an overall assessment based on the four performance parameters and for deciding the long-term variable remuneration that will be paid to the CEO.The long-term variable remuneration to be paid to other senior executives will be established by the board in consultation with the CEO.A precondition for receiving the long-term portion shall be that the participants make an initial investment of their own in H&M shares,amounting to around 10 percent of their fixed basic annual cash salary after tax,close to the 2021 annual general
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Sustainability and Corporate Responsibility reportPart of Ericsson Annual Report 2023Annual Report 2.
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1Make Possiblea Better FutureSUSTAINABILITY REPORT 2023Sustainability Report 20232Table of ContentsIntroduction 3Message from Our CEO 52023 Highlights 62030 Goals and Progress 7Fiscal 2023 Company Overview Highlights 10Corporate Responsibility Materiality Assessment 12 Awards and Recognition 13Memberships and Affiliations 13Net Zero 2040 Playbook 14A Collaborative Path to Net Zero 15Protect our Planet 22Key Highlights 23Goals and Progress 24Climate and Energy 25Climate and Water Risk Assessment 31Water Management 32Waste Management 33Innovate for Progress 35Key Highlights 36Goals and Progress 37Sustainability Systems Center of Exellence 38Promoting the Circular Economy 41Product Safety 43Supply Chain Responsibility 44Invest in People 47Key Highlights 48Goals and Progress 49Human Rights 50Recruiting and Hiring 51Employee Benefits 54Culture of Inclusion 56Pay Equity 62Learning and Development 63Environmental,Health and Safety 67Lead with Purpose 69Key Highlights 71Community Impact 73Corporate Governance 79Ethics&Compliance 81Cybersecurity and Data Protection 83Public Policy 85About this Report 87About this Report 88Third-Party Data Assurance Statement 89Data and Disclosures 90About Applied Materials 91Environmental Metrics 92Social Metrics 96SASB Index 103TCFD Index 106GRI Index 113Front cover:Applieds Logistics Service Center has one of the largest solar arrays in Austin,Texas,with over 10,000 solar modules that will generate 5.6MW of clean energy.Table of ContentsNET ZERO PLANETPROGRESSPEOPLEPURPOSEABOUTDATAINTRODUCTIONSustainability Report 2023301Sustainability Report 2023IntroductionMessage from Our CEO2023 Highlights2030 Goals and ProgressFiscal 2023 Company Overview HighlightsCorporate Responsibility Materiality AssessmentAwards and RecognitionMemberships and AffiliationsMessage from Our CEOAs technology transforms our world at an unprecedented pace,it offers almost limitless possibilities to Make Possible a Better Future for everyone.Artificial Intelligence(AI)and the Internet of Things(IoT)are the biggest inflections of our lifetimes,and they are all built upon semiconductor innovation.Realizing the full potential of these game-changing technologies will require major advances in the performance,power efficiency and cost of chips.At the same time,the semiconductor industry needs to significantly scale up global chip manufacturing capacity while simultaneously finding a path to net zero.These are complex challenges that no single companyor countrycan solve alone.Rather,we must work together across the semiconductor supply chain to define and deploy innovative solutions.Just as AI and IoT will reshape our world,I fully expect deeper and earlier collaboration will reshape our industry in the years to come.”Gary E.Dickerson,President and Chief Executive OfficerSustainability Report 20235Message from Our CEOThere has never been a more exciting time to be working in technology and especially in the semiconductor industry.The digital transformation of the global economy is built on semiconductor innovation and that means the semiconductor industry now provides a foundation for virtually every other industry.As a result,we expect the market for semiconductors to approximately double in size by the end of this decade.But this expansive growth cannot come at the expense of our planet.There is consensus within the scientific community that we must limit global warming to 1.5C to avert the most severe impacts of climate change.While advances in semiconductor technology are enabling new solutions that can accelerate global carbon reduction,the carbon emissions linked to manufacturing those semiconductors are on a path to quadruple by 2030.We cannot solve certain challenges by creating new ones,and it will take the entire industry working together to chart a different path.Our industry has a shared responsibility to deliver the game-changing advances in technology the world needs while consuming less energy,generating fewer emissions and extending the functional life of our products.The onus is on us to drive grid decarbonization,create a more efficient,low-carbon supply chain and develop more sustainable solutions in manufacturing.At Applied Materials,we have set bold Scope 1,2 and 3 carbon reduction targets,which have received validation from the Science Based Targets initiative(SBTi).In this report you will see the progress we are making toward these goals to reduce the emissions produced by our company(Scope 1)and the energy we purchase(Scope 2),as well as the emissions from our supply chain and customer use of our products(Scope 3).Ninety-nine percent of our emissions are Scope 3,which means we cannot achieve our aspirations in isolation.We must set common objectives,based on deep collaboration and enduring partnerships up and down our value chain.This is the driving force behind our Net Zero 2040 Playbook,which outlines a collaborative pathway along with detailed,practical plans for us to work together with our co-travelers.Our Net Zero 2040 Playbook encompasses several key initiatives that we launched in 2020 and now have strong momentum.Our 3x30 program focuses on reducing the electricity consumption,chemical consumption and physical footprint of our systems by 30%,averaged over our entire portfolio,by 2030.In July 2023,we launched our first purpose-built,low-carbon platform,which we call Vistara.This is Applieds most significant new platform in over a decade,designed for flexibility,intelligence and sustainability.In addition,we have more than 25“eco products and services”that are available for new systems and can be retrofitted to tools in our customers installed base.In parallel,our SuCCESS2030 initiative,which stands for Supply Chain Certification for Environmental and Social Sustainability,provides us with a scalable framework to work with our supply chain partners so they can attain the same standards in the areas of environmental impact,labor practices and diversity and inclusion.Within Applied Materials,we have also deepened our commitment to advance a Culture of Inclusion,which helps define how our leaders lead,and how we engage with our colleagues inside Applied.We are investing time and resources to inspire and strengthen the future talent pipeline,attract and retain employees with diverse experiences,and build a more inclusive supply chain.As we scale our workforce,operations and partnerships to support the exciting era of AI and IoT,I am more certain than ever that deeper and earlier collaboration will be the foundation for the semiconductor industrys future success.None of us can do this alone.But together,we can innovate the way we innovate,align the ecosystem around a common vision and tangible plan to get there,and Make Possible a Better Future for everyone.Gary E.DickersonPresident and Chief Executive OfficerMessage from Our CEOINTRODUCTIONNET ZERO PLANETPROGRESSPEOPLEPURPOSEABOUTDATASustainability Report 202362023 HighlightsReleased our Net Zero 2040 Playbook Received SBT i validation for 2030 Scope 1,2 and 3 emissions reduction targetsAnnounced multibillion-dollar investment to establish Equipment and Process Innovation and Commercialization(EPIC)CenterApplied Materials Foundations Board renewed Generation Girl initiative through August 20265.6 MWrooftop solar array installedone of the largest in Austin,TexasEstablished Applied Materials Momentum Fund to support women in completing engineering degreesDeveloped the Responsible Manufacturing Program(RMP)94%of employees completed Diversity,Equity and Inclusion(DEI)100 and 101 learning modules2023 HighlightsINTRODUCTIONNET ZERO PLANETPROGRESSPEOPLEPURPOSEABOUTDATASustainability Report 202372030 Goals and Progress PeopleGoalProgress*UN SDG*StatusAchieve greater than 25%women representation at Applied globally from 2021 baseline20.3%,representing a 2.2%increase from FY21Achieve greater than 21%executive women representation at Applied globally,with an aspiration to achieve equal global and executive representation of women by 2040from 2021 baseline13.0%,representing a 0.8%increase from FY21Achieve greater than 25%underrepresented minority(URM)representation in Applieds U.S.workforce from 2021 baseline19.9%,representing a 3.5%increase from FY21Achieve greater than 10%executive URM representation in Applieds U.S.workforce from 2021 baseline5.9%,representing a 1.1%increase from FY21PlanetGoalProgress*StatusUN SDG*100%of electricity at Applied globally comes from renewable sources by 2030Goal validated by SBTi70%of electricity at Applied globally,including 100%in the U.S.,came from renewable sources 50%reduction in Scope 1 and 2(market-based)emissions by 2030 from a 2019 baselineGoal validated by SBTiScope 1 and Scope 2(market-based)emissions decreased by 4%from FY22;2%increase from our 2019 baseline55%reduction per million USD of value added of Scope 3 Category 11 emissions by 2030 from 2019 baseline for semiconductor products*Goal validated by SBTi8crease per million USD gross profit of Scope 3 Category 11 emissions from FY21;7crease from our 2019 baseline*Not yet startedIn progressOn targetCompleted*Cumulative through fiscal 2023 unless otherwise noted*United Nations Sustainable Development Goals*The target addresses just the direct electricity portion of Category 11 emissions per SBTi requirements*Category 11 emissions do not include emissions from Applieds Display business(which represented 5%of total net sales in FY2023)nor from refurbished systems2030 Goals and ProgressINTRODUCTIONNET ZERO PLANETPROGRESSPEOPLEPURPOSEABOUTDATASustainability Report 202382030 Goals and Progress ProgressGoalProgress*UN SDG*StatusReduce equivalent energy consumption per per-wafer pass for semiconductor products by 30%by 2030 from 2019 baselineAverage per-wafer energy use continued to decrease due to changes in the mix of products sold.Incorporating new energy savings developments into our existing and upcoming products keeps us on track to meet or exceed our 3x30 target.Reduce the impact from chemical consumption per per-wafer pass for semiconductor products by 30%by 2030 from 2019 baselineSustainability Systems Center of Excellence team and its engineering partners in the product business units continue to pursue development of multiple products that can significantly reduce chemical impact through reduced demand for process chemicals,alternative process chemistries and improved abatement solutions.Some of these initiatives are expected to be multi-year efforts,but we are on track to meet or exceed the 3x30 target.30%reduction in tool footprint per production unit ratio(sqm/wph)for semiconductor products from 2019 baselineFootprint reduction to date is largely the result of productivity improvements in existing tool architectures.As new product architectures,such as Vistara,begin volume shipments to customers,footprints can be further reduced and are expected to meet or exceed the 3x30 target.$1 billion spend with women-and minority-owned businesses by 2027$594 million spent with certified diverse suppliers in 2023.*Cumulative through fiscal 2023 unless otherwise noted*United Nations Sustainable Development GoalsNot yet startedIn progressOn targetCompleted2030 Goals and ProgressINTRODUCTIONNET ZERO PLANETPROGRESSPEOPLEPURPOSEABOUTDATASustainability Report 20239About Applied Materials About Applied MaterialsWe are the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world.Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality.At Applied Materials,our innovations Make Possible a Better Future.Applied Materials has been reporting on social responsibility and environmental matters since 2005.Our Products and ServicesApplied provides manufacturing equipment,services and software to the semiconductor,display and related industries.With our diverse technologies,we deliver products and services that improve device performance,power,yield and cost.Our customers include manufacturers of semiconductor chips,display products,and other electronic devices,and they may use what they manufacture in their own end products or sell the items to other companies for use in electronic products.Semiconductor Systems Design and manufacture the systems used to fabricate semiconductor chips.Applied Global Services Provide integrated solutions including consulting,spare parts,upgrades,services,remanufactured equipment and automation software to improve equipment and fab operation performance and productivity.Display and Adjacent Markets Make the products to manufacture liquid crystal displays(LCDs),organic light-emitting diode displays(OLEDs)and other display technologies and customer-oriented devices,and technology used to manufacture solar energy cells.Applied Ventures,LLCApplied Ventures,LLC is the venture capital arm of Applied Materials,investing in and collaborating with startups with disruptive technologies.Applied Ventures promotes and drives environmental,social and governance(ESG)-related innovations in the broader semiconductor industry through investments and engagements with the venture startup ecosystem.In fiscal 2023,Applied Ventures co-organized the second annual Startup for Semiconductor Sustainability pitch event at SEMICON West,providing a platform for startups to showcase their sustainable solutions for the industry.INTRODUCTIONNET ZERO PLANETPROGRESSPEOPLEPURPOSEABOUTDATASustainability Report 202310Fiscal 2023 Company Overview Highlights Fiscal 2023 Company Overview Highlights#1worlds#1 semiconductor and display equipment company$26.5Brevenue$3.1BR&D investment19,600patentsAMATstock listing on NASDAQ34,000employees in 150 cities,24 countriesHeadquartered in Californias Silicon ValleyHeadquarters and Key Manufacturing FacilitiesSanta Clara,CaliforniaHeadquartersAustin,TexasSemiconductor Equipment Manufacturing&RemanufacturingGloucester,MassachussettsSemiconductor Equipment ManufacturingRehovot,Israel Semiconductor Equipment ManufacturingSingaporeSemiconductor Equipment ManufacturingTainan,TaiwanDisplay Equipment ManufacturingEmployees by RegionNorth AmericaAsia-PacificEurope,the Middle East and AfricaFemale 3,409Male 11,395Undeclared 38Total 14,842Female 2,703Male 12,505Undeclared 1Total 15,209Female 840Male 3,437Undeclared 0Total 4,277INTRODUCTIONNET ZERO PLANETPROGRESSPEOPLEPURPOSEABOUTDATASustainability Report 202311ESG Vision and StrategyESG Vision and StrategyOur 1X/100X/10,000X ESG framework considers the social and environmental impacts of our direct operations(1X);how we design solutions to address our industrys impact,including that of our customers and suppliers(100X);and how our technology can be used in innovation to advance sustainability and equity on a global scale(10,000X).10,000XFOR THE WORLD Lead with PurposeInvest in PeopleProtect our PlanetInnovate for Progress100XFOR THE INDUSTRY 1XFOR OUR BUSINESS INTRODUCTIONNET ZERO PLANETPROGRESSPEOPLEPURPOSEABOUTDATASustainability Report 202312Corporate Responsibility Materiality AssessmentCorporate Responsibility Materiality AssessmentApplied regularly conducts corporate responsibility materiality*assessments to help us identify the ESG issues most important to our stakeholders and where we can have the greatest impact.We also view issues through a double-materiality lens,which assesses the ESG factors likely to affect our business(e.g.,financial impacts)as well as the factors that our activities may affect,both positively and negatively.Our 2023 materiality assessment,conducted on the Datamaran platform,showed no new issues,though there are small variations in issue prioritization on both the standard and double-materiality assessments.The top material issues continue to be employee health and safety,climate change and GHG emissions,and energy management,and these align with the priority focus areas in Applieds ESG strategy.Employee health and safetyClimate change and GHG emissionsEnergy management*The terms“material”and“materiality”as used in this report and the corporate responsibility materiality assessment and double-materi-ality assessment are different than those terms as used in the context of filings with the U.S.Securities and Exchange Commission(SEC).Issues deemed material for the purposes of this report may not be deemed material for SEC reporting purposes.INTRODUCTIONNET ZERO PLANETPROGRESSPEOPLEPURPOSEABOUTDATASustainability Report 202313Awards and RecognitionAwards and Recognition Best Workplaces in Taiwan 2023 EPA Green Power Partner Forbes 2023 Worlds Best Employers Micron Supplier Award for Sustainability SIG|Future of Sourcing Awards“Innovation in Governance/Compliance”Winner 3BL 100 Best Corporate Citizens 2023 USA Today Americas Climate Leaders 2023 VETS Indexes Recognized Employer 2023Memberships and Affiliations Alliance for Global Inclusion,Commitment Partner Association of Certified Fraud Examiners(ACFE)Boston College Center for Corporate Citizenship Business Ethics Leadership Alliance(BELA)CEFLEX(Europe)Clean Energy Buyers Association(CEBA)DIGITALEUROPE Diverse Manufacturing Supply Chain Alliance(DMSCA)Houston Minority Supplier Development Council(HMSDC)IEEE International Roadmap for Devices and Systems(IRDS)Community International Association of Privacy Professionals(IAPP)Bronze sponsor Interuniversity of Microelectronics Centre(imec)Sustainable Semiconductor Technologies and Systems(SSTS)National Minority Supplier Development Council(NMSDC)RE100 Reboot Representation Coalition(India)Responsible Business Alliance(RBA)Responsible Minerals Initiative(RMI)SEMI Semiconductor Climate Consortium(SCC)Founding member,Governing Council member SIA Semiconductor PFAS Consortium Womens Business Enterprise National Council(WBENC)INTRODUCTIONNET ZERO PLANETPROGRESSPEOPLEPURPOSEABOUTDATASustainability Report 20231402A Collaborative Path to Net ZeroSustainability Report 2023Sustainability Report 202315A Collaborative Path to Net Zero“None of us can do this alone.The only way we can accomplish Net Zero is by working together.”Gary E.Dickerson,President and Chief Executive OfficerAdvances in AI and IoT enable nearly infinite applications that touch every area of our livesincluding business,education,healthcare,logistics and smart mobility.By the end of this year,there are expected to be more than 207 billion1 devices connected to the worldwide IoT network,and increasingly these connected devices are augmented with AI.In 2023,the world witnessed major evolutionary gains with augmented AI demonstrating impressive capabilities.2 As businesses increasingly integrate artificial intelligence into their operations,this creates unprecedented demand in the semiconductor industry,which is foundational for these technological advances.According to imec,the semiconductor industry is expected to double in size this decade,reaching$1 trillion in global revenue by 2030.3 Yet tremendous growth in computing power could come with a potentially high cost to our planet if left unchecked.In fact,total energy usage by electronics and computing systems may grow from about 10%of global electricity supply today to more than 30%by 2030.Imec projects our industry is on a path to quadruple its carbon A Collaborative Path to Net Zerofootprint this decade,from about 100 million tons CO2e per year in 2020 to nearly 400 million tons CO2e per year by 2030.At Applied,were committed to shifting this paradigm,together with our customers and partners.We aim to decarbonize in line with the 1.5C pathway as defined by the Paris Agreement,even as we aggressively grow our business.Weve identified a clear strategy to work together to reach our aspiration,transforming the foundation of technology and accelerating the global clean energy mix.We call it the Net Zero 2040 Playbook.Did You Know?An advanced fab with a capacity of 50,000 wafer starts per month consumes about one terawatt-hour per yearroughly equivalent to the electricity use of a city of 100,000 residents.1 2024 IoT And Smart Device Trends:What You Need To Know For The Future()2 The Dawn Of Creation:2023 Rise Of Generative AI()3 Imec USA:accelerating semiconductor innovation|imec(imec-)PLANETPURPOSEPROGRESSABOUTPEOPLENET ZERO INTRODUCTIONDATASustainability Report 202316Opportunities Beyond the NumbersApplied Materials has set 2030 science-based goals for Scope 1,2 and 3,which received validation from the Science-Based Targets initiative in 2023.We continue to make progress toward our Scope 1 and Scope 2 goals,which are the emissions that come from running our business and the energy we purchase.We aim to reach net zero for these emissions by 2030.The greater challenge comes with Scope 3emissions that are generated upstream in our supply chain and downstream through customers use of our semiconductor system products.Ninety-nine percent of our emissions are Scope 3,so the only way for us to reach our 2040 aspiration is to work in close,long-term collaboration with our customers and suppliers.For more than a year,a cross-functional Applied team worked together to collect,analyze,model and forecast our projected path to net zero that is rooted in science.Our models forecast that we could generate around 37 million metric tons of carbon by 2030 and 55 million metric tons by 2040 in a“business as usual”scenario.To hit the 1.5C pathway,we need to reduce our projected emissions to just over one million metric tons by 2040,which represent nearly a 90solute reduction from 2019 emissions levels.Total CO2e emissions will vary year over year as we implement further strategies to address our full carbon footprint.We expect these strategies will take time to implement and deliver steeper reductions in the second half of this decade.In fiscal 2023,Applieds absolute emissions were 22.6 million metric tons CO2e,representing a reduction of 11%over fiscal 2022.The greatest opportunity we see is in working across our industry to drive grid decarbonization,to support our customers to achieve their own net zero goals,to innovate differently to improve our product efficiency and to work with our supply chain to redesign for a net zero future.These are the building blocks of our Net Zero 2040 Playbook.They arent just the right thing to do for the planet,they are also business opportunities for our company,our customers and our industry.Opportunities Beyond the NumbersPLANETPURPOSEPROGRESSABOUTPEOPLENET ZERO INTRODUCTIONDATASustainability Report 202317Accelerating Grid DecarbonizationNearly 70%of our Scope 3 emissions are linked to the energy used to power our products.Advanced fabs consume a significant amount of electricity,so where that power comes from is very important.Of the estimated 40 billion tons of global carbon dioxide emissions in 2023,nearly 37 billion tons are attributed to fossil fuels.4Using clean energysuch as solar and windhas a much more positive impact on nature and society,including on air and water quality,human health,biodiversity and ecosystems.5It also drives greater semiconductor demand.Smart grid connectivity increases demand for sensors and power devices.Grid intelligence requires foundry-logic and memory demand.Each megawatt of wind and solar produced requires power chips.Given the environmental,social and business benefits,locating new fabs where there is access to clean energy should be a major consideration for customers and for governments that provide financial incentives for new fab construction.Yet,regulatory and market barriers impact the availability,accessibility and affordability of renewable energy in many areas around the world.As a business community,we have significant influence in the form of combined buying power to help advance global grid decarbonization.In 2023,Applied joined Intel as the inaugural corporate sponsors of Schneider Electrics Catalyze program,which aims to accelerate access to renewable energy across the global semiconductor value chain.We also joined the Semiconductor Climate Consortium Energy Collaborative,bringing together the combined purchasing power of semiconductor companies to encourage a faster conversion to clean energy in the Asia-Pacific region.Through active participation in programs like Catalyze and the SCC Energy Collaborative,as well as organizations like the CEBA and RE100,we can amplify our industrys combined voice as buyers of energy to improve global accessibility to clean energy options.We encourage our customers and partners to join us in this effort.Did You Know?Applieds Logistics Service Center has one of the largest solar arrays in Austin,Texas,with over 10,000 solar modules that will generate 5.6MW of clean energy.Accelerating Grid Decarbonization4 Global carbon emissions from fossil fuels reached record high in 2023|Stanford Doerr School of Sustainability5 Building a Nature-Positive Energy Transformation|WWF(panda.org)PLANETPURPOSEPROGRESSABOUTPEOPLENET ZERO INTRODUCTIONDATASustainability Report 202318Innovating with CustomersOur biggest opportunity to accelerate progress toward net zero is for our customers to set and achieve their own science-based net zero goals.Currently,about two-thirds of our customers have scoped net zero goals,contributing to a reduction of about eight million tons of CO2e by 2040.Bringing the additional one-third onto the 1.5C pathway would accelerate adoption by another four million tons of CO2e.These reductions are incremental to the grid decarbonization discussed above.We are working alongside customers to achieve emissions savings and energy reductions,supporting those that have set net zero goals as well as those that have not yet developed a net zero strategy.Building on our ongoing energy-savings work with Taiwan Semiconductor Manufacturing Company(TSMC),we have expanded our sustainability engagements with major memory and IoT,Communications,Automotive,Power and Sensors(ICAPS)customers in Europe,Asia and North America,helping reduce greenhouse gas(GHG)emissions and energy consumption of their wafer fab and subfab equipment.In May 2023,we announced a historic investment to establish the worlds largest and most advanced facility for collaborative semiconductor process technology and manufacturing equipment research and development(R&D),the EPIC Center.Here we will bring together customers,university partners,suppliers and peers to accelerate innovation and commercialization of energy efficient,next-generation technology.We are also driving solutions alongside our customers through active engagement in the Semiconductor Climate Consortium and imecs SSTS program.Innovating With CustomersGoal8M tonsCO2e by 2040.Two-thirds of customers have scoped net zero goals.PLANETPURPOSEPROGRESSABOUTPEOPLENET ZERO INTRODUCTIONDATASustainability Report 202319Improving Product Efficiency About 80%of our Scope 3 emissions comes from our customers use of our products.To achieve our own goals and support our customers in achieving theirs on the net zero pathway,we are investing to improve the sustainability of our systems,while offering products and services that help customers reduce their own emissions.Our 3x30 engineering team,established in 2020,focuses on reducing the electricity consumption,chemical impact and physical fab footprint of our systems by 30%,averaged across our entire portfolio,by 2030.We use proprietary modeling tools that analyze product design and process recipes and incorporate semiconductor equipment utilization data to pinpoint sustainability improvement opportunities for legacy,in-production and design-stage semiconductor manufacturing tools.Through Applied Global Services(AGS),we work with customers to optimize the eco-efficiency of their existing equipment and fab performance to help lower their cost of ownership,save energy,reduce environmental impacts and meet GHG reporting regulations.We have 24 eco-focused products and services in our portfolio todayboth new ecoUP innovations and components for existing products.One such product introduced in 2023,Vistara,is the first platform designed to support Integrated Materials Solution recipes using more types and sizes of chambers.It optimizes high-energy-consumption subfab components,like pumps,heat exchangers,chillers and gas panels,lowering platform energy consumption by as much as 35%compared to previous platforms.To extend the life of our existing products while advancing environmental performance for customers,we offer new components,software and solutions through ecoUP Upgrades.EcoTwin,for example,is a digital twin that can monitor and model recipes and operations so chipmakers can drive energy optimization in their fabs.The iSystem Controller,developed in collaboration with TSMC,monitors resource consumption and GHG emissions and automatically adjusts the energy needs in the subfab based on whats happening within a tool.By utilizing the ecoUP Upgrades and our newest eco-performance-optimized technologies,like the Vistara platform,chipmakers can advance progress toward reducing their Scope 1 and Scope 2 emissions.At the same time,these technologies help us to reduce our own Scope 3 emissions and accelerate progress on our path to net zero.Improving Product EfficiencyFlexibilityIntelligenceSustainabilityChamber types,sizes,combinationsAccelerate time to marketIncrease yieldsReduce energy,materials,footprintSemiconductor Wafer Fabrication PlatformVistaraGoal30%reduction of electricity consumption,chemical impact and physical fab footprint of our systems by 2030PLANETPURPOSEPROGRESSABOUTPEOPLENET ZERO INTRODUCTIONDATASustainability Report 202320Transforming Our Supply Chain The fourth component of our 2040 Net Zero Playbook is significant,not only for our own 1.5C journey and that of our customers,but also for the journey of our entire industrydecarbonizing the semiconductor supply chain.In 2020,we launched our SuCCESS2030 program,a 10-year roadmap for strengthening our ESG supply chain strategy to support our business.Weve collected GHG goals and data from our top spend suppliers,through which 80 suppliers were able to provide site-level data for Applied supplier sites.We are working with our suppliers on creating a path to reach net zero by 2040,including establishing a GHG emissions reduction plan and assisting them in procuring renewable energy.Our supply chain accounts for about 13%of our Scope 3 emissions.At the same time,these partners also supply our customers and peers,which is a call to action for cross-industry collaboration.In June 2023,we announced our collaborative engineering center in India that will be focused on critical supply chain technologies for equipment.The center will be designed to bring together Applied engineers,leading global and domestic suppliers,and top research and academic institutions,enabling them to collaborate in one location with a common goal of accelerating development of energy-efficient semiconductor equipment sub-systems and components.Transforming Our Supply Chain PLANETPURPOSEPROGRESSABOUTPEOPLENET ZERO INTRODUCTIONDATASustainability Report 202321Our Journey to Net ZeroWhile we are making good progress toward our 2030 goals and have a clear pathway to execute our Net Zero 2040 Playbookwe cannot achieve these aspirations alone.Ninety-nine percent of our emissions are shared with our customers and suppliers,so our success depends on forging strong,long-term partnerships up and down our value chain.By working together to redesign the semiconductor value chain,to decarbonize the grid that powers breakthrough technology and to innovate in new and transformative ways,we believe we can and will solve the great contradictory challenge facing our industry:how to become a$1 trillion market,while simultaneously creating a path to net zero carbon emissions.Collaboration is the solution that benefits us all.Our Journey to Net Zero2022Reached 100%renewable electricity in the U.S.,69%globallyInitiated supplier GHG emission surveysJoined Semiconductor Climate Consortium and imec SSTS2024 Installed Tainan PV Solar System in Taiwan2021Conducted Scope 3 Analysis with third partyAssured climate footprint20302040Net Zero 2040 Playbook2020Announced goals to reach 100%renewable electricity and reduce Scope 1 and Scope 2 emissions by 50%by 2030Committed to Science Based Targets initiative and Task Force on Climate-Related Financial Disclosures2023Announced Net Zero 2040 PlaybookScope 1,Scope 2 and Scope 3 targets validated by Science Based Targets initiativeInstalled one of the largest rooftop solar arrays in Austin,Texas on our Logistics Service CenterReleased Vistara platformNet Zero 2040 Achieve near-term SBTis 3x30 Goals 100%Renewable Energy GloballyPLANETPURPOSEPROGRESSABOUTPEOPLENET ZERO INTRODUCTIONDATASustainability Report 202303Protect our PlanetKey HighlightsGoals and ProgressClimate and EnergyClimate and Water Risk AssessmentWater ManagementWaste Management22Sustainability Report 202323Our Net Zero 2040 Playbook reflects Applieds strategy to decarbonize our value chain on a 1.5C trajectory as we invest in a renewable energy future.With 2023 recording the warmest year in history6and 2024 on pace to exceed that record-breaking rise in the global temperaturescomprehensive action to protect our planet has never been more urgent.We believe our industry has both the responsibility and a tremendous opportunity to lead the way to a more sustainable future through collaboration and innovation,as outlined in our Net Zero 2040 Playbook.And we are committed to leading by example.With SBTi validation of our 2030 Scope 1,2 and 3 emissions reduction targets,we are working to reduce our GHG emissions aligned with the 1.5C pathway as defined by the Paris Agreement.We have formed an internal task force to explore innovative Scope 1 efficiency improvements that will enable us to continue advancing our reduction targets even as the company expands to meet growing customer demand.For Scope 2,Applied is making significant investments to accelerate clean energy adoption across our global operations as we aim to reach 100%renewable energy for our electricity use by 2030.We made solid progress toward increasing our renewable electricity use in 2023,through expansion of on-site solar,utility green energy programs,power purchase agreements(PPA)and renewable energy credits(RECs)to support our operations worldwide.For example,we installed one of the largest rooftop solar arrays in Austin,Texas,and signed our first on-shore wind PPA in Taiwan.Just as importantly,we are working alongside our customers,partners and others in the industry to combine our collective purchasing power to accelerate grid decarbonization globally,through active participation in groups like Schneider Electrics Catalyze Program,the Semiconductor Climate Consortium Energy Collaborative,RE100 and CEBA.As we continue to reduce the emissions produced by our company and the energy we purchase,we remain focused on addressing the largest share of our footprint:Scope 3.Through Sustainability Systems Center of Excellence innovations aligned with our 3x30 goals and advancements in our SuCCESS2030 10-year roadmap,we are working to drive transformative innovation and practices that help decarbonize the entire semiconductor value chain.Protecting our planet is a daily practice that impacts every choice we make as a business.With our sights set on a net zero pathway,value chain goals aligned with the latest climate science,advancements in clean energy and a focus on expansive collaboration and transformative innovation,we see infinite possibilities to accelerate a low-carbon future for all.Key HighlightsKey Highlights for 2023Received validation from the SBTi for Scope 1,2 and 3 emissions reduction targetsReleased a Net Zero 2040 Playbook,identifying a clear strategy to reach Net Zero emissions in collaboration with our partners7%expanded total renewable electricity by 7%year over year Announced our largest on-site renewable generation system covering about 75%of the Austin Logistics Service Center roof7%reduced GHG intensity 7%per employee and per million dollars of revenue12%reduced total water withdrawal 12%,including 9%reduction in water-stressed areasConducted a comprehensive refresh of our Task Force on Climate-Related Financial Disclosures(TCFD)-aligned Climate Risk AssessmentReached 100%renewable electricity in the U.S.and 70%globallyAustin Solar Array Video6 Sources:National Centers for Environmental Information(NCEI)INTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 202324Goals and ProgressGoals and Progress2030 GoalsGoalProgress*StatusUN SDGNot yet startedIn progressOn targetCompleted100%of electricity at Applied globally comes from renewable sources by 2030Goal validated by SBTi70%of electricity at Applied globally,including 100%in the U.S.,comes from renewable sources 50%reduction in Scope 1 and Scope 2 CO2e emissions by 2030 from 2019 baselineGoal validated by SBTiScope 1 and Scope 2(market-based)emissions decreased by 4%from FY22;2%increase from our 2019 baseline55%reduction per million USD of value added of Scope 3 Category 11 emissions by 2030 from 2019 baseline for semiconductor products*Goal validated by SBTi8crease per million USD gross profit of Scope 3 Category 11 emissions from FY21;7crease from our 2019 baseline*Applied is a member of corporate groups collaborating to reduce the environmental impact of technology.Semiconductor Climate Consortium(SCC)(Founding Member,Governing Council Member)Schneider Electrics Catalyze Program(Founding Member)SCC Energy Collaborative(Founding Member)imec SSTS program RE100 CEBA*Cumulative through fiscal 2023 unless otherwise noted*The target addresses just the direct electricity portion of Category 11 emissions per SBTi requirements*Category 11 emissions do not include emissions from Applieds Display business(which represented 5%of total net sales in FY2023)nor from refurbished systemsINTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 202325Climate and EnergyClimate and EnergyAs we continue to grow to meet the demands of our customers,our commitment to reducing our Scope 1,2 and 3 carbon impacts remains steadfast.We expanded our global renewable electricity by 7%,adding new renewable projects in Taiwan and Xian,as well as in the U.S.,which also helped us reduce our Scope 2(market-based)emissions 7%year over year.In 2023,SBTi classified Applieds Scope 1 and 2 emissions reduction target ambitions as in line with the 1.5C trajectory,which is currently the most ambitious designation available through the SBTi process.The near-term science-based targets as validated by SBTi that Applied Materials commits to are:Reduce absolute Scope 1 and 2 GHG emissions 50%by fiscal 2030 from a fiscal 2019 base year.Increase active annual sourcing of renewable electricity from 36%in fiscal 2019 to 100%by fiscal 2030.Reduce Scope 3 GHG emissions from use of sold products 55%per million USD of value added by fiscal 2030 from a fiscal 2019 base year.The validation reflects our commitment to minimize our own carbon footprint and marks a significant step toward our Net Zero 2040 Playbook,as we collaborate with our customers and partners to reduce carbon emissions across the semiconductor industry.The SBTi is a collaboration between CDP,the United Nations Global Compact(UNGC),World Resources Institute(WRI)and World Wide Fund for Nature(WWF)and is one of the We Mean Business Coalition(WMBC)commitments.INTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 202326Scope 1:Direct Emissions from our OperationsIn 2023,Applieds Scope 1 emissions totaled 49,053 metric tons of CO2e,representing a 1%increase from FY22.The primary drivers of Applieds Scope 1 emissions are the use of natural gas for facility operations and process gases used for equipment testing in R&D labs.To identify the greatest opportunities to drive efficiency in our operations and reduce our Scope 1 footprint,we formed a cross-functional Scope 1 internal task force in fiscal 2023 with representatives from ESG,Environmental,Health and Safety(EHS),Global Workplace and Infrastructure(GWI)and Sustainability Systems Center of Excellence.The task force is organized into two working groupsprocess gases and natural gasto address the largest portions of Applieds Scope 1 footprint.Each group is tasked with identifying key strategies and priorities to ensure Scope 1 emissions stay below the levels required to meet our science-based targets.Outcomes from the recommendations made by the Scope 1 task force will be shared in future Applied Sustainability Reports.We are also working through industry groups,such the SCC and imec,to collaborate and share best practices for reducing Scope 1 greenhouse gas emissions across the semiconductor value chain.Scope 1 and Scope 2 Emissions by source(MT CO2e)Electricity(market based)67,661 72,933 65,573 77,433 78,677 Stationary 25,103 24,415 24,081 22,022 23,090 Process Emissions*22,302 23,090 16,222 12,360 11,000Refrigerant 1,634 1,114 2,083 2,286 1,125Mobile Combustion 14 14 10 10 9FY23FY22FY21FY20FY19Total Scope 1 Scope 2 (market-based)116,715121,566107,969114,111113,901Emissions Data UpdateWe aligned the methodology for measuring process gases across key R&D facilities in fiscal 2023 to improve the accuracy and consistency of our data in alignment with our science-based targets.Based on the updated methodology,we have restated our Scope 1 emissions data to enable comparability over time.Climate and EnergyEnergy management Applieds total energy use increased 4%in 2023 from the previous year,in line with the expansion of our real estate footprint.At the same time,our greenhouse gas intensity dropped 7%as measured against employee headcount and revenue,as reported in the Environmental Metrics on page 92.Across our global headquarters,semiconductor and display manufacturing,and semiconductor remanufacturing sites,our facilities groups implemented energy efficiency projects that saved more than 5.7 million kWh,resulting in over 1,203 metric tons of avoided CO2e emissions savings.By continuing to optimize our lighting systems with LED lights at sites around the globe,we saved 2.7 million kWh of electricity and about 604 metric tons of CO2e emissions.Nearly 2.3 million kWh of the savings came through energy conservation measures and upgrades to our Building Management Systems(BMS)at our sites in Massachusetts and California.Green IT EffortsApplied continued its multi-year effort to increase efficiency and reduce our data center carbon footprint through optimization efforts and transitioning to cloud computing.In 2023,our efforts included:Santa Clara Co-Location Data Center and Cloud Migration:In 2023,we completed migration of key applications to cloud and a move to a new co-location data center facility.With these moves to modern infrastructure and other improvements,we reduced net power usage by 25kW and moved another 12kW to carbon neutral power sources.Amsterdam Co-Location Data Center and Cloud Migration:In 2023,we completed migration of key applications to cloud and a move to a new co-location data center facility.This resulted in a reduction of 18kW and we moved an additional 15kW to carbon neutral power sources.*Restated using updated process gas methodologyINTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 202327Employee teams drive local impact Employees across the globe help advance Applieds ESG strategy through local impact programs,initiatives and community outreach.Cross-functional Applied Impact Teams in India,Israel,Korea,Southeast Asia(Singapore/Malaysia/Philippines)and Taiwan are united through the Global Applied Impact Network(GAIN).GAIN is intended to augment and amplify regional ESG performance by connecting the countrys regional teams to share knowledge and to support the companys ESG framework.In the U.S.,our employee-led Green Teams in Austin,Texas and Gloucester and Newburyport,Massachusetts collaborate through the Applied Sustainability Alliance,sharing best practices to help reduce our personal and collective environmental footprints.The teams work to increase awareness of sustainability issues and practices that employees can implement at work,at home and in their local communities.Through special speaker events,volunteering activities,environmental projects and other engagement efforts,the teams spark discussions,advance deeper understanding and inspire action among our employees.GAIN and the Sustainability Alliance are supported and sponsored by our Global ESG Team,which helps ensure the teams efforts complement and support our vision to Make Possible a Better Future.SPOTLIGHTAustin Green Team A group of passionate employees in Austin,Texas holds the honor of being Applieds longest consecutively serving Green Team.First formed in 2009,the Austin Green Team is an active group of sustainability-invested employees that host regular campus events to engage the broader Austin employee community in living and working with less impact on our planet.One of the largest rooftop solar installations in Austin is at Applied,and the Austin Green Team uses this project to educate employees about the importance and benefits of renewable energy,hosting learning sessions on topics like electric cars and residential rooftop solar.The Team often pairs activities with holidays and global observances,such as an organic farming event timed with Earth Day,and an“upcycle Halloween”event inspiring creative costume ideas using otherwise discarded items.In the spring,the Team joined with a local community organization,Austin Creative Reuse,to host an art-inspired workshop to turn wood architectural samples,designer and decorator fabric samples,and traditional household paper-based waste products,like tissue rolls and egg cartons,into creative art displays,totes and laptop bags,and recycled writing paper.Climate and EnergyINTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 202328Scope 2:Indirect Emissions From Energy Use Our Scope 2 market-based emissions decreased 7%from FY 2022,totaling 67,661 metric tons of carbon dioxide equivalent(CO2e)in fiscal 2023,driven in large part by renewable electricity progress in the Asia Pacific region.This represents a 14crease from base year fiscal 2019.Renewable Electricity The largest share of our Scope 2 footprint is traceable to the power needs of our manufacturing sites and labs.Applied Materials is committed to sourcing 100%renewable electricity for our worldwide operations as part of our 2030 Sustainability Goals.Through 2023,we maintained 100%renewable power in the U.S.and reached 70%globally.Our global renewable energy strategy includes four key approaches:utility green procurement programs,RECs,virtual power purchase agreements(VPPA)and on-site solar power generation.United States In 2023,Applied announced our largest on-site renewable generation system,a 5.6 megawatt (DC)solar array comprised of over 10,000 state-of-the-art solar modules covering about 75%of the Austin Logistics Service Center roof.This installation,completed in March 2024,is one of the largest rooftop solar arrays in Austin and Central Texas and is expected to begin service in September 2024.The Austin solar array has the potential to offset about 43%of the buildings electricity consumption and save over 5,400 metric tons of CO2 per year.Its expected to reduce our Logistics Service Center energy costs by about 46%.In addition to Austin,Applied also maintains on-site solar generating capacities at our facilities in Sunnyvale,California;Singapore;Bangalore,India;and Xian,China.Combined these arrays generated 1,437 MWh of clean power in 2023.We also continue to invest in a VPPA with the White Mesa Wind Project in Texas,which has been operational since October 2021.The White Mesa VPPA represents 51%of our total global renewable energy and 54%of our U.S.renewable energy portfolio.Taiwan Solar Array and PPA Applied signed its first power purchase agreement in Taiwan with Energy Helper TCC Corporation to procure 1.2 MW of onshore wind energy over the next four years(about 3,000,000 kWh/year).The project is an important first step to supporting the expansion of renewable energy in the Taiwan market.In addition,construction of a 700 kW on-site solar array was completed in March 2024 at our Tainan facility,which will further expand our renewables portfolio in the region.Israel PPA We signed a 15-year contract with Enlight Renewable Energy,which finances,develops and constructs solar power plants,to provide renewable electricity to Applied Materials in Israel.Since March 2024,Applied Israels energy is being sourced from Enlights solar and storage facilities in growing percentages,with the intent to reach 100%by 2030.Xian,China A contract was signed with Beijing Electricity Trade Center to provide renewable electricity to Applied Materials in Xian,China.From March through October 2023 the agreement has delivered over seven million kWhs of green power,representing 44%of total electricity used at the Xian campus in fiscal 2023.These global on-site power installations,PPAs and VPPAs,in combination with RECs and utility green procurement programs in Santa Clara and San Jose,California;Austin,Texas;and Alzenau,Germany,enabled us to expand our total renewable electricity by 7%year over year to 341,562 MWh of renewable power in 2023.Climate and EnergyRenewable Electricity by Type(MWh)FY23FY22FY21FY20Utility Green Procurement 134,512 102,883 95,080 87,128 RECs 60,548 32,536 64,252 65,332 VPPA 145,065*183,604 63,888On-site Renewables 1,437 157 309 375*Actual VPPA generation in fiscal 2023 was higher,exceeding our total U.S.electricity consumption.The total quantity was capped to match our electricity use for the year and residual RECs will be retired in the following reporting yearINTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 202329Scope 3:Value Chain Emissions*Our Scope 3 emissions dropped 12%year over year,driven in large part by production adjustments in 2023 that followed record-breaking production in 2022 to address a significant order backlog caused by COVID-19-related supply chain disruptions.Among the 15 categories defined by the Greenhouse Gas Protocol,Category 11,Use of Sold Products,represents the largest share(80%in 2023)of our Scope 3 emissions.Category 11 covers both emissions from the electricity used to power the equipment in customer fabs during its estimated 10-year lifespan and the chemicals and gases used during the chipmaking process.Our Category 11 emissions dropped 4%in 2023,driven primarily by our product mix.Because of the outsized influence of Category 11 on our overall carbon footprintand our customers footprintsour Sustainability Systems Center of Excellence and dedicated 3x30 engineering team are focused on reducing the energy consumption,chemical impact and fab footprint of our systems by 30%this decade.Applieds systems are designed for durability,supporting upgrades,repairs,refurbishment and reuse,and Applied Global Services(AGS)focuses on optimizing our equipment and fab performance and productivity with the lowest feasible environmental footprint.Climate and EnergySPOTLIGHTMassachusetts Green TeamThe Massachusetts Green Team,including campuses in Gloucester and Newburyport,focused its efforts in 2023 on strengthening its internal network,including uniting with representatives of EHS,facilities,logistics,and various engineering disciplines,to learn,collaborate and act together to advance more sustainable lifestyle and work practices.In 2024,the team is collaborating with EHS and Facilities to improve the current recycling program across our local campuses,including working with local waste management partners.Among its efforts,the Team led the construction of outdoor vegetable and pollinator gardens.The on-campus garden spots provide relaxing spaces for employees to gather during breaks and the opportunity to pick and enjoy fresh vegetables.By planting a mix of vegetables and pollinating plants,the gardens have invited wildlife that promote healthy bee populations.Blackberry bushes were also also planted at each site to encourage foraging and to help make the campuses greener places to work.To further support education on local food generation,the Team has contracted with a beekeeping service,The Best Bees Company,a Certified LGBT Business Enterprise,to monitor and manage our hives,collect the honey and educate our teams on healthy beekeeping practices.In 2023,20 pounds of honey were collected and sold at the Fight Against Hunger auction in Gloucester,extending the positive impact from the beehives to help address food insecurity.The Team is also building a sustainability tool library,which will offer,for loan,tools that help advance sustainability at Applied and at home.The first tool purchased for the tool library is a thermal camera,used to inspect homes and buildings for sources of heat loss.The camera will be used in campus buildings to confirm insulation efficiency and can be checked out by employees for use at home.*Applied Materials Scope 3 measurements do not include our display businessINTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 202330Category 1,Purchase of Goods and Services,which estimates our upstream supply chain emissions,represents the second largest share of our Scope 3(about 13%)emissions.In 2023,our Category 1 emissions dropped about 27%,based on our supplier spend,which correlates to our adjusted production in 2023 following the post-pandemic backlog in 2022.Applied is working with our suppliers to collect GHG emission goals and data,from which we can collaborate on creating a plan for a pathway to net zero by 2040.We anticipate being able to integrate primary supplier data into our GHG inventory in the near future and are working with suppliers to improve the quality of the data being reported.Applied continues to review the methodology annually to refine its calculations,emissions factors,data,estimates and underlying assumptions.In alignment with this review process,we have adjusted the historic data for Category 1 in fiscal 2021 and 2022,as well as Category 4,Upstream Transportation and Distribution,for fiscal 2019,2021 and 2022 in the Data and Disclosures section.The adjustment does not materially impact our overall Scope 3 calculations for those years.See the Data and Disclosures section for complete 2019-2023 Scope 3 emissions reporting.Scope 3 Emissions(Million MT CO2e)FY23FY22FY21FY19BaselineCategory 11(Use of sold products)18.0 18.8 16.4 10.2 Category 1(Purchased goods and services)2.9 3.9 3.2 1.9Category 4(Upstream transportation and services)1.0 2.0 1.3 0.6All other categories 0.6 0.7 0.5 0.5Fiscal 2020 not included due to abnormal business operations related to COVID-19 pandemicBiodiversity ConservationApplied recognizes that we cannot collectively reach our net zero aspirations without the protection and restoration of nature.Although Applied has minimal exposure to biodiversity impacts through its business operations,we are actively evaluating opportunities to invest in nature-based restoration projects,which benefit biodiversity,climate and communities.Climate and EnergyINTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 202331Climate and Water Risk AssessmentClimate and Water Risk AssessmentApplied monitors emerging climate-and water-related risks on an annual basis,and every two years,we do a more comprehensive risk assessment to evaluate key physical climate and water risks across our value chain as well as transition risks and opportunities for our business.In 20232024,Applied engaged a third party to conduct a comprehensive refresh of our climate risk assessment.The assessment included a scenario analysis across high-carbon and low-carbon pathways for physical and transitional risks.It was modeled from 2020 to 2040 to align with our Net Zero 2040 Playbook.The assessment included engagement from a broad cross-function of internal stakeholders.The assessment identified and prioritized seven climate-related risks and opportunities for further analysis:exposure from extreme and chronic weather events,water risk,carbon pricing,regulations on process chemicals,R&D pressure,product deselection and customer demandwhich is both a risk and an opportunity.Applied has teams dedicated to global emergency response,crisis management and business continuity,including at local facilities,that ensure our business is prepared to respond and recover quickly from climate-related events and effectively support our customers and suppliers operations.We participate in efforts to inform policymakers about issues and challenges critical to our business and industry,including advancing next-generation technology.We are prioritizing the elimination of per-and polyfluoroalkyl substances(PFAS)where technically and commercially feasible,and the development of non-PFAS alternatives where needed,as part of our“PFAS Responsible”approach to process chemicals.Applied is well positioned to meet increasing customer demand through its portfolio of eco-advantaged products and continues to develop purpose-built technologies that enable customers to meet their own current and future environmental obligations to stakeholders.We see increasing opportunities for our ICAPS business in advancing decarbonization across the world by enabling key technologies,such as electric vehicles(EVs)and smarter,more efficient electrical grids.See the TCFD Index in the Data and Disclosures section.In 2023,Applied Materials earned an A-score from CDP on its Climate Change list and a B score on CDPs Water Security list.See our Climate Change and Water Security disclosures.INTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 202332Water ManagementWater ManagementAbsolute water withdrawal decreased 12%and water withdrawal in water-stressed areas decreased 9%in fiscal 2023,primarily due to a reduction in irrigation,especially in water-stressed regions,improvements in facility and equipment water efficiency,and post-pandemic supply chain stabilization.Applieds operations are not high-volume water consumers relative to the broader semiconductor industry,yet we strive to optimize our water use across our facilities.Ninety percent of water use is in our labs or mixed-use buildings,with our R&D labs having the highest consumption of ultrapure water.Most of our tools require cooling water,which runs in a closed-loop process and is negligible in terms of water consumption.Our water conservation efforts include:Water recycling and reuse for non-potable applications,especially cooling and landscape irrigation Rainwater collection at certain sites for use in landscaping or non-production needs Drought-tolerant landscaping and smart irrigation to reduce the number of watering daysFacility groups are responsible for on-site water use management,with oversight from the companys EHS organization.For example,in Singapore,our facility group began channeling HVAC condensate to top off the cooling tower water,saving 43,800 cubic meters of water in fiscal 2023.Our Vice President of Global EHS is responsible for ensuring that water-related risks and minimization opportunities are assessed as appropriate.Water reduction is covered under our EHS policy and ISO 14001 EHSMS,which call for our business operations to identify opportunities,make continual improvements on environmental preservation and natural resource conservation,and meet or exceed all relevant regulatory requirements.Water Withdrawal(Thousand m3)FY23FY22FY21FY20FY19City water purchase2,0772,2212,1492,0881,990Groundwater1.31381001626INTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 202333Waste ManagementApplied is committed to minimizing waste across our global locations and logistics operations,with a special focus on eliminating non-recyclable,landfill-found waste.Waste reduction,reuse and recycling programs are managed and monitored at the site level.In 2023,Applied decreased our total waste 2%year over year,and increased our landfill/incineration diversion rate to 73%,up 1%over 2022.A few of our site-based projects included:Installing wood augers to recycle wood crates in Austin,Texas,repurposing over five million pounds of wooden crates into engineered wooden products,such as oriented strand board(OSB),achieving an 85%waste diversion rate.In Israel,an industrial symbiosis project,established by the Ministry of Economics and Ministry of Environmental Protection,provides a platform for businesses across industries to repurpose and reuse items.Through this platform connection,Applied diverted about 30 tons of potential waste(packages,electrical and mechanical items,furniture,cables,pipes,pumps),enabling new uses in the market.Composting cafeteria waste in Singapore.Hazardous waste accounted for less than 6%of our annual waste output in 2023,up from 3%in 2022 due to the addition of a new Chemical Mechanical Planarization(CMP)tool and its associated waste.We contract with licensed third parties to transport waste,including hazardous waste,for off-site disposal,consistent with applicable laws and regulations.Our EHS organization oversees the process and verifies all disposal sites and methods meet regulatory requirements.We evaluate potential vendors via the CHWMEG Facility Review Program,which provides environmental,operational and financial information on waste treatment,disposal,recycling and storage facilities.Waste ManagementDiversion Rate 807060504030201002019202020212022202375gsrs%PercentageYearYear-Over-Year Waste PerformanceFY23FY22FY21FY20FY19(Thousand Mt)Non-haz recycled12.913.912.510.48.9Non-haz composted0.20.20.10.10.4Non-haz incineration0.10.30.71.30.5Non-haz landfill14.14.74.82.32.1Total haz waste1.10.50.50.40.5INTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 202334Applied Materials Taiwan Driving Environmental Efficiency Applied Materials Taiwan implemented a variety of environmental efficiency initiatives in 2023,driving solid reductions in electricity,waste and water use across our campuses.For example:425,607 kWh of electricity saved through office lighting optimization with LED light retrofits,another 6,076 kWh saved through sensor-controlled LED landscape lighting,and 9,720 kWh saved by optimizing office air conditioning and wall lamps use outside of business hours 3,155 kg CO2 emissions saved by converting to Green Label and Forest Stewardship Council(FSC)-certified products,including hand and dish soap,bath tissue and paper towels 21,000 kg CO2 emissions saved by repurposing wood packaging waste to create a wooden pathway on campus 16.2 tons of plastic waste was reused(between JulyNovember 2023)to produce Solid Recovered Fuel for power generation and garbage bag production 1,092 tons of water saved by optimizing deionized water usage through recycling Waste ManagementApplied strives to reduce the negative impacts of wastewater produced by our operations,monitoring to ensure sufficient removal of solids and adherence to permitted parameters,such as ph and fluoride content,before discharge to publicly owned treatment works.Each Applied site is responsible for wastewater monitoring.Concerns are escalated to site management and applicable corporate staff for immediate correction.SPOTLIGHTINTRODUCTIONPURPOSEPROGRESSABOUTPEOPLENET ZERO PLANETDATASustainability Report 2023Innovate for Progress04Key HighlightsGoals and ProgressSustainability Systems Center of ExcellencePromoting the Circular EconomyProduct SafetySupply Chain Responsibility35Sustainability Report 202336In an era of hyper-accelerated innovation,progress toward sustainability cannot be incremental.Applied is taking a system-view approach,together with our customers and business partners,to fundamentally transform our industry on a pathway to net zero.The digital transformation that is redefining our economy and impacting every aspect of our lives is also impacting our planet at an expedited pace.The semiconductor industrythe very foundation of tech innovationis uniquely positioned to solve this challenge.But it wont happen in isolation.Applied is committed to collaborating across the semi ecosystem to drive energy-efficient computing and create a pathway to global carbon reduction.Were building the worlds largest and most advanced facility for collaborative semiconductor process technology and manufacturing equipment R&D in Silicon Valley and planning a collaborative engineering center in Bangalore,India,to fundamentally transform how innovation happens,from concept to commercialization.Working alongside our customers,were innovating the way we innovatecreating purpose-driven products and advancing the environmental performance of existing productsto significantly reduce the energy,chemical and physical footprints of fabs as we drive progress toward our ambitious 3x30 goals.Through a growing portfolio ofand continuing investments ineco-advantaged products and upgrades,and with more than a third of our installed systems under service agreements,were enabling our customers to optimize the life of their equipment,boost their efficiency and lower emissions,while maximizing the value of their capital investment.Upstream in our value chain,our suppliers play an essential role in our systems-view approach.Our strategic 10-year roadmap,SuCCESS2030,guides our progress toward creating a more sustainable supply chain aligned with our business values and standards.Through these collaborations with our customers,suppliers and the broader technology ecosystem,we see a clear pathway to accelerate the energy-efficient computing roadmap as we aspire to achieve net zero semiconductor manufacturing.Key Highlights for 2023Announced a landmark investment to build the EPIC Center,accelerating innovation and commercialization of energy-efficient,next-generation technologyKey Highlights24eco-advantaged products and services in our portfoliowith a pipeline of new developments and ecoUP components for existing productsReleased Vistara,Applieds first platform designed to support Integrated Materials Solution recipes using more types and sizes of chambersIntroduced Sculpta Pattern-Shaping Systeman industry-first patterning technology that eliminates an entire EUV mask layer from a wafer process flow6,000crates eliminated from outbound shipments and 70%reduction in supplier inbound extra-large shipments through packaging optimization initiative 69supplier audits conducted in alignment with the RBA audit protocolRecognized with the Intel EPIC Program Outstanding Supplier Award with Supplier Diversity DistinctionReceived Microns Supplier Award for Outstanding Performance in SustainabilitySetting New Goals to Advance SustainabilityNET ZERO INTRODUCTIONPURPOSEABOUTPLANETPEOPLEPROGRESSDATA37Goals and ProgressGoals and Progress3x30 GoalsGoalProgress*StatusUN SDGReduce equivalent energy consumption per-wafer pass for semiconductor products by 30%by 2030 from 2019 baselineAverage per-wafer energy use continued to decrease due to changes in the mix of products sold.As we incorporate new energy savings developments into our existing and upcoming products,we are on track to meet or exceed our 3x30 target.Reduce the impact from chemical consumption per-wafer pass for semiconductor products by 30%by 2030 from 2019 baselineSustainability Systems Center of Excellence team and its engineering partners in the product business units continue to pursue development of multiple products that can significantly reduce chemical impact through reduced demand for process chemicals,alternative process chemistries and improved abatement solutions.Some of these initiatives are expected to be multi-year efforts,but we are on track to meet or exceed the 3x30 target.30%reduction in tool footprint per production unit ratio(sqm/wph)for semiconductor products from 2019 baselineFootprint reduction to date is largely the result of productivity improvements in existing tool architectures.As new product architectures,such as Vistara,begin volume shipments to customers,footprints can be further reduced and are expected to meet or exceed the 3x30 target.SuCCESS2030 GoalsGoalProgress*StatusUN SDGCollect GHG data from top suppliers and partner on reduction targetsConducted GHG surveys with over 80 suppliers in fiscal 2023Drive compliance with RBA Code of Conduct and Applied Materials Standards of Business Conduct(SBC)Conducted audits of over 50 top-tier suppliers in 2023Increase the percentage of spend with,and representation of,women-and minority-owned businesses by 2024,aiming to reach$1 billion in diverse spend by 2027Met our interim goal of increasing diverse spend to 3.8%of total global supplier spend,spending$594 million with certified diverse suppliers in 2023Transition the supply chain to recyclable content packaging,with a target of 80%by year-end 2023Through 2023,an estimated 80%of Applied packaging materials were made from recyclable materialsNot yet startedIn progressOn targetCompleted*Cumulative through fiscal 2023 unless otherwise notedNET ZERO INTRODUCTIONPURPOSEABOUTPLANETPEOPLEPROGRESSDATASustainability Report 202338Sustainability Systems Center of ExcellenceSustainability Systems Center of ExcellenceAs the semiconductor industry continues to deliver better performance per bit,chip structures are becoming more intricate and wafer production is becoming orders of magnitude more complex.This complexity requires more process steps that increase direct emissions,energy use and supply requirements.At the same time,growing demand for current and legacy generation chips to support the sectors,including the Internet-of-Things,communications,automotive,power electronics and sensors(ICAPS),lead to compounding increases in GHG emissions from chipmakers.A key element of our Net Zero 2040 Playbook is driving efficiencies in our products so they use less electricity and process chemistry and emit fewer emissions for each wafer processed.By improving the sustainability of our products,we can help our customersmany of whom have set their own aggressive net zero emissions targetsreduce emissions from their own operations.Our 3x30 engineering team,established in 2020,is focused on reducing the energy consumption,chemical impact and fab footprint of our systems by 30%this decade.The team fosters a culture that prioritizes sustainable design principles in the earliest stages of product development to create systems that consume fewer resources and supports end-to-end deployment and adoptions of purpose-built sustainability products by our customers.Our comprehensive sustainable design approach encompasses three core elements:Sustainability Systems Center of Excellence,which supports our product engineeringdesign teams in developing more sustainabletechnologies products and processes;theresults can be seen in our expanding portfolio ofpurpose-driven products and services for faband subfab.A proprietary modeling tool that quantifies theenergy,chemical impact and footprint of past,present and future tool designs,to providecontinuous measure and ensure progress towardour 3x30 goals.Customer partnerships to innovate efficienciesin our tools and processes,boost industry-widesustainability and deliver broad benefits tothe planet.NET ZERO INTRODUCTIONPURPOSEABOUTPLANETPEOPLEPROGRESSDATASustainability Report 202339Next-Generation Platforms and Systems Vistara is one of our most significant new equipment platforms in a decade,reimagined for a new,more-sustainable era of chipmaking.Vistara is our first purpose-built platform,designed to support Integrated Materials Solution recipes using more types and sizes of chambers.It combines and co-optimizes multiple process steps within a single tool,resulting in an estimated 35%reduction in platform energy consumption and about 30%reduction in chemical footprint for etch applications.The design increases throughput density by as much as 30%,allowing chipmakers to build smaller fabs and potentially save one million metric tons of carbon for every 100,000 wafer-starts-per-month fab built.Applieds Sculpta Pattern-Shaping System features industry-first patterning technology that eliminates an entire EUV mask layer from a wafer process flow.In addition to significant capital and manufacturing cost savings,Sculpta enables tremendous energy savings of more than 15 kWh per wafer,direct GHG emissions reduction of more than 0.34 kg of CO2e per wafer and water savings of about 15 liters per wafer.ecoUP Upgrades and Purpose-Built ProductsApplied has 24 eco-focused products and services in our portfolio todaynew ecoUP innovations and components for existing products.This is a pipeline of new upgrades engineered for our existing products that help customers meet their sustainability targets.Applied offers new components,software and solutions that advance environmental performance.For example:EcoTwin is a digital twin that can monitor and model recipes and operations so chipmakers can drive energy optimization in their fabs.EcoTwin Eco-Efficiency Software automatically generates detailed reports of carbon footprint and related consumption parameters from both the fab and subfab to help customers identify opportunities to reduce consumption.iSystem Controller monitors resource consumption and GHG emissions and automatically adjusts the energy needs in the subfab based on whats happening within a tool.The small footprint iSystem controller can support up to four tools and is easily installed on both Applied and non-Applied Materials process tools.Aeris-G is a pre-pump plasma abatement solution that uses less energy by treating the actual process gas volume.The Aeris-G system can be installed within the pump footprint of each chamber and requires only power,nitrogen,oxygen,cooling water and ultrapure water connections.For new tool installations,Aeris-G saves subfab space,reduces utility and exhaust connections and minimizes installation costs while improving abatement efficiency of greenhouse gases.There are more than 20and growingfield-application specific upgradable products in our ecoUP portfolio to help customers optimize the performance of their existing tools while reducing energy consumption and GHG emissions,including shared heat-exchangers between chambers,low-power systems,thermal control and equivalent energy utilities savings components.Sustainability Systems Center of ExcellenceIndia Sustainability Systems Center of Excellence TeamThe India Sustainability Systems Center of Excellence team develops many of our ecoUP Upgrades in collaboration with Applieds business units,with the specific purpose of improving the performance of our existing equipment.The team conducts modeling and testing to validate the performance improvement of the ecoUP upgrades and works to find new ways to reduce and eliminate use of certain types of materials.For example,the team developed upgrade kits to decrease evaporation loss on heat transfer fluids,which reduces the amount of GHG emissions and PFAS that is released by certain thermal management systems used widely in the semiconductor industry.NET ZERO INTRODUCTIONPURPOSEABOUTPLANETPEOPLEPROGRESSDATASustainability Report 202340SPOTLIGHTAccelerating Semiconductor Collaboration and InnovationTo meet the explosive demand and growing complexity of technology,the semiconductor industry needs to fundamentally transform its model of collaboration and feedback to increase the speed and lower the cost of innovation.In May 2023,Applied announced a landmark investment to build the worlds largest and most advanced facility for collaborative semiconductor process technology and manufacturing equipment R&D,the EPIC Center.Located at an Applied campus in Silicon Valley,the multibillion-dollar EPIC facility will include more than 180,000 square feetmore than three American football fieldsof state-of-the-art cleanroom for collaborative innovation with chipmakers,universities and ecosystem partners.The new EPIC Center is expected to reduce the time it takes the industry to bring a technology from concept to commercialization by several years,while simultaneously increasing the commercial success rate of new innovations and the return on R&D investments for the entire semiconductor ecosystem.The EPIC platform will provide university researchers with access to the full range of industrial-scale capabilities to validate their ideas.University researchers can perform research alongside industry professionals,and Applied can collaborate with academic partners to build a network of industrial-quality satellite labs at university facilities.In July 2023,Applied and Arizona State University(ASU)announced such a satellite lab.Aided by the Arizona Commerce Authority,the Materials-to-Fab(MTF)Center will be a world-class shared R&D and prototyping facility designed to accelerate the transfer of innovations from ideation to fab prototype.Students and faculty will have the opportunity for hands-on learning and research using the same equipment used in leading production fabs.To build an inclusive talent pipeline,Applied also intends to launch an endowment fund that will provide scholarships to first-generation and/or underrepresented minority students in the ASU Ira A.Fulton Schools of Engineering.Sustainability Systems Center of ExcellenceEPIC Center LaunchAddressing PFAS in the Semiconductor Industry As part of Applied Materials commitment to minimize the environmental impact of our operational footprint and supply chain,we have adopted a“PFAS Responsible”approach.We are prioritizing both the elimination of per-and polyfluoroalkyl substances where technically and commercially feasible,and the development of non-PFAS alternatives where needed.In critical applications where no current line of sight exists to suitable non-PFAS alternatives,Applied will drive environmental and commercial risk mitigation and work with our suppliers and customers to ensure the most responsible use of PFAS.Limited and responsible use of PFAS will require industry-wide collaboration.Applied is actively participating in industry groups that are sharing information about the use of PFAS throughout the semiconductor industry,including serving as a leading member of SIAs Semiconductor PFAS Consortium and SEMIs PFAS Initiative.For more information,please see Applied Materials Statement on P F A S.Applied Materials received Microns 2023 Supplier Award for Outstanding Performance in Sustainability.Applied collaborated with Micron to achieve about 15k MTCO2e emissions savings,17M kWh of energy reduction and 120k m3 of DIW usage reduction in 2023.NET ZERO INTRODUCTIONPURPOSEABOUTPLANETPEOPLEPROGRESSDATASustainability Report 202341Promoting the Circular EconomyPromoting the Circular EconomyApplieds customers need to run their equipment at maximum capacity,often 24 hours a day,seven days a week.This can put big demands on their electricity use and increase process chemistry and carbon emissions.Applied Global Services(AGS)provides integrated solutions to optimize equipment and fab performance and productivity.Through its corrective and preventive service contracts,AGS ensures Applieds installed equipment is working at its optimal performance with the lowest environmental footprint.AGS works with our customers to understand their sustainability goals and manufacturing expectations,and deploys diagnostic systems and tools,powered by AI,to fully understand how the equipment is performing.The team combines that insight with deep product knowledge to recommend software and/or hardware upgrades to help optimize performance and minimize emissions.For example,Applieds Total Kit Management(TKM)program provides a customized kit of certified spares with best-in-class cleaning and coating services to reduce total cost of ownership.For our CMP equipment,the HeadSmart TKM solution offers offsite head rebuilds,which saves the customer valuable floor space while keeping the CMP polishing head in use longer.Applied has rebuilt more than 276,000 heads through the HeadSmart solution.Applied operates regional TKM processing facilities,which help reduce transportation costs and time.By carefully monitoring key dimensions on the parts,we are able to best determine when parts have achieved end of life.Our Forecast Parts Management(FPM)leverages Applied Materials global supply chain infrastructure and inventory to offer parts support specifically tailored to our customers operational needs.The FPM allows greater supply assurance by placing the right inventory closer to fabs,which provides savings to our customers while reducing the carbon footprint.By the Numbers16,600276,000111,468Systems under service agreementsHeads rebuilt through the HeadSmart solutionKits per year are recycled in our chambers following TKM processingDid You Know?AGS supports more than 48,000 installed Applied semiconductor,display and other manufacturing systems worldwide through a global distribution system in more than 195 locations and trained service engineers and recycling facilities located in close proximity to customer sites.Operating Amid Electricity Constraints AGS is working with a customer located in a region where access to electricity is at risk.Optimizing the efficiency of their equipment isnt just about cost efficiencyits about operating at the greatest capacity with the lowest possible energy footprint.Using a system of diagnostic data collection and analysis,AGS is able to prioritize actions,parts and eco upgrades to keep the equipment operating at optimal output aligned with the environmental constraints faced by this customer.Applied Global ServicesNET ZERO INTRODUCTIONPURPOSEABOUTPLANETPEOPLEPROGRESSDATASustainability Report 202342Keeping Systems and Parts in Use LongerApplieds systems are designed for long life,supported by upgrades,repairs,refurbishment and reuse.All newly manufactured parts are engineered for greater repairability,and where possible,Applied uses refurbished parts to repair and remanufacture systems and parts.As part of its work supporting customers in the field,AGS recovers parts and assemblies from our equipment for potential reconditioning and reuse.Applied has the capability to repair about 10,000 unique parts.Applied maintains one of the industrys largest global inventories of spare parts,with recovered parts searchable in our inventory management system and ready to be selected for cleaning and repair.Each recovered part goes through an exacting process of inspection,cleaning,refurbishment and repair.These recovered parts are certified by AGS as“like new”for reuse,with a full warranty and the same service level as a new part.Repaired parts are used to support Applied equipment in the field.Packaging Reduction and ReuseApplieds precision products require strong,durable packaging to avoid damage and absorb vibration during transport.Our Design for Distribution task force works to meet those stringent demands while reducing materials use,improving recyclability and increasing reusability.In 2023,about 80%of our packaging materials were made from recyclable materials(polyethylene,polypropylene,corrugated fiberboard,steel and wood),up from 70%in 2022.Our supplier packaging specifications prohibit all non-recyclable material,except laminated plastic bags used for moisture barrier protection,for which there is currently no viable alternative.We are working with our suppliers to report packaging materials data.Together with our major packaging partner,TransPak,we are establishing a baseline of our total use of lumber,plywood and foam for packaging used to ship products to customers,which will enable us to set tangible reduction targets informed by data.In fiscal 2023,TransPak and Applied calculated wood content savings based on selected designs.This initial project was done as a proof of concept to validate our measurement approach.Through this targeted effort,Applied reports a savings of about 1.2 million pounds of wood content in 2023.Applied offers an ever-expanding portfolio of eco-focused products and services.Using fiscal 2023 as a baseline,supported with a validated measurement methodology,we aim to achieve a target reduction of 5%in 2024.This will be calculated through a macro approach of measuring board feet of lumber,square feet of plywood and square feet of foam for packaging across our portfolio.Award-winning Design for Distribution In 2023,more than 100 representatives from our manufacturing engineering,procurement,logistics,sourcing,packaging engineering,operations and multiple business units embarked on a project to rethink processes,redesign packaging and reimagine sourcing and shipping logistics to solve for rising end-to-end transportation costs and heavy,inefficient packaging designs.Applied has traditionally relied on wood crates to safely and securely ship our semiconductor manufacturing products to customers.In fiscal 2022,Applied used 108,000 wood crates,which is the equivalent of about 80 acres of forest or 20,000 trees.The crates,generally single use,are not optimized based on content,leaving excess,non-functional“air space”that costs more to ship,takes up more space in transit and uses more materials than necessary to protect the products.The cross-functional team set out to solve these issues,implementing a company-wide program to reduce waste and excessive spend on packaging materials and freight by integrating logistics into product design.The program includes both incoming and outgoing materials,covering everything that we buy,integrate,make and sell.The team uses modeling and simulations to ensure we are optimizing both the packaging and logistics.Among the improvements the team realized in 2023 include:Redesigning shipping crates and implementing flat packaging and packaging densification to better match the packaging with the product or products being shipped;the packaging optimization resulted in a 70%reduction in supplier inbound extra-large shipments and a 21%reduction in wasted“air space”in the packaging Implementing a collapsible crate design to reduce storage and transportation costs Reusing inbound crates for outbound shipments to customers Replacing wood with FSC-certified fiberboard where possible,which also reduces the weight of shipments Providing crate recycling where beneficial Carting to enable mode shift from air to ocean,as well as aggressively negotiating freight ratesThe project reduced outbound shipments by about 6,000 crates(equivalent of saving about 5,300 trees),reduced the consumption of wood and plastics,lessened the cost and carbon footprint of logistics operations through smaller,lighter and fewer crates per shipment and saved Applied$164 million dollars in fiscal 2023.The project also inspired an awareness and greater understanding of the positive environmental impact Applied employees can drive together.The Design for Distribution Program received the top score for the Applied 2023 Presidents Quality Award.The annual award,presented by Applied CEO Gary E.Dickerson and VP Global Quality Vinjay Sinha,focuses on recognizing teams that are strengthening our Culture of Quality by applying quality processes and data-driven decision-making to deliver impactful enhancements to our products and services or sustainable,systemic improvements in our operations.Promoting the Circular EconomyNET ZERO INTRODUCTIONPURPOSEABOUTPLANETPEOPLEPROGRESSDATASustainability Report 202343Product SafetyProduct SafetyApplied Materials develops and implements comprehensive product design,manufacturing,labeling and testing policies and programs to ensure our products are safe to use and comply with applicable legal requirements and conform with relevant industry standards and guidelines.Third-party assessments validate that our products meet applicable safety requirements.Applieds product release process draws upon applicable consensus standards,including SEMI S2.Our risk assessment process follows the applicable SEMI S10 Safety Guideline for Risk Assessment and Risk Evaluation Process on identifying,estimating and evaluating the lifecycle risks of semiconductors.Our Product Safety group partners with other company functions to oversee the design of products and services,monitors their safety during the products lifecycle and drives compliance with our product safety policy and procedures.NET ZERO INTRODUCTIONPURPOSEABOUTPLANETPEOPLEPROGRESSDATASustainability Report 202344Supply Chain ResponsibilitySupply Chain ResponsibilitySuCCESS2030 is our 10-year roadmap for creating a more sustainable supply chain.The effort builds on our foundation of supporting ethical labor practices,environmentally responsible operations,responsible minerals sourcing and international human rights standards.Through SuCCESS2030,our assessments of supplier performance and capabilities require shared commitments across core ESG focus areasincluding environmental impact;labor practices;and diversity,equity and inclusionmost of which include defined performance targets.We hold our supply chain partners to the same high standards as we hold ourselves.Applieds Supplier ESG Requirements document is incorporated into our Global Supplier Agreements and other agreements with direct and indirect suppliers.These requirements are also included in the terms and conditions for logistics suppliers and all purchase order transactions and are enumerated in our most commonly used agreements for indirect services.Our SuCCESS2030 Office oversees metrics and compliance audits and conducts training and coordination with participating suppliers.Applied is committed to protecting human rights and conducting business in an ethical and responsible manner.Learn more about our commitment to human rights and Applieds Responsible Manufacturing Program.Supplier Audits,Risk Assessment and RemediationTo best assess the working conditions of the employees within our supplier factories,Applied conducts third-party audits to the RBA audit protocol,which includes labor and working conditions,environment,health and safety,and ethics.The RBA audit program requires at least three data points,including worker interviews,to validate conformance to the audit criteria,ensuring a thorough review of working conditions.The RBA includes hundreds of member companies aligned to one code,one audit protocol and one audit result,enabling suppliers to leverage their audit reports across multiple customers to help reduce audit fatigue and free up time to focus on remediation and capacity improvement.With thousands of supplier factories around the world,we prioritize supplier sites based on spend.For other facilities,we include our medium-to high-risk sites,according to regional risk,as assessed by the RBA Risk Assessment tool.For our suppliers,these on-site audits typically take four to 10 days.It is required that there is no interference by the supplier site management.Worker interviews must be conducted without management present and interviews are not recorded.In 2023,Applied had zero instances of management interference.Once the audit is completed and the findings are agreed upon,the suppliers work with our SuCCESS2030 team to close issues.In the event of a life-threatening priority finding,audit firms are required to notify Applied within 24 hours,though these types of priority findings are typically reported at the time of discovery.At Applied,we require our suppliers to close their priority and major findings within the recommended RBA timeline through additional on-site,third-party audits.NET ZERO INTRODUCTIONPURPOSEABOUTPLANETPEOPLEPROGRESSDATASustainability Report 202345To support our suppliers in closing their findings,we have secured services from an independent consulting firm to work directly with our suppliers to create corrective action plans.Our audit reports go through a quality review,and the suppliers are given a post-audit survey on their audit experience throughout the entire cycle.This helps ensure high quality and consistency across auditors and firms and enables us to work with individual auditors to improve their processes and capacity,as needed.Supplier sites that are under consideration by Applied go through a shortened,second-party audit.An Applied engineer reviews audit criteria,such as forced labor,young workers,working hours,environment,health and safety,and ethics.All Applied engineers who conduct these condensed working-condition assessments have taken the RBA auditor course.Potential suppliers who fail to close the gaps in these assessments are not approved to be Applied suppliers.2023 Supplier AuditsInitial Audits ConductedClosure Audits ConductedTotal Audits Conducted511869Capability BuildingWe offer our suppliers a structured program of webinars and training on responsible factories,product compliance and other topics to help them close any gaps across our ESG focus areas.In addition,our SuCCESS2030 Office meets one-on-one with each tier 1 supplier,at least once a year,to go through the SuCCESS2030 requirements and answer any questions.Suppliers can also meet with the head of SuCCESS2030 using a public scheduling link.GHG DataIn fiscal 2023,we announced our Net Zero 2040 Playbook.To prepare Applied suppliers for this initiative,we collected GHG goals and data from all our top spend suppliers,through which 80 suppliers were able to provide site-level data for Applied supplier sites.In 2024,we are continuing to collect supplier site data for all our top suppliers,by spend,and to drive adoption of GHG reduction goals for at least 110 suppliers.Our survey includes source data for us to collaborate with our suppliers on creating an emissions reduction plan to reach net zero by 2040,including establishing a reduction plan and assisting them in procuring renewable energy.As part of this effort,Applied Materials became an inaugural corporate sponsor of Schneider Electrics Catalyze partnership program,which aims to accelerate the adoption of renewable energy and reduce carbon emissions throughout the global semiconductor value chain.We also joined the Semiconductor Climate Consortium Energy Collaborative,bringing together the combined purchasing power of semiconductor companies to encourage a faster conversion to clean energy in the Asia-Pacific region.Through active participation in programs like Catalyze and SCC Energy Collaborative,as well as through organizations like CEBA and RE100,we are building on our SuCCESS2030 efforts to instill sustainability best practices among our suppliers and intend,in the future,to accelerate supply chain decarbonization and drive higher output of clean energy for the semiconductor industry.Responsible Minerals SourcingApplied Materials is committed to the responsible sourcing of minerals used in our products.Key to this commitment is our policy around tantalum,tin,tungsten and gold(3TG),also known as conflict minerals for their frequent origin in the Democratic Republic of Congo(DRC)and adjoining countries affected by conflict and human rights abuses.For more than five years,Applied has worked with third-party service providers to assist in conducting outreach to suppliers regarding their sourcing of 3TG intentionally added to products furnished to Applied,and evaluating their responses.Applied is a member of the RMI,and we work to validate that our suppliers conform with Responsible Minerals Assurance Process(RMAP)standards.In 2023,our SuCCESS2030 team worked directly with approximately 11 smelters or refiners to ensure their continued participation in the RMI RMAP program.Our SuCCESS2030 lead is the co-chair for the RMI Smelter Engagement Team(SET),which oversees the different smelter engagement teams,and three Applied employees serve in a voluntary capacity.In addition,an Applied SuCCESS2030 program manager leads a second-level SET team,which oversees re-audits as part of the RMAP program to maintain the RMAP conformance rate.Supply Chain ResponsibilityIn addition to 3TG,we also collect data on cobalt and will begin our due diligence for aluminum,steel and iron in fiscal 2024.We are one of the founding members of Copper Mark,to ensure a responsible supply chain within the copper industry.For more information about our 3TG due diligence,please see our Conflict Minerals Report.Supplier DiversityWe met our goal to achieve greater than$500 million spending with certified diverse or pending certified diverse suppliers39%with minority-owned,56%with women-owned and 5%with veteran-owned businessesreaching$594 million in 2023.Our goal is to reach$1 billion in spend with diverse suppliers by 2027.All suppliers,regardless of certification or ownership status,must meet the same procurement standards,participate in the same audits and go through the same rigorous onboarding process.To ensure all Applied suppliers are accountable to the same quality standards,there is no special consideration or weighting based on diverse supplier status.We are also active in the supplier diversity space beyond Applied,including being a:Founding member of SEMIs Manufacturing Ownership Diversity(MOD)working group,which brings together semiconductor manufacturers,original equipment manufacturers(OEMs),material suppliers,certified diverse suppliers and diverse supplier organizations to build collective understanding,remove barriers and create growth opportunities that advance a more diverse manufacturing supply chain.Corporate member of the Diverse Manufacturing Supply Chain Alliance(DMSCA),which is the only U.S.non-profit membership organization focused exclusively on the development of small-and medium-sized U.S.-based diverse manufacturers.DMSCA helps diverse manufacturers assess and mitigate performance risk and address operational readiness,including environmental sustainability factors,to support emerging technologies,like IoT and AI.Corporate member of the National Minority Supplier Development Council(NMSDC),which,in addition to being a certifying agency,provides minority business enterprises(MBEs)with resources,such as business classes,pitch coaching and connections to potential corporate buyers.In fiscal 2023,Applied joined a regional NMSDC chapter,through which we collaborate across multiple industries to increase efficiencies and advocacy in the supplier diversity space.NET ZERO INTRODUCTIONPURPOSEABOUTPLANETPEOPLEPROGRESSDATASustainability Report 202346Applied Materials earned the exclusive Intel EPIC Program Outstanding Supplier Award with Supplier Diversity Distinction for 2023.The award recognizes the highest level of achievement in the Intel global supply chain and is an ongoing realization of continuous improvement within the high-performing Intel supplier ecosystem.Of the thousands of Intel suppliers around the world,only a few hundred qualify to participate in the EPIC Supplier Program.Applied is one of only six companies recognized by Intel in 2023.Intel honored Applieds unwavering commitment to quality,drive for excellence and dedication to technology innovation.Supply Chain ResponsibilityFostering Diverse Supplier TalentApplied is working to grow the pipeline of talent across our supply chain.In addition to working closely with our existing suppliers to secure applicable diversity certifications,we are committed to helping strengthen both the capabilities and capacity of suppliers to grow with Applied and the semiconductor industry.This includes helping strengthen the pipeline of talent with essential vocational skills,like welding and electrical,as well as science,technology,engineering,arts and math(STEAM)skills to support our supply chain.Applied is working to establish a vocational and S
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THE ESTE LAUDER COMPANIES INC.OUR FISCAL 2024REPORTSOCIAL IMPACT&SUSTAINABILITY3ABOUT THIS REPORTCAUTIONARY NOTE This report contains information about our social impact and sustainability goals,targets,initiatives,commitments,and activities of ELC (which includes The Este Lauder Companies Inc.and its subsidiaries).These efforts involve certain risks and uncertainties,such as changes in our business(e.g.,acquisitions,divestitures,or new manufacturing or distribution locations),financial performance,the standards by which achievement is measured,the assumptions underlying a particular goal or matter,and our ability to accurately report particular information.Actual results could differ materially from our stated goals or the results we expect.Changing circumstances,including evolving expectations for social impact and sustainability generally or to specific focus areas,changes in standards or the way progress or achievement is measured,may lead to adjustments in,or the discontinuation of,our pursuit of certain goals,commitments,or initiatives.Moreover,the standards by which social impact and sustainability efforts and related matters are measured are developing and evolving,and certain areas are based on assumptions.The standards and assumptions could change over time.The selection by management of alternative acceptable measurements could have resulted in materially different amounts or metrics reported herein.In addition,statements made about our company,business,or efforts may not apply to all business units(e.g.,ones that were more recently acquired).This report may use certain terms that third parties refer to as“material”in connection with certain social impact and sustainability matters.Used in this context,however,these terms are distinct from,and should not be confused with,the terms“material”and“materiality”as defined by,or construed in accordance with,securities or other laws and regulations.Therefore,matters considered to be material for purposes of this report may not be considered material in the context of our financial statements,reports with the U.S.Securities and Exchange Commission(“SEC”),or our other public statements,and the inclusion of information in this report is not an indication that such information is necessarily material to the Company in those contexts.This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995,including statements regarding our social impact and sustainability goals,targets,initiatives,commitments,and activities,as well as our future operations and long-term strategy.Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations,we cannot assure that actual results or outcomes will not differ materially from any future results or outcomes expressed or implied by such forward-looking statements.Forward-looking statements include all statements that do not relate solely to historical or current facts and involve a number of known and unknown risks,uncertainties,and other important factors such as those described above and in our recent SEC filings including in“Item 1A.Risk Factors”and“Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations”in our Annual Report on Form 10-K for the fiscal year ended June 30,2024,and in our subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.We assume no responsibility to update the information contained in this report or to continue to report any information.This report provides information about the social impact and sustainability activities and performance for The Este Lauder Companies Inc.(referred to herein as the“Company,”“ELC,”“our”,or“we”).The content covers our priority focus areas.Unless otherwise noted,this report covers activities during our fiscal 2024 (i.e.,July 1,2023,through June 30,2024)and includes data for most facilities we own(or lease)and operate.This report has been prepared with reference to the Global Reporting Initiative(GRI)Standards.This report is also aligned to the recommendations outlined by the Sustainability Accounting Standards Board(SASB),the Task Force for Climate-related Financial Disclosures(TCFD)and the Task Force for Nature-related Financial Disclosures(TNFD).The GRI,SASB,TCFD,and TNFD indices for this report can be found on pages 77-85.Certain environmental and social metrics have been subjected to independent limited assurance.Please see PricewaterhouseCoopers LLPs Report on page 88.Read more about our social impact and sustainability initiatives at:https:/ see our Annual Report on Form 10-K for the fiscal year ended June 30,2024,for other information including our business performance.4TABLE OF CONTENTSINTRODUCTION05 ABOUT THE ESTE LAUDER COMPANIES INC.07 LEADERSHIP LETTERS 09 PROGRESS ON OUR GOALS AND COMMITMENTS13 FEATURED STORIES27 OUR COMMITMENT TO SOCIAL IMPACT&SUSTAINABILITY SOCIAL IMPACT 31 EMPLOYEE HEALTH AND SAFETY33 EMPLOYEE EXPERIENCE37 SOCIAL INVESTMENTS40 INCLUSION,DIVERSITY&EQUITYSUSTAINABILITY 44 CLIMATE48 WATER50 WASTE52 SOURCING 55 NATURE AND BIODIVERSITY59 PRODUCT FORMULATION62 PACKAGING DATA TABLES AND ASSURANCE DOCUMENTS65 METRICS 77 GRI/SASB/TCFD/TNFD INDEXES 88 INDEPENDENT ASSURANCE STATEMENTS 5The Este Lauder Companies Inc.is one of the worlds leading manufacturers,marketers,and sellers of quality skin care,makeup,fragrance,and hair care products,and is a steward of luxury and prestige brands globally.The Companys products are sold in approximately 150 countries and territories under brand names including:Este Lauder,Aramis,Clinique,Lab Series,Origins,MAC,La Mer,Bobbi Brown Cosmetics,Aveda,Jo Malone London,Bumble and bumble,Darphin Paris,TOM FORD,Smashbox,AERIN Beauty,Le Labo Fragrances,Editions de Parfums Frdric Malle,GLAMGLOW,KILIAN PARIS,Too Faced,Dr.Jart ,and the DECIEM family of brands,including The Ordinary and NIOD.ABOUTIncluded on theDow Jones Sustainability Index(DJSI)for North America,for the fourth consecutive yearThe Human Rights Campaign (HRC)named The Este Lauder Companies as aBest Place to Work for LGBTQ Equality with a perfect score of 100%for HRCs 2023-2024 Corporate Equality Index for the 14th yearRanked top 100 on Americas Most Responsible Companies by Newsweek for 2024Recognized by Fortune as one of theWorlds Most Admired Companiesin 2024Ranked as one of the top100 Best Corporate Citizensby 3BL MediaOurProfit Recovery&Growth Planis designed to accelerate rebuilding our profitability,leverage our capabilities,further strengthen our consumer-facing activities,andFuel Long-Term Sustainable GrowthRecognized by CDP with ratings ofA in Climate ChangeA-in Forests,Palm OilA-in Forests,TimberA-in Water Security for 2023Our Hero Productshave generated trial and earned Consumer LoyaltyABOUT THE ESTE LAUDER COMPANIES6$15.61Billion in net sales:International 75%;U.S.25%Countries&Territories1504Major Product CategoriesSkin Care,Makeup,Fragrance,Hair Care7Dear Stakeholders,At The Este Lauder Companies,our purpose is to put the power of possibility in the palm of every hand,a guiding principle that has shaped our organization for more than 75 years.This commitment continues to inspire new opportunities for both our company and the global communities we serve.As a global company operating in a dynamic landscape,our commitment to long-term,sustainable growth demands innovation and persistence.Our environmental and social efforts are integral to this journeyfostering innovation,value creation,operational efficiency,and engagement with both current and future talent.In fiscal 2024,we continued to deepen these efforts,taking important steps to align our practices with our goals and seeking opportunities to further embed these principles into how we do business.This past fiscal year,our dedication to these efforts came to life for our consumers through a variety of experiences and touchpoints.As a brand-led,prestige beauty company,creativity and innovation are at the core of our identity.This same spirit drives the design of our products and packaging,making them beautiful,luxurious,and aligned with our sustainability goals.Our diverse portfolio of brands continues to create beloved products to meet the evolving expectations of our consumers in this ever-changing prestige beauty landscape.As we endeavor to build a stronger and more agile company,we remain guided by the values that have shaped us over the yearsgenerosity of spirit,innovation,willingness to challenge the status quo,and commitment to acting responsibly.Our social impact and sustainability efforts embody these values and are driven by the creativity and resilience of our talented teams around the world.Alongside the strength of our employees,brand portfolio,and product assortment,we are confident in our ability to continue shaping the future of beautyone that celebrates every unique,beautiful future.WILLIAM P.LAUDER Executive Chairman The Este Lauder Companies Inc.FABRIZIO FREDA President and Chief Executive Officer The Este Lauder Companies Inc.WILLIAM P.LAUDER&FABRIZIO FREDALETTER FROM LEADERSHIP LETTERS8NANCY MAHONLETTER FROM Our sustainability goals are a key part of our business strategy.In fiscal 2024,we achieved several of these goals ahead of schedule,including surpassing our water withdrawal targets,publishing our first corporate ingredient glossary,and reaching our palm oil objectives before our 2025 deadline.For the fifth consecutive year,we achieved carbon neutrality across our Scope 1 and Scope 2 greenhouse gas emissions and sourced 100%renewable electricity globally for our direct operations.Lastly,we continue to address industry-wide challenges,like emissions and packaging,through innovative and collaborative tools to move our progress forward.Our social impact initiatives demonstrate our dedication to the communities where we live,work,and source.The Este Lauder Companies Charitable Foundation remains committed to advancing education and leadership opportunities for women and girls,promoting equity,and investing in communities.Our brands and employees champion causes they care aboutfrom mental health and disaster relief to equity and womens leadership.Within our own walls,we continue to build a workplace that prioritizes well-being,mentorship,and development opportunities for our employees.We also continue to increase diversity across our workforce,products,and marketing efforts,to attract and retain the best talent and deliver exceptional products for our consumers.As we look ahead,I am excited about the opportunities to build on this momentum.Together,we will continue to lead with purpose,striving to position the company for long-term,sustainable growth.Thank you for your commitment to this important work.NANCY MAHONChief Sustainability Officer The Este Lauder Companies Inc.Dear Stakeholders,In fiscal 2024,our talented teams across brands,regions,and functions collaborated to deliver exceptional products while continuing our journey to embed social impact and sustainability into every aspect of our business.I am proud of the meaningful progress we have made and am pleased to share The Este Lauder Companies Fiscal 2024 Social Impact and Sustainability Report with you.9PROGRESS ON OUR GOALS AND COMMITMENTSPROGRESS ON OUR GOALS AND COMMITMENTSOur goals are an important part of our strategy to embed social impact and sustainability into business operations.Below is our progress toward our goals as of June 30,2024.Please see metrics tables (pages 65-76)for year-over-year goal progress.GOALGOAL1 1FY24 METRICFY24 METRICTARGET TARGET NOTESNOTESSTATUSSTATUSSUSTAINABILITYClimate and EnergyReduce absolute Scope 1 and 2 greenhouse gas(GHG)emissions 50%by 2030 from a 2018 base year.237%reduction Scope 1 and 250%reduction Scope 1 and 2 (fiscal 2030 target)Emissions increased due to the use of temporary generators at our largest,and recently completed,manufacturing facility in Japan as we await completion of an electrical substation by the local utility.We realized an emissions reduction from fiscal 2023 for our corporate vehicle fleet as we pursue our electric vehicle transition.Reduce Scope 3 GHG emissions from purchased goods and services,upstream transportation and distribution,and business travel 60%per unit revenue by 2030 from a 2018 base year.321%per unit revenue60%per unit revenue(fiscal 2030 target)The largest contributors to the emissions decrease over fiscal 2023 are our reduction in usage of air freight and reduction in purchased goods and services.Small increases were observed in employee commuting and business travel as these activities continue a post-pandemic rebound.By 2030,100%of our global corporate fleet vehicles will transition to electric.410.70%Progress continues to be driven by planned transitions in mature EV markets within Europe,with additional transitions planned across developing markets globally(e.g.UK,NOAM)in fiscal year 2025.See pp.45-47 for details.Since fiscal 2020,we have achieved carbon neutrality across our Scope 1 and Scope 2 emissions and sourced 100%renewable electricity globally for our direct operations each year5commitments that we met again in fiscal 2024 and intend to maintain moving forward.WaterBy 2025,we are committed to reducing our water withdrawal from our direct manufacturing sites by 20%,from a fiscal 2019 baseline,focusing on our high and extremely high water-stressed sites.623%reduction20%reductionWe continued to focus on efficiency and implementation of water management best practices as well as execution of capital projects.See pp.48-49 for details.WasteWe have an annual commitment to maintain zero industrial waste-to-landfill for all global manufacturing,distribution,and innovation sites.799.8%diverted100%divertedIn fiscal 2024,due to unforeseen operational challenges with waste process facilities used by external partners,we diverted 99.8%industrial waste from landfill.1.“By 20XX”means by the end of calendar year 20XX,unless otherwise noted.2.Reduction is from a fiscal 2018 baseline and reflects Scope 1 and Scope 2 market-based emissions including renewable energy sourced from contractual agreements.By 2030 means by the end of fiscal year 2030.3.Reduction is calculated from a fiscal 2018 Scope 3 baseline(Scope 3 in metric tons CO2 equivalents/net sales in million USD).By 2030 means by the end of fiscal year 2030.4.Global corporate fleet vehicles include sales,executive,benefit,and employee perquisite passenger vehicles that are owned or leased by ELC and provided to employees pursuant to their role within the organization.Electric vehicles are defined as battery-electric vehicles and plug-in hybrid vehicles with an all-electric range of at least 50 km.5.Electricity consumption for all global activities with ELC operational control.Renewable electricity consumption reflects on-site solar generated and consumed at ELC locations,renewable off-site generation(utility contracts),Energy Attribute Certificates(EACs)purchases,and a Virtual Power Purchase Agreement(VPPA).6.Reduction is from a fiscal 2019 baseline of 1.5 million cubic meters water withdrawal at ELC-operated manufacturing sites.Excludes any manufacturing sites not fully operated by ELC within the target timeline.7.Excludes DECIEM.ON TRACKOFF TRACKSOCIAL IMPACT&SUSTAINABILITY GOALS AND PROGRESSTARGET MET AND MAINTAINEDABOUT THE ESTE LAUDER COMPANIES10GOALGOAL1 1FY24 METRICFY24 METRICTARGET TARGET NOTESNOTESSTATUSSTATUSSUSTAINABILITYSourcingAs part of our continuous efforts to address issues that may exist within complex supply chains,by 2025 we will have identified sensitive ingredient supply chains and developed robust biodiversity and social action plans for them.In fiscal 2024,we continued to strengthen and implement biodiversity and social action plans for priority ingredients,and to embed related programs and partnerships across our operations(please see pp.52-54 for details).By 2025,at least 95%of our palm-based ingredients8(palm oil and its derivatives)will be certified sustainable from Roundtable on Sustainable Palm Oil(RSPO)physical supply chains.95%(calendar year 2023)950%of our palm-based ingredients8 are certified under one of RSPOs four certification types.In calendar year 2023,we achieved our RSPO physical supply target ahead of schedule.Packaging 9By 2025,75-100%of our packaging will be recyclable,refillable,reusable,recycled,or recoverable.71u-100%We continue our work on this goal despite shifts in product mix demanding changes in our packaging requirements.By 2025,increase the amount of post-consumer recycled(PCR)material in our packaging to 25%or more.20%Since achieving our initial goal of 15%PCR in 2021,we have continued to progress towards our enhanced goal of 25%,despite facing industry-wide PCR cost and availability challenges.Our ambition is to use responsibly sourced paper products whenever possible with a goal to have 100%of our forest-based fiber cartons10 Forest Stewardship Council(FSC)certified by 2025.950%We experienced a temporary decline in FSC performance year-over-year due to changes in the methodology of our calculation.By 2030,reduce the amount of virgin petroleum content in our plastic packaging to 50%or less.82P%We continue to make progress on this goal by leveraging a broad range of packaging solutions,including advanced recycling,exploration of bio-based resins,and innovative uses of materials such as paper.Ingredient TransparencyWe will develop a glossary of key ingredients that includes descriptions of the ingredients purpose and will make this information available online by 2025.In fiscal 2024,ELC published an ingredient glossary on the Companys corporate website.In addition,brands including Aveda,Bobbi Brown Cosmetics,Bumble and bumble,Clinique,Darphin,DECIEM,Dr.Jart ,Este Lauder,Editions de Parfums Frdric Malle,GlamGlow,La Mer,MAC,Origins,and Smashbox have published key ingredient glossaries on their brand websites.SOCIAL INVESTMENTSBrand CauseEach brand11 will focus on and support at least one social or environmental cause by 2025.910%We continue to help our brands to identify and support causes that resonate with their individual brand identities.EMPLOYEE ENGAGEMENTEmployee SafetyWe will drive safety to continue decreasing Total Recordable Incident Rate(TRIR)12 to ensure continued world-class leading levels,with a goal of 0.15 by 2025.0.220.15While there was a marginal increase in our TRIR in fiscal 2024(from 0.20 in fiscal 2023),our lost time frequency rate decreased to 0.13 and we had reductions in both“slip,trip,and fall”recordable injuries and“struck by”recordable injuries.We continue to have one of the best-in-class TRIRs in our industry and strive towards making progress on our goal of decreasing the TRIR to 0.15 by the end of calendar year 2025.Employee Volunteerism&GivingBy 2025,we will engage and mobilize employees to contribute a total of$25 million,by completing actions such as donating or volunteering,to nonprofits through ELCs social impact and sustainability engagement program,since its launch in 2015.$24.2 million13,14$25 millionWe continued to make progress towards our 2025 target through a portfolio of employee engagement initiatives.PROGRESS ON OUR GOALS AND COMMITMENTS8.Excludes palm-based ingredients not directly procured by ELC,such as those procured by third-party manufacturers(TPMs)and directly procured and received by DECIEM.9.Product packaging is defined as any item to be used for the containment,protection,handling,and presentation of products and delivery to ELCs distribution centers that is included on the bill of materials.Excludes DECIEM.10.Forest-based fiber cartons are defined as folding cartons or sleeves made from solid bleached sulfate paperboard,folding box board,or an equivalent board made with post-consumer waste.11.For purposes of this metric the number of brands is 22.12.TRIR is the number of Occupational Safety and Health Administration(OSHA)recordable incidents per 100 workers.Excludes DECIEM.13.Metrics reflect information self-reported to ELCs employee social impact and sustainability engagement program,the ELC Good Works platform,used to report employee volunteerism,employee monetary donations,and ELC charitable matching gifts.The platform was available in 17,31,and 31 markets at the end of fiscal 2022,2023 and 2024,respectively.Eligible employees are those who meet certain criteria,which varies by market,and have access to the platform.Excludes DECIEM.14.Metric includes total cumulative ELC employee donations and amount matched,inclusive of volunteer rewards,by ELC since the launch of the ELC Good Works platform in November 2015.(continued)11PROGRESS ON OUR GOALS AND COMMITMENTSWe are proud to have made intentional and impactful strides along our journey to advance gender and racial equity.Read more about the progress weve made as of June 30,2024,below.1 Read more about our commitments on pages 40-43.COMMITMENTCOMMITMENTFY24 PROGRESSFY24 PROGRESS2 2STATUSSTATUSGENDER EQUITYOpportunityAchieve global pay equity by 2023.The initial commitment to achieve global pay equity3 was met in 2023.4 In 2024,we expanded our work to achieve pay equity by including our Point-of-Sale(POS)employees globally and again met our commitment.5LeadershipAchieve gender parity for women in senior leadership positions(SVP )globally by 2025.Women representation at the SVP level globally was 49.7%in fiscal 2024,an increase from 46.9%in fiscal 2023.Expand leadership development programs.The positive impact of the Open Doors Womens Leadership Program continues to reverberate among its alumnae.100%of participants better understand their leadership strengths and how to apply them,and over 95%report they are more confident in their abilities and skills,are better equipped to act on feedback and embrace a growth mindset.18 months following the program,89%of participants remained with ELC,and one out of every 2 earned a promotion.We facilitated over 25 Open Doors Live events,which brought customized,experiential learning to nearly 1,000 employees across brands,regions,functions,channels,and ERGs.We launched 4 Open Doors Collection programs led by brands,regions,functions and ERGs.We refreshed the Open Doors Course Collection with new video content,additional supplemental learning materials and interactivity.Health and EducationSustain position as#1 global corporate donor to the Breast Cancer Research Foundation(BCRF).ELC continues to be the largest corporate donor to BCRF,funding research worldwide.In fiscal 2023,the ELC Charitable Foundation(ELCCF)made a$15 million commitment over five years that will fund a new BCRF research initiative.As of June 30,2024,$6 million has been funded for this study.For more information,see pp.16,38,42-43.Launch and expand select philanthropic partnerships in health and education.ELC continues to support Co-Impacts Gender Fund with a multi-year commitment of$15 million over 5 years through ELCCF.The Gender Fund has awarded grants in support of 85 predominantly women-led initiatives across Africa,Asia and Latin America.ELC continues to work in collaboration with National Youth Poet Laureate Amanda Gorman,on WRITING CHANGE and met its initial goal of providing$3 million in funding over three years to support grassroots organizations dedicated to advancing literacy as a pathway to equality,access,and social change,through the power of young voices.WRITING CHANGE expanded to support 10 organizations across the United States.TARGET METON TRACKGENDER AND RACIAL EQUITY COMMITMENTS AND PROGRESS1.Gender and racial equity commitments that have been met in prior years have been removed from the progress tables and may be added back in the future as needed.2.The Company is committed to compliance with federal,state,and local laws.Accordingly,trainings and initiatives are periodically reviewed for compliance.3.For purposes of this commitment,the Company defines pay equity as a pay gap of less than 1%and/or not statistically significant between women and comparably situated men included in its pay equity review process.4.In fiscal 2023,the following global workforce populations were included in the pay equity review process:R&D,Supply Chain(including Manufacturing and Distribution),other Corporate Functions,Brands,and Regions.At that time,the review did not include Point-of-Sale(POS)employees or non-discretionary pay populations.5.With the exception of non-discretionary pay populations(i.e.where we are restricted from making such adjustments),all employee populations are now included in our pay equity review process.ABOUT THE ESTE LAUDER COMPANIES12COMMITMENTCOMMITMENTFY24 PROGRESSFY24 PROGRESSSTATUSSTATUSRACIAL EQUITYListening and LearningFoster a strong internal culture of advocacy and inclusion to help employees share their perspectives,be heard,and collectively affect change.Hosted 32 Listening Sessions across ERGs,global brands and leadership programs to help inform our employee engagement strategy.In fiscal 2024,the Identifying and Disrupting Unconscious Bias training had over 2,300 attendees,comprised of over 760 employees engaged in live global training and over 1,600 employees engaged in self-paced e-learning.Within the scope of the completion rate across the self-paced e-learning,over 1,400 were Point-of-Sale employees.Talent and OpportunityProvide equitable access to professional development and advancement for our Black employees in the United States and hold ourselves accountable for creating a workforce that is more representative and responsive to people of all backgrounds.U.S.Census Data for the Black population was 13.6%as of 2020.In fiscal 2024,17.3%of ELCs U.S.total hires were Black.Over the last 3 years,46.4%of From Every Chair participants have earned promotions and/or experienced career mobility since the launch of the program.In fiscal 2024,ELC expanded our partnership with Spelman College to provide professional development,coaching and networking opportunities to freshman students through the institutions Convocation Lecture Series.We also launched a strategic partnership with AFROTECH,one of the largest networks of Black STEM professionals,to increase our access to Black talent across all levels.Brand Marketing&Creative RepresentationEnsure that that the end-to-end creative process accurately and consistently represents the Black experience,engages Black professionals,and that our products meet the needs of our Black consumers.Created a Multi-ethnic Consumer council as a forum to accelerate gains in market share,user penetration,and new consumer recruitment.Leveraged peer organizations(e.g.,World Federation of Advertisers,See Me Index,Unstereotype Alliance,Creative Equals)for learnings,tools,and creative best practices.Continued to build creative agency roster with certified Black and Latino-owned agencies.Looked to best practices to inform our approach in how to expand current creative agency partners roster of talent.Continued to support brands in developing relevant products,benefits,claims and marketing strategies to drive greater relevancy in communication and engagement.PROGRESS ON OUR GOALS AND COMMITMENTS13SCIENCE OF BEAUTYADVANCING WOMEN IN THE When Mrs.Este Lauder started her company at her kitchen table more than 75 years ago,she acted as a one-woman product development department,expertly crafting products that met consumers needs.1314The gender gap in STEM starts early.Research shows that while 12-year-old girls and boys show a similar interest in computer science,boys are more likely to be encouraged to pursue technology by teachers,parents,and the media.Studies find that most Gen Z girls and young women say theyre not interested in STEM careers because they dont believe they would enjoy it(61%)or be good at it(57%).*A key focus of this work is educating young women on the diverse opportunities within STEM careers.For instance,on Long Island,New York,where we have a longstanding R&D and manufacturing presence,ELC executives and R&D leaders partnered with the Girl Scouts of Nassau County and local Hofstra University for their annual STEM conference.Additionally,in partnership with Spelman College,a global leader in STEM education for Black women,in Atlanta,Georgia,The Este Lauder Companies Charitable Foundation(ELCCF)helped to launch the inaugural CULTIVATING THE NEXT GENERATION OF STEM TALENTToday,this blend of innovation and creativity is a cornerstone of The Este Lauder Companies approach to invention,where women comprise 70%of our scientists and technical professionals and women lead all of our global R&D and Innovation Centers.Around the worldfrom the Innovation Labs in Shanghai,China,to our research salon in Blaine,Minnesotathese teams are proof of a modern STEM(science,technology,engineering,and math)industry,leveraging cutting-edge technologies,state-of-the-art chemistry,AI,and deep consumer insights.Were proud of the advancements we continue to make,but there are still many gaps to overcome.Across industries,globally,women represent only 28.2%of the STEM-focused workforce,compared with 47.3%of the workforce in non-STEM sectors.Furthermore,while women account for 25%of non-STEM leaders,they occupy just over 10%of STEM leadership positions.*For ELC,advancing women in STEM is both an opportunity and responsibility,one that will continue to power new possibilities within our company and in the communities we serve.We are committed to fostering a long-term pipeline of diverse STEM talent,supporting women within the workplace,and advancing women leaders who are driving the creative,scientific,and technological breakthroughs of tomorrow.Black Beauty STEMinist Lab Intensive and Symposia to offer students a week of hands-on training and networking with women of color who hold STEM roles in the beauty and personal care industry.ELC actively engages in addressing this disparity by working with schools and scientific organizations to help build the STEM education pipeline for girls and young women around the world.Our strategic partnerships and internal programs leverage our STEM leaders as mentors and role models,while our ELC facilities show real-world applications of STEM disciplines,and our investments help to jumpstart new programs.ELC scientist at Girls Scouts of Nassau County,New York STEM conference making lip gloss with a program attendee.Spelman College students participating in the Black Beauty STEMinist Lab,gaining hands-on STEM experience.*World Economic Forum Gender Gap Report,2024.*www.code.org15SUPPORTING A STEM WORKFORCE AND ADVANCING STEM TALENTEncouraging young women to pursue STEM is essentialbut its far from enough.Within our organization and our communities,we are committed to helping to promote and retain women in STEM through career development,education,ongoing training,recognition,and support.One of our flagship partnerships promotes gender equality in scientific research.For 7 years,ELC has partnered with Springer Nature,a leading scientific research publisher,to host the Nature Awards for Inspiring Women in Science.The awards spotlight early-career women researchers and work that encourages girls and young women to engage in STEM subjects.This years winner,the SwaTaleem Foundation,helps girls in New Delhi,India,study and remain in STEM fields.Ahead of the awards ceremony,ELC hosted a networking day at our R&D facilities in Melville,NY,for honorees to connect with some of our leading scientists.Internally,we strive to support women in STEM roles at every stage of their careers.For entry-level talent,we host a slate of programs,like a specialized track in our ELC Presidential Associate Program designed to bring more women into data and analytics fields,and our longstanding R&D and Packaging STEM Internship Program for high-performing Engineering/Life Sciences undergraduate and masters students.For ELC employees,our Open Doors STEM Womens Leadership Initiative provides an interactive online leadership program for emerging talent,fostering skill development and authentic leadership.We also facilitate mentorship and networking opportunities through dozens of programs and Employee Resource Groups(ERGs),with subgroups such as Women in Technology and Women in Supply Chain,which recently launched a cohort in Japan.Our Global Supply Chain function is also a member of“boom!”,a global community that brings together a powerful,cross-industry community of women-identifying supply chain professionals for networking and learning opportunities,of which 100 women from ELC are members.To learn more about our ERGs and Employee Experiences,see pages 33-36.We also support numerous training and skills development programs for women and girls around the world.ELCs Travel Retail division and ELCCF work closely with The Asia Foundation,a nonprofit international development organization,to support the STEM ConnectHer program in Japan,Korea,India,Malaysia,and Singapore that gives young women the skills to succeed in STEM careers through online training,mentorship,company site visits,and other professional development resources.Our brands are also dedicated to this cause;Este Lauder has a longstanding partnership with Kode with Klossy,the nonprofit founded by Global Brand Ambassador Karlie Kloss,that creates learning experiences for young women and gender expansive youth,inspiring them to pursue their passions in a technology-driven world.The 2023 Nature Awards for Inspiring Women in Science awardees Hortense Le Ferrand,of Nanyang Technological University in Singapore,and Ananya Tiwari,of SwaTaleem Foundation in New Delhi,India.16Empowering Women through Research,Education,and Medical ServicesYEARS OF THE BREAST CANCER CAMPAIGN:ELC has been at the forefront of supporting the global breast cancer community for more than 30 years.At a time when breast cancer wasnt spoken about openly,Evelyn H.Lauder saw an opportunity to bring awareness to the disease and address stigmas in womens health.In 1992,she co-created the pink ribbon and founded The Este Lauder Companies Breast Cancer Campaign(The Campaign)inspiring a global movement around its mission to help create a breast cancer-free world for all.Together with The Este Lauder Companies Charitable Foundation(ELCCF),The Campaign has funded more than$144 million for lifesaving research,education,and medical services around the world,with more than$114 million funding medical research through the Breast Cancer Research Foundation(BCRF).As part of its global impact,The Campaign funds numerous grants and programs that help accelerate opportunities for women in STEM.In fiscal 2023,with ELCCF,The Campaign committed$15 million over 5 years to establish the BCRF Health Equity Initiative to address breast cancer disparities,specifically those impacting Black women in the United States.Additionally,The Campaign funds BCRF grants that span a multitude of focus areas,from understanding basic cell biology to developing new diagnostic tests and enhancing patient quality of life during and after treatment.PARTNERSHIP BEYOND OUR WALLSWe also recognize the need to drive further impact beyond our walls,which is why we work with cross-sector and multilateral partners,leveraging our convening power as a global organization.Most recently,ELC assembled and supported numerous events and onstage conversations alongside the 78th session of the United Nations General Assembly(UNGA)and during Climate Week NYC in September 2023.We are a longtime partner of the UN Foundation,and during UNGA week,we co-hosted an evening reception with the theme of“Access&Inclusion:Promoting Equality in an Era of Emerging Technology.”The conversation focused on the digital gender divide and the significant gaps in access to digital tools for women and girls,as well as the essential need for safer online spaces.At ELC,we are proud to be part of the systemic work addressing the significant gender gap globally,within our communities and through our long-term partnerships.When it comes to persistent challenges like the gender gap in representation and advancement in STEM,we know that we go further when we work together.We strive to serve as a bridge-builder in these effortslistening,advocating for community-led solutions,and leveraging our resources to continue driving meaningful impact.BCC Global Ambassador,Elizabeth Hurley,joins ELC-funded BCRF researcher Dame Lesley Fallowfield and UK&I BCC Ambassadors:Lauren Mahon,Dr.Zoe Williams,Kreena Dhiman,and Leanne Pero MBE.17PACKAGING SUSTAINABILITYPackaging helps us tell the story of our prestige beauty products.From luxurious materials to sophisticated designs,thoughtfully constructed packaging instantly elevates the experience of spritzing a finely crafted perfume or applying a sumptuous night cream.Yet our approach to packaging at ELC goes beyond delighting consumers senses:It also presents a key opportunity to incorporate additional sustainability concepts into our product offerings,aligned with our goals.In fiscal 2020,we launched Packaging Sustainability Guidelines to help inform our package developers,marketers,and procurement teams as they create and deliver high-quality packaging that is functional,luxurious,and tailored to the needs of each of our unique brands.We approach packaging sustainability through the conceptual framing of“5 Rs”:recyclable,refillable,reusable,recycled,or recoverable.By 2025,our goal is for 75 to 100%of our packaging by weight to be aligned with at least one of these principles.In fiscal 2024,71%of ELCs packaging by weight was recyclable,refillable,reusable,recycled,or recoverable.As we monitor our progress toward achieving these goals at scale,our global Packaging Sustainability team continues to work closely with our brands,including those more recently acquired,to find new opportunities and areas for long-term improvement.In support of our progress toward a circular economy,ELC also holds membership in groups including the Sustainable Packaging Initiative for Cosmetics and the Business Coalition for a Global Plastics Treaty.5RS of THE1819REFILLABLERefillable packaging allows a container to be used multiple times in conjunction with a replaceable secondary component,helping to minimize single use and helping contribute to a circular economy.One of our brand leaders in refillable packaging is Bobbi Brown,which minimizes waste with the design of its Extra Repair Moisture Cream Intense.When consumers polish off the last of this moisturizer,they can easily insert a refill pod into the original packaging,giving it new life with every replenishment.In fiscal 2023,Este Lauder transitioned its Luxury Fragrance collection to a recyclable and refillable glass bottle.According to the results of the life cycle assessment conducted,purchasing the Luxury Fragrance in the recyclable glass bottle and one refill helped us reduce associated emissions and water consumption by 20ter the initial purchase.*This products refillable bottle also helps to minimize packaging weight by 40%.REUSABLEReusable packaging refers to containers that can be used multiple times,with or without a secondary refill component,as well as packaging that can be returned to the brand.At the end of fiscal 2024,9 of our brands offered at least one reusable packaging component for select products.Le Labo provides a notable example:Consumers in the United States and United Kingdom can refill their eau de parfum glass bottles(50 mL and up)online or in select labs worldwide.With their personalized labels and elegant glass packaging,Le Labos fragrance bottles are worthy of keepsake status;refilling the bottles allows consumers to reuse and cherish their bottles for years.RECYCLABLEA products recyclability may depend on size,decoration,material,and components,as well as the location in which it is sold.We look to integrate recyclability principles into packaging design whenever possible.Aveda,for instance,is an industry leader with its development of paper-based,locally recyclable sachets for product samples.Compared to plastic alternatives,production of these paper-based sachets reduces water consumption by at least 36%and emits 37wer greenhouse gases.First launched in Europe and the United Kingdom,Avedas paper-based sample sachet is expected to roll out globally in 2025,making it the brands priority sampling packaging,where applicable.Other packaging materials present design opportunities for recyclability,too.For example,Origins continues to design with packaging sustainability principles in mind with its PlantfusionTM Body Collection packed in recyclable packaging.*After having purchased your first refillable and recyclable glass bottle.20RECYCLEDRecycled packaging incorporates materials that have been recovered or diverted from the waste stream.Including post-consumer recycled(PCR)content into our packages requires close collaboration with our suppliers,underscoring the collective and global nature of advancing towards our packaging sustainability goals.Aveda uses recycled content as one of the principles that guides the brand packaging decisions across its products,including Be Curly AdvancedTM co-wash,which arrives in a recyclable bottle with 90%post-consumer recycled material.Bumble and bumbles Seaweed Nourishing Shampoo and Conditioner has packaging made from 100%recycled packaging materials.Reducing and removing packaging where possible Designing packaging that is reusable and refillable Building designed-in recyclability Increasing amounts of Post-Consumer Recycled(PCR)material in packaging Replacing petroleum-based plastics with bioplastics(if the bioplastic can be recycled and does not contaminate traditional recycling streams)RECOVERABLERecoverable packaging can be collected through take-back programs,diverting it from landfills and converting it into energy or recycled materials.Developing such programs is a highly complex process:They are subject to local recycling and waste-handling laws and infrastructure,and implementation requires comprehensive employee training.Despite this complexity,ELC continued to develop take-back initiatives in fiscal 2024,with certain brands expanding their programs to new markets.Today,brands including MAC,Aveda,DECIEM,Bobbi Brown,and Clinique offer take-back programs in select markets.“Back-To-MAC,”for instance,is a program that collects consumers used MAC packages for recycling,where possible.LAUNCHED IN 2020,ELCS PACKAGING SUSTAINABILITY GUIDELINES OUTLINE 5 KEY PRIORITIES:21BRANDS IN ACTION Alongside the work of The Este Lauder Companies Charitable Foundation and ELCs Breast Cancer Campaign,our brands focus on championing the causes that matter to them,their employees,consumers,and communities.Their innovative campaigns,partnerships,and investments support progress in areas that are redefining leadership,addressing stigmas in mental health,and exploring solutions to the most pressing environmental concerns of our time.THE ESTE LAUDER COMPANIES INC.22AVEDAEvery April,since 1999,Aveda employees,Salons and Spas,Institutes,Experience Centers,and customers join together during Aveda Earth Month to raise funds to help provide and protect clean water at home and around the world.To date,they have raised over$72M for their nonprofit partners including global partner,charity:water.These funds have provided over 1.5 million people with clean and safe water and protecting thousands of watersheds in the communities where we work and live.Aveda raises money for Earth Month in a variety of ways including limited-edition product sales and promotions like#NoWashDay,and fundraising events including Appointments for Clean Water,Catwalks for Water,and Walks for Water.BOBBI BROWN COSMETICSThe Bobbi Brown Pretty Powerful Fund is dedicated to empowering women and girls by partnering with nonprofit organizations that advocate for education as a pathway to gender equality.It supports initiatives including Shes the First,a nonprofit organization working to uplift women and girls through education.Since launching the Pretty Powerful Fund in 2019,the brand has donated over$1.5 million to global womens empowerment organizations and gender equality organizations.In 2024,the brand launched a#PrettyPowerful partnership in EMEA with the Global Observatory for Gender Equality and Sport,which works to drive awareness of womens empowerment through sport and an active lifestyle.As part of this partnership,tied to the start of the 2024 Paris Olympic Games,Bobbi Brown Cosmetics launched a virtual exhibition on its website to drive awareness around the massive achievements of women in sports,who overcome barriers and obstacles every single day.23DECIEMDECIEM was founded on the principles of authenticity,transparency and kindness.Through building growth to power good,DECIEM is committed to fostering a world of belonging,one with inclusive communities where people feel accepted,appreciated,and valued for who they are.Since 2020,DECIEM has provided donations and support to nonprofit organizations that celebrate and advocate for LGBTQIA communities globally.To further this work,in 2024,DECIEM participated in Toronto Pride for the first time.As Gold sponsors,the brand was able to use its platform to collect 20K postcards of support for LGBTQIA youth and DECIEM employees distributed over 137,000 free products(Hyaluronic Acid B5 and Lash&Brow)to attendees.DR.JART Dr.Jart s commitment to artful experiences extends to its partnership with nonprofit Art Start to support emerging youth artists and strengthen local communities.Since its launch in 2021,sponsoring young artists across disciplines,this collaboration has produced Dr.Jart products with packaging designed by Art Start students.Dr.Jart has also partnered with Art Start on a series of interactive workshops centered around creative storytelling,brand building,and professional development for more than 40 youths from the organizations Emerging Artist Program across New York City,New York and Milwaukee,Wisconsin.BUMBLE AND BUMBLEBumble and bumble is committed to inclusive education and training.In 2023,the brand announced the first recipients of its hair trade scholarship with Point Foundation,which supports members of the LGBTQIA community in their education and career development within the hair industry.Additionally,alongside founding member Aveda,the brand became a supporting partner of the US-based Professional Beauty Associations Texture Education Collective,which helped spearhead a New York law ensuring that Cosmetology State Board licensing for cosmetology students include training,education,and testing on all hair textures.Leveraging this success,Minnesota and Connecticut enacted similar laws in May and June 2024.24JO MALONE LONDONJo Malone London continued to reinforce its 12 year long commitment to mental health by joining forces with UNICEF on a 2 year long partnership to protect and promote mental health and wellbeing for children,young people and caregivers around the world.With this 2-year partnership,Jo Malone London is committed to donating$4.5 million to UNICEFs mental health work by 2025,through the sale of the charity candle collection,consumer check-out donations and employee fundraising activities.LA MERLa Mer is committed to helping support ocean conservation efforts around the world through the La Mer Blue Heart Oceans Fund,a campaign dedicated to marine habitat restoration and youth education.The work supports global efforts to protect and restore marine habitats.In fiscal 2024,the fund continued this work with beach cleanups around the world on World Oceans Day and an awareness-driving Ripples of Change campaign on social media.TOM FORD BEAUTYIn 2020,Lonely Whale launched Unwrap the Future,a multi-year program with an ambitious mission:Vet and scale marine-safe alternatives to traditional thin-film plastic,nearly half of annual ocean plastic pollution.The TOM FORD Plastic Innovation Accelerator,powered by Lonely Whale,won the 2024 SXSW Innovation Award in the Climate Change category for its technological advancements.Sponsored by TOM FORD BEAUTY and The Este Lauder Companies Inc.,the TOM FORD Plastic Innovation Accelerator is advancing awareness of thin-film plastic and accelerating market adoption of prize-winning seaweed-based alternatives.ESTE LAUDEREste Lauders Emerging Leaders Fund(ELELF)is redefining leadership by helping to support a new generation of emerging women leaders and challenging the gender stereotypes present in current expectations of leadership.In March,ELELF and Vital Voices(VV),a global nonprofit that invests in women leaders,hosted the 2nd annual VV Visionaries Summit,which offered participants 3 days of interactive workshops,panels,coaching sessions,and networking opportunities.25ORIGINSLaunched in 2009,the Origins Green the PlanetTM Fund collaborates with environmental nonprofits,such as One Tree Planted,on tree planting efforts that benefit local communities and help address the impact of climate change.To date,the Origins Green the PlanetTM Fund has planted 2.3 million trees,helping to add greenery to underserved urban areas and create green belts within cities.MACMAC celebrated 30 years of VIVA GLAM with an expanded philanthropic initiative that reflects the challenges we face as a global community today.With a mission to promote“equality”for all,the VIVA GLAM umbrella now officially focuses on sexual,gender,racial and environmental equality with four key pillars to further societal change and better the lives of everyone who calls our planet home.Over three decades,MACs raised more than$525 million for the mission and,in fiscal 2024,it called for raising the next half-billion dollars through efforts that include the VIVA GLAM Lipstick lineup,which continues to give back 100%of the selling price to support the VIVA GLAM mission.Additionally,VIVA GLAM expanded to include partnerships with The Trevor Project and It Gets Better as well as Plastics for Change,which broadens the campaigns work to environmental equality in Mangalore,India.THE ESTE LAUDER COMPANIESThe WRITING CHANGE initiative exemplifies ELCs commitment to education,especially for women and girls,as well as equity for all.In partnership with Amanda Gorman,National Youth Poet Laureate and Este Lauder Global Changemaker,ELC pledged$3 million,over 3 years,to advancing literacy as a pathway to equality,access,and social change through the power of young voices.In fiscal 2024,WRITING CHANGE supported new organizations that reach more communities across the United States.The work of WRITING CHANGEs 10 organizations earned The Este Lauder Companies recognition on Fast Companys list of the Worlds Most Innovative Companies in corporate social responsibility for 2024.26OUR COMMITMENT TO SOCIAL IMPACT&SUSTAINABILITY2627OUR COMMITMENT TO SOCIAL IMPACT&SUSTAINABILITYWe manage our business for the long term,with a lens of patient capital.Our company was founded more than 75 years ago by Este and Joseph Lauder,and since our initial public offering in 1995,we have been a publicly traded,family-controlled company that benefits from both the Lauder familys demonstrated dedication and our employees commitment to our continuing success.Our companys strategic approach guides our direction by consistently looking 10 years ahead to inform our ongoing transformationto best position us for long-term,sustainable growth.Social impact and sustainability forms one of the Companys key strategic pillars.Our 3-year Corporate Strategy sharpens our focus on our social impact and sustainability initiatives,while also amplifying our environmental,social,and governance(ESG)efforts.Our social impact and sustainability initiatives help drive innovation,growth,and efficiency across the business and within our brand portfolio.Our social impact and sustainability goals are designed to connect with value creation,acting as a catalyst to continually transform our business and seize future opportunities.AN INTEGRATED APPROACH TO ESG MANAGEMENT We recognize the importance of integrating social impact and sustainability into our business and continually refine our approach to managing ESG.Our Chief Sustainability Officer(CSO)leads the Global Corporate Citizenship and Sustainability(GCCS)function and reports to our Executive Chairman and our President and Chief Executive Officer(CEO).The CSO also serves on the Companys Executive Leadership Team.The GCCS function is responsible for managing corporate-wide social impact and sustainability initiatives;supporting corporate,brand,channel,and region-led sustainability strategies and commitments;as well as leading our ESG reporting and goals governance work.Our ESG strategy is further directed by individual Environmental,Social,and Governance subcommittees composed of senior leaders and subject matter experts.The Environmental,Social,and Governance subcommittees meet periodically to discuss,harmonize,and accelerate social impact and sustainability initiatives across the business,driving progress toward related goals and commitments.The subcommittees are responsible for reviewing the information in this report,including the focus areas identified through our priority issues analysis.We drive horizontal integration of ESG across the business through close partnerships among senior leaders from Finance;Global Communications and Public Affairs;GCCS;Human Resources;Inclusion,Diversity&Equity;Legal;Research&Development;and Supply Chain,as well as representatives across brands,regions,channels,and other functions.The Nominating and ESG Committee of our Board of Directors(the“Board”)regularly receives updates on these and other initiatives.OUR COMMITMENT TO SOCIAL IMPACT&SUSTAINABILITY28OUR COMMITMENT TO SOCIAL IMPACT&SUSTAINABILITY28CORPORATE GOVERNANCE AND EXECUTIVE COMPENSATIONOur Board has developed corporate governance practices to fulfill its responsibilities to stockholders,providing general direction and oversight of the management of the Companys business and affairs.Our Board is led by our Executive Chairman,who is a member of the Lauder family and the Nominating and ESG Committee of the Board.In addition,we have an independent director who serves as our Presiding Director.A majority of the directors on our Board are independent.On June 30,2024,there were 15 directors on our Board,comprised of:(i)9 independent directors;and(ii)6 non-independent directors,including our President and CEO,4 directors who are members of the Lauder family(including our Executive Chairman),and one non-employee director.The Board has established the following standing Board committeesthe Nominating and ESG Committee;the Compensation Committee,which includes the Stock Plan Subcommittee;and the Audit Committee.For more information about our Board and committees,please visit the Corporate Governance section on our website.Our Nominating and ESG Committee has oversight responsibility for our companys ESG activities and practices,including social impact and sustainability matters.The Nominating and ESG Committee receives updates during its meetings on topics such as climate,social impact,and sustainability;progress toward the Companys commitments;and other related matters.The Board also receives periodic updates on these matters.Our Compensation Committee establishes and approves compensation plans and arrangements with respect to the Companys executive officers and administers the Companys Executive Annual Incentive Plan.The Stock Plan Subcommittee has authority over decisions regarding awards to executive officers under the Companys Share Incentive Plan.Our compensation program for executive officers is designed to attract and retain world-class talent and to motivate achievement of both our long-term and short-term goals.We believe that the design and governance of our compensation program supports the business strategy and the overall goal for sustainable growth in net sales,profitability,and return on investment on an annual and long-term basis.Given our history,ownership structure,and strategy,we follow principles of long-term stewardship and patient capital,and our compensation approach reflects and supports this.Consistent with our culture and our compensation philosophy and objectives,our combination of compensation elements is intended to help drive and promote strong,balanced,and sustainable corporate performance.We evaluate the performance of employees,including our executives,against ESG goals holistically,within the framework of our corporate strategy,as an input into compensation decisions.In particular,we incorporate specific goals tied to the Companys broader social impact and sustainability strategy into the identified business goals for top executives,and compensation decisions are made based on their achievement.For example,such business goals were included in the fiscal 2024 Executive Annual Incentive Plan program and were used as an input into determining fiscal 2024 equity grants.The fiscal 2024 business goals for top executives encompassed multiple strategic focus areas concerning social impact and sustainability matters.Specifically,the fiscal 2024 business goals for certain executives incorporate inclusion,diversity,and equity matters;support enterprise-wide talent initiatives;and progress in connection with Company sustainability objectives.Additional information on our governance practices and information about executive compensation matters can be found in our 2024 Proxy Statement.ETHICS AND INTEGRITY We cultivate a culture of uncompromising ethics and integrity,expecting our employees and business partners to conduct themselves in compliance with applicable laws and regulations and with the ethical standards and policies set forth in our Code of Conduct(CoC)and Supplier Code of Conduct(SCoC).Newly hired employees are required to sign and acknowledge that they have received,read,and will comply with the CoC.In addition,annually,employees above certain levels are required to complete Ethics and Anti-Bribery and Corruption trainings and acknowledge their understanding and compliance with the CoC.From time to time,we conduct trainings on the CoC for groups of our employees.Employees globally are expected to raise questions or concerns about conduct that may be inconsistent with the law,the CoC,or other policies to their supervisor,Human Resources contact,the Global Ethics team,and through the Companys Integrity Helpline.Employees can communicate and report suspected violations confidentially and anonymously,where permitted by law.Employees can raise questions or concerns by calling the toll-free number,visiting the Integrity Helpline website,or sending a text message(text communication available in North America only).Questions or concerns related to questionable accounting,internal controls,or auditing matters can also be raised directly to the Audit Committee of the Board.We have standard operating procedures to manage reports,ensuring consistent investigation and response procedures across incident types and reporting channels.Serious violations are reviewed by the Companys Ethics and Compliance Committee,which oversees implementation of the CoC.The Ethics and Compliance Committee reports to the Audit Committee regularly regarding the effectiveness of our Global Ethics Program.The Companys Internal Audit function periodically reviews business unit operations using a risk-based audit plan.Internal Audit regularly assesses the effectiveness of the Companys Ethics and Anti-Bribery and Corruption program through routine and targeted audits of business functions and/or sales affiliates.OUR VIEW ON HUMAN RIGHTS We have policies,processes,training,and systems in place to identify,assess,monitor,and mitigate or eliminate actual or potential impacts in compliance with applicable laws and regulations.29OUR COMMITMENT TO SOCIAL IMPACT&SUSTAINABILITYOur approach to respect human rights recognizes the following international protocols:UN Guiding Principles on Business and Human Rights Universal Declaration of Human RightsIn fiscal 2022,we conducted a corporate-level Human Rights Assessment(HRA)based on the methodology outlined by the UN Guiding Principles on Business and Human Rights,the global standard for HRAs.Through the HRA process,we assessed human rights risks and impacts across our operations,including our corporate policies and procedures,as well as our supply chain,manufacturing,and retail operations.The HRA has provided us with a framework to help identify and prioritize our salient human rights risks and impacts,and to identify key actions for improvement.Key activities to date include expanding access to grievance mechanisms across the enterprise and supply chain by rolling human rights violations reporting into our integrity helpline and developing a more proactive and deliberate human rights due diligence program for high-risk commodities within sensitive supply chains.In fiscal 2024,building upon our previous modern slavery statements for specific jurisdictions,we published an Enterprise Modern Slavery statement,outlining actions undertaken to identify and minimize risks relating to modern slavery in our business and supply chain.We also launched a modern slavery prevention training for employees to raise awareness of modern slavery risks and warning signs.Our CoC outlines our expectations for promoting a respectful workplace,engaging in ethical business practices,and operating in a socially responsible and fair manner.We require our employees,service providers,and suppliers to operate in compliance with applicable laws,including,but not limited to,employment laws pertaining to child labor,minimum wage,overtime compensation,hiring,and occupational safety.Our SCoC sets forth the basic requirements we expect of suppliers,including vendors,service providers,independent contractors,and consultants,as a condition to doing business with our company.It is based on internationally recognized standards,including the Universal Declaration of Human Rights and International Labor Organizations Conventions.Read more about our SCoC on pages 52-54.Our Human Rights Policy is available on the ELC Corporate website.Our Modern Slavery Statement is available on the ELC Corporate website.ENTERPRISE RISK MANAGEMENT Enterprise Risk Management(ERM)is a structured and dynamic process to understand the Companys risks and their interrelationships,and to drive proactive risk mitigation.This process is supported by a formalized governance and committee structure that facilitates appropriate oversight of key risks and associated mitigation strategies.The risks(e.g.,Social Impact and Sustainability,Geopolitical,Privacy,Cybersecurity,etc.)are aggregated into the ERM portfolio and presented to senior management and the Board on a periodic basis.In parallel with the ERM process,additional ELC teams monitor and manage social impact,sustainability,and regulatory risks on an ongoing basis,including through periodic discussions with internal and external stakeholders.The ERM team also participates in the priority issues analysis process.Results and insights from this analysis,including risks associated with changes in our priority focus areas,are integrated into the ERM process.DATA PRIVACY AND CYBERSECURITY The Company is committed to respecting privacy and protecting the security of our employees and consumers.Our cybersecurity and privacy programs are managed by dedicated teams in our organization,governed by an executive,cross-functional steering committee.The Audit Committees oversight responsibilities include information technology and cybersecurity.In addition to privacy laws applicable to our global operations,we maintain privacy policies and standards and follow a set of global Privacy Principles for the processing of personal data:(1)collect and use data purposefully,(2)provide notice and choice,(3)safeguard personal data,and(4)maintain data integrity.In fiscal 2024,we launched our privacy page on the ELC Corporate website,which lists our consumer privacy policies,as well as privacy program details within our CoC and SCoC.For more details,please see our Privacy page.Our cybersecurity program is aligned with our privacy program to mitigate risk from current and potential cyber-driven threats,aiming to protect the Companys data,networks,and systems.Our cybersecurity function has fit-for-purpose tools,controls,and capabilities based on best practices.This blended capability strategy leverages a mix of internal and external resources,supported by robust processes,policies,and technologies.It includes protective technologies,access controls,proactive services,active defense,and security resilience.Our numerous information security policies cover topics such as acceptable use of information technology,training and awareness,regulatory compliance,disaster recovery,third-party risk management,and incident response.We have dedicated resources to monitor for and respond to incidentsincluding a 24/7 Security Operations Centerand different ways for employees to report suspicious activities.In the event of a data breach,our policy requires that we notify data subjects in accordance with applicable law.To promote compliance and awareness,we take a risk-based approach to training employees on privacy and cybersecurity requirements and best practices at least annually.Other awareness and education activities occur throughout the year such as data privacy day events,cybersecurity video blogs,an intranet site with resources,and monthly global newsletters.PRIORITY FOCUS AREAS FOR SOCIAL IMPACT AND SUSTAINABILITYWe continually evaluate areas of risk and opportunity for our business as part of our strategic planning process.We also periodically conduct comprehensive assessments to validate our priority social impact and sustainability focus areas.Our most 30OUR COMMITMENT TO SOCIAL IMPACT&SUSTAINABILITY30recent priority issues analysis was conducted in fiscal 2023.As part of our periodic assessments,we considered the emphasis placed on certain ESG topics across global regulatory,corporate disclosure,and media environments.We also evaluated stakeholder interest in such topics through research and direct engagement.We considered the relevance of ESG topics to our business strategy and objectives;importance to key stakeholders;and potential impact on the environment,society,and economy.As of June 30,2024,our priority focus areas are:Climate Change and Greenhouse Gas(GHG)Emissions Employee Health and Safety Inclusion,Diversity&Equity Product Quality and Safety(including ingredient transparency)Product and Packaging Design(including green chemistry and plastics)We also continue to monitor interest among some stakeholders in sourcing,nature and biodiversity,human rights,and water.Our priority focus areas are reflected in our corporate goals and commitments and are integrated into our strategic planning,risk management,and reporting processes.We map our priority focus areas to related Global Reporting Initiative(GRI)Standards(pages 77-81)and the United Nations Sustainable Development Goals(SDGs).OUR COMMITMENT TO THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALSThe United Nations SDGs are a voluntary framework of 17 global goals and targets meant to accelerate advancement toward a more sustainable world.Since they were issued in 2015,they have become a common touchstone for governments,the private sector,and civil society in tracking sustainability progress.While we align with many UN SDGs,we primarily focus on the 6 SDGs most aligned to our priority focus areas:STAKEHOLDER ENGAGEMENT We seek to build productive relationships with our key stakeholders,including employees,consumers,investors,retailers,nongovernmental organizations(NGOs),suppliers,policymakers,regulators,and local communities.These relationships depend on active engagement and meaningful dialogue to strengthen bonds,expand trust,and develop areas of mutual interest and opportunity for advancement.The types of stakeholder engagements and topics discussed concerning social impact and sustainability matters vary.For example:We engage with employees in various ways,in person and digitally,including direct interaction with managers or through Human Resources business partners;our companys intranet;social media;town halls,special presentations,and learning events;and employee engagement and pulse surveys.We continue to leverage the results from our fiscal 2022 ELC Listens Engagement Survey,our fiscal 2022 social impact and sustainability focused Pulse Survey,and our more recent fiscal 2023 ELC Listens Pulse Survey to focus on topics employees identified as most important.For more information on our fiscal 2023 ELC Listens Pulse Survey,please see page 34.We engage with consumers through direct interaction online and in-store settings,consumer feedback portals(including Consumer Care),satisfaction surveys,third-party market research vendors,and social media and influencer channels.Consumer interest in social impact and sustainability includes product formulation and ingredient transparency;sourcing practices and biodiversity;packaging;climate action;and social issues.We engage with investors through our multi-faceted,strategic investor relations program to help communicate with the investment community about our companys performance and corporate values.We also inform current and prospective investors and the sell-side analyst community about our business strategies and social impact and sustainability goals and initiatives.In fiscal 2024,we continued our significant ESG-oriented investor outreach,participating in numerous one-on-one calls and external events and conferences.We also gathered feedback through our annual ESG investor perception study and continue to work to integrate insights and recommendations into our social impact and sustainability strategy and disclosure.We engage with suppliers regularly through business review meetings and partnerships such as Supplier Leadership on Climate Transition(Supplier LOCT),The TRaceability Alliance for Sustainable CosmEtics(TRASCE),and Action for Sustainable Derivatives(ASD).We use Ecovadis,a third-party rating service,to help us assess direct and indirect suppliers on environmental impact,labor and human rights,and ethical procurement practices.Through these and other initiatives,we solicit input and feedback to better understand the complexities of our supply chain.We also conduct webinars and assessments to uncover insights and learn about key areas of focus for our suppliers.For more information regarding supplier engagement and our SCoC,please see Sourcing pages 52-54.SOCIAL IMPACT EMPLOYEE HEALTH&SAFETY31GOVERNANCE The Executive Vice President(EVP)of Global Supply Chain establishes our environmental,health,and safety philosophy.The EVP directs the activities of the Global Environment,Health,and Safety(EHS)department,which is responsible for program development and implementation throughout the Company through partnerships with brands,regions,and functions.The EHS department is organized into 5 key pillars under the Senior Vice President of Supply Chain,EHS:Value Chain,Commercial Regions,Environmental Sustainability,Technical Programs and Compliance,and EHS Center of Excellence.These pillars are set up to standardize,streamline,and implement best practices,while strengthening employee engagement programs and awareness campaigns.To further reinforce our commitment to employee health and safety,the Company has a Corporate Medical department that is overseen by our Corporate Medical Director.As part of our Environmental and Safety Management System,we have a process in place to investigate and report workplace incidents,including injuries,property damage,spills,and near misses.Safety incident reports are documented,and corrective actions are identified and tracked.We also have a process where safety alerts and best practices are issued globally for sites to take preventative actions.The Environmental and Safety Management System defines criteria for serious accidents and incidents that could result in a high consequence injury.We comply with legal requirements regarding whistleblower protections around employees rights to remove themselves from,and report on,what they believe are unsafe conditions.We continuously seek to improve our environmental and safety management and performance.We conduct internal ISO compliance audits at our manufacturing sites*approximately once every 2 years.Our owned and operated manufacturing sites are also audited by our third-party registrar,as is our global EHS office,to maintain our conformance to the ISO 14001 standard and maintain our certification.New facilities that are the result of acquisitions are assessed for risk,and plans are made to integrate those operations within our existing safety policies and protocols.*Excludes the Shimotsuma,Japan manufacturing facility and DECIEM manufacturing sites.EMPLOYEE HEALTH&SAFETY The Este Lauder Companies strives to provide a healthy and safe workplace for our employees.We are committed to strengthening our safety culture through continuous improvement and innovation and seek to be an industry leader in workplace safety.Our work in this focus area is aligned with UN Sustainable Development Goal 3Good Health and Well-Being.POLICIES AND CERTIFICATIONS EHS Policy Statement Our safety program is fully integrated into our environmental management system,which in turn has been certified to ISO 14001 standards at our manufacturing sites.*Excludes the Shimotsuma,Japan manufacturing facility and DECIEM manufacturing sites.STRATEGY AND FISCAL 2024 PROGRESS As we strive to reach our ultimate goal of zero workplace incidents,we promote a proactive and collaborative approach to safety and compliance.We have rigorous safety policies and practices in place and reinforce our safety messages through consistent communication with employees.Highlights in fiscal 2024 included:Globally,ELC had a Total Recordable Incident Rate(TRIR)*of.22 in fiscal 2024,which is higher than our rate reported in fiscal 2023.We continue to have one of the best-in-class TRIRs in our industry and strive toward making progress on our goal of decreasing the TRIR to 0.15 by the end of calendar year 2025.Achieved zero recordable accidents across many of our facilities,including 3 manufacturing sites,17 distribution centers,and 6 research and development(R&D)sites.Received 85 Safety Awards from the National Safety Council(NSC)in 3 categoriesOccupational Excellence,Perfect Record Award,and Million Work Hours Awardacross 35 supply chain and R&D facilities and 12 global brand operations,with some facilities receiving multiple awards.In addition,Agincourt,EMEA Hub West,Aveda Experience Centers,Bobbi Brown,Clinique,La Mer,and Travel Retail-Americas received the NSCs Industry Leader Award for outstanding safety achievements among the top 5%of member companies.*TRIR is the number of Occupational Safety and Health Administration(OSHA)recordable incidents per 100 workers.Excludes DECIEM.32SUSTAINABILITY WASTESOCIAL IMPACT EMPLOYEE HEALTH&SAFETY32IMPLEMENTING A RISK-BASED APPROACHThroughout fiscal 2024,we continued to work toward eliminating risk within our operations by leveraging tools such as hazard risk mapping assessments,employee engagement programs,and platforms for employee recognition.HAZARD RISK ASSESSMENTS:We are leveraging insights from hazard risk assessments within our manufacturing facilities and select distribution centers into our decision-making process.We are using the results to set internal reduction goals and implement trainings,action tracking,and periodic reviews to prevent accidents and injuries.The sites continue to work to close out action items identified during the risk assessments.EMPLOYEE ENGAGEMENT:Regular employee engagement events are held across our facilities to promote awareness and involvement in key EHS initiatives.EHS Engagement Leads across many of our manufacturing campuses meet regularly to share best practices and develop guidance for our Behavior Based Safety(BBS)Teams.Our BBS program reinforces our actively caring safety culture through employee-led initiatives and communications around best practices.In fiscal 2024,we launched BBS in a distribution center in Italy,bringing us to a total of 39 BBS Steering Teams across 22 facilities in 10 countries.These teams supported more than 3,250 employees,completed more than 34,000 BBS observations,and developed and implemented more than 300 projects to improve safety and increase awareness for safe behaviors at their sites.Our formal BBS training programs include Management Awareness Training,Employee Awareness Training,Steering Team Training,and Hazard Identification Training.EMPLOYEE RECOGNITION:Recognition is an important facet of driving engagement and highlighting the valuable contributions of our employees to our EHS goals.In fiscal 2024,we enhanced our Safety Ambassador Program at our manufacturing facilities,to further recognize employees contributions to maintaining or improving safety performance.TRAININGS AND CAMPAIGNS We engage our global employees in promoting a safety mindset and encourage them to take proactive measures to ensure safety protocols are followed across our sites,including manufacturing,distribution,R&D,retail,and office locations.We deliver a robust program of job-specific safety trainings to our employees to help prevent injuries,minimize risks,and promote well-being.We also provide leadership trainings to guide our managers and supervisors in safety initiatives.Throughout the year,our global EHS teams run campaigns to further reinforce safety priorities,including:Take Action!,which encourages employees to identify unsafe conditions or near-miss events.The Safety Ambassador Program,a program that provides opportunities to recommit to our actively caring safety culture.Employee roundtables and EHS engagement committees to improve overall EHS team performance.Our annual Safety Month campaign,this year titled“Take Action for Safety,”works toward increasing awareness of hazards in the workplace and adjusting working practices to reduce accidents and near misses.Campaign assets are available in more than 20 languages to allow for greater engagement and implementation across manufacturing,fulfillment,R&D,office,and retail locations.In fiscal 2024,we recognized ELC freestanding stores and ELC Retail Field Leaders in North America that met and exceeded a collection of safety metrics through The Safety Crown awards and Retail Partner Safety Gems awards programs,respectively.The award winners were recognized for exceeding safety metrics over a given time period.In addition,we continued to prioritize the health and safety of our retail employees around the globe through risk assessments,virtual ergonomic education sessions,and awareness campaigns.CORPORATE MEDICAL PROGRAMOur Corporate Medical Director serves as our Medical Advisory Board leader and subject matter expert as it relates to the health and well-being of our employees around the world.She collaborates with our Global Benefits and EHS teams to deliver on our health and well-being strategy that is based on 6 elements:physical,emotional,intellectual,financial,spiritual,and social well-being.The program seeks to promote equity and increase access to well-being programs globally.For example,in fiscal 2024,we increased the number of onsite health and well-being events,such as vaccination clinics,biometric screenings,and health fairs with vendor partners.The Corporate Medical Director also works to provide employee health and well-being education via a monthly global newsletter and frequent webinars on a variety of well-being topics.In addition,the position supports our medical accommodations program,works to promote employee safety,and monitors health alerts and emergencies globally.ADDITIONAL RESOURCESEmployee Safety Goalp.10Employee Safety Metricsp.70SOCIAL IMPACT EMPLOYEE EXPERIENCE33GOVERNANCEThe Executive Vice President,Global Human Resources,sets the Global Human Resources strategy in alignment with and in support of ELCs corporate strategy.The Global Human Resources strategy identifies employee and workforce practices and activities to deliver on people-related outcomes that drive our enterprise business goals.Our Total Rewards team,which includes Global Compensation and Global Benefits,provides competitive compensation and benefit packages to support our employees financial,physical,and mental well-being.Our Global Talent team,which includes Talent,Talent Acquisition,and Enterprise Learning and Development,drives recruitment and offers our employees career development and learning opportunities.The Enterprise Learning and Development team implements our strategy around fostering continuous innovation and growth,aligning with the strategic objectives outlined in the Global Human Resources strategy.The Volunteerism and Giving Team within the Global Corporate Citizenship and Sustainability function manages activities that offer employees opportunities to engage with the communities we support.POLICIES AND CERTIFICATIONS ELC Code of Conduct Human Rights Policy STRATEGY AND FISCAL 2024 PROGRESSHiring,retaining,and developing the best talent globally is key to our success in sustaining long-term growth.Our talent strategy is focused on employee engagement and investments EMPLOYEE EXPERIENCE Our longstanding guiding principles of respect for the individual,uncompromising ethics and integrity,generosity of spirit,and fearless persistence underpin the employee experience at The Este Lauder Companies.Our employees are integral to the long-term success and resilience of our business.We are committed to providing a workplace that is collaborative,inclusive,compassionate,and motivating,where our employees can innovate,lead,and drive our company forward.Benefits offered to our employees support UN Sustainable Development Goal 3Good Health and Well-Being,among other goals.in career development,as well as measuring and recognizing performance through employee reviews.Our investments include providing programs to equip our employees with the right skillsets and knowledge,as well as opportunities to transfer to other functions or regions through short-term and long-term assignments.We believe these programs and opportunities create a pipeline of talent and leadership necessary to drive and deliver on our long-term strategy.To enhance our culture and measure our human capital objectives,we regularly engage with our employees.We provide several mechanisms for our employees to provide their feedback,including direct discussions with managers,employee surveys,and interactive townhall meetings.Key topics covered during employee engagement include inclusion,diversity,and equity;career opportunities and development;work-life balance;and employee benefits.Based on our review of employee survey results,we implement action plans to enhance employee satisfaction and to ensure alignment with our overall human capital strategy.In fiscal 2024,ELC announced the Profit Recovery and Growth Plan(PRGP).This program is designed to enable the Company to return to sustainable,long-term profitable growth by leveraging strategic investments and unlocking cost efficiencies across regions,brands,product categories,and channels.The PRGP includes a restructuring program which will help us increase speed and agility by simplifying and right-sizing portions of our organization.While the decision to implement restructuring is never an easy one,we are confident that it is the right decision for our business.We acknowledge that change of this nature is difficult and can have a negative effect on employee morale and engagement.Accordingly,we are committed to communicating with all employees in a clear,transparent manner with our core values of care and support throughout this transition.EMPLOYEE ENGAGEMENT We continue to listen to our employees throughout their journey with ELC.We use onboarding,engagement,and exit surveys to understand areas of strength as well as opportunities for enhancing overall employee experience.34SOCIAL IMPACT EMPLOYEE EXPERIENCE34We continue to leverage the results of our fiscal 2023 ELC Listens Pulse Survey,an employee engagement survey which gathered feedback from 12,000 global corporate and field employees,to create action plans that focus on the areas that matter most to our employees.These include recognition for achievements,expanding career and skill development opportunities,and supporting work-life balance.With on-going global volatility,we are encouraging our leaders to prioritize communicating our strategy and strong path forward so that employees have clarity around prioritization and the direction for our future.EMPLOYEE COMPENSATION AND BENEFITSWe are committed to supporting our employees in their professional and personal lives as they navigate an increasingly complex and dynamic world.We aim to provide resources that allow employees to choose the benefits and development opportunities that are right for them,no matter their region or role.Our competitive compensation and benefits packages are meant to attract and retain top talent,and we are committed to fair and equitable pay across the organization.Compensation is based on individual circumstances such as role,experience,location,and performance.We offer base pay,annual incentives,and equity awards for certain job grades.Benefit packages may include pension and post-retirement benefit plans,health and wellness programs,flexible work arrangements,parental(maternal,paternal,and adoptive)leave,adoption assistance,back-up childcare,primary care assistance,and educational benefits.These benefits differ by country;shown below are illustrative examples:Mental health benefits are offered to employees and the members of their households globally,including short-term counseling and crisis services.In fiscal 2024,this benefit was enhanced to 10 sessions per issue,per year.Family-related benefits for eligible U.S.-,U.K.-,and Ireland-based employees include 20 weeks of paid parental leave,which exceeds the legally required minimum for these jurisdictions.Eligible U.S.employees can also access a back-to-work flexibility program following parental leave and an adoption assistance program to reimburse employees for eligible expenses,up to$150,000,related to the adoption of a childregardless of an employees gender,marital status,or sexual orientation.The Company provides family-support benefits for eligible U.S.employees through fertility support and surrogacy programs.We also continue to provide health care benefits and services for transgender,nonbinary,gender-nonconforming,and LGBTQIA employees including enhanced coverage for gender affirming procedures and care.Education-related benefits for eligible U.S.employees include a student loan contribution program,offering up to$100 per month toward eligible loans with a lifetime maximum of$10,000,and a tuition-reimbursement program,which offers reimbursement for preapproved academic courses.In fiscal 2024,the program was enhanced to increase the level of reimbursement for undergraduate and graduate programs.Employees needs continue to change as they navigate challenges and changes in our world.We continue to review and refine our diverse portfolio of benefit programs to support them across the various stages of their lives.EMPLOYEE LEARNINGWe offer an enriching array of educational offerings to inspire our talent.These programs help create a stimulating,inclusive environment,equipping our people with competitive,in-demand skills.We seek to help our employees expand both core and advanced competencies,while creating value and long-term growth for our company.We provide a blended approach to instructional design consisting of digital learning,virtual instructor-led and classroom trainings,and project experiences,while providing a suite of coaching and mentoring opportunities.On-the-job training and peer-to-peer knowledge sharing,across our global employee populations,rounds out the learning landscape and helps accelerate our employees success.Brand Education teams continue to advance our High-Touch capabilities by creating new innovative learning experiences to train point-of-sale employees globally on products,services,and artistry.Our learning and development offerings are curated to enable key business objectives by upskilling our talent with a focus on people leadership;artificial intelligence(AI),data,and analytics;digital fluency;advanced marketing;creative and operational excellence;accelerated omni retail capability;inclusion,diversity,and equity;and sustainability.We have more than 300 active projects and learning initiatives across business verticals to support the development of employees in accordance with the companys strategic goals and objectives.THE ELC LEARNING HUB The ELC Learning Hub is our central digital training and education destination.This personalized,interactive online learning tool offers more than 30,000 learning experiences and is accessible to our global workforce,including office,retail,and manufacturing employees,and is currently available in 30 languages.Highlights of recently launched offerings on the ELC Learning Hub include:AI Academy:A digital destination for employees to explore and learn about AI for all skill levels.Offerings cover foundational concepts,responsible AI,hands-on AI-tool use,advanced courses,and access to industry experts.IT Academy:A curation of learning programs and practical activities to accelerate and deepen IT employees expertise and growth through advanced skill development.Social Impact and Sustainability Education:A one-stop shop for education and discovery aimed at driving innovation,best practices,and employee engagement on key social impact and sustainability topics.These include Womens Advancement;Inclusion,Diversity&Equity;Generational Diversity and Leadership;Product Sustainability and Innovation;and Climate and Environment.EXTERNAL RESOURCESWe also provide employees with access to training and educational opportunities offered through external content providers,including:SOCIAL IMPACT EMPLOYEE EXPERIENCE35 Since the program launched in 2018,through June 2024,more than 22,500 employees have participated in learning on the LinkedIn Learning platform,with over 120,000 courses completed and 3.4 M videos viewed accounting for a total of over 160,000 hours spent advancing our learning objectives.Coursera provides curated learning for ELC employees in partnership with top universities and industry thought leaders around the world and is considered one of the best skill content providers for growing talent in the digital space and beyond.Since the launch of Coursera at ELC in February 2023,more than 1,200 learners enrolled in a course,resulting in over 1,200 completions,117 guided projects,and 90 specialization certifications.ELC provides employees with an opportunity to transform their careers by participating in award-winning General Assembly bootcamps offering extensive training.In fiscal year 2024,52 high-potential employees participated in instructor-led bootcamps covering a range of topics,including Advanced Analytics,Data Analytics,Digital Marketing,Product Management,Data Science,Python and UX Design.EMPLOYEE DEVELOPMENT PERFORMANCE AND DEVELOPMENT PLANS Our Performance and Development Plan(PDP)is a critical component of our employee development process.This corporate-wide tool covers office-based employees across brands,regions,functions,and channels.It allows employees and managers to set goals,have ongoing coaching conversations,and review performance at the end of each year.We have expanded Digital PDP to additional brands and affiliates and reached more than 18,000 employees in fiscal 2024.We continue to modernize the digital tool with enhancements to improve the user experience.Our High-Performance Leadership Competencies are used in performance evaluations to set individual goals and guide employees in leveraging their strengths throughout their career journeys.These competencies provide the framework to build the skills,knowledge,and behaviors that enable us to embody the“Lead from Every Chair”philosophy of our President and CEO,Fabrizio Freda.Leading from every chair means every member of the Company,no matter role or position,is an agent of progress and positive change.SIGNATURE LEADERSHIP PROGRAMS*We understand the value of rising talent and offer robust resources to support our high performers so they can drive growth and inspire us toward greater success.We continue to be responsive to the needs of our workforce and are committed to providing access to professional development and advancement opportunities.CEO Global Presidential Program:This program recruits a diverse group of highly talented recent graduates(BA/BS or MA/MS/MBA)and develops them through a series of curated on-the-job learning experiences,strengths-based coaching,mentorship,professional development sessions,and exposure to senior leaders during an 18-to 24-month period.CEO Global Reverse Mentor Program:This program allows young talent within the Company to exchange valuable insights,perspectives,and share trends with our most senior leaders while providing a development opportunity to understand leaders priority topics.ELC and Wharton:Our Executive Chairman,William P.Lauder,sponsors a week-long Business Symposium at The Wharton School of the University of Pennsylvania for high-potential leaders to learn from top faculty,industry experts,and external speakers.In addition,the ELC x Wharton Virtual Series provides an opportunity for all full-time employees to learn about strategic insights and innovative thinking from top-tier Wharton faculty.People Leadership Program:This multi-award winning,innovative,5-month high-performance global leadership program provides our experienced leaders with the strengths-based skills and inclusive mindset needed for success.As of fiscal 2024,more than 950 leaders have graduated from the program,expanding their competencies in areas such as accountability,connectedness,agile leadership,influence,and confidence.Emerging Leaders Program:This global program is designed to inspire,equip,and empower newer people leaders with the inclusive strengths-based mindsets,skills,and capabilities they need for success at this critical point in their leadership advancement.As of fiscal 2024,more than 600 graduates have completed the program.Open Doors:This suite of leadership development programs helps enable professionals at all levels,of all genders,and in all areas of the business to reach their potential by giving them the tools and support they need for success.ELCoach Executive Coaching Program:This global program provides 1:1 and team coaching opportunities through an integrated connected coaching approach and consistent coaching framework by leveraging internally and externally certified coaches.*The Company is committed to compliance with federal,state,and local laws.Accordingly,trainings and initiatives are periodically reviewed for compliance.ELC GROWTALENT DEVELOPMENT MARKETPLACEELC Grow,our internal talent marketplace,offers corporate employees the opportunity to develop their careers through short-term projects,internal networking,and open positions while offering added capability to the business and building our talent pipeline.In fiscal 2024,we continued expansion of ELC Grow,which is now actively used by more than 8,400 corporate employees across North America,LATAM,EMEA,U.K.and Ireland,and APAC.VOLUNTEERISM AND GIVINGOur employees are committed to supporting causes close to their hearts.We honor and celebrate their generosity of spirit and goodwill and work to amplify their collective impact by providing tools and resources that further drive their efforts.Through these efforts,we are making progress toward our goal of engaging and mobilizing employees to contribute a total of$25 million by the end of calendar year 2025(since the launch of the ELC Good Works platform in 2015).36SOCIAL IMPACT EMPLOYEE EXPERIENCE36ELC GOOD WORKS ELCs employee social impact and sustainability engagement program,ELC Good Works,provides diverse,inclusive,and personalized employee initiatives,such as Volunteer Time Off,virtual and in-person team volunteer opportunities,and Company matching campaigns to enhance the employee experience and empower employees.ELC Good Works is available to eligible employees*in 31 markets globally.We encourage employees to stay involved in their communities and in the causes that matter most to them.Our Volunteer Time Off(VTO)program allows eligible employees*to receive paid time off for individual volunteerism with their favorite nonprofits during standard work hours and to receive$20/volunteer hour(or local currency equivalent)to donate to the nonprofit of their choice.In fiscal 2024,the program expanded to include eligible employees in 11 markets internationally.*ELC Good Works eligibility includes full-time regular and part-time regular employees in Argentina;Australia;Belgium;Brazil;Canada;Chile;Colombia;France;Germany;Hong Kong,SAR of China;India;Luxembourg;Mexico;Netherlands;New Zealand;Panama;Peru;Switzerland;and the U.S.,as well as full-time regular and part-time regular corporate employees in Denmark;Italy;Japan;Norway;Philippines;Poland;Portugal;Romania;South Africa;Spain;and Sweden.In the U.K.,eligible employees include corporate regular full-time,regular part-time,and fixed-term contract employees;all Jo Malone Global and Travel Retail employees;and regular full-time,regular part-time,and fixed-term contract employees at the Whitman manufacturing site.Excludes DECIEM.*VTO eligible employees are active,full-time,and part-time regular corporate employees in Argentina,Brazil,Benelux,Canada,China,Mexico,Nordic,Romania,South Africa,United States,and the United Kingdom,and active manufacturing and fulfillment employees in the United States and the United Kingdom.ADDITIONAL RESOURCESEmployee Metricspp.65-70Employee Volunteerism and Giving Goalp.10Employee Engagement webpageELC Benefits webpageELC GOOD WORKS PURPOSE WEEKIn fiscal 2024,we hosted our 2nd annual ELC Good Works Purpose Week.This 5-day series of global education,engagement,and volunteering opportunities was intended to empower employees to drive positive change in communities where we live,work,and source.Highlights of this week included:LEONARD A.LAUDER IMPACT AWARDSThe Leonard A.Lauder Impact Awards celebrate and honor employees exemplary volunteerism and commitment to our communities outside of the workplace.In fiscal 2024,we recognized 7 recipients from across our global regions.The honorees distinguished themselves by,among other initiatives,delivering home-cooked meals during the pandemic,supporting underserved communities,and contributing to waste management efforts.SI&S COMMUNITY OF PRACTICEIn fiscal 2024,we launched a Social Impact and Sustainability(SI&S)Community of Practice(CoP),as part of ELC Good Works Purpose Week.The SI&S CoPs mission is to encourage global employees to come together,build a diverse community,and share their insights,thoughts,and innovative ideas toward advancing SI&S for our business and our world.We hosted our first-ever global virtual launch event in May 2024,with a webinar to underscore the importance of creating a community to work toward positive environmental and social impact.ELC CARES EMPLOYEE RELIEF FUNDInitially created to support eligible applicants*impacted by COVID-19,the ELC Cares Employee Relief Fund(ELC Cares Fund)provides immediate and critical financial relief to employees impacted b
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ESG HighlightsAnnual Report 20232DisclaimerThis document and any related conference call or webcast(including any related Q&A session)has been prepared by Telefnica,S.A.(hereinafter“Telefnica”or“the Company”,and in conjunction with its subsidiaries the“Telefnica Group”)exclusively for summarised and illustrative purposes regarding its non-financial information.The Company does not assume any liability for the content of this document if used for any other purposes different from the one outlined above.The present document may contain forward-looking statements,opinions and information(hereinafter,the“Statements”)relating to the Telefnica Group(hereinafter,the“Company”or“Telefnica”),and may include financial and non-financial forecasts and estimates or statements regarding plans,objectives and expectations regarding matters,such as the customer base and its evolution,growth of the different business lines and of the global business,market share,possible acquisitions,divestitures or other transactions,the outcome of recently completed transactions,the Companys results and its operations,including its environmental,social and governance commitments and targets.The Statements can be identified,in certain cases,through the use of words such as“forecast”,“expectation”,“anticipation”,“aspiration”,“purpose”,“belief”“may”,“will”,“would”,“could”,“plan”,“project”or similar expressions or variations of such expressions.In any case,these Statements do not intend to be exhaustive,nor have been verified by third parties or audited,therefore,Telefnicas opinions and aspirations with respect to future events should be considered indicative,provisional,and only for illustrative purposes.For this reason,these Statements do not represent,by their own nature,any guarantee of future fulfilment or profitability,and are subject to risks and uncertainties that could cause the final developments and results to materially differ from those expressed or implied by such Statements.These risks and uncertainties include those identified in the documents containing more comprehensive information filed by Telefnica with the different supervisory authorities of the securities markets in which its shares are listed and,in particular,the Spanish National Securities Market Commission(CNMV)and the U.S.Securities and Exchange Commission(SEC).Except as required by applicable law,Telefnica does not assume any obligation to publicly update the Statements to adapt them to events or circumstances taking place after the date hereof,including changes in the Telefnicas Group business,changes in its business development strategy or any other circumstances.This document and any related conference call or webcast(including any related Q&A session)may contain summarised,non-audited or non-IFRS financial and non-financial information(including information referred to as“organic”and“underlying”).Such information may not be prepared in accordance with the reporting requirements established by the SEC,and is presented for supplemental informational purposes only and should not be considered a substitute for audited financial or non-financial information presented by the Company.The Companys non-IFRS financial measures may differ from similarly titled measures used by other companies.In addition,there are material limitations associated with the use of non-IFRS financial measures since they exclude significant expenses and income that are recorded in the Companys financial statements.The information contained herein should therefore only be considered in conjunction with Telefnicas consolidated financial statements for the year ended December 31,2023,as filed with the CNMV and the SEC,as well as other publicly available information regarding the Company.Information related to Alternative Performance Measures(APM)used in this presentation are included in Telefnicas consolidated financial statements and consolidated management report for the year 2023,submitted to the CNMV,in Note 2,page 11 of the.pdf filed.Recipients of this document are invited to read it.Neither this document nor any related conference call or webcast(including any related Q&A session)nor any of their contents constitute an offer to purchase,sale or exchange any security,a solicitation of any offer to purchase,sale or exchange any security,or a recommendation or advice regarding any security,or a solicitation for any vote or approval in any other jurisdiction.This document and any related conference call or webcast(including any related Q&A session)may include data or references to data provided by third parties.Neither Telefnica,nor any of its administrators,directors or employees,either explicitly or implicitly,guarantees that these contents are exact,accurate,comprehensive or complete,nor are they obliged to keep them updated,nor to correct them in the case that any deficiency,error or omission were to be detected.Moreover,in reproducing these contents by any means,Telefnica may introduce any changes it deems suitable,may omit partially or completely any of the elements of this document,and in case of any deviation between such a version and this one,Telefnica assumes no liability for any discrepancy.ContentIntroduction:ESG at TelefnicaP.04Environment:Building a greener futureP.16Governance:Leading by exampleP.35Social:Helping society to thriveP.26Annex P.45ESG at the core of our organizationLong-standing commitment to ESGClear pathway aheadAnticipating upcoming regulation3rd party validationsIntroduction:ESG at TelefnicaIntroduction5 10th consecutive year on the CDP A List and Supplier Engagement Leader for 4th year running.World leader in the WBA Digital Inclusion Benchmark for 3rd consecutive year.Leading telco in Ranking Digital Rights for 3rd consecutive year.Board committee dedicated to sustainability issues since 2002.(more info).Industrys 1st issuer of green bonds and hybrids(green&sustainable).Clear ESG priorities,with firm ESG targets.ESG targets linked to employees annual variable remuneration(20%).Double Materiality assessment according to CSRD requirements.Facilitating investors reporting disclosure requirements(e.g.,PAIs,SDG Impact report)Mission and corporate strategy place sustainability at the core.Telefnicas approach to managing ESG3rd party validations Long-standing commitmentClear pathway ahead Anticipating regulationESG at the core of our strategyIntroduction6ESG embedded within our mission and strategyTo make our world more human by connecting peoples livesOur mission:388m accessesESG teams in our 12 Operating MarketsPresence in 170 countriesESG embedded in our GPS programme as a lever to transform the businessESG at the core of the organizationGrowthProfitabilitySustainabilityB2B,B2C,PartnersImproved performanceLeverage reduction Value creationGrowth Transform our operational model ProfitabilitySustainabilityTransform our customer relationship Transform to long term valueIntroduction7Long-standing commitment to ESGTelefnica is a pioneer in sustainable financingObjective:40%of Telefnicas financing to be linked to sustainability criteria by 2026(33.6%at the end of 2023).Exchange rate at year-end 2023.Sustainable financing includes balance-sheet debt(classified as current and non-current financial liabilities),hybrids instruments and undrawn committed credit lines.Sustainable criteria defined on Telefnicas sustainable financing frameworks according to ICMA,LMA,APLMA,LSTA principles,and other ESG criteria.Not necessarily aligned with the requirements of the EU Taxonomy Regulation.Introduction8Clear pathway aheadTelefnicas ESG prioritiesReduce the digital divide by connecting the under-served and bringing transferable,digital skills to people.Ensure an inclusive and safe workplace to attract and retain the best talent.Transform the customer relationship with new offerings and opportunities through an ESG lens.Embed ESG across the business and our supply chain,with the highest ethical standards Ensure the security and privacy of customer data with the highest standards and processes.Minimise our environmental impact,including achieving net-zero emissions,100%renewables and zero waste.Maximise our reach in providing products and services that decarbonise the economy.Helping society thriveLeading by exampleBuilding a greener futureIntroduction9Net Zero by 2040(SBTi validated)Scopes 1&2%emissions reducedsince 201590%reductionby 203080%We reduced scopes 1,2&3 emissions by 51%in the last 8 years.Main levers to achieve these targets:8.6%reduction on energy consumption since 2015,while data traffic has increased 8.6x.In 2023,100%renewable in Europe,Brazil,Peru&Chile.New target:90%reduction of scope 1&2 emissions by 2030(previously 80%).Scope 3%emissions reducedsince 201656%reductionby 2030321%Renewable electricity%in own facilities100%renewablesby 203082%Environment:Key targets&progress ENERGY&CLIMATE CHANGE20222023TargetsHighlightsZero waste by 2030Customer Premise EquipmentRouters,decoders90%refurbished by 202486%By repairing and reusing,we avoided the purchase of 3.7M of new equipment.Mobile devicesReused and recycled100%reuse,resale and recycling mobile devices by 203099%New GSMA target of collecting 20%of directly distributed mobile phones from customers by 2030(in 2023,11%).491,422 mobile devices reused in 2023.Waste managementZero waste to landfill by 2030100%of waste reused and recycled by 203098%We reused and recycled 97%of waste,including 4.5M items of electronic equipment,avoiding 365,929 tCO2.GSMA target:Reuse and recycle 100%of network equipment by 2025(99%in 2023).CIRCULAR ECONOMYDevelopment of green digital solutionsAvoided emissionsHelping our customers to avoid emissions 81 MtCO2e 86 MtCO2e In 2023,we helped our customers avoid 86 MtCO2 thanks to connectivity and Eco Smart services.52%of our B2B solutions have been verified as Eco Smart.GREEN DIGITALISATIONTarget achievedClear pathway aheadIntroduction10Social:Key targets&progress DIGITAL INCLUSIONHUMAN CAPITALEmployee satisfactioneNPSEmployee satisfaction70 points annually69p76p 11 point improvement since 2019.Updated target to 70p(previously 60p).Diversity&inclusionWomen executives%women executives37%by 202731.32.8.7%improvement since 2015.Updated target to 37%by 2027(previously 33%by 2024).1k employees with disabilities added to workforce vs.2022.Talent with disabilitiesNumber of employees with disabilitiesx2 employees with disabilitiesby 20241,4822,57220222023TargetsHighlightsDigital inclusionRural connectivity%mobile broadband coverage 90%rural mobile broadband coverageIn main markets by 202480-99-99%Rural population coverage per operation(4G/LTE):82%Brazil,99%Germany,95%Spain and 99%UK.Total population coverage(4G/LTE):92%total footprint.Total population coverage(5G):48%Brazil,95%Germany,87%Spain,and 51%UK.Digital skillsNumber of beneficiariesAt least 1M beneficiaries annually13057151251354 Employability training in digital skills through Telefnica Fundacin programmes,e.g.“Conecta Empleo”.Clear pathway aheadTarget achievedHUMAN RIGHTSHuman rightsEvaluation of 100%of our operations every year Percentage operations evaluated1000%Pioneers in publishing a report on the Due Diligence process to take into account the new regulatory requirements.Implementation of the recommendations from the Global Impact Assessment performed in 2022.HUMAN CAPITALIntroduction11SUPPPLIERSPotential high-risk suppliers%externally assessed on sustainability100%by 202672r.3k on-site audits in 2023.In 2023 we requested our key suppliers to align and validate science-based decarbonisation targets by SBTi.GOVERNANCE&ESG CULTURE CorruptionNumber of confirmed cases of corruptionZero tolerance of corruption00 95k employees received anti-corruption training,which represents 91%of the workforce Launch of the ESG Academy for employees,reaching 2,500 in 2023.Members of the Board also trained in ESG topics.We have transformed gender representation on the Board:11%women directors in 2015;40%today.Board diversitymale on the Board DirectorsParity in top governing bodiesBy 203033.3%PRIVACY&SECURITYData PrivacyPosition in Ranking digital rightsLead the industry in digital rights1st1st Telefnica has held the 1st position in the last three editions of the Ranking Digital Rightss index.75k hours of training in data protection&security.Data SecurityData Breaches involving personal identifiable information Highest levels of security20 Our main operations are certified under ISO 2700.SUSTAINABLE FINANCERaise sustainable finance%total financing linked to sustainable criteria40%sustainable finance(1)by 202627.33.6%6.3 pp Increase of financing linked to sustainability criteria vs.2022.Governance:Key targets&progress(1)Sustainable financing includes balance-sheet debt(classified as current and non-current financial liabilities),hybrids instruments and undrawn committed credit lines20222023TargetsHighlightsClear pathway aheadIntroduction12ESG targets linked to remuneration(1)A 2024-2028 Long-Term Incentive Plan proposal is expected to be put forward at the forthcoming 2024 General Shareholders Meeting.(1)For executivesClear pathway aheadFor all employees receiving bonusIntroduction13Double materiality:determining element of our strategyWell prepared for upcoming regulation(1)Please see further information in Annex VI.Introduction14Anticipating investors EU regulatory needsWe are well suited to meet the Art.8&9 funds criteria:Sector joint proposal under ETNO and GSMA using the Stakeholder Request Mechanism to ask for a new activity in taxonomy specifically dedicated to telecommunication networks.According to the White paper on Buildings Europe digital infrastructure for tomorrow,The Commission will engage with the sector to improve the potential scope of the EU taxonomy for green investments in electronic communication networks.Our Business,and Environmental&Social practices,lead to substantial net-positive SDG impacts(100bn in 2022)(1).In FY 2023,we reported on Taxonomy alignment for climate change activities&Taxonomy eligibility for new circular economy activities.Currently there is a low level of alignment(Revenues 1.6%,Capex 0.5%)Alignment implies compliance with Social Minimum Safeguards&Do-Not-Significant-Harm.Telefnica consistently achieves scores above industry averages in ESG ratings.Telefnica reports in its management report an exhaustive list of the metrics that investors could potentially use to comply with the SFDR Principle Adverse Indicators.3Principle Adverse IndicatorsWe map our sustainability performance against investor requirements under the EUs Sustainable Finance Action Plan,demonstrating how Telefnica can match investors needs in complying with Art.8&9 SFDR fund requirements.1Taxonomy,Eligibility&Alignment2Going beyond with positive impact(1)Please see further information in Annex I and Telefnicas Impact Report(link to website)Well prepared for upcoming regulationIntroduction153rd party validationsOur performance is validated by leading rankings4th most admired telecommunications operator in the world and 2nd in EuropeFortune 5006th consecutive year10th consecutive year1st in telco sectorGovernance QualityScore 490%scoreClimate targets validated by SBTi Accountability&TransparencyRatings&Rankings3rd consecutive year1st in Digital Inclusion benchmark 3rd consecutive year2th consecutive year as top rated66/1004.6/5A86/10015.2(1)1)Copyright 2024 Sustainalytics,a Morningstar company.All rights reservedEnergy and climate change Telefnica decarbonisation roadmapEnergyConnectivity&digital solutions for a green transitionCircular economyBiodiversity and waterTelefnicas environmental policies have led the sector for many years.Our digital solutions are helping to decarbonise the economy.E:Building a greener futureE:Building a greener future17In order to reach our short and long-term climate targets,we implemented a Climate Action Plan that goes beyond the Paris Agreement and aims to limit the temperature increase to 1.5C above pre-industrial levels.TargetTarget KPI2023 ProgressKey messages Operational emissions-90%Scope 1&2 emissions reduction by 2030 compared to 2015.-81%Scope 1 emissions dropped by 7%compared to 2022.Scope 2 emissions dropped by 3%compared to 2022.Valuechain emissions-56%Scope 3 reduction emissions by 2030 compared to 2016.-31%In 2023 Telefnica has further implemented supplier engagement initiatives to reduce its 64%of Scope 3 emissions stemming from the supply chain.(more info).Neutralisation100%Offsetting of unabated Scope 1&2 emissions in key markets(1)by 2025.65%Spain:credits from Telefnica Forest,as well as other conservation and restoration projects,accounting for 18%operational emissions.Germany:neutralised 60%of their operational emissions Brazil:offset 100%of their Scope 1&2 emissions through the purchase of carbon credits.Telefnica,S.A.:mitigated 68%of the impact of the Scope 1&2 emissions from its corporate premises.Decarbonisation Plan:Targets&progress so far(1)Key markets mean operations in Germany,Brazil and Spain.E:Building a greener future1851%in 2023 vs 2015Step1Set near-term and long-term SBTi targets and implement a strategy to achieve them.Step2Reduce Scope 1&2 emissions through renewable energy&efficiency.Step3Reduce value chain emissions(scope 3)through suppliers engagement and circular economy.Step4Neutralise unabated emissions through certified carbon credits.Decarbonisation Plan:Pathway to Netzero by 2040Carbon offsetting stands for offsets that represent avoided or reduced emissions.At Telefnica,we are using carbon credits to reduce emissions from deforestation and forest degradation,which ensure the protection and conservation of forests(REDD )Carbon neutralisation stands for offsets that represent carbon removed from the atmosphere and permanently stored.At Telefnica,we are using carbon credits from natural solutions,such as afforestation,reforestation and restoration projects(ARR),which promote forestation and thereby absorb carbon.E:Building a greener future19Decarbonisation Plan:Scope 3 InitiativesScope 3 emissionsScope 3 emissions in 2023Engagement initiatives with suppliersE:Building a greener future20TargetTarget KPI2023 ProgressKey messagesEnergy Efficiency90%Reduction in energy use per traffic unit(MWh/Pb)by 2025 vs 2015.89%(1)82.2M savings in energy efficiency and management projects during 2023.8.6%reduction on energy consumption since 2015,while data traffic has increased 8.6x(2).Renewable Electricity 100%Electricity sourced for own facilities consumption from renewables by 2030.84%In 2023 we increased energy sourcing for own facilities consumption from renewable sources by 2 pp(ramping up from 82%of total supply).Our commitment is reflected in the Renewable Energy Plan,to achieve 100%renewable sourcing through purchase agreements(PPAs),self-generation,and guarantees of origin.Our Energy Efficiency and Renewable Energy Plans include a wide range of initiatives aimed at reducing our own emissions(Scopes 1&2).Energy:Targets&Progress so far(1)Our total energy consumption was 6,012 GWh(21,642,699 GJ),of which 95%was electricity and 5%was fuel.We highlight that we have managed to improve our rate of energy consumption per unit of traffic by 89.3%compared to 2015.(2)In 2015 we had an energy consumption of 6,578(GWh)and in 2023 we have reduced to 6,012(GWh),even though we increased from 17 PB of traffic to 146.E:Building a greener future21Energy:Relevant initiativesOur network transformation initiatives such as energy efficiency projects,contributed to 66%of total energy savings.Moving from copper,2G,3G and 4G networks to all-IP,fibre and 5G networks will give us a more streamlined business model.Fibre optics-85%more energy efficient vs copper network.2024:Spain will be the 1st country in EU to shutdown its copper network.5G-Up to 90%more energy efficient than 4G.Germany,Spain,Brazil,Peru and Chile also certified 100%of electricity consumption at third-party sites as being renewable,enabling us to reach 84%globally.Progress in renewable energy consumption in own facilitiesE:Building a greener future22Connectivity&digital solutions for the Green Transition Digital solutions for environmental challenges(1)Of the total,84.9 MtCO2 correspond to services where Telefnica only provides broadband and mobile connectivity for the B2C segment and 1.2 MtCO to IoT,cloud,big data and health services where Telefnica provides the connectivity,IoT devices,platforms,services and/or software.These data include emissions generated by connectivity and the network infrastructure that forms part of these services.We offer services that have the potential to generate environmental benefits by reducing the consumption of energy and water and the emission of CO and boosting the circular economy.In this regard,our portfolio of Eco Smart services,verified by AENOR(an independent certifier),identifies those solutions that have the potential to make a positive contribution to the environment when used by our customers.Customers emissions avoided through digitalisation Thanks to the efficiencies generated by our connectivity and Eco Smart services,we helped our customers avoid the emission of 86.1(1)MtCO2 in 2023.Eco Smart Services52%of our services in Brazil,Chile,Colombia,Germany,Mexico,Peru,Spain,Telefnica Global Solutions(TGS),T.Tech and T.Tech UK&I have been verified as Eco Smart by AENOR.E:Building a greener future23Promoting circularity:Waste&digital initiativesTelefnicas digital initiatives to promote reuse&circular economy VICKYBlockchain technology to increase traceability of customer premise equipment(modems,routers and TV set-top boxes).APOLLOBig data and analytics to optimise collection routes for uninstalled or inactive equipment.MAIAMarketplace to promote internal reuse of network equipment and when is not possible,facilitate equipment sales of secondhand network equipment.MARAOmnichannel model with an end-to-end approach that allows our customers evaluate mobile devices and access trade-in programs,technical support or repair services.GRETELPlatform to increase traceability in waste management and to identify opportunities to improve reuse and recycling rates.Total waste generated(%)E.g:Cables,electronic equipment(WEEE),batteries,paper and others.Promoting the circular economy in the transformation of our network by prioritising the reuse of electronic equipment and,where this is not possible,extracting value from materials through recycling.Electronic equipment(%)Only electronic equipment waste(WEEE)97%reused&recycledE:Building a greener future24Promoting circularity:Targets&Progress so far TargetTarget KPI2023 ProgressKey messagesDesign with environmental criteria100%of new home connectivity equipment designed with environmental criteria from 202533%Launch of new products such as the Fibre to the Room(FTTR)device,which contains 70%recycled plastic in its casing or HomeSpot 5G Router which is 63%repairable and 89%recyclable and recoverable.Refurbishing and reusing CPE90%refurbished customer premise equipment(e.g.routers,decoders)by 202488%We avoided the purchase of 3.7M of new equipment.Reused mobile devices500kUnits of reused mobile devices by 2030491,422 Reused 491,422 mobile devices,27%more than 2022.Collected mobile devices20%used mobile devices taken back over total new devices sold/distributed through own channels by 2030(GSMA goal)11%In 2023 we collected 102t of mobile phones,11%of the total devices distributed.Zero mobile device waste to landfill100%reused and recycled mobile phones collected by 2030(GSMA goal)99%We reused and recycled 99%of the total mobile phones collected.Zero network equipment waste to landfill100%network equipment reused and recycled by 2025(GSMA goal)9913,805 reused items of network equipment,36%more compared to 2022,thanks to initiatives such as the MAIA marketplace.Zero waste to landfill100%of waste reused and recycled by 203097%We reused and recycled 97%of their waste,including 4.5M items of electronic equipment and avoiding 365,929 tCO2 associated with the manufacture of new products.E:Building a greener future25Protecting and conserving biodiversity and waterIdentify and assess nature-related impacts,risks and opportunities(direct operations&value chain).Apply mitigation hierarchy(avoid,mitigate,restore and offset)in relation to priority areas on biodiversity.Establish partnerships and share best practices.Improve employee awareness to encourage responsible and efficient use of resources.Our fundamental aim is to manage all natural resources efficiently:BiodiversityWater98%of Telefnicas facilities are located in habitats with low or very low biodiversity value.12.8%reduction in water consumption in 2023,with a 6.3crease in countries classified as highly water-stressed areas.Human capitalTargets&progressDiversity&inclusionDigital inclusionHuman rightsCustomer relationshipSustainable products&servicesContribution and impact on societyS:Helping society to thriveTelefnica is enabling an inclusive digital transition.Our human capital management aims to attract and retain the best talent.S:Helping society to thrive27Human Capital:Targets&Progress (1)Parity defined on not more than 60%and not less than 40%of each gender.TargetTarget KPI2023 ProgressKey messagesOverall motivation70 annuallyEmployee Net Promoter Score76 7pp in eNPS vs.2022(80%of employee participation).Women executives37%of women executives by 2027.32.8%Programmes to accelerate female employee careers and attract female talent.Commitment to gender equality recognised by Bloomberg Gender-Equality Index.Pay gap /-1justed Gender Pay Gap(%)in own workforce by 2024.0.71%Target seeks to ensure equal pay for equal work.Achieved in 2022.0%Gross Gender Pay Gap(%)in own workforce by 2050.16.1%0.7 pp reduction in gross pay gap between 2022&2023.Increasing proportion of women in key positions,i.e.executives or income generation positions(49%in 2023).Gender parity at the highest levelsParity1%women in the companys highest governance bodies.40%women on the Board of Directors Target achieved in 2022 for the Board of Directors.Objective to achieve parity across the Companys highest governance bodies by 2030.Promote inclusion 2,700 employees with disabilitiesN of employees with disabilities by 2024.2,572 Enhanced disability awareness programmes.Commitments through Valuable 500 initiativeWork-life balance70 annuallyAt least 70%in the employee motivation survey regarding work-life balance.81%Variety of flexible work options including hybrid working and subsidised four-day week,among others.Pioneering digital disconnection agreement in 2019 with all trade union organisations.Target achievedS:Helping society to thrive28Overall motivation Professional development New ways of working Safety,health and well-beingAI for customised trainingLeveraging AI in our SkillsBank tool.Human Capital:Employee survey resultsAdopted a consolidated hybrid,flexible,and digital work model,redefining workspaces and prioritising employee well-being.Universitas TelefnicaTailored training for all professionals.All employees have access to online courses on occupational health,safety and well-being95%of our professionals reported that their work has purpose and meaning in the employee survey(80%participation).81%of our employees reported in the employee survey that learning forms part of their day-to-day working lives.94%of our employees consider that the hybrid-flexible working system enables them to be more productive.81%of our employees feel that Telefnica supports well-being at the Company73%of our employees are covered by a certified(ISO 45001or OHSAS18001)occupational health and safety management system.33 pp higher than in 202265%of employees have adopted our hybrid work model.S:Helping society to thrive29 Female talentPeople with disabilitiesEthnic and cultural diversityHuman capital:Diversity&Inclusion LGBT AgeExamples of Initiatives during 2023:Group level:Empowering Women.Spain:Female Talent Boost Programme.Hispam:Futura leadership programme.600 participants during 2023. 1,090 employees with disabilities incorporated during 2023.109nationalities in our workforce.Signatories of the UN Standards of Conduct for Business to protect the rights of LGBT .Benefits for LGBT couples&parents that go beyond the legal requirements(Hispam).Development and wellbeing of transgender talent(transitioning toolkit,employability workshops)and commitments to attract talent in Brasil(111 employees).63%of new recruits in 2023 under 35 years of age and initiatives to promote senior talent(e.g.Brazil).Training&recruitment of candidates for tech roles with specialist partners.Ensuring workplace accessibility.Initiatives to attract talent and promote leadership from the global majority(UK&Brazil).91%of employees stated that they worked in a company with equal opportunities and 84%said that everyones ideas were taken into consideration regardless of position,gender,age,religion,sexual orientation or identity,ethnicity,origin,disability or personal background.S:Helping society to thrive30Training in digital skills via Fundacin Telefnica:Basic digital skills(e.g.Renacer Digital).Intermediate digital skills(e.g.Conecta Empleo,Lderes Digitales).Employability and training in advanced digital skills(e.g.Campus 42).Developing new solutions and innovative services that can improve peoples lives New verticals:e.g.renewables(Solar360 in Spain),eHealth,circularity&education.Solutions and verified labels to inform customers e.g.Eco Rating for B2C and Eco Smart for B2B customers.Ensuring that P&S meet the strictest privacy and security standards to generate confidence in use of new technologies.Protecting and fostering a responsible use of technology.Safe and responsible use of technologyDigital inclusion:meaningful connectivity1.2Mof new P&S will be reviewed under our Responsibility by Design framework by 2025.people reached through awareness-raising initiatives on the safe and responsible use of technology.Connectivity:Access to broadband communication networks.Accessibility:Digital services as a key tool for improving the lives of people with disabilities.Affordability:Providing social tariffs to not a barrier to using new technologies92%of the population in all our markets has access to our 4G/LTE mobile broadband coverage.Innovation and relevant servicesDigital skillsInclusive access100(M people given intermediate or higher digital skills training to improve employability.S:Helping society to thrive31Human Rights:due diligence processTargetTarget KPI2023 ProgressKey messagesHuman rights risk assessment 100%of our operations assessed on human rights twice a year.100%Global impact assessments every 3-4 years to identify and validate existing/new Human Rights impacts.Based on the results,we conduct local impact assessments twice a year and independent thematic impact assessments if a new relevant impact is identified.Pioneering report on the Due Diligence process to take into account the new regulatory requirements,following a five-step process:The Global Human Rights Policy establishes the general guiding principles that form the basis of our relationship with suppliers,employees,customers&society.Global and specific(local,thematic)impact assessments to understand potential impacts and risks on human rights.Priority areas of impact:We adapt internal policies and processes to prevent,mitigate and/or remedy potential human rights impacts.We carried out monitoring and reporting activities on an ongoing basis and generates public reports about our Due Diligence process.Our Whistleblowing and Queries Channel enables any individual or entity to express concerns or complaints regarding human rights among other topics.Digital Inclusion.Digital Rights.Responsible use of new technologies.Protection of children.Social and environmental standardsin the supply chain.Due Diligence in Human Rights&Environment1 Policy2 Impactassesments3 Integration into processes4Assesment and reporting5Complaint and remedy mechanismsS:Helping society to thrive32Customer Relationship:Building trustNet Promoter Score 2017 2020 2021 2022 20233126Voice of the Customer programmesSpain:The handling of dissatisfied customers through close-the-loop allows almost 70%of customers to end up being satisfied.Brazil:Resolution rate of the complaint process:75%|Churn reduction:60%.Germany:Since the launch of the program in 2019 the relational NPS has increased by around 20 points.Responsibility to the CustomerOur internal regulation on Responsible Communication provides guidelines on how to address customers and other stakeholders.Net Promotor Score Our 2023 ProgressCustomer satisfactionWe measure NPS as a target linked to customer trust.NPS is included within our employees remuneration schemes NPS reached 31 points in 2023,marking an improvement of 10 points vs.2017.99%network availability during 2023,in line with our objective to provide the best connectivity.We are part of the Planet Pledge initiative.In 2023:Trained 450 marketing,comms,events&sponsorship employees to reduce environmental impact.Provided guidelines to avoid greenwashing.233019S:Helping society to thrive33Sustainable innovationWe develop innovative solutions to help our customers transition to more sustainable and competitive business models Open innovation portfolio/active start-ups 538Total cumulative investment in Open Innovation 233M Eco RatingSustainable Products&Services:key to our growth strategyMeasuring the environmental impact of mobile phones throughout their life cycle.Responsibility by designIntegrating ethical,environmental sustainability and accessibility principles into P&S and channels.Implemented in 100%of our marketsPioneers:AI principles published in 2018Sustainable innovation 3,203 M invested in R&D i during 2023.497 industrial property rights in 2023.High-capacity and energy-efficient networks with solutions based on Data-and AI-driven operations.10 years investing in innovative startupsCore&Network innovationOpen innovationRanked amongst the top 50 companies in Europe for R&D investment*(*)According to the European Unions Research and Innovation Observatory.Portfolio of solutions to address global challenges E-Health services Cyber-security52%of the B2B portfolio has an Eco Smart certificationAnnex34Energy and climate change Climate ChangeContribution and impact on societiesSince 2019 we have been measuring our impact and our contribution to the main SDGs in order to better integrate this into the organisations decision-making models.To measure and monetise our impacts,we have followed the guidelines provided by organisations such as:Harvard Business School(HBS)The Value Balancing Alliance(VBA)The World Business Council for Sustainable Development(WBCSD)The Capitals CoalitionThe latest report published considered 2022 data and rendered a 100bn contribution(similar to previous years),Annex IISocioeconomic Contribution Report100bn socio-economic contribution48bn2.5bn32bn17bnCorporate governanceCulture based on ethicsData privacySecurity and cybersecurityManaging a responsible supply chainG:Leading by exampleTelefnica maintains strict levels of governance oversight through policies,personnel,and programmes.G:Leading by example36Our 15-member board has a diverse skill set and backgroundCorporate Governance:A balanced and diverse board15Members on the Board of Directors40%Women on the Board of Directors%of Directors with the following knowledge and skillsBoard composition%of Directors with professional experience in the following sectors66,67%IndependentDirectorsLead independent DirectorInternational diversity0,40%total votingrightsAverage Directors Tenure8,80 Years Renewed Board of Directors since 201673.33%New directorssince December 2019Target achievedG:Leading by example37Corporate Governance:Active Board oversightThe Board continuously analyses the main strategic issues facing Telefnica.The Board is responsible for approving Telefnicas Strategic Business PlanThe Strategy and Innovation Committee(SI)supports the Board in analysing Telefnicas global strategy policyThe Board is informed monthly of the matters discussed by the SI,which includes the global strategic policy,and receives updates from management on strategic issues including among others:Board oversight of StrategyBoard oversight of Responsible Business PlanBoard meets onceevery monthApprovalResponsibleBusiness PrinciplesResponsible Business PlanCorporate Support and Business AreasMain Sustainability PoliciesGlobal Sustainability(ESG)OfficeEthical FrameworkRoadmap for SustainabilityCountry OperatorsSupervisionMonitoringImplementationHuman Capital Management Initiatives and PlansUpdates on TransformationprogrammeESG Landscape and Responsible Business PlanStrategic Portfolio AnalysisSustainability and Regulation CommitteAudit and Control CommitteeExecutive Commission meets twice every monthBoard AnnualStrategic Off-siteSustainability and Regulation Committee meets once every monthG:Leading by example38Corporate Governance:Sustainability ManagementMain bodies of the sustainability governance modelGeneral shareholders MeetingBoard of DirectorsThe Companys highest decision-making body;Among its functions is the approval of the Sustainability Report.Approves the Responsible Business Principles,the Responsible Business Plan and the relevant ESG policies and regulations.Sustainability and Regulation CommitteeNominating,Compensation and Corporate Governance CommitteeCreated under its new structure on December 2023,it oversees implementation of the Responsible Business Plan at its monthly meetings,among other tasks.Oversees the variable remuneration system,which includes sustainability-related targets,among other things.Audit and Control CommitteeExecutive CommitteeOversees certain matters related to sustainability information,regulatory compliance,the risk analysis and management process and the Companys reporting processes.One of the Telefnica Groups highest management bodies,monitors the business and the Responsible Business Plan as well as other issues related to the management of sustainability targets.Global Sustainability(ESG)OfficeCompany areas responsible for managing sustainability mattersDevelopment of the business plan,reporting of sustainability information,management of sustainability risks,monitoring the ESG culture,communication for engagement with stakeholders and coordination of sustainable finance,among others.Undertake the implementation of the objectives of the Responsible Business Plan.General Shareholders MeetingBoard of DirectorsSustainability and Regulation Committee Nominating,Compensation and Corporate Governance CommitteeAudit and Control CommitteeExecutive CommitteeGlobal Sustainability(ESG)Office Company areas responsible for managing sustainability mattersVarious governance and management bodies involved in sustainability managementG:Leading by example39A culture of responsible business is ensured via robust policies,extensive training and the facilitation of reporting channels.Ethics and responsible businessTargetTarget KPIOur 2023 ProgressKey messagesResponsible Business0Zero Tolerance of corruption and bribery0 confirmed cases of corruption.94,900 employees(91%of the workforce)have been trained in anti-corruption.5,823 suppliers awarded in 2023 have received information on integrity policies and values.AllEmployeesEmployees trained in Responsible Business Principles and Human Rights92,401 employees Since the Principles of Responsible Business course was launched(May 2022),89%of employees have completed the training.AllOperationsOperations assessed for corruption risksAll operations assessed The operations risk map,including the basic compliance risk,is carried out twice a year.Implementing a solid culture of ethics&compliance Integrity is the basis for our Compliance function.Legal compliance&zero tolerance to corruption&bribery Mandatory responsible business,human rights training,integrity training and internal awareness campaigns.New Policy on Whistleblowing in 2023(new regulatory requirements).912 complaints received in 2023,328 of which were substantiated,and 109 resulted in termination of contracts.Robust training on ethicsWhistleblowing channel Training on competition law available for all company areas.In 2023,no material judicial proceeding were in progress for violation of competition law and no fines were paid for anticompetitive practices.Fair competition We do not take a political standpoint beyond views on matters affecting Telefnica.Online and in person courses 3,300 courses(5,500 training hours)on ESG topics and business ethics completed by 2,500 employees in 2023.Political neutralityESG AcademyG:Leading by example40Privacy and SecurityPrivacy and Security is fundamental to our business.Our priority is to generate a relationship of trust with all those with whom we work.ProtectionWe apply privacy and security by design,that is incorporated into the initial concept of our products and services and subsequently throughout the development process.Individuals must be able to manage and control their personal data.This enables access to their data and to additional information about the risks and benefits associated with management thereof.The principle of transparency is about both providing people with straightforward tools that allow them to control their data and having the technological development needed to generate maximum respect for privacy and information security.Data must be secure and individuals privacy must be preserved.This is the foundation of our business and our primary consideration when designing our services and collaborating with third parties.Key Data 202375,821 hours of training in data protection and cybersecurity,with over 94k attendees6,007 days dedicated by internal audit to data protection and cybersecurityLeading telco in Ranking Digital Rights index and the DigitalInclusion BenchmarkDesignTransparencyEmpowermentG:Leading by example41 Data privacy:performance,internal controls and main targetsOur internal data privacy policiesOur data privacy performance in 2023Key targetsfor 2024Approve and introduce Binding Corporate Rules(to guarantee transfer of personal data outside the EU),which will permit us to increase our level of commitment to privacy even further.Update the Groups Privacy Policy it in line with the BCRs Groups Privacy Policy to bring.Update the Global Privacy Centre,which is part of the Global Transparency Centre.In order to reduce risk exposure and increase digital trust,Telefnica complies with the Data minimisation”principle of the General Data Protection Regulation(GDPR),to obtain,process and store only the personal data that is necessary and to do so only for a specified time.We have established policies and guidelines on the storage and deletion of data in the Transparency Centres of the Groups operators.30 requests for mediation were processed through Voluntary mediation system with AUTOCONTROL 0 fines due to data protection issues as a result of a security breach or incident affecting personal data.G:Leading by example42Security&Cyber-security Protecting people and property from potential damage from Security threats while guaranteeing confidentiality,integrity and availability of the companys information assets.Key indicators&targetsHigh Severity Cyber security incidents involving personal identifiable information:0(vs.2 incidents affecting 95%of contracts/RFPs with supplierswill contain security requirementsby 2025.Next Steps Continue our review of the global regulatory framework on security in order to simplify it and align it with new versions of international standards,such as ISO 27001.Move forward with deploying the Zero Trust1 model to control IT system access and with implementing tools to govern the security of cloud environments.Increase the percentage of contracts/RFPs that contain security requirements for the supply chain.(1)Zero Trust is a security strategy applied to accessing information that will be provided through“minimum privilege”control techniques.It will be end-to-end encrypted and guided by the principle of“never trust,always verify”Internal security management Prevention,detection and appropriate response to reduce attacks and protect digital services across the Group.Physical and operational security Digital security Business continuity Fraud prevention Supply chain securityInternational standards such ISO 27001 and NIST are followed.https:/ by example43Cyber Security Capabilities for our customers via Telefnica TechIdentifyProtectDetect&respondCyber-exposure management Cyber-Threat Intelligence.Vulnerability Management.Offensive SecurityZero-trust defense.Managed Security Services.Managed Secure Networking ServicesManaged extended detection&response.DFIR.Managed SIEMIdentityNetworkEnd-pointCloudOTDataAppsPeopleNextDefense PlatformSecurity AutomationManaged&professional services and consulting6,300 Professionals 4,000 Certifications2 DOCs SOCs 15 yearsof Cyber Security practice in Telefnica24x7 always-on security professionals with global reach&local presenceG:Leading by example44Supply Chain ManagementTelefnicas supply chain approach is based on two pillars2.Engagement1.Risk managementTargetTarget KPI2023 ProgressKey messagesSupply chain risk assessment 100%of potential high-risk suppliers assessed on sustainability matters via an external platform by the end 202672%Identification of potential high-risk suppliers through our internal risk assessment methodology.Potential high-risk suppliers then evaluated based on 15 sustainability criteria that cover ESG aspects.Every stage is accompanied with training and engagement with our suppliers:to raise awareness and promote capabilities to improve.100%of our suppliers are required to accept our sustainability standards.687 potential high-risk suppliers.72%of potential high-risk suppliers have been evaluated on sustainability aspects18,324 administrative or on-site audits and 853 audited suppliers with improvement plansSTEP 1STEP 3STEP 4STEP 2All suppliers are required to accept our Supply Chain Sustainability Policy.Identification of potential high-risk suppliers.Performance assessment of potential high-risk suppliers.Audits(administrative or on-site)of potential high-risk suppliers.Annex45AnnexESG Reporting linksDouble Materiality Climate change risks and opportunitiesOur Board of DirectorsContribution to societyData privacy by design process,assuring transparency and empowering our customersPerformance in ESG Ratings ESG ReportingAnnex46NNNNNESG Reporting linksESG LibraryAnnex IESG ReportingConsolidated Management Report 2023E EnvironmentS SocialGGovernanceAnnex47Double materiality:ProcessAnnex IIDouble materiality Impact,risk and opportunity(IRO)assessment criteriaImpact perspectivePositive ImpactActualScale Scope Economic AssessmentPotential(Scale Scope Economic Assessment)x LikelihoodNegative ImpactActualScale Scope RemediabilityPotential(Scale Scope Remediability)x LikelihoodFinancial perspectiveRisksScale Economic Assessment x Likelihood for potentialOpportunitiesAnnex48Energy and climate change Climate ChangeClimate change:Risks and opportunitiesTelefnica analyses climate-related risks in accordance with the recommendations of the Task Force on Climate related Financial Disclosures(TCFD).The opportunities are associated with cost reductions and business growth.Annex IIIClimate change risks and opportunitiesAnnex49Telefnica is firmly committed to the ongoing improvement of its corporate governance framework,increasing,strengthening and consolidating best practices in this area.Corporate Governance:Our board of directorsAC=Audit and Control CommitteeE=Executive CommissionNCCG=Nominating,Compensation and Corporate Governance CommitteeSRC=Sustainability and Regulation CommitteeCommittee KeyVernica Pascual BoMemberIndependent DirectorCommittees:NCCGSolange Sobral TargaMemberIndependent DirectorCommittees:SRCAlejandro Reynal AmpleMemberIndependent DirectorMara Rotondo UrcolaMemberIndependent DirectorCommittees:AC,SRCPeter LscherMemberIndependent DirectorCommittees:E,AC,NCCG(Chair)Carmen Garca de AndrsMemberIndependent DirectorCommittees:AC,SRCFrancisco Javier de Paz ManchoMemberOther External DirectorCommittees:E,NCCG,SRC(Chair)Mara Luisa Garca BlancoMemberIndependent DirectorCommittees:AC,NCCG,SRCFrancisco Jos Riberas MeraMemberIndependent DirectorClaudia Sender RamrezMember Independent DirectorCommittees:EJos Javier Echenique LandirbarVice Chairman and Lead Independent Director Independent DirectorCommittees:E,AC(Chair),NCCGIsidro Fain CasasVice ChairmanProprietary Director Committees:EJos Mara lvarez-Pallete LpezExecutive Chairman Executive DirectorCommittees:E(Chair)Jos Mara Abril PrezVice ChairmanProprietary Director Committees:E,SRCngel Vil BoixChief Operating Officer Executive DirectorCommittees:EAnnex IVOur Board of DirectorsAnnex50Energy and climate change Climate ChangeContribution to Society during 2023 7,580M euros are the taxes paid during 2023:For every 100 euros of turnover,we spend 19 euros in taxes.For every euro of gross operating margin we obtained in 2023,we generated 4.3 euros of contributions to the GDP of the main countries in which we operate.23,370 million euros awarded to 8,462 suppliers.83%of purchases awarded to local suppliers.Our activities constitute a catalyst for job creation:for every person we hire,we additionally generate over 10 indirect or induced jobsAnnex VSocioeconomic Contribution ReportG:Leading by example51Data privacy by design process,assuring transparency and empowering our customersCustomer empowermentProtection:privacy by design processTransparencyGlobal Privacy Center Our objective for 2024 is to continue improving this centralised channel,among other things by linking all of our operators Transparency Centres.Our operations certified under ISO27001 are published in the Transparency center.Operators Privacy and Security CentresEnable both our customers and stakeholders to obtain information about the processing of their personal data in a simple,digital and understandable way.Transparency centerAllows customers to set their data privacy and management preferences via their Personal Data Space,permitting to control and ensure the transparency of data.Designing P&S is crucial to implement legal and security-based privacy protection measures as well as ensure all business processes related to activities impacting personal data.Annex VIData PrivacyAnnex52Performance in ESG RatingsAccountability&TransparencyGRI standards(comprehensive)SASB Telecommunication Services Sustainable Industry Classification SystemTCFD recommendations(Environmental)Recommendations of IIRC Eligibility activities reported under EU TaxonomyAnnex VII3rd Party Validations-Performance in ESG RatingsBloomberg Gender Equality IndexIncludedCDPACDP Supplier EngagementLeaderDigital Inclusion Benchmark(DIB)89/1001st in the world(ICT sector)EcoVadis 75/100FortuneMembers of the Most Admired Companies 2023 list(4th in the world/2nd in Europe)FTSE Russell4,6/51st in the sectorMoodys Analytics66/1003rd position in the sectorMSCIARanking Digital Rights1st in the telecommunications sectorRefinitiv A-S&P DJSI86/100Member of DJSI EuropeSustainalytics(1)15.2(low risk)8th in the telecommunications sectorWorkforce Disclosure Initiative 90%World Benchmarking Alliance1stThe table includes the latest valuations provided by institutions in 2023 or later,but based on information from that year.1)Copyright 2024 Sustainalytics,a Morningstar company.All rights reserved
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ZEEKREnvironmental,Social,and Governance(ESG)Report2023Jointly Building a Responsible Supply ChainEmpowering Employees to Make Breakthroughs5155Fostering Win-win CooperationAddressing Climate ChangeProtecting the Ecological Environment3746Promoting Green Development TogetherCreating Ultimate Customer ExperienceGathering Community Strength2733Co-creating with ZEEKR UsersAbout the ReportMessage from CEOAnnual ESG PerformanceAbout ZEEKRSustainability Governance0203040608Appendix 1:Assurance Report of the Independent Auditor Appendix 2:GRI Sustainability Reporting Standards Content Index 6263ContentsAll-round SafetyDriving Unparalleled Product Development1721Pursuing UltimatePerformance02About ZEEKRAbout the ReportZEEKR 2023 Environmental,Social,and Governance(ESG)ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherAbout the ReportThis is the second Environmental,Social,and Governance Report(hereinafter“ESG Report”or“the Report”)released by Zeekr.The goal of this Report is to disclose Zeekrs management,practices,and performance in environmental,social,and governance fields to the Companys stakeholders.Reporting PeriodThe Report covers the time frame from January 1,2023 to December 31,2023(the reporting period),with some information dating back to previous years or referring to later years.Reporting Scope andBoundariesThe Report focuses on the business operations that are directly controlled by Zeekr Intelligent Technology Holding Limited.Preparation BasisReport OverviewThe Report is prepared with reference to the GRI Sustainability Reporting Standards(GRI Standards 2021)issued by Global reporting Initiative(GRI),IFRS S1:General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2:Climate-related Disclosures issued by International Sustainability Standards Board(ISSB),and is based on the current development of the Company as well as its ESG practices.By following the process of identifying and prioritizing key stakeholders and important ESG topics,determining the scope of ESG reporting,collecting relevant materials and data,preparing the Report and reviewing the information in the Report,we ensure the completeness,materiality,authenticity,and balance of the content of the Report.Data SourceUnless otherwise stated,the information and data in the Report are derived from the Companys official documents and statistical reports.ReferencesLanguagesFor better presentation and readability,Zeekr Intelligent Technology Holding Limited is collectively referred to as“Zeekr”,Zeekr Intelligent Technology,“the Company”and“we”in the Report.Unless specified otherwise,all financial data in this Report is presented in RMB.The Report is available in Chinese and English.In case of any discrepancy between the Chinese and English versions,the Chinese version shall prevail.Report Reliability Assurance and ApprovalTo ensure the reliability and accuracy of this Report,TV Rheinland(Shanghai)Co,Ltd.has independently verified the Report in accordance with the Account Ability 1000 Assurance Standard v3(AA1000AS v3)Moderate level of assurance.The Report has been confirmed by the Companys ESG Task Force,and was approved by the ESG Committee on September 27,2024.DisclaimerThe Report contains forward-looking content,including plans and goals for future development.These statements are based on the current expectations of our management and may differ significantly from actual results due to uncertain factors.The Company is not obligated to update any forward-looking statements in the Report.Report FeedbackWe highly value to the opinions of all parties.If you have any suggestions on the improvement of the report,please contact us by the contact information as below.Your feedback will help us further improve the Report,and our ESG performance.Email:03ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherMessage from CEOFor the automotive industry,it is clearly an era of dramatic changes.The shift of conventional cars from electrification to intelligence is bringing increasingly new opportunities and challenges for Chinese automobiles to go global.At a new point where the timeframes of its two centenary goals converge,concentrating on the mission of“co-creating the future of mobility experiences”,Zeekr continues to deliver innovative,ever-advancing,and disruptive outcomes.In 2023,guided by the tenet of sustainable development,we stepped up efforts in products,users,communities,environment,employees,and supply chains,creating myriad“shining moments of Zeekr”and long-term value for all stakeholders.In 2023,we officially released our ESG strategy,with key actions formulated to achieve the strategic goal of“to be an ESG leader in the intelligent electric vehicle industry”.Underpinned by the four pillars of“zero-carbon ecosystem”,“sustainable future”,“ultimate experiences in mobility”,and“proactive compliance management”,our ESG blueprint propelled us steadily toward sustainable development goals.We unceasingly pursue better performance.By continuously optimizing our corporate governance structure and compliance management system,we contribute to healthy and safe mobility while upholding the high standards of business ethics.We also build a solid foundation for sustainable development with strong governance capacity and product quality.Based on the concept of modular automotive manufacturing,we have developed the worlds most scalable EV architecture,SEA.With the architecture,coupled with vertical integration of the industrial chain,we continue to innovate and make breakthroughs in the core areas of smart EVs.In 2023,Zeekr delivered 118,685 vehicles,up 65 percent year on year.Totally,we had delivered 190,000 vehicles by now.Meanwhile,we rolled out the worlds first 800V ultra-fast charging ecological solution through the comprehensive innovation of vehicles,electricity,and grids offering the ultimate mobility experience to pure electric users and eliminating range anxiety.We strive for value co-creation with Zeekr users.By embedding the idea of“co-creation”in our corporate DNA,we are committed to co-creating the ultimate experience with our users and bringing more diverse values to users.In 2023,we consistently improved our service network and ecosystem.We built 882 charging stations across 137 cities nationwide,ranking third by quantity among pure electric brands in China.We launched 436 ultra-charging stations in 2023,with 2,409 ultra-fast charging piles spanning 102 cities nationwide,ranking first in the quantity of self-developed 800V high-voltage ultra-charging piles in the industry.We integrate our development with social responsibilities by focusing on users,communities,and the environment.We have launched more diversified community activities covering biodiversity conservation and green and low-carbon development,contributing to public welfare undertakings with concrete deeds.Our journey to green development is not alone.Upholding green development,we always integrate climate action as a key element in our corporate development narrative and continuously reduce carbon emissions across the whole chain of manufacturing,supply,and use,ultimately achieving the long-term goal of carbon neutrality.In 2023,Zeekr Intelligent Factory was listed in the“2023 5G Factory Directory”released by the Ministry of Industry and Information Technology.The factory boasts approximately 300,000 square meters of photovoltaic facilities,and generates 33,671.20 MWh of electricity annually.Totally,we have achieved 100%use of green electricity.Furthermore,we weave the concept of circular economy into our business operations and production processes.Through resource conservation and closed-loop manufacturing across the entire vehicle lifecycle,we boost resource efficiency,striving toward a“nature-positive”business model.We seek win-win cooperation to make inroads into global markets.We deem our employees as the major driving force for corporate growth.In addition to protecting employees lawful rights and interests,we particularly value talent unearthing and retention,and pursue a sound compensation and growth system and a well-rounded occupational health management mechanism,aiming to foster a diverse,equal,inclusive and sustainable workplace where Zeekr and employees can grow together and trust each other.Moreover,we will further strengthen supply chain management.We not only improve our supply chain management system,but also support suppliers to improve responsibility performance in a compliant,honest and win-win cooperative manner,thereby promoting high-quality development of the automotive industry.In 2023,we officially made inroads into global markets.We inaugurated sales in the Netherlands,Sweden,and Germany.We tapped into markets in the four Gulf countries in the Middle East,namely,UAE,Saudi Arabia,Qatar,and Bahrain,blazing a new chapter of globalization with more international employees,suppliers,and business partners.On May 10,2024,Zeekr successfully went public on the New York Stock Exchange in the United States.We will further upgrade corporate governance to realize sustainable development driven by global compliance and transparency,co-create the ultimate experience of mobility with global users,and bring stable long-term value to investors.Moreover,we will accelerate our actions in low-carbon manufacturing and corporate responsibility,striving to bring a greener and brighter future to our planet.Conghui AnChief Executive Officer04ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherAnnual ESG Performance Product and InnovationZeekr 001 set a Guinness World Record for the longest electric vehicle journey on a single charge,covering an impressive 907.623km.ZEEKR 001 also got the highest auxiliary safety score ever recorded by the China Insurance Research Institute(CIRI).Zeekr 001 FR unveiled the worlds first mass-produced 8295 Intelligent Cockpit Computing Platform.The Kr AI prototype made a debut in Zeekr 007 OS 6.0,bringing its intelligent interaction system Eva to new heights in all scenarios.Zeekr 009 won three major awards,namely the“China Top 10 Car Bodies-Best Craftsmanship Award”,2023 China 10 Best EV Powertrain Systems,and“Five Star Healthy Car”title.Zeekr X won the“2023 Automotive Disciplined Innovation Award”.The worlds first 800V ultra-fast charging ecological solution:300 Overseas patent applications in total3,000 Domestic patent applications in totalUser ServicesChampion in 2023 China New Energy Vehicle Customer Experience Value Index(NEV-CXVI)Study by J.D.Power342Directly-operated outlets worldwide in total 7outlets won18international design awards340Directly-operated outlets in China in totalProduct and InnovationThe worlds first mass-produced lithium iron phosphate(LFP)ultra fast charging battery-the Golden Brick BatteryZeekr Intelligent FactoryShortlisted in the2023 5G Factory Directory by the Ministry of Industry and Information Technology 118.62 kgce per vehicle Actual energy consumptionabout 300,000 m2Photovoltaic coverage areaEnvironmentalFull-stack independent development 800 V high-voltage architectureThe first V3 charging pile in the world with 800 kW single-gun peak powerRenewable energy applicationsEnergy and resource utilization882 Charging stations builtnearly137Cities covered100%Coverage rate of first and second-tiercities in China33,671.2 MWhPower generation in total146,000 mReuse of reclaimed water05ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherZ-Green ProjectSocialDiversified Governance“Blue Guardian”Global Marine Public Welfare Program358,649 Total participants of“carbon reduction actions”Employee Development607,082 hours Employee training in total98,358 Participants in totalIntegrity and Compliance100%Signing rate of Compliance Commitment Letter by employees22.22%Percentage of women in senior management in China85,354 Participants of compliance training 6.87hours Compliance training duration per employeeRecognized as one of the“Top 10 Innovative Cases”in Chinas Digital Public Welfare Communication in 202333 Total offline environmental protection activities in 2023400 Coastal environment patrols in total3,000 Volunteers nationwide attractednearly10 tons Marine debris collected in total 20 Cities covered111,012 tCO2e Cumulative carbon reduction through low-carbon behaviors(long-distance travel with NEVs or walking for short distances),equivalent to the annual carbon sink of Mongolian Scotch Pine of 24.74 million 1,000 Users involved 10,000 eligible individuals were granted with restricted stocks,covering senior,middle,grassroots,and front-line employees 94.94%Total signing rate of the Integrity and Compliance Statement of Zeekr Business Partners100%Key supplier audit rateIt effectively helps identify and respond to supply chain risksEnvironmentalSocialCorporate Governance06ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherAbout ZEEKRZeekr founded in March 2021,is an intelligent mobility technology company driven by intelligence,digitalization,and data.Zeekr was officially released as a new smart pure electric vehicle brand under Zhejiang Geely Holding Group(Geely Holding)in April 2021.Zeekr positions itself as a premium technology brandZeekr follows an innovative path of full-stack independent research.By collaborating with top ecological partners worldwide,we have efficiently integrated industrial ecological resources.Combining the“1 2 3”strengths of the giants with a user-centric approach,we have opened up a unique path in the intelligent electric vehicle industry,creating the distinctive“Zeekr model.”Zeekr is dedicated to starting from zero,gathering hope,and collaborating with users to create a better and more sustainable future of mobility.Strengths of the Giants:Efficiently integrating the most valuable resources in the industrial ecosystemPure user-oriented thinking:Ensuring the purest user-oriented thinking through a user-oriented approach1architectureThe Sustainable Experience Architecture(SEA)2systems that are highly integratedThe integration of the automotive and forward-looking technological industriesThe integration of enterprises and users3major advantagesCluster integration Organizational level CreativityThe ZEEKR Model:The Unique Path for the Smart Electric Vehicle IndustryZEStands for Zero,the starting point of infinite possibilities.EStands for Evolving the Electric Era.KRStands for Krypton,a rare gas that emits light when electrified.The Sustainable Experience Architecture(SEA)creates a three-dimensional framework at the hardware,system,and ecological levels.It accommodates a wide range of vehicle sizes,from smaller A-segment to larger E-segment models,and meets the modeling needs of various vehicle types,including sedans,SUVs,MPVs,small city cars,sports cars,pickups,and future models.The SEA architecture has revolutionized the automotive software development cycle by reducing development time by more than 50%.The Sustainable Experience Architecture(SEA)Read More07ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherValue SystemBased on the technology ecosystem and user ecosystem,we work to use technology to create a trendy,convenient,and enjoyable future of mobility for mankind through product innovation,user experience innovation,and business model innovation.Vision&MissionBrand LabelBrand PropositionCo-creating the future of mobility experiencesHuman TechTrustworthyImagine BeyondWe keep an open mind,and maintain transparent communication.Equality is necessary in all our relationships.We strive for a better tomorrow for all.Through innovative design and technology solutions,we are laying a path towards a more sustainable future.We encourage diversity and celebrate our differences as humans.With an open attitude,we innovate for a better tomorrow.ZEEKR StyleSustainabilityDiversityEquality08ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherSustainability GovernanceZeekr continuously strengthens the corporate governance structure,and works to establish a sound compliance management system covering various fields.We strive to play a greater value in environmental,social and governance areas by formulating ESG strategy and continuously improving the ESG management system and mechanism.Governance Structure ImprovementIn compliance with the Company Law of the Peoples Republic of China and applicable requirements in which we operate,Zeekr continuously improves its corporate governance system,and has established a well-defined governance structure encompassing the Board of Directors,the management,and operational teams.During the reporting period,the Companys Board of Directors,the management,and the operational teams strictly followed relevant regulations and corporate rules.They conscientiously fulfilled their duties and ensured the standardization and effectiveness of the Companys governance structure.We consistently improve the management structure to ensure compliance with laws,regulations,and corporate strategies.our Board of Directors currently consists of 8 directors,including 4 independent directors*,and all with qualified professional backgrounds and essential knowledge,skills,and qualities to fulfill their duties.They keep abreast of the Companys production,operations,financial status,impact of major events and their risks to ensure efficient operation and informed decision-making.Our senior management team has rich experience in the automotive industry and can drive the continuous and stable operation of brand,marketing,sales,research and development,production and manufacturing,supply chain,human resources,finance,legal and other aspects.Integrity and Compliance in OperationsZeekr is committed to cultivating a corporate culture with high standards,business ethics,and compliance principles and continues to guide and standardize the business behavior of employees,managers,and partners through management improvement,system improvement,and standardized operation.This provides a solid guarantee for the long-term and stable development of the Company.We have formulated the Compliance Performance Evaluation Management Measures,which includes compliance management in the quarterly and annual performance evaluation indicators for each department.The evaluation considers various dimensions such as compliance culture inheritance,compliance management mechanisms building,and compliance risk management.With a problem-oriented approach,we identify weak links in compliance management and continuously improve the management system.Zeekr has established a robust long-term mechanism and developed the Zeekr Intelligent Technology Integrity and Compliance Guidelines Codes.These codes serve as the baseline for all employees to uphold integrity,work efficiently,implement corporate strategies,and adhere to our policies.Employees are required to conduct business correctly and uniformly,promoting the development of a law-abiding and honest company.Furthermore,we convey the spirit of compliance in a top-to-down manner,and have established a dedicated company-level Compliance Committee to evaluate the effectiveness of risk management and internal control through both internal and external compliance checks.Compliance System Building and Compliance Performance EvaluationOrganizational Structure of ZEEKRs Compliance SystemCompliance CommitteeChief Compliance OfficerThe routine administrative office is established within the Legal Compliance DepartmentIntegrated ComplianceEHS ComplianceCompliance InvestigationData ComplianceTrade Compliance*The structure and membership of the companys Board of Directors are consistent with the contents of the listing prospectus published on May 9,2024.09ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherTo standardize compliance risk management,we have developed the Compliance Risk Management Measures in accordance with regulatory documents such as ISO 37301-Compliance Management Systems-Requirements with Guidance for Use,and GB/T 24353 Principles and Implementation Guidelines for Risk Management.We have clearly defined the primary responsibilities of each department,and standardized the closed-loop mechanism for compliance management,including compliance obligation identification,risk assessment,risk response,and rectification.To tighten compliance risk governance,we thoroughly investigate related risks in key and high-risk businesses,and identify compliance-related residual risks in accordance to laws,regulatory policies,internal rules,and business processes.We evaluate the outcomes of risk rectification and the effectiveness of continuous risk monitoring of relevant departments based on the Compliance Performance Evaluation Management Measures.We also encourage all business departments to carry out self-inspections and self-corrections to timely identify and solve problems.Based on the Compliance Consultation,Reporting,Investigation,and Reward Management Measures,we have established a whistle-blower protection mechanism that encourages employees to report risk information or violations.This has fostered an environment where employees are willing to report and address issues.Compliance Risk ManagementCompliance Risk Management SystemObjectives:To promote an honest and law-based compliance culture,cultivate employees compliance awareness,and deepen the concept of“protecting value through compliance”Principles:Good governance,balance,transparency,responsibility,and sustainabilitySupports:Resources,capability,awareness,communication,and policiesPlanDoCheckActionPlan for implementing and evaluating compliance risk policies and proceduresPlan for compliance training and publicityCompliance risk identificationCompliance risk analysisCompliance risk evaluationCompliance risk responseDevelop risk monitoring and early warning mechanisms based on risk rating resultsUrge all departments to conduct compliance risk self-inspectionsEstablish mechanisms for internal communication,risk response,and reportingGuide department compliance risk rectification based on self-inspection resultsPeriodically reassess compliance risksWeCom consulting platform:“ZEEKR Integrity”AssistantZEEKR Integrity and Compliance WorkbenchZEEKR Legal Compliance PortalZEEKRs Integrity Complaint and Reporting ChannelsZEEKR Integrity email:10ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherThe Company has continuously improved its integrity and dedication system.We have effectively expanded the channels for reporting violations by conducting integrity inspections on directly-operated outlets,sending anti-corruption initiative letters to suppliers,and launching an integrity assistance hotline and integrating it into the Zeekr Info Center dialogue platform.These efforts have fostered a culture of integrity,honesty,and efficient collaboration among all parties.In 2023,the Company strictly handled corruption cases according to law,and 2 corruption cases were transferred to public security organs for investigation.In addition,we have defined departmental responsibilities and established preliminary review and case investigation mechanisms for integrity violations,ensuring that the entire process,from case acceptance to investigation,conclusion,handling,remedial measures,and case closure is standardized and well-regulated.Creating a Culture of IntegrityWe launch comprehensive compliance training with contents customized for various business scenarios,personnel,and positions.In 2023,based on the Zeekr Intelligent Technology Integrity and Compliance Codes,we provided training on related to compliance,including anti-corruption,fair competition,export control,information security,and data compliance.In order to consolidate a compliant culture,we have launched the“Compliance Culture Month”,a theme campaign,during which Zeekr and its subsidiaries promote compliance through a series of activities.We aim to integrate the compliance culture into our daily operations and make compliance our shared goal.Compliance Publicity and Training100%Signing rate of Compliance Commitment Letter by employeesIn 2023As compliance management moves towards a higher level,digital compliance will assume a more prominent role.Proceeding from our own businesses and process,we integrate information technology into a new autonomous compliance risk management mode that manages compliance risks,conducts self-inspections and self-corrections,and evaluates compliance performance,effectively improving the level of compliance management.Digital Compliance Blueprint for Comprehensive Digital Compliance ManagementCompliance Obligation IdentificationCompliance Risk AssessmentCompliance Risk RectificationCompliance Risk MonitoringCompliance Performance ManagementCompliance obligation identificationDefine the primary responsible department for compliance obligationsCompliance risk responseCompliance risk early warningCompliance risk rectificationCompliance risk rectification follow-up and verificationContinuous monitoring of compliance risksCompliance inspectionCompliance performance standard systemCompliance performance evaluation and scoring Application of compliance performance evaluation resultsInherent&residual risk level assessmentSpecial compliance investigationCompliance incident handlingSelf-examination and self-correction for complianceCompliance Policy and System Management Compliance dynamics and industry focus Laws,regulations and regulatory policiesCompliance Management VisualizationCompliance risk overview Compliance performance overviewCompany rules and regulationsIn 202385,354Participants of compliance training6.87 hours ZEEKRs Compliance Lecturer CertificationCompliance training duration per employee11ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherBoard of DirectorsZEEKR ESG CommitteeZEEKR ESG Task ForceClimate actionResource conservationCommunity responsibilityMobility safetySustainable supply chainBusiness ethicsEmployee responsibilityData responsibilityEnvironmental(E)Social(S)Governance(G)Support ESG StrategyZEEKRs ESG Governance StructureESG Governance StructureTo promote Zeekrs economic,environmental,human resource,technological,and social capital in the long run for high-quality development and sustainable growth,the Company has established an ESG Committee under the Board of Directors,composed of Conghui An,Stephen Brown Davis,Latha Maripuri and Michael David Ricks,chaired by Conghui An.The ESG Committee is primarily responsible for the oversight of major ESG-related matters.The ESG Task Force,serving as the executive body of the ESG Committee,supports the efforts to deliver the ESG strategy.Board of DirectorsOverseeing and approving major ESG matters and related countermeasures;Discussing and making decisions on suggestions proposed by the ESG Committee.ZEEKR ESG CommitteeReview and discuss with management the Companys ESG strategy,initiatives,and policies;Review and monitor the operational,regulatory,and reputational risks and impacts of ESG on the Company and provide insight and guidance with respect to the Companys management of such risks and impacts;Review and discuss reports from management regarding the Companys progress toward its key ESG objectives;Provide input and guidance with respect to communications with employees,investors,and other stakeholders,as appropriate,regarding the Companys position on or approach to ESG matters;Review and assess the performance of the Committee and the adequacy of the ESG Committee Charter annually and recommend any proposed changes for approval by the Board;Perform any other activities consistent with the ESG Committee Charter,the Companys Articles of Incorporation and the Companys Bylaws as this Committee or the Board may deem necessary,advisable or appropriate for the Committee to perform.The Committee shall report to the Board periodically.At least annually,the Committee shall evaluate its own performance and report to the Board on such evaluation.ZEEKR ESG Task ForceResponsible for the implementation of the ESG strategy formulated by the Board of Directors and the ESG Committee;Continuously assessing the trends in business development and sustainability to identify ESG-related risks and opportunities;Supporting departments in formulating specific work plans and annual goals in line with the ESG strategy,and providing ESG-related training and professional guidance;Continuously following up on the demands of regulatory authorities,investors,and stakeholders on ESG;Regularly reporting on ESG work outcomes and assisting the ESG Committee in supervision and assessment.12ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherESG Management EnhancementIn 2023,Zeekr officially released the ESG strategy,with key actions formulated to achieve the strategic goal of“to be an ESG leader in the intelligent electric vehicle industry”.Internally,it offers clearer guidance for planning related work.In 2023,we went a step further on the existing basis.We continuously deepened the strategic exploration and study in the ESG realm,and constantly optimized our management framework.Furthermore,to ensure that all ESG strategies and initiatives are accurately aligned with the actual demands of the Companys business sectors,we carefully developed and radically executed our ESG blueprint tightly around the Companys long-term development strategy.Through these efforts,we propelled the Company to move steadily towards the sustainable development goals.ZEEKRs ESG Strategy FrameworkZEEKREquality,Diversity,SustainabilityCo-creating the future of mobility experiencesTo be an ESG leader in the intelligent electric vehicle industryWorking with stakeholders to build a more resilient zero-carbon ecosystemPartnering with employees and communities to foster a more harmonious and sustainable futureHarnessing digital and smart technology to deliver ultimate experiences in driving environment and mobilityWorking with the supply chain to implement a“proactive”compliance management mechanism that generates sustainable business valueUser co-creationESG governanceStakeholder engagementESG capacity buildingESG-oriented InnovationDigitalized ESG managementValuesVison&MissionStrategic ObjectiveStrategic OrientationEnabling factorsEco-friendly EnvironmentEnvisioned FutureExcellent MobilityEffective Compliance13ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherAfter the release of the ESG strategy,the Company assesses its effectiveness in addressing sustainability-related risks and opportunities on an ongoing basis,and makes adjustments when appropriate.This approach ensures that the ESG strategy is increasingly aligned with the Companys overall strategy and can create long-term value for all stakeholders more effectively.By referring to the ESG guidelines and policies in China and other major market countries,the latest ESG developments and trends in the smart electric automobile industry,as well as the Companys cash flow,funds planning,and business cycle,we identify and assess the major risks and opportunities of ESG-related matters with material financial impacts.ESG topics with material financial impactsImpact durationMain value chain impactedExpected impact on the business model and value chainMeasures and performance in addressing risks and opportunitiesClimate change and carbon emissionsShort,medium,and long termsZeekrs operationsand supply chainsSee Section“Addressing Climate Change”of this reportSee Section“Addressing Climate Change”of this reportResource utilization and recyclingMedium and long termsZeekrs operationsand supplychains Risks:Scarcity of natural resources will lead to increased costs of utilizing related resources.Development of alternative materials will require R&D investments.Opportunities:Optimizing product design and improving manufacturing processes can reduce material and resource usage,thereby saving production costs.Establishing a circular economy system by replacing new material purchases with resource recycling can reduce procurement costs.See Section“Addressing ClimateChange”and“Protecting the Ecological Environment”of this reportMobility safetyShort and medium termsZeekrs operations Risks:Product safety issues,if any,will lead to recalls,customer claims,or lawsuits,resulting in compensation costs.Product safety issues,if any,will affect consumers purchasing intentions,thereby decreasing business revenue.Opportunities:Prioritizing product safety can reduce after-sales quality costs and compensation costs.Prioritizing product safety can increase appeal to consumers and increase business revenue.See Section“All-round Safety”of this reportSustainable supply chainsShort and medium termsSupply chains Risks:Suppliers failing to meet the Companys ESG requirements may affect the ESG compliance of the Companys products and related local and export sales,thus reducing business revenue.That suppliers have major ESG issues may affect the continuity of the Companys business,leading to increased remediation costs or reduced business revenue.Opportunities:Well-established ESG management in the supply chain is beneficial to enhancing the long-term stability of the Companys business and avoiding economic losses incurred by ESG risks.See Section“Jointly Building a Responsible Supply Chain”of this reportEmployee responsibilityShort and medium termsZeekrs operations Risks:There is a possibility of increasing employee turnover rates,which will raise recruitment and retention costs,and affect the Companys operational efficiency.Opportunities:A sound system to protect employees rights and interests,continuous employee care,and encouragement for employee growth and personal value realization are favored by employees and help forge a stellar employer brand.See Section“Empowering Employees to Make Breakthroughs”of this report14ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherMateriality AnalysisBy referring to the automotive industry policies,capital market focus,and Zeekrs ESG strategy,we identified,screened,and prioritized material topics through stakeholder interviews and questionnaire surveys.This helped us develop a materiality matrix,which we used to present Zeekrs ESG performance regarding major material topics during the reporting period.The importance of employee training and career development and occupational health and safety in the ESG materiality matrix in 2023 has increased compared to 2022.It shows that ESG strategic actions,including those related to employee responsibility,have been gradually implemented in the Company to promote employees understanding of the concept of sustainable development and contribute to the Companys long-term sustainable development.Environmental topicsSocial topicsGovernance topicsZEEKRs ESG Materiality Matrix for 2023Importance to stakeholdersImportance to Zeekrs developmentGenerally importantVery importantVery importantExtremely importantExtremely importantProduct qualityMobility safetyOccupational health and safetyCustomer serviceEmployee training and career developmentEmployee rights protectionCommunity responsibilitySustainable supply chainInnovative technologyClimate change and carbon emissionsWaste and emissions managementResource utilization and recyclingBiodiversityCompliance and integrityRisk managementData security and privacy protectionDiversity,equality,and inclusion15ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherStakeholder CommunicationThe sustainable development of Zeekr needs the support of all stakeholders.We attach great importance to communicating with stakeholders and have formed a regular communication mechanism.By establishing diversified communication channels,we actively understand,adopt,and analyze the expectations and demands of various stakeholders and enhance their awareness and participation in Zeekrs ESG work.StakeholdersUsersEmployeesGovernment and RegulatoryDepartmentsSuppliersIndustry PartnersCommunitiesTopics of concern Product quality and safety Information security and privacy protection Product technological innovation Service satisfaction Sustainable mobility Protection of rights and interests Diversity and equality Reasonable compensation and incentives Occupational health and safety Capability enhancement and career development Compliance and business ethics Climate change and carbon emissions Conservation of natural resources Waste and pollutant management Corporate governance and risk management Responsible supply chains Climate action and recycling Fair and transparent procurement Product responsibility Promoting common development Technological innovation and Intellectual property management Industry cooperation and development Corporate responsibility and community engagement Biodiversity protection Eco-friendliness Educational equityCommunication channels and response methods Online and offline promotional events Satisfaction surveys The Zeekr App Car clubs Customer complaint feedback Interaction on the Companys website and social media Employee training Zeekr E-learning online training platform Employee conference Online physical examination appointment and psychological counseling platform Questionnaire Transparent information disclosure Daily communication and reporting Supervision and inspection Visit reception Signing of procurement contracts and partnership statements Supplier conference Supplier review Supplier training Communication on technology,product&quality Industry conferences and seminars Project cooperation The“Blue Guardian”environmental project Community-based public welfare initiatives Non-profit education in the field of intelligent driving16ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherPursuing Ultimate PerformanceDriving Unparalleled Product DevelopmentAll-round SafetyZeekr focuses on the R&D of cutting-edge technologies for intelligent electric mobility.Meanwhile,we continuously enhance product safety,striving to assure all-round safety and achieve holistic evolution of all core safety technologies in the new energy sectors.We are committed to crafting electric vehicles for users with high performance,long ranges,advanced intelligent technologies,and exceptional safety performance.Responding to ESG issues:Product qualityInnovation technologyMobility safetyData security and privacy protection17ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherAll-round SafetyUltimate safety is the unwavering belief and pursuit of Zeekr.Committed to“All-round Safety”,Zeekr not only focuses on the R&D of traditional automotive safety technologies,but also innovates in the fields of batteries,motors,electronic control,intelligent driver-assistance,intelligent connection network,and core automotive systems to deliver safe and reliable services to global car users in the era of intelligence.Passive SafetyUpholding a forward-looking development concept based on global five-star standard,Zeekr has designed and developed safety protection for all scenarios,the entire supply chain,all links,and all passengers of vehicle use,fully considering collision test standards from around the world such as C-NCAP(CATARC),C-IASI(CIRI),E-NCAP(Euro NCAP),US-NCAP(NHTSA),and IIHS to guarantee driving safety with the most demanding requirements.In October 2023,in the China“Top 10 Car Bodies”contest launched by CATARC,CISRI,and Hunan University,Zeekr 009 won the“Top 10 Car Bodies in China-Best Craftsmanship Award”.In November 2023,Zeekr X won the“2023 Automotive Disciplined Innovation Award”.A Blend of Flexibility and Strength Body DesignZeekr 009 roof design can withstand a maximum load of 13 tons,providing a strong protective barrier for the safety of occupants.128kN of Roof-crush ResistanceZeekr All New 001,Zeekr 007 and Zeekr 009 features an integrated die-casting rear aluminum body.The one-piece rear body is rolled off by a giant 7,200-ton die-casting machine,reducing nearly 800 welding points.In the event of an impact,it can reduce the deformation by 16%and increase the bending rigidity by 11%.Integrated Die-casting Rear Aluminum BodyThe unique dragonfly structure of the Zeekr 001 FR reduces the number of welding points by 66,reduces weight by 7%,and increases seat mount stiffness by an average of 18%.One-piece Die-cast Mid Section with Dragonfly StructureZeekr 007 adopts the mega-casting steel-aluminum body,with a torsional stiffness of 43,500 Nm/deg.Its A-pillars and B-pillars are made of 1,500MPa hot stamping steel,which is 3-4 times stronger than that of ordinary steel,Zeekr 009 adopts 2,000MPa hot stamping steel,building a strong body frame to effectively resist impacts.The Mega-casting Steel-aluminum BodyThe crumple zone of Zeekr 001 is made of 7xxx series and 6xxx series aluminum alloy,boasting appropriate strength and deformation ability.This design significantly reduces the weight of the vehicle,and is ready to deform and crumple in a collision,while taking pedestrian protection into consideration.7xxx Series Aluminum Alloy in Crumple ZoneCollision Protection StrategiesIn the event of a head-on collision,the vehicle will automatically throw out the frontal electric motor and the electric motor will sink automatically to redirect impact,avoid penetrating passenger compartment and protect the passenger safety.Electric Motor Sinking Protection Mechanism in Head-on CollisionsIn response to the most stringent 25%offset frontal impact,the vehicle will automatically disintegrate the front wheels with high rigidity to avoid penetrating passenger compartment and harming passengers.Throwing out Wheels to Reduce Impact in Small Overlap CrashesInspired by the watertight compartment of aircraft carriers,we equip a“nine-square grid”and“ten-square grid”battery anti-collision structure.The anti-collision beam at the side of the car body adopts the thickest aluminum material,allowing the entire vehicle to withstand a lateral impact force of approximately 75 tons,to better protect the battery and occupants.“Nine-square grid”“Ten-square grid”Anti-collision StructureIn case of a low-speed rear-end collision,the rear anti-collision beam and crash box absorb the impact,thereby reducing maintenance costs.For a medium-speed rear-end collision,the extruded aluminum beam deforms and absorbs energy,reducing maintenance costs.In case of a high-speed rear collision,the die-cast aluminum beam in the rear of the vehicle flexes to absorb and distribute the force.In the event of an ultra high speed rear collision,the die-cast aluminum body structure ensures the safety of occupants on all three rows.Integrated Impact Alleviation Strategies During Collisions18ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherActive SafetyZeekr continuously employ cutting-edge global safety technologies,including dual 7nm Mobileye EyeQ5H intelligent driving chips and Falcon Eye Vidar visual fusion perception system,and are equipped with all-scenario assisted driving safety functions,such as full-speed lane centering control(LCC) adaptive cruise control(ACC),and automatic parking assist.These functions make efficient judgments before the vehicle collides,comprehensively improving driving safety.According to the test results released by China Insurance Automotive Safety Index(C-IASI)in April 2023,Zeekr 001 achieved a record-breaking score of 113.78 in the vehicle assistant safety index.It is also the first model that gets a perfect score in three vehicle assistant system tests.The entire series is equipped with standard LiDAR and visual fusion perception,bringing stronger perception abilityZeekr 007 is first equipped with a SEA architecture,with a full stack self-developed advanced intelligent driver-assistance,and the NVIDIA DRIVE Orin intelligent driving chipThe intelligent driving computing and perception system provides comprehensive perception of road conditions with powerful computing capabilitiesZAD intelligent driver-assistance systemZEEKR All New 001ZEEKR 007ZEEKR 009ZEEKR XHigh-speed autonomous Navigation Zeekr Pilot(NZP)functionLCC Enhanced lane centering assist,which enhances the traffic capacity for obstacle avoidance,large intersections without lane lines or misaligned intersectionsVehicle-mounted satellite communicationIn intelligent driving mode,the central control screen,instrument panel,and AR-HUD(Augmented Reality Head-up Display)will display SR(Surrounding Reality)real-time rendering models to help drivers better understand the driving situationTwo high-performance 7nm Mobileye EyeQ5H chips jointly work to provide powerful computing capabilitiesThe Navigation Zeekr Pilot(NZP)driving assistance system is gradually enabled to reduce medium-and long-distance driving fatigue in high-speed and urban expressway scenariosThe Intelligent Anti-Skid distributed traction control system(dTCS)ensures smooth and safe driving in case of vehicle avoidance on high-speed roads and rainy and snowy roadsOMS occupant monitoring system,with front-row cameras that recognize passenger gestures,and rear-row millimeter-wave radars that detect vital signsAPA automatic parking assistRSPA remote smart parking assistDOW door opening warning7 8-megapixel HD cameras4 2-megapixel surround-view cameras1 250m ultra long range millimeter-wave radar5 HD cameras5 millimeter-wave radars12 ultrasonic radars1 LiDAR12 HD cameras5 millimeter-wave radars12 ultrasonic radars1 LiDAR for the entire series1 250m ultra long millimeter-wave radar4 long-range ultrasonic radars8 short-range ultrasonic radars12 HD camerasThe current product software and hardware configuration is upgraded with product version updates.For the performance and configuration of vehicle products,please refer to the actual purchased product and the latest information released on the official website.19ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherZeekrs battery R&D efforts focus on two key areas:collision resistance and fire prevention.Through eight safety protection measures such as cloud monitoring,real-time prevention and control,multi-layer insulation,efficient heat absorption,active cooling,automatic warning,barrier free heat removal,and millisecond power outage,the NTP non-heat-spreading technology ensures that the battery system only smokes and does not catch fire under extreme conditions.Battery SafetyZeekr is equipped with a global e-Call(emergency call)system,and is exploring advanced functions such as rotation angle,occupants tracking,and fire rescue.E-Call SystemZeekr is the first in the industry to be equipped with satellite communication,enabling direct satellite connection.It guarantees stable two-way 24/7 satellite messaging and voice calls in all regions,so that safety is always on line.Satellite CommunicationEnsuring Users SafetyZeekr has launched an all-round safety armor system which guarantees the safety of occupants from the sides,bottom,top,front,and rear.Healthy and Eco-MobilityZeekr further employs its safety concept to the field of health protection.From our careful selection of materials to efficient air purification systems,from our strict noise control to optimized seat comfort,all reflect our deep concern for the health of drivers and passengers.In 2023,the China Automotive Health Index(C-AHI)released the testing results of four indicators,including Volatile Organic Compounds and Vehicle Odor Intensity(VOC),Electromagnetic Radiation(EMR),Particulate Matter(PM),and Vehicle Allergic Risk(VAR).Zeekr 009 gained Five-Star results in all of the four indicators.Zeekr 009 is equipped with an eco-friendly cockpit,using interior materials such as Ultrasuede suede fabric.More than 180 tests and experiments have been conducted,and restrictions have been set on over 30 harmful substances.There is also a maximum 90%increase in allergenic dye standards and a maximum 80%increase in restrictions on substances such as formaldehyde and phenol,exceeding the certification standards for baby clothing,ensuring healthy breathing of users.Eco-friendly InteriorZeekr 009 has an intelligent microclimate control system for air conditioning,which is capable of screening up to 99.9%of PM2.5 particles through its four key functions:active cockpit cleaning,Air Quality System(AQS),CN95 high-efficiency air filtration,and intelligent carbon removal,adding a defense line of safety for users health.Moreover,the Zeekr intelligent fragrance system offers three fragrance options to keep the air inside the vehicle clean and fresh.Air QualityProduct Quality and SafetyZeekr establishes a rigorous product quality and safety management system across the lifecycle,which covers design,production,and after-sale services,and full-scenario coverage of user services.We pay attention to every detail in delivering every vehicle,providing users with upscale and high-quality products.Adhering to laws and regulations pertaining to product quality,Zeekr has established a comprehensive quality management system and a quality and safety working group,and formulated the Product Quality Development Process and Engineer Handbook for Quality Management of Vehicle Development to standardize the quality control of new products,and ensure high product quality,cost-effectiveness,and satisfactory delivery.In 2023,Zhejiang Zeekr Intelligent Technology Co.,Ltd.obtained the ISO 9001:2015 Quality Management System Certification.At Zeekr,safety is a core value that is integrated throughout our entire production process.We have established a sound work safety management system to improve the safety management of our construction workshops.Meanwhile,we continuously enhance the safety awareness and operational skills of all personnel to ensure work safety from multiple dimensions.We passed ISO 45001 and ISO 14001 certifications,and met international standards for safety,environmental protection,and occupational health at the Zeekr factory.In 2023,Zeekr Intelligent Factory made the list of“2023 5G Factory Directory”of the Ministry of Industry and Information Technology.Quality Management SystemWork Safety ManagementZeekr adheres to Chinas Regulations on Administration of the Recall of Defective Motor Vehicle Products,and has established its own Product Recall Management Regulations.For vehicles sold globally,upon discovering a defect,Zeekr will immediately stop production and sales of defective vehicles,actively communicate with users about the specific details and handling methods,voluntarily report to the regulatory authorities and carry out recalls,and ensure that product quality issues are properly addressed.In 2023,no recall was initiated due to defective products.After Sales Quality ManagementISO 9001:2015 Quality Management System Certification20ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherUser Privacy SafetyAs the technology of intelligent connected vehicles(ICVs)advances non-stop,the automobile information security has become one of the hot spots among researchers.Authorities including the Cyberspace Administration of China issued the Several Provisions on the Management of Automobile Data Security(Trial),which aims to regulate automobile data processing activities,protect the legitimate rights and interests of individuals and organizations,and safeguard national security and social public interests.Zeekr has unveiled a number of key systems such as the Zeekr Automobile Data Compliance Management Measures,Zeekr Vehicle Project Privacy Management Rules,and Zeekr Internet of Vehicles Software Development and Management Measures.Meanwhile,a series of highlight practices are launched to build a high wall against data security risks.Zeekr continues to build and integrate the security ecosystem of Internet of Vehicles(IOV)through airtight cybersecurity and information security fortresses,and has achieved excellent results in numerous fields.With one-click activation of Guest Mode,personal settings,browsing history,and other information are automatically concealed,protecting the users privacy from intrusion.In the meantime,with the driving location information uploaded in real-time,users can grasp the dynamics of the vehicle at any time,and lend their vehicles without worry.Our privacy control management is the approach to the precise control of application privacy.Only applications fully trusted by users can obtain the required permissions for microphone,camera and others.Even after authorization,the privacy permissions can still be withdrawn at any time to ensure that personal data is always in the owners hands.Once the driving comes to an end,such information as the navigation history records,bluebooth pairing records,hotspot connection records,and call records will automatically deleted under the incognito mode,securing user privacy protection.Privacy Control ManagementExclusive rights protection for users private photo gallery.The gallery privacy technology protects the images in the users gallery and guards against any access by non-car owners.Gallery Account Protection Visitor ModeUnder the circumstances of vehicle transfer,and vehicle scrapping,etc.,clicking the“Factory reset”will return the vehicle to the start,and remove all personal traces of its user.Once the potential risk is identified after the user leaves the vehicle,the vehicle in sentry mode will immediately record video,trigger sound and light alarms,etc.,to prevent the loss of user property.Users can decide when to turn on the sentry mode based on their actual needs.In strict accordance with relevant legal requirements,we anonymize pedestrian and license plate information to guarantee user privacy.Factory Reset Sentry ModeIncognito Mode Third-party Recognition and Honors for IOV SecurityIn 2023,Zeekr and Applus IDIADAs certification departments reached a strategic partnership agreement on independent UN R155 certification testing,proving that the testing capabilities of Zeekrs IOV security laboratory have recognized by the Spanish Ministry of Transportation and other international official authorities,aligned with the international leading standard.March 2023December 2023Zeekr was elected as the Vice Chair of the CCIA Automotive Cybersecurity Committee.Zeekr received the title of Excellent IOV Security Defense Unit issued by Zhejiang Communications Administration.May 2023Zeekr was awarded the title of Excellent Supporting Unit in the Cybersecurity Attack and Defense Competition in the 7th World Intelligent Congress.July 2023Zeekr obtained certifications of UN R155 Cybersecurity Management System(CSMS)and Vehicle Type Approval(VTA)for Zeekr 001 and Zeekr X.Zeekr obtained the DevOps certification issued by the China Academy of Information and Communications Technology.June 2023Zeekr published its self-developed AutoSuite,which was successfully selected into the BlackHat USA 2023,a top international security conference with the topic of AutoSuite:An Open Source Multi-protocol Low Cost Vehicle Bus Testing Framework.21ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherDriving Unparalleled Product DevelopmentAiming to provide users with a safe,intelligent,efficient,comfortable,and personalized travel experience,Zeekr insists on full-stack independent development,as well as the rapid iteration and updating of integrated software and hardware.We continuously seeks empowerment through technological innovation,and builds a diversified product mix featuring innovative applications,excellent quality,and top-notch services to interpret Zeekr Speed with actions.Intelligent Technology OutcomesZeekr insists on independent R&D of intelligent technologies.Dedicated to innovative R&D in fields such as smart cockpits and intelligent driver assistance systems,we build up our competitive edge and sustain a leading edge in technologies.Innovation and R&DWe regard innovation and R&D as our lifeline.Relying on Geely Holdings profound industrial foundation and global advantageous resources accumulated over the past 30 years,we clarify the global,whole-field and whole-process product research and development mechanism,continuously increase R&D investment,establish an international R&D center and R&D team,we aim to grow into an industry-leading developer with full-stack self-developed intelligent technology.R&D MechanismR&D Strategy and layoutR&D TeamsProduct innovation:We have built a whole-process system and rapid decision-making mechanism covering market research,user insight,product planning,investment decision-making and vehicle approval.Experience innovation:We carry out the“Meta-vitality”proposal to quickly collect employees ideas of experience innovation in a funnel approach.Technology innovation:We actively explore the next generation technologies,and fully review their feasibility before investment and development.After the preliminary research and validation,we will apply these technologies to certain vehicle models.At the Auto Shanghai 2023 exhibition,Zeekr released its European strategy,making an entry into the global market.We have signed agreements with partners from Israel and Kazakhstan,and penetrated four middle eastern countries in the Gulf region:UAE,Saudi Arabia,Qatar,and Bahrain.We have signed a partnership agreement with Kam Lung Motor Group(KLM),which will help launch our right-hand drive vehicles in Hong Kong and Macau in 2024.Domestic teams:We have established the Shanghai Zeekr Intelligent R&D Center,VREMT,and Hangzhou Bay Zeekr Intelligent Factory to ensure product quality.Overseas teams:We have set up an European automotive R&D and design center,Zeekr Tech EU,in Gothenburg,Sweden,which aims to supply the global market with high-end electric vehicles.Zeekr 001FR has unveiled the worlds first mass-produced 8295 intelligent cockpit computing platform.The cockpit processor SA8295P supports more cameras,screens,and other devices,further streamlining the electronic and electrical structure of the cockpit,greatly improving the speed,fluency and stability of the system.Based on the Android operating system,our self-developed smart cockpit OS operates perfectly,intelligently,and openly,delivering more comprehensive services and better performance.ZEEKRs New Generation of Smart CockpitA New Generation of Smart CockpitIn terms of intelligence,Zeekr 007 OS6.0 has introduced the Kr AI prototype for the first time,equipped with Eva system to boost intelligent interaction in all scenarios,which brings users unparalleled experience in route planning,car encyclopedia,and news feed.Zeekr 007 OS6.1 has welcomed a visitor mode and an upgraded Sentry Mode,providing all-round protection for vehicles.Zeekr has seen more personalized audiovisual entertainment and lighting shows,which will bring users a refreshing driving experience.22ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherFully Intelligent Driving ExperienceFull-speed Lane Centering Control(LCC) Adaptive Cruise Control(ACC)Zeekrs advanced full-speed LCC ACC feature combines multiple intelligent driving technologies to offer a range of smart mobility options to users.Highway Navigation ZEEKR Pilot(NZP)Zeekrs NZP system,released in August 2023,supports automatic on and off-ramp navigation,lane changes,and cruising speed changes according to speed limit,effectively improving driving safety and reducing traffic congestion.Dual-chamber Air Suspension and CDD Electromagnetic Damping SystemZeekr 009 features dual-dimensional adjustment of vehicle height and suspension stiffness at the millisecond level and real-time matching of optimal damping,ensuring dynamic comfort across various road conditions.Intelligent Magic CarpetZeekrs intelligent magic carpet air suspension technology can scan road conditions with the detection system and pre-adjust the suspension at the millisecond level.It can predict motions,allowing for a smooth ride even on bumpy roads.Intelligent Four-wheel Drive SystemZeekrs drive system features two cutting-edge technologies:“Lightning Switching”and“Intelligent Anti-Skid”.The lightning switching all-wheel drive system utilizes electronic control units(ECUs)working in tandem to automatically switch between two-wheel drive and four-wheel drive based on driving mode and road conditions,achieving millisecond-level transitions.The lightning switching system enables long range and powerful performance,and the intelligent anti-skid system provides enhanced safety for high-speed hazard avoidance.In 2023,Zeekr 009s“Lightning Switching”was recognized as one of“China Heart”2023 China 10 Best EV Powertrain Systems.Zeekr consistently invests and innovates in intelligent driving.We continuously boost performance with over-the-air(OTA)upgrades,which not only improve driving safety but also offer a seamless and effortless driving experience.Fast Charging TechnologyWe offer the worlds first 800V ultra-fast charging ecological solution.Based on Zeekrs full-stack independent development,the 800V high-voltage architecture makes all components are suitable for high voltages over 800V.This solution unleashes the full power of its 100kWh dual-motor setup when the State of Charge(SOC)is over 50%,indicating ultimate performance experience.Meanwhile,it achieves seamless switching between front AC asynchronous and rear PM synchronous drive combinations for two-wheel and four-wheel drive,without compromising performance and endurance.In 2023,we released the worlds first mass-produced 800V lithium iron phosphate(LFP)ultra fast charging battery-the Golden Brick Battery with volume utilization of 83.7%and a maximum charging rate of 4.5C.Golden Brick Battery delivers superior charging efficiency,topping up 500 km of range in just 15 minutes.Zeekr 001 set a Guinness World Record for the longest electric vehicle journey on a single charge,covering an impressive 907.623km.Continuous OTA UpgradesIn 2023,Zeekr completed 10 OTA upgrades,redefining the speed of the OTA industry.Through functional iterations and the repair of potential system defects,Zeekr achieved rapid OTA upgrades for the full vehicle stack and throughout the entire lifecycle.Zeekrs OTA solution based on the next generation EE architecture provides personalized services for car users.ZEEKRs Golden Brick Battery23ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherIndustry CooperationZeekr actively engages in technical exchanges and cooperation with its peers to mobilize leading research resources,building a technology community of intelligent mobility.In January 2023,Zeekr debuted Zeekr 001 and a Waymo-customized model based on the Zeekr M-Vision concept car in the Consumer Electronics Show(CES),showcasing amazing results achieved with our global top tech partners.In April 2023,we signed a strategic cooperation memorandum with Intel to jointly develop innovative products such as intelligent in-vehicle experiences.We continue to deepen cooperation with Mobileye,further advancing electric vehicle towards high-level autonomous driving.Data Governance and Privacy ProtectionZeekr always upholds the bottom line of data compliance and user privacy,highlighting the philosophy that compliance creates value.To effectively avoid risks of data and privacy leakage and build up advantages for Zeekrs products and services,we continuously reinforce information security management and privacy protection,and elevate our management capabilities in data and privacy process covering key elements of data compliance management,including data governance and its operational models,personal information lifecycle management,privacy policies and notice and consent,operational procedures and technologies.Intellectual Property Right ProtectionZeekr attaches great importance to protecting the intellectual property rights of our independent innovations while also respecting the legitimate rights of third parties.We have developed rules including Measures for the Administration of Intellectual Property Rights of Zeekr and Regulations for the Management of Brand IP of Zeekr.Our comprehensive internal management system covers a wide range of areas,including patent strategy,litigation,licensing,trademarks,branding,copyright,trade secrets,and open source.We identify and evaluate intellectual property risks in research,production,supply,and sales,and develop effective solutions to acquire more domestic and foreign patent applications,trademark registrations,and software domain name registrations.By the end of 2023,we had 1,258 patents(including 123 invention patents)and 2,465 pending patent applications.By the end of 2023 3,000 Domestic patent applications in total 300 Overseas patent applications in total600 Domestic trademark applications in total2,300 Overseas trademark applications in total0Intellectual property infringement lawsuitsincluding54%Invention patents27%Utility models19sign patentsZeekr has escalated data protection to the strategic management level of the Company.To this end,the Data Committee has been established as the highest decision-making body for data governance,chaired by the Companys CEO.The Data Committee is responsible for the unified planning and implementation of our data governance initiatives,with working groups such as Compliance and Privacy Protection Working Group,Data Security Executive Group,and Data Standardization Working Group set up to implement the requirements of the Data Committee on data governance.Apart from data security and privacy security,we concurrently perform data quality management and data operations to further ensure that the application of data governance and data efficiency complements security and privacy.Zeekr has established a collaborative mechanism for cross-national and international market data compliance management.We scientifically defined the privacy compliance roles for various business scenarios to ensure that all tasks are mutually regulated and interconnected internally and externally.Data Governance FrameworkChairman of the Data CommitteeCEOData PrivacyProtection Working GroupData Security Executive GroupData Standardization Working GroupZEEKR Data Governance Framework24ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherZeekr keeps refining the information security management processes,including information security risk assessment,information asset management,human resources,physical security,access control,malware protection,data backup,log management,security audit,secure development,supplier management,and information security continuity.Additionally,we regularly implement internal audits and management reviews on an annual basis.Zeekr regularly carries out offensive and defensive drills,testing,and third-party vulnerability analysis for continued improved security performance.In 2023,Zeekr revised the Information Security Vulnerability Management Measures and devised the Information Security Incident Emergency Response System.To ensure immediate and effective responses to risks,we have set up a tiered management system for information security incidents,standardized emergency response plans and procedures,and post-incident responses based on urgency including incident investigation and assessment,issue rectification and related investigation,loss management,and incident summary reporting.We have also invited external experts and internal data security teams to conduct special inspections of the data security systems of all the business and product lines.By identifying problems in advance and taking appropriate management and technical measures,we effectively mitigate security risks.In 2023,we conducted a total of 762 internal tests and 2 external tests.Zhejiang Zeekr Intelligent Technology Co.,Ltd.has been awarded ISO/IEC 27001:2013 Information Security Management System,ISO/IEC 27701:2019 Privacy Information Management System,and ISO/IEC 38505:2017 Governance of Data certifications,and passed 2023 cybersecurity evaluations,including SOX compliance review of listing rules,GDPR compliance review,WP29 Guidelines,and national information system evaluation,meeting internationally renowned certification standards for information security.Information Security Management ProcessesCertificates of ISO/IEC 27001:2013 Information Security Management System,ISO/IEC 27701:2019 Privacy Information Management System,and ISO/IEC 38505:2017 Governance of Data.In 2023We adhere strictly to laws and regulations such as the Data Security Law of the Peoples Republic of China,the Personal Information Protection Law of the Peoples Republic of China,and the Several Provisions on the Management of Automobile Data Security(Trial).In alignment with requirements of the ISO/IEC 27001:2013 Information Security Management System and the ISO/IEC 27701:2019 Privacy Information Management System,Zeekr constitutes a comprehensive management system that covers the full life cycle of data.Zeekr has updated and released the User Privacy Policy for Zeekr vehicle and Zeekr online App,making it explicit to protect users rights to access,copy,correct,supplement,and delete personal information,and to change authorization status.Meanwhile,we have developed the Personal Information Protection Management System,which specifies the privacy assessment process of various products before launch and mandates integrating privacy protection awareness into product design and daily business operations.We have established a robust user information protection mechanism,continuously optimizing technologies and sharpening management capabilities throughout the collection,storage,and usage of user information to effectively protect users personal information and privacy security across various business interaction scenarios.Data Protection Policies0Major information security incidents and privacy breaches0Confirmed complaints against the infringement of user privacy and loss of user data100%Coverage of data compliance/privacy protection training for employees25ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherZeekr is building a management system across the entire data lifecycle.By virtue of data governance and operation models,we take such measures as personal information management,risk and compliance management,third-party management,employee awareness improvement and training,so as to consistently optimize the user privacy management.User Privacy ProtectionZeekr actively champions the concept of Privacy by Design and emphasizes the closed-loop management of privacy compliance throughout the entire R&D process.Based on process development and data-driven operations,we propose requirements for privacy compliance through the internal R&D stages including vehicle manufacturing,user operations,and internal management systems.We have released the management standards such as the Zeekr Vehicle Project Privacy Management Standards,the Zeekr IoV Software Development Management Standards,and the Zeekr Mobile Application Privacy Compliance Management Standards,along with accompanying documents to support the implementation of privacy compliance in various R&D activities.Zeekr regulates supplier data processing through supplier compliance qualification and contractual agreements to ensure that suppliers process data in line with the Companys privacy data management requirements.Meanwhile,we promote a privacy compliance culture within the Company and conduct specialized privacy compliance training for the management and business personnel to raise the awareness of privacy compliance and professional skills.Zeekr proactively coordinates privacy compliance with business operations when increasing our global presence.To ensure compliance while developing business,based on demands for business data efficiency,we identify and analyze privacy regulations in global markets,scrutinize our business scenarios,systems,and data in China and abroad,perform data logging and data protection impact assessments,and formulate and implement differentiated compliance strategies,standards,and rules on privacy compliance.Zeekr continuously refines its training on privacy compliance work flows,and legal compliance for each team.Specifically,we formulate detailed training plans,and train all of our employees in terms of information security and privacy compliance awareness.We also regularly evaluate and update the training contents,improving the compliance awareness of all staff.Privacy Compliance Management in R&DSupplier Compliance ManagementRegulation Identification and Privacy Policy DevelopmentPrivacy Compliance Awareness Training for Employees26ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherCo-creating with ZEEKR UsersCreating Ultimate Customer ExperienceGathering Community StrengthSince its birth,Zeekr has deeply embedded the idea of co-creation into its DNA.Adopting a people-centered view,the Company is in relentless pursuit of innovations in customer experience,community development and environmental protection and strives to co-create the ultimate travel experience with users.Responding to ESG issues:Customer serviceCommunity responsibilityBiodiversity27ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherCreating Ultimate Customer Experience Bearing in mind the mission of co-creating the future of mobility experiences,Zeekr is dedicated to building itself a user-oriented enterprise,through which it can interact,co-create and broaden development channels with its users,thus implementing the idea of everything created by users and shared with users.User ServicesWe are consistently building and improving our mobility service system and have realized all-scenario user service coverage by virtue of big data and intelligent and digital applications.Committed to the direct sales model,Zeekr has designed multi-channel customer service system that is flexibly applicable to multiple outlet service forms,such as diversified flexible store service forms such as city landmark flagship stores,multifunctional Zeekr Houses,and bustling but compact stores,as well as online platforms and mobile applications for product consultation and online transactions,to improve user satisfaction from an all-round customer experience.Zeekr is dedicated to building an industry-leading marketing service system.Through its directly-operated Zeekr Centers,Zeekr Spaces,Zeekr Delivery Centers,and Zeekr Houses,the Company provides users with high-quality services and experiences in sales,delivery,after-sales service,owner communities,automotive accessories,and financial services.By the end of 2023,Zeekr had opened stores in 79 cities.Customer Store ServicesThe exhibition space of the brand and the product experience center,the trend center leading the new travel way,the urban reception hall where users meet friends,and the co-creation center that gives users inspirationA place for product delivery and service experience,ensuring a professional,user-friendly,and one-stop delivery experience,and creating a comfortable,high-efficient,and diverse car ownership experienceA space and touchpoint where users experience ZEEKRs products and technology,and a fashionable Internet-famous site for community activitiesZeekr House,located in the automotive business district,is a complex that integrates sales,experience,delivery,and after-sales servicesZEEKR CenterZEEKR Delivery CenterZEEKR SpaceZEEKR House18 International design awards for 7 Zeekr outlets Championin 2023 China New Energy Vehicle Customer Experience Value Index(NEV-CXVI)Study by J.D.Power 342Directly-operated outlets worldwide in total340 Directly-operated outlets in China in total By the end of 202328ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherSince its inception,Zeekr has taken into account industry standards and user needs in major markets worldwide.Zeekr has announced its European strategy:In Europe,For Europe.Adhering to a user-centric philosophy,Zeekr will leverage the three key business pillarsexcellent products,the direct sales model,and one-stop servicesto tap into the European market.Our goal is to become the leading brand in European EV market by 2030.European User ServicesIn 2023,Zeekr inaugurated its first batch of brick-and-mortar direct sales stores in Stockholm,Sweden,and Amsterdam,the Netherlands.The Company unveiled the fully electric Zeekr 001 and Zeekr X models for private travel.These software-driven models showcase the collaboration between China and Europe,providing innovative technology and sustainability solutions for European customers.To satisfy user needs,Zeekr also extends a suite of one-stop services for European customers that cover financial policies,vehicle charging systems,aftersales support,and Internet of Vehicles(IoV).Providing a variety of financial solutions for car buyers and lease customers Ensuring unlimited vehicle evolution continually through Over-The-Air(OTA),allowing users to unlock more vehicle features for free June 2023Pre-sales of the Zeekr 001 and Zeekr X models were launched in the European market.November 2023The first Zeekr Center in Europe was opened in Stockholm,Sweden.December 2023The Zeekr Center in Amsterdam,Netherlands was opened.December 2023Zeekr entered the Israeli market,and four Gulf states in the Middle East,namely,UAE,Saudi Arabia,Qatar,and Bahrain.ZEEKR Finance Providing household charging boxes,public charging stations,and home energy storage solutions to ease users charging anxietyZEEKR Power Offering a variety of aftersales channels,allowing users to benefit from warrantiesAfter-sales SupportZEEKR Internet of Vehicles29ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherZeekr Power,a sub-brand of Zeekr specializing in vehicle charging,is a service team that is dedicated to building an all-round energy service ecosystem by virtue of household charging,public charging and battery delivery.By the end of 2023,Zeekr Power had built 882 charging stations and had come into use across nearly 137 cities nationwide,achieving 100%coverage in first-and second-tier cities.Additionally,Zeekr is collaborating with major charging operators such as State Grid,and China Southern Power Grid.Zeekr Apps charging map has connected into the third-party premium charging networks,covering over 340 cities with more than 610,000 charging guns.ZEEKR PowerPlaying a leading role in Chinas ultra-fast charging industry,since its brand establishment,Zeekr has insisted on the self-development,self-built,and self-operation of ultra-fast charging networks.In 2023,Zeekr officially rolled out the V3 charging pile,and simultaneously built the first wind,solar,energy storage and charging integrated demonstration station.Different from the hybrid construction of ultra-fast charging by our peers,our charging station is equipped with ultra-fast charging piles,combined with the unique intelligent power sharing technology in the industry.Therefore,users will not be afraid of charging piles being occupied,will not need to“open mystery boxes”,and waste resources.Zeekr is accelerating the Stations and Piles scheme.It is expected to increase the ultra-fast charging stations to 1,000 by 2024,and the charging piles to 10,000 by 2026.Ultra-fast Charging Ecological LayoutWhile optimizing its charging network,Zeekr Power is also vigorously boosting innovation in online and offline charging services.To address common pain points such as difficulty in finding charging stations and cumbersome charging processes,Zeekr has pioneered the smart charging stations with three main functions:smart guidance,smart lock release,and plug and play.Among these,smart guidance is primarily applied at underground charging stations around complex environment.It uses precise indoor navigation to help users quickly locate the stations.Upon arrival,drivers are spared from getting out of their vehicles because the system will automatically identify available parking spaces and lower the ground lock.The plug-and-play function,combined with seamless payment and parking fee reduction,ensures a smooth charging experience.By the end of 2023,Zeekrs smart charging stations are covering 100%of underground parking lots.Smart Charging StationZeekr Power has built a comprehensive energy ecosystem for different scenarios such for homes and cities,and launched three major services:household charging,public charging and battery delivery.The public charging network is open to all NEV users.Zeekr now has 7kW,11kW and 20kW smart household charging piles on sale.Its one-stop installation service has reached households of users in 321 cities across 31 provinces nationwide,delivering over 70,000 piles in total,which are highly recognized by users.The 24/7 battery delivery and client charging services has covered 44 major cities nationwide.With one-click appointment,the charging manager will arrive at the doorstep to provide charging services,saving time and effort.Additionally,emergency mobile charging vehicles are deployed in six major cities including Beijing,Shanghai,Guangzhou,Shenzhen,Hangzhou,and Chengdu,to offer emergency power delivery services to users.All-inclusive Energy Service Ecosystem11,166.28 kWhAccumulated power generationIn 2023,the first wind,solar,energy storage and charging integrated demonstration station436Ultra-fast charging stations 2,409Ultra-fast charging piles102Cities covered By the end of 20231st in the industryNumber of self-built ultra-fast charging piles800 kWSingle-gun peak powerIn September 2023,we released the first V3 charging pile in the world1,000 VMaximum output voltage 800 AMaximum output current30ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherTo meet consumers demands for vehicle upgrades,Zeekr provides services throughout the entire vehicle life cycle.We have also established Zeekr Certified,our sub-brand specializing in second-hand vehicles,which offers one-stop vehicle asset management service including intelligent evaluation,testing service,replacement service,trade-in purchase,official repurchase and retail of certified second-hand vehicles.ZEEKR CertifiedMain Services of ZEEKR CareIntelligent ServiceIt enables intelligent monitoring and pre-examination of vehicles,full traceability and transparency,and can pinpoint problems whichever occur in the entire process.Convenient ServiceThe Zeekr manager offers 24/7 online service to immediately respond to user needs.When users require repair or maintenance,Zeekr offers the one-stop service including App appointments,doorstep vehicle pick-up and delivery,travel continuation,and scooters.User-friendly ServiceZeekr provides 24/7 comprehensive roadside assistance service,including standby assistance and exclusive dual-vehicle rescue for customers in need.Zeekr is responsive to road accidents and guarantees worry-free claims.Based on the service demands across the entire product lifecycle and user journey scenarios,Zeekr Care,the after-sales service brand of Zeekr,provides a comprehensive service assurance system including intelligent diagnosis,vehicle maintenance,roadside assistance,doorstep pick-up and delivery,remote upgrades,and 24/7 online manager service.Leveraging its intelligent,digital,and human-centered technologies,Zeekr aims to deliver premium service experiences to users through intelligent,convenient and user-friendly applications,thus satisfying their demands for pure electric mobility.Based on big data,intelligent and digital means,Zeekr endeavors to offer one-stop services to meet service demands across the entire product lifecycle and user journey scenarios.ZEEKR Care200 Professional tests120,000 kmDriving mileage at most 6 yearsValidity period0Structural damage or water-related and fire-related accidentsIn 2023Zeekr certified the official second-hand vehicle retail service31ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherZeekrs service knows no boundaries,and the Company continuously makes customers voices heard by dialogue.We formulated such rules and regulations as VOU Tickets Management Rules to standardize the communication procedures with our customers.The online and on-site communication channels we established can help us grasp customers needs,extensively gather feedback,and thereby consistently improve our service quality.Zeekr has improved digital coverage through a full-chain product system that includes online and offline channels,marketing,sales,delivery,and after-sales.This endeavor has not only reduced marketing and operational costs,and optimized the after-sales service framework,but also enhanced the vehicle charging system,and fostered a smart digital ecosystem.By combining digital technology with AI,Zeekr has created a digital life-form system.It further broadens the vehicles service range and enhance the operational efficiency.The Company has launched a digital service system and introduced paperless customer service.In 2023,the customer order and delivery process was 100%conducted through an online system,with over 110,000 vehicles delivered through a paperless process.The paperless service allows customers to follow vehicle deliveries in real time while facilitating full lifecycle service.ZEEKR Establishes a Digital Marketing System to Unblock the Last Step of Consumer ServiceCasePremium Service ResourcesBig Data and Digital SolutionsIn 2023 ZEEKR Retail Service System It consists of 6 centers:Zeekr Center,Zeekr Space,Zeekr Delivery Center,Zeekr Service Center,Zeekr House,and Online Social Center Zeekr APP,which uses Zeekr APP as a bond to connect usersZEEKR Manager 24/7 online services including answering questions about products and driving scenarios,coordinating and following up service needs on remote examination,repair and maintenance,charging,and roadside assistance etc.ZEEKR Fellow Users can report sales,delivery,and after-sales issues to Zeekr Fellow,while those after sales can also be addressed via the users hotlineOn-site Service Outlets For product-related problems,users can directly contact service outlets to communicate related issues ZEEKR User Communication Channels31Provinces with available repair and maintenance services at service centers44,961Intelligent diagnoses24/7Zeekr manager service 37Cases of OTA-based support services(for Zeekr 001,Zeekr 009 and Zeekr X)290,000 Vehicles repaired 64,400 Doorstep pick-ups and deliveries 3,144 Emergency services including going-out charging and troubleshooting about16,716 Road rescues52,701 Travel continuations 300High-performing after-sales service outlets 32ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherBy blending in-store experiences with online dissemination,Zeekr helps users gain a deeper understanding of their vehicles functions in various scenarios,making driving easier and safer.Additionally,Zeekr expands its influence through online education on safety philosophy.Capability Building for User Mobility SafetyWith a focus on existing product technologies,Zeekr constantly seeks out the most internationally advanced technologies and applications,and vigorously track user needs,promoting the popularization of intelligent driving.Zeekr hosts the Zeekr Intelligent Driving Forum and offline sharing and exchanges to help users understand Zeekrs intelligent driving products and cutting-edge technologies.Experienced users with relevant background in intelligent driving are selected as volunteers for the the“Zeekr Intelligent Driving Class”program.They collaborate with Zeekrs intelligent driving engineers to design and develop the program,and jointly deliver educational courses.Additionally,Zeekr has established an online column accordingly to publicize intelligent driving through images,texts,and videos.By the end of 2023,the“Zeekr Intelligent Driving Class”has engaged over 800 volunteers.ZEEKR Launches a Public Welfare Project“ZEEKR Intelligent Driving Class”to Publicize Intelligent DrivingCaseZ-Talk Z-Speed Driver Training Online Safety Education Zeekr has established Z-Talk,an“Engineer-User”talk series,to provide the most offline platform for sharing production information and vehicle functionalities with users.The talk series aims to deepen users perception of product technology and vehicle capabilities.By the end of 2023,we held over 40 such events,with over 1,200 participants.Zeekr conducts simulations of various road scenarios and unexpected situations.Expert instructors adopt real-world teaching approach to equip users with effective responses,including training on handling challenging road surfaces such as ice,snow,and slippery roads.By the end of 2023,Zeekr had successfully organized 18 events,reaching over 450 participants in total.Zeekr communicates the driving safety idea by means of videos,images,and texts,such as the guidance on proper driving posture and explanations of intelligent driving safety technologies.Additionally,the Company joins hands with users to create a safety education column that draws from real-world driving experiences to discuss methods for handling emergencies.33ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherGathering Community Strength Zeekr always upholds the idea of sustainable development.Staying true to its founding aspiration of giving back to the society,Zeekr integrates social responsibilities into its mission and vision.We are dedicated to the cause of public welfare to spread love and positive energies far and wide.CharityAs a tech firm specializing in smart travel,Zeekr adheres to the public welfare philosophy of“science and technology for good”to develop its long-term public welfare cause,coordinating high-quality corporate development and social sustainability.Zeekr takes into account biodiversity conservation in project construction period and marine environmental protection,and carries out public welfare activities by combining its technological strength and community recognition.Since 2022,the“Blue Guardian”program have made strides in:At its inception,Zeekr,in collaboration with Zhejiang Geely Holding Group,launched the“Blue Guardian”global marine public welfare program,in a bid to empower marine conservation by leveraging self-developed satellite technology.In the meantime,Zeekr partnered with China Environmental Protection Foundation and BlueRibbon Ocean Conservation Association and initiated the“Blue Guardian Marine Protection Action”,which includes such activities as trash cleanup,stock enhancement,coral protection,and artist co-creation.ZEEKR“Blue Guardian”Program Advances to Safeguard Marine EcologyCaseZeekr“Blue Guardian”global marine public welfare program was selected as one of 2023 China Digital Public Welfare CommunicationTOP 10 Innovation Cases10Cities nationwide 3,000 Volunteers across the country about 10 tons Marine garbage collected 400 Coastal patrols34ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherUser Co-creation As a user-centric enterprise,we highlight in-depth engagement with our users,particularly among younger demographics.We aim to cultivate a community that embraces our brands values and vision,empowering our brand growth.Zeekr has also established its community,service,and shopping platforms within its App,and is vigorously organizing online and offline activities to grow and thrive with more users harmoniously.Zeekr is committed to helping its users to find like-minded friends while enjoying the fun of driving.To this end,we hold regular on-site activities with various themes nationwide to tap into more lifestyles for customers to experience high-tech life.ZEEKR Activities In addition to co-creation activities of user service,we also build Zeekr communities with the suppor t of incentive mechanisms and activities to make Zeekr-user and user-user connections.For face-to-face communication,Zeekr Center serves as a brand space where customers can connect and share their happiness.Online,Zeekr APP provides a dedicated social platform for free and open communication and exchange of ideas among our customers.Our communities stretch throughout the country,online or offline.ZEEKR CommunityZEEKR Vehicle Owners Community Halloween EventZEEKR Hangzhou Vehicle Owner LectureSummer holiday-Child-parent Fun ParkThe Dragon Boat Festival-Canoeing DayLove Today-Summer Friend-making PartySports Now-Dousha Mountain RideIn 2023“ZEEKR Together”Activities40,000 Users enjoying exclusive care during summer,the Asian Games,the National Day and winter 70 Thematic co-creation activities of user service held35ZEEKR 2023 Environmental,Social,and Governance(ESG)ReportAbout ZEEKRAbout the ReportFostering Win-win CooperationCo-creating with ZEEKR UsersPursuing UltimatePerformanceSustainability GovernanceAnnual ESG PerformanceMessage from CEOAppendixPromoting Green Development TogetherCross-boundary CooperationCommitted to the brand values of“equality,diversity and sustainability”,Zeekr is on its quest for improving its brand influence.By promoting cross-boundary cooperation with all sectors of society,the Company is dedicated to prospering the new energy vehic
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CREATINGSHARED VALUE2024SUSTAINABILITY REPORTCOMMITTED ACTIONS,POSITIVE IMPACTSCONTENTSINTRODUCTION 3Letter from Vicki 3About Oxy 4Oxys Mission,Vision and Values 6Health,Safety,Environmental and Sustainability(HSE&S)Principles 7Our Sustainability Strategy 8Our Climate Strategy 9Stakeholder Engagement 10Committed to Good:Contributions to Sustainable Development 112023 Performance Highlights and Progress on our Sustainability Pillars 13PRINCIPLES OF GOVERNANCE 16Board Composition and Practices 18Enterprise Risk Management 22Cybersecurity 23Business Ethics and Human Rights 24Public Policy Engagement and Lobbying 27Oxys Operating Management System 31PEOPLE 37Human Capital and Workforce Development 38Health and Safety 54Process Safety and Asset Integrity 62Emergency Preparedness and Response 64Promoting Transportation Safety 66Product Stewardship 69PLANET 70Environmental Stewardship 71Accelerating Carbon Innovation 72Greenhouse Gas Emissions,Methane and Flaring 80Other Air Emissions 83Energy Utilization and Efficiency 84Water Stewardship 86Waste Management 94Spill Prevention 98Biodiversity,Land Use and Remediation 100PROSPERITY 108Community Engagement and Social Investment 110Managing Our Supply Chain 130Industry Engagement and Leadership 133ABOUT THIS REPORT 135Additional Oxy Reporting Guidance 136Sustainability Report Topic Prioritization 137APPENDICES 139Oxy Sustainability Report 2024Vicki Hollub President and Chief Executive OfficerIt is with great appreciation that I reflect upon Oxys recent sustainability accomplishments across our energy production,midstream and marketing,essential chemistry and carbon innovation businesses.To achieve Oxys vision of a sustainable future,we have built an integrated portfolio of assets and infrastructure operated by remarkable people driven by passion to outperform.Our comprehensive strategy starts with taking care of our people and upholding consistently high standards around the world.On the safety front,our company-wide employee Total Recordable Injury Rate(TRIR)was 0.21 in 2023,a 19%improvement from the previous year,while our contractor TRIR was consistent with our 2022 safety results.We also helped employees seize opportunities across our organization,with more than 20%of U.S.employees making moves through promotion or transfer.We added a new Talent Engagement and Employee Experience team to deliver the best experience possible to employees,and continued our leadership in Diversity,Inclusion and Belonging by hosting over 14 Employee Resource Group events.In June 2024,U.S.News&World Report recognized Oxy as one of its 2024-2025 Best Companies to Work For.Out of 3,000 large,publicly traded companies that were considered for the recognition,Oxy was among only 18%of companies that rated“Best”status.Additionally,we ranked in the#1 spot within the Mining and Raw Materials industry.Oxys efforts to decarbonize our own operations and advance technologies that will help others to do the same continues,with a reduction of the companys Scope 1 and Scope 2 greenhouse gas(GHG)emissions of 20.4%since 2019,and a 65.2%reduction in methane emissions over this period.We achieved a 67%reduction in routine flaring for global oil and gas operations from our 2020 baseline,while sustaining zero routine flaring in our domestic operations.To further worldwide industry efforts to reduce global emissions,we became an original signatory to the Oil and Gas Decarbonization Charter(OGDC)and committed funding to the World Banks Global Flaring and Methane Reduction(GFMR)Partnership at COP28 in Dubai.We significantly expanded our sustainability-focused investments and partnerships over the past year.These included our acquisition of all the outstanding equity of Carbon Engineering our Direct Air Capture(DAC)technology partner of five years.Carbon Engineerings groundbreaking research and development will play an important role in our integrated Net-Zero Strategy and position us to accelerate cost reduction among our carbon removal offerings.Construction of our first Direct Air Capture facility,STRATOS,is underway in Ector County,Texas,and on schedule to be commercially operational in mid-2025.Demonstrating that DAC is becoming an investible technology,we formed a joint venture with BlackRock,one of the worlds leading providers of investment,advisory and risk management services,to develop STRATOS,which will be the worlds largest DAC plant when completed.Our 1PointFIve subsidiary is also making significant progress in creating a global market for carbon dioxide removal credits(CDRs).In July 2024,1PointFive announced a landmark deal with Microsoft,which agreed to purchase 500,000 metric tons of CDRs,the largest DAC CDR purchase to date.A commitment of this magnitude demonstrates how one of the worlds largest corporations is integrating scalable DAC into its net-zero strategy,and the important role this technology will play in achieving global climate targets.Also in support of our climate strategy,wholly owned Oxy subsidiary TerraLithium formed a joint venture in June 2024 with BHE Renewables,a wholly owned subsidiary of Berkshire Hathaway Energy.This partnership will further advance the demonstration and deployment of our patented Direct Lithium Extraction process and associated technologies to extract and commercially produce high-purity lithium compounds from geothermal brine.In August 2024,we welcomed our new colleagues from CrownRock to Oxy.The CrownRock acquisition complements Oxys premier Permian asset base and will enhance our sustainability strategy.Oxy and CrownRock have built leading positions in water recycling in the Midland Basin,and we look forward to integrating our substantial water processing capabilities to further enhance our proactive water stewardship.We also work closely in the regions surrounding our operations,partnering with educational institutions,workforce development programs and community and environmental advocacy groups to ensure benefits from our projects flow to the local communities and promote greater prosperity.2024 marks Oxys 40th anniversary in the Sultanate of Oman where we serve as one of the countrys leading international investors.Our 3,330 Omani employees comprise over 25%of our global employee base,and our capital investments and operations drive significant in-country value,contributing to 20,000 contractor or supplier jobs and life-changing social investments.In the U.S.,we expanded local partnerships,ranging from providing lifesaving equipment for first responders in the Permian Basin and supporting food banks across our multi-state operations,to donating more than 72,000 books to underserved communities in our hometown of Houston.We have also sponsored community events and meetings with local organizations to provide information to residents,address their questions and listen to their feedback about how we can extend our legacy as a Partner of Choice.Our 2023 progress demanded hard work and innovation by thousands of talented people across the organization.I would like to thank the dedicated Oxy workforce,as well as the communities that host our operations,for making what we do possible.Id also like to thank our Board of Directors and its Sustainability and Shareholder Engagement Committee for their service and direction as we strive to lead our industries in high-performance oil and gas production,midstream and marketing,essential chemistry and carbon innovation.Vicki Hollub President and Chief Executive OfficerPLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESAbout Oxy Oxys principal businesses consist of three segments:oil and gas,chemical and midstream and marketing.The oil and gas segment explores for,develops and produces oil(including condensate),natural gas liquids(NGL)and natural gas.Our subsidiary Occidental Chemical Corporation(OxyChem)primarily manufactures and markets basic chemicals and vinyls.The midstream and marketing segment purchases,markets,gathers,processes,transports and stores oil,NGL,natural gas,CO2 and power.It also optimizes its transportation and storage capacity,and invests in entities that conduct similar activities,such as Western Midstream Partners,L.P.Within the midstream and marketing segment,Oxy Low Carbon Ventures(OLCV)seeks to leverage Oxys legacy of carbon management in enhanced oil recovery(EOR)to develop Carbon Capture,Utilization and Storage(CCUS)projects,including the commercialization of Direct Air Capture(DAC)technology,invest in other low-carbon technologies intended to reduce greenhouse gas(GHG)emissions from Oxys operations and strategically partner with other industries to help reduce their emissions.We conduct operations internationally,with assets primarily in the United States,the Middle East and North Africa.We are one of the largest oil and gas producers in the U.S,including a leading producer in the Permian and Denver-Julesburg(DJ)Basins,and offshore Gulf of Mexico.We are regarded as a premier partner in Oman,the United Arab Emirates and Algeria.2023 Daily Average Production(Mboe/d)351881452711,5316,24012412,570 as of year-end 20231728,8543,4202023 Segment Earnings($Millions)EmployeesNorth AmericaLatin AmericaMiddle EastOther InternationalOil and GasChemicalMidstream and Marketing24PermianRockies and Other DomesticGulf of MexicoMiddle EastAlgeria and Other InternationalDomesticInternational1,2237,79582X4Oxy Sustainability Report 20244PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESU.S.CanadaChileLatin AmericaAlgeriaGulf of MexicoOmanUAE*Oxy applies operational control as our primary organizational boundary for climate and sustainability reporting.Algeria,Al Hosn and Dolphin are joint ventures in which Oxy is a participant but is not the operator.We include them here as their operations generate significant value for Oxy and our partners.See About this Report for further information on our reporting boundaries.Oxys Integrated Portfolio Emerging low-carbon businesses commercializing CCUS and DAC solutions Developing competitive-returns businesses with cash flow stabilityOxy Low Carbon Ventures A leading position in the Denver-Julesburg Basin 0.7 MM net acres including vast minerals position Among the largest producers in Colorado with significant free cash flow generation Emerging Powder River Basin 0.3 MM net acresRockies 9 active operated platforms Significant free cash flow generation Sizeable inventory of remaining tie-back opportunitiesGulf of Mexico Premier unconventional positions in the Delaware and Midland Basins 2.8 MM net acres-1.4 MM for unconventional-1.4 MM for conventional Significant scale,technical capability and low-decline conventional production Strategic infrastructure and logistics hub in place EOR advancements and CCUS potential for economic growth and carbon reduction strategyPermian Deepwater exploration opportunitiesLatin America 23 owned or operated facilities in the U.S.,Canada and Chile Integrated assets capture benefits of favorable market conditions Top-tier global producer in every product producedOxyChem High-return opportunities in Oman 6 MM gross acres,17 identified horizons Exploring Blocks ON-3 and ON-5 in UAE 2.5 MM gross acres World-class reservoirs in Algeria 0.5 MM gross acres in the Berkine Basin Al Hosn and Dolphin provide steady cash flow with low sustaining capexMiddle East/North Africa*as of year-end 20235Safah Field,North OmanLead with PassionOutperform ExpectationsDeliver Results ResponsiblyUnleash OpportunitiesCommit to GoodWe love what we do and make sure it shows.We aim to revolutionize the industry.We demand excellence from ourselves always.We think boldly so we can go farther,faster.We hold ourselves accountable.We never stop building value.We unlock potential others dont see.We take calculated business risks others wont dare.We do the right thing no matter what.We take care of each other,our company,and our world.PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESOxys MissionOxys ValuesOxys VisionWe dare to do what others wont.We will lead the industry by reaching for the impossible,then achieving it.We do this by having the right assets in the hands of remarkable people driven by passion to outperform.Oxy Sustainability Report 20246Design and conduct safe,reliable and sustainable operations that promote worker and public health and safety,product stewardship and environmental quality.Respect the laws and values of communities where we operate and participate constructively in legislative and regulatory development.Conserve natural resources,including biodiversity,wildlife,habitat,water and energy,and manage resources responsibly.Advance the circular economy through waste minimization,reuse and recycling and extending the productive lives of our property,plants and infrastructure.Evaluate and mitigate potential risks and impacts to people and the environment.Pursue our ambitious goals of net-zero greenhouse gas emissions in our operations and products to further the goals of the Paris Agreement.Report on our performance and engage with shareholders and other stakeholders to enhance health,safety,environmental and sustainability programs.Collaborate with host communities to contribute to their vitality in the transition to a net-zero future.Provide innovative products,services and solutions to help host governments,partners,suppliers and customers address global challenges,achieve net-zero goals,and advance the UN Sustainable Development Goals.PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESHealth,Safety,Environmental and Sustainability(HSE&S)PrinciplesThese principles,approved by our Board of Directors in 2022,unify our workforce around key issues,frame our engagement with stakeholders,and exemplify our core values in practical,actionable ways.Oxy Sustainability Report 20247Corporate GovernanceRisk ManagementCybersecurityPublic Policy EngagementBusiness EthicsPLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESOur Sustainability Strategy:Integrating Sustainability into Everyday OperationsOxys integrated business model unifies our talented,diverse workforce with best-in-class assets and industry leadership to advance innovative solutions to global challenges in accordance with our HSE&S Principles.Founded in 1920,Oxys success is built on our core values,technical expertise,business acumen,strong partnerships and our ability to deliver lasting results.Our employees lead and innovate for the acceleration of a successful transition to a low-carbon future while providing the reliable energy and chemicals essential to society.A big part of this effort is the ongoing evaluation of ways in which we can integrate sustainability throughout the company,improve our programs and performance,and transparently share our progress with stakeholders.As part of our commitment to sustainability,Oxy strives to diligently identify and address our key risks and opportunities.We integrate our sustainability pillars and HSE&S Principles into our strategic planning and investment decision-making processes and routinely perform risk assessments to support readiness for emerging challenges and opportunities.OxyChems approach to sustainability and stewardship aligns with Oxys HSE&S Principles.OxyChem is a leading producer of life-enhancing chemistry as well as a central contributor to our role as an innovative and sustainable industry leader.We value our reputation as a Partner of Choice.We are dedicated to:Our sustainability strategy is organized around four pillars:Key focus areas:Key focus areas:Key focus areas:Key focus areas:Operating responsiblyUpholding and promoting human rightsMaintaining high ethical standardsRespecting cultural norms and values everywhere we operateProviding safe,healthy andsecure workplacesBenefiting our stakeholdersProtecting the environment and minimizing our footprintContributing to our neighboring communities and regional economiesGOVERNANCEPEOPLEPLANETPROSPERITYGHG Emissions and Climate ChangeCommunity EngagementTalent Attraction,Retention and AdvancementWater StewardshipSocial InvestmentWaste ManagementSupply Chain ManagementDiversity,Inclusion and Belonging(DIB)Biodiversity and Habitat ConservationHealth and Safety of our Workforce and CommunitiesOxy Sustainability Report 20248PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESOur Climate Strategy:Building to Net-ZeroOxys original Net-Zero Strategydiagram from our 2021 Climate ReportIn 2020,Oxy was the first U.S.oil and gas company to announce goals to achieve net-zero GHG emissions for our total emissions inventory including use of sold products.These goals include achieving net-zero GHG emissions(i)from our operations and energy use before 2040,with an ambition to do so before 2035,and(ii)from our sold products,with an ambition to do so before 2050.We currently have several short-and medium-term targets to support these overarching net-zero goals and ambitions.Oxys HSE&S Principles reflect our ambitious net-zero goals and strategy to advance the goals of the Paris Agreement,our collaboration with host communities in the transition to a net-zero economy,and our drive to provide innovative products,services and solutions to address global challenges.Our Net-Zero Strategy describes the multiple pathways through which we aim to meet our sustainability goals,achieve a successful net-zero transition and help others to do so.Central to this strategy is our development and commercialization of technologies that lower both GHG emissions from industrial processes and existing atmospheric concentrations of CO2.Oxy believes that carbon removal technologies,including DAC and CCUS,can,given the necessary incentives for their development and deployment,provide essential CO2 reductions to assist the worlds transition to a less carbon-intensive economy.Oxy Sustainability Report 20249The content coverage of our climate and sustainability reportsMatters related to corporate governance,including the adoption of proxy access and amendments to our charter that facilitate shareholders ability to act by written consent and call special meetingsThe executive compensation program,including the design of the short-term incentive program.PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESStakeholder EngagementStakeholder engagement is a central activity with us at Oxy and a catalyst for ongoing improvement in our policies,practices and reporting.We work to build trust through regular and transparent communication and engagement with shareholders,employees,policy makers,environmental organizations,business partners and community leaders and neighbors where we operate.Oxys stakeholder engagement process includes the identification of key stakeholders,an assessment of stakeholder interests and issues,an evaluation of the communitys socioeconomic needs if applicable,and the development and implementation of a stakeholder engagement plan.We use a variety of methods and metrics,such as priority topics assessments and value chain impact mapping,to discern and assess important sustainability issues raised by internal and external stakeholders.Our goal is to understand and proactively address issues to develop beneficial outcomes.Members of the Boards Sustainability and Shareholder Engagement(S&SE)Committee engage with shareholders periodically,oversee Oxys shareholder engagement program,and report shareholder views to the Board.We regularly meet with shareholders to hear their views on governance,human capital and Oxys Net-Zero Strategy,among other ESG topics.Shareholder engagements in recent years have resulted in enhancements to Oxys sustainability programs and disclosures such as:Our President and CEO,members of the Board and our Corporate Secretary,alongside representatives of our Investor Relations,Human Resources and Environmental and Sustainability teams,also regularly engage with a wide range of other stakeholders on sustainability matters pertinent to Oxyincluding climate-related risks and opportunities.These engagements include our approach to carbon management and the policies,technologies and market mechanisms that advance our net-zero goals and those of other industry sectors.We welcome and consider feedback from shareholders and other stakeholders on our performance,engagement and reporting.This process informs our sustainability strategy and programs,which helps us to improve transparency and report on the issues that matter most to our stakeholders.Oxys strong community engagement promotes deep relationships that benefit our communities,our workforce and our shareholders.We recognize and respect our neighbors and local community members from all backgrounds as stakeholders.Their input provides valuable insight into local needs and interests,ways we can augment our projects by addressing their questions and concerns,and how our presence can enhance the community.Informed by that dialogue,we seek to invest our time and resources in programs and initiatives that support the areas surrounding our operations,with an emphasis on disadvantaged communities,and programs that promote mutually beneficial and inclusive relationships withour neighbors.Oxy also engages with host governments,non-governmental organizations(NGOs),non-profit organizations,unions,community leaders,and other stakeholders to advocate for policies that serve the UN Sustainable Development Goals(SDGs)relevant to our businesses and the goals of the Paris Agreement.We believe these collaborations position Oxy,our shareholders and our communities for success and reinforce our reputation as a respected Partner of Choice.Members of the Oxy and 1PointFive teams with Bill Gates at King Ranch,TxOxy Sustainability Report 202410Oxy Sustainability Report 202411PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESCommitted to Good:Contributions to Sustainable Development Oxys sustainability strategy leverages the UN SDGs applicable to our businesses.These goals act as a blueprint for member states to advance peace and prosperity for people and the planet.While the SDGs apply directly to countries,businesses can help governments further these goals through investments in communities,the goods and services produced,and stewardship of natural resources and the environment.Oxy endeavors to contribute to the following SDGs which are embedded in our HSE&S Principles and underpin our approach to the Sustainability Pillars:Principles of Governance,People,Planet and Prosperity.These SDGs provide us with a complementary framework to communicate and enhance our supportive role with local communities and host governments.As reflected in our HSE&S Principles and Human Rights Policy,Oxy incorporates the SDGs into our sustainability strategy and seeks to identify additional opportunities in areas where we operate to help countries,regions and communities make progress toward achieving these goals.In designing and carrying out our projects,we closely consider their social and environmental attributes,in addition to the products,services,infrastructure and economic benefits that our investments generate.While Oxy focuses on these SDGs,for which we believe we can make a greater societal contribution,we also evaluate opportunities to advance additional SDGs in our operations and investments.SDG 3:Good Health and Well-BeingSDG 6:Clean Water and SanitationSDG 7:Affordable and Clean EnergySDG 8:Decent Work and Economic GrowthSDG 9:Industry,Innovation and InfrastructureSDG 12:Responsible Consumption and ProductionSDG 13:Climate ActionSDG 17:Partnerships for the GoalsOxy Sustainability Report 202412PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESOxys focused sustainability strategy hasgarnered recognition,including:Oxy was listed as a constituent company in the FTSE4Good Index Series.As of 2023Oxy received an MSCI ESG Rating of A.Oxy received an A-score from CDP for climate disclosure at CDPs Leadership Level,tied for the top score in the global exploration and production(E&P)industry.OxyChem received Vantage Vinyl Gold certification from the Vinyl Sustainability Council(VSC).OxyChem secured a Bronze medal from EcoVadis,a key sustainabilityrating organization.OxyChem received 77 safety and environmental awards from leadingtrade organizations.Oxy Sustainability Report 202413We launched a new Talent Engagement and Employee Experience team focused on enhancing employee engagement.PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPerformance Highlights and Progresson our Sustainability Pillars In 2023,Oxy achieved significant progress in our sustainability strategy of building shared value across our portfolio of high-performance energy production,essential chemistry and carbon innovation.Oxy added enhanced mental health support to our generous health,financial and work-life benefits available to our employees,spouses or domestic partners,and dependents.Our employee Total Recordable Injury Rate(TRIR)for 2023 was 0.21,a 19%improvement from 2022(0.26).We engaged with shareholders representing 60%of our average shares outstanding in 2023.We were honored to be recognized by Fortune in 2023 as one of the Worlds Most Admired Companies,ranking No.1 in the Mining,Crude-Oil Production category.Oxy has made the list every reported year since 2008 and has achieved the No.1 ranking 13 times.23.5%of our U.S.employees experienced internal job moves due to promotions and transfers.In the past two years,Oxys Board added three new independent directors with valuable and diverse skills and experiences:Vicky A.Bailey,Claire ONeilland Kenneth Robinson.48%of our college hires were conversions from our intern program.Our President and CEO,Vicki Hollub,was named Energy Executive of the Year by leading energy information company Energy Intelligence.Oxy continues to be a leader in carbon management and major projects,applying our skills to the development of crucial infrastructure for the net-zero transitionincluding our first commercial DAC facility,STRATOS.Talent Attraction,Retention and Advancement:Safety:Empowered by our HSE&S Policy,HSE&S Principles and Operating Management System(OMS),Oxys workforce continued to deliver strong sustainability performance.Highlights for each of our SustainabilityPillars in 2023 are below:GOVERNANCEPEOPLEOxy Sustainability Report 202414Carbon Innovation:PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESOxy reduced Scope 1 and Scope 2 GHG emissions by 20.4%from 2019 and 2.6%from 2022.Oxy reduced methane emissions by 65.2%from 2019 and 15.9%from 2022.Oxy acquired full ownership of Carbon Engineering,the technology developer behind the STRATOS facility and a leading name in carbon removal research and development.96%of the total water withdrawn by Oxys U.S.oil and gas operations came from non-fresh sources.Oxy entered into a joint venture agreement with BlackRock which provides$550 million of committed investment for the development of the STRATOS facility.Oxy subsidiary 1PointFive commenced the Front-End Engineering and Design(FEED)for the DAC facility at the South Texas DAC Hub.Oxy achieved a 67%reduction in routine flaring for global oil and gas operations from our 2020 baseline.OxyChem implemented numerous water usage reduction projects throughout its facilities,resulting in the reduction of about 1.19 million barrels of water usage.Water Stewardship:DIB:Our Employee Resource Groups(ERGs)hosted more than 14 events.Oxys Vice President of Diversity and Inclusion,Angela Johnson,won the National MLK Leadership Award from the Energy Diversity&Inclusion Council.PLANETGHG Emissions:Oxy was recognized by the Oil and Gas Methane Partnership(OGMP)2.0 as achieving the Gold Standard pathway based on a credible implementation plan.At COP28,Oxy was an original signatory to the Oil and Gas Decarbonization Charter(OGDC)and committed funding to the World Banks Global Flaring and Methane Reduction(GFMR)Partnership.OxyChem maintained zero reportable PVC resin spills across its PVC manufacturing sites.Our Oman South operations treated and recycled 90%of their produced water to generate steam for enhanced oil recovery,while Oman North operations treated and recycled about 85%of their produced water for water flooding in enhanced oil recovery.97%of the total water withdrawn by Oxys global oil and gas operations came from non-fresh sources.PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESBiodiversity:Oxy has enrolled more than 1.6 million acres under various conservation agreements,which promote collaborative on-the-ground conservation and restoration initiatives for various species and their habitats.Oxy currently manages six sites certified by the Wildlife Habitat Council(WHC)Conservation Certification in Kansas,Louisiana,Ohio,Tennessee andWest Virginia.PROSPERITYOxy contributed$25 million to social investment programs.Oxy paid$3.9 billion in taxes globally.Our Oman in-country value(ICV)was 36%of total supply chain expenditure,and we spent 22%on Omani small and medium-sizedenterprises(SMEs).Oxys operations in Oman contributed to more than 20,000 contractor or supplier jobs,in addition to our more than 3,300 direct employees.In Oman,Oxy provided drinking water to over 13,000 people living in remote villages and settlements across our operating areas.OxyChem sponsored a pioneering study in Tanzania to determine how the societal and environmental benefits of access to clean water contributeto the UN SDGs.Powder River Basin,WYOxy Sustainability Report 202415 99%EMPLOYEES COMPLETED THE CODE OF BUSINESS CONDUCT CERTIFICATIONINDEPENDENTDIRECTORS9YEARS25 Code of Business Conduct Legacy BOARDCOMMITTEES5Oxy prides itself on rigorous oversight of sustainability planning,practices and reporting.GOVERNANCE Executing on Updated HSE&S Principles Integrating Important Global Frameworks Leading Progress in Low-Carbon ProjectsIn 2023,Oxy maintained proactive governance of sustainability matters.The company continues to make strong progress integrating ESG criteria into our strategic planning and decision-making processes.Oxy Sustainability Report 202416PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESOxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemGOVERNANCEOur Board of Directors and senior management are committed to high standards of ethical conduct,institutional integrity and effective corporate governance throughout our businesses and worldwide operations.Our governance structure supports our drive to create value for our shareholders and benefit our communities and society as a sustainable energy leader.Our Board holds our leadership accountable with criteria that reflect our companys mission,vision and core values;our commitment to ethical behavior under our Code of Business Conduct;and our attention to assessing risk and internal controls.We implement responsible policies and robust management systems,including our OMS,to foster and reinforce business practices that are consistently sound,highly principled and transparent.Our governance policies are reviewed and updated periodically to reflect changing laws and regulations,evolving leading practices and shareholder feedback.Strong GovernanceOur FocusPrinciples of GovernanceActive Oversight of Relevant Sustainability MattersRisk ManagementDedication to Respecting and Upholding Human RightsTransparency on Public Policy EngagementVarying perspectives in the boardroom by virtue of diverse director backgrounds,experiences,qualifications,skills,genders,ethnicities and tenures.The S&SE Committee provides oversight of key sustainability and social responsibility issues and oversees Oxys external reporting on such matters,including climate-related risks and opportunities,the political contributions policy and the charitable contributions program.Applying our OMS and Enterprise Risk Management(ERM)program across sustainability risks and opportunities.We operate in accordance with universally recognized rights and freedoms as provided in our Code of Business Conduct and our Human Rights Policy.Maintaining transparency on our position on climate-related policies,political engagement,lobbying and engagement with trade associations and industry groups.The Environmental,Health and Safety(EH&S)Committee of the Board oversees and reviews the status of HSE issues,including compliance with applicable laws and regulations,the OMS and remediation projects.17Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemBoard Composition and Practices Oxys diverse and highly qualified Board is led by an independent Chair.The structure and operation of the Board is defined by Oxys corporate governance policies,and the Board is committed to strong corporate governance and director refreshment to help promote diverse leadership and expertise.The Board oversees Oxys corporate governance,strategy and risk management,including climate-related and other sustainability risks and opportunities,and our HSE performance.These matters are incorporated into regular Board and committee meetings,as well as the Boards annual strategic review session,as central elements of Oxys strategic planning.In addition,the Boards committee structure is designed to help ensure the Board and its committees have the appropriate oversight of relevant sustainability issues.Directors are provided with continuing education,including business-specific learning opportunities through site visits and briefing sessions led by internal experts or third parties on topics that are relevant to Oxy.These sessions are coupled with continued briefings on climate-related risks and opportunities from the OLCV team and other members of management on Oxys Net-Zero Strategy,our GHG emissions and associated reporting,as well as pertinent legislative and regulatory updates.Directors are also encouraged to attend additional continuing education programs designed to enhance the performance and competencies of individual directors and the Board.Each new director is provided with extensive onboarding materials and information covering director responsibilities,corporate governance practices and policies,business strategies,leadership structure and long-term plans concerning Oxy.These materials enable the individual to perform the duties of a director.Orientation also includes individualized meetings with senior management and other key leaders.The Board and its committees provide strategic guidance to management and oversight of Oxys business strategy throughout the year.Various strategy elements are discussed at every Board meeting and at many meetings of the Boards committees.Each year,the Boards strategy oversight includes a dedicated discussion of significant risks,opportunities and strategies at the Boards strategic planning meeting,which allows for an in-depth annual assessment of the key risks and opportunities facing Oxy.Risk oversight occurs at both the Board and committee level.The Board is responsible for overseeing Oxys policies and procedures with respect to risk management,and has empowered its committees with oversight of specific risks tailored to each committees area of focus.Each committee meets regularly with management to review compliance with existing policies and procedures,and to discuss changes or improvements that may be warranted.Director EngagementStrategy Oversight Risk Oversight Oxy Board members touring Permian drilling site18Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemAudit CommitteeCorporate Governance and Nominating CommitteeEnvironmental,Healthand Safety CommitteeExecutive Compensation CommitteeSustainability and Shareholder Engagement CommitteeRisk and Opportunity OversightTo augment the Boards strategic risk management responsibilities,the Board has empowered its committees with oversight of the risks and matters described below,which are tailored to each committees area of focus.Assists the Board in monitoring the companys financial statements,compliance with legal and regulatory requirements,the qualifications and independence of the independent auditor,the independent auditors performance and Oxys internal audit functionOversees the Corporate Governance Policies,Board composition and refreshment,Board committee leadership and membership and Board,committee and individual director performance evaluationsOversees external reporting on ESG and sustainability matters,including climate-related risks and opportunitiesOversees compliance with applicable HSE laws and regulationsOversees the risk assessment related to the companys compensation policies and programs applicable to executive officers and other employees,including the determination of whether any such policies and programs encourage unnecessary or excessive risk-takingOversees information technology(IT)security programs,including cybersecurityAdministers the companys Related Party Transactions PolicyOversees the companys social responsibility programs,policies and practices,including the Human Rights PolicyOversees the shareholder engagement programOversees Oxys Political Contributions and Lobbying Policy and Charitable Contributions and MatchingGift ProgramOversees the companys Operating Management System,including results of internal compliance reviewsOversees remediation projectsOversees Oxys Enterprise Risk Management(ERM)program and Code of Business Conduct compliance program19Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemRole of ManagementSenior leadership manages risks and the ERM Council of executives governs and directs the ERM program.Regularly reports to the Board on financial,operational,human capital,cybersecurity and HSE&S matters.Risk and Opportunity OversightStrategy OversightThe Board and its committees provide strategic guidance to management and oversight of Oxys business strategy throughout the year.Annual strategic planning meeting allows for dedicated,in-depth discussion of key risks and opportunities facing Oxy.20Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemBased on shareholder feedback,the Compensation Committee maintained the sustainability metric weighting for the 2023 Annual Cash Incentive(ACI)Award at 30%to continue advancing the companys Net-Zero Strategy and incentivize executives to address Oxys Scope 1,2 and 3 emissions in the short term by including targets focused on emissions reduction projects and low carbon ventures.Emissions Reduction ProjectsLow Carbon VenturesComplete asset registry of emissions generating equipment for U.S.onshore oil and gas operationsComplete 30%of construction for Trains1 and 2 of STRATOS by year-end 2023Reduce operating emissionsAdvance carbon management platformAchieve a 50%reduction in routine flaring from Oxys 2020 baseline1 Gulf Coast sequestration hub on trackfor Class VI permitting by 2025Deploy at least 5 projects or operational changes to reduce Scope 1 or 2 GHG or otherair emissionsContract STRATOS cumulative offtake ofover 1 million tons of CO2Significant Portion of ACI Award Tied to SustainabilityScope 1 and 2 TargetsScope 3 Targets21Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemEnterprise Risk ManagementOxys vision to lead the industry and reach for the impossible,while delivering the essential products the world needs,takes strong risk management.ESG performance is integral to Oxys overall risk management and strategic planning processes.Our ERM program establishes a framework for how we identify,assess and manage the risks that may affect our ability to implement our business strategy.The ERM programs primaryobjectives are to:Oxys ERM program is central to strategic decision-making and capital planning and promotes safe,reliable and sustainable operations.Oxy incorporates analyses of short-(14 years),medium-(412 years)and long-term(beyond 12 years)financial risks of a lower-carbon economy to assess the resilience of our assets and capital investments.The ERM program builds upon systematic risk assessment programs in functional disciplines,such as our HSE risk management,security and social responsibility programs under the OMS,and the work of our planning and commercial teams.This program addresses a range of potential HSE,social and operational risks and opportunities related to our businesses,workforce,customers and the communities where we operate through:Enable risk-informed decision-making Risk Event Identificationand Categorization Risk Reviewand ValidationRisk AssessmentRisk MonitoringPlan for operational challengesImprove risk-based capital allocationProvide an enterprise-wide portfolio view of riskESG performance is integral to Oxys overall risk management and strategic planning processes.The Board provides oversight of,and senior leadership is actively engaged in managing and assessing,sustainability-related risks and opportunities.22Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemCybersecurity Oxy is committed to safeguarding our digital and physical assets to promote the integrity,confidentiality and availability of our systems and data.Our comprehensive cybersecurity framework incorporates a variety of mechanisms,controls,technologies and policies,all thoughtfully designed to prevent or mitigate the risk of data loss,theft,misuse or other security incidents.The governance of our cybersecurity efforts is rigorous,with our Boards Audit Committee overseeing IT security programs and the full Board reviewing our cybersecurity posture annually.Our Chief Information Officer(CIO),who has over two decades of IT and cybersecurity experience,leads our teams in implementing and maintaining our cybersecurity and data protection measures and advancing the review and improvement ofour strategies.Our approach to cybersecurity is multi-faceted,involving dedicated teams for both business network and Industrial Control Systems(ICS)security,under the guidance of our CIO and other key stakeholders.This initiative is part of our broader ERM program,aligned with leading industry practices such as the National Institute of Standards and Technology(NIST)framework.We leverage a balanced mix of people,processes and technology to identify and swiftly respond to potential cybersecurity threats.Regular security monitoring,penetration testing,vulnerability scanning and personnel training are among the tools deployed to proactively identify and address cybersecurity threats.We also maintain rigorous cybersecurity policies that outline our practices,controls and physical safeguards that mitigate risk to our systems.These efforts are supported by regular internal and external assessments,including third-party audits.To continue providing our staff with the necessary tools and skills to identify cybersecurity risks,all employees and contractors are required to complete annual cybersecurity training.In addition,all employees and contractors participate in regular phishing simulation awareness training.Oxy annually dedicates the month of October to cybersecurity awareness.Oxys cybersecurity incident response plan outlines key procedures for timely and effective action in the event of a cybersecurity incident,including risks flowing from vendors and suppliers.This planning promotes swift communication and resolution processes.This plan is part of our ongoing dialogue with senior leadership and the Audit Committee,providing a cohesive strategy and response to cybersecurity challenges.Material cybersecurity incidents are reported to Audit Committee and/or the full Board,as appropriate,via Oxys set protocols.Cyber-related risks in the oil and gas industry stem from the extensive use of IT and ICS.Oxy has not experienced material losses due to cybersecurity incidents.We remain vigilant,understanding that the sophistication of cyber threats continues to evolve,requiring ongoing investment in cybersecurity measures to protect our operations,our people,our partners and the communities we serve.In alignment with our commitment to operational integrity and ethical business conduct,our cybersecurity efforts are an extension of our broader corporate responsibilities.We are dedicated to safeguarding our digital and physical assets and preserving the trust of our employees,partners and the communities in which we operate.For more information on Oxys cybersecurity efforts and oversight,see our most recent 10-K.23Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemBusiness Ethics and Human RightsOxy has implemented a range of policies that establish clear performance expectations for business conduct by our workforce,including respect for the cultural values of our employees,contractors and neighboring communities,and the promotion of human rights.Our Code of Business Conduct(the Code)communicates Oxys commitment to high standards of ethical behavior and embodies Oxys business ethics,policies and procedures.The Code guides business activities,including compliance with laws and regulations(such as antitrust,anti-bribery and insider trading laws),conflicts of interest,political contributions and lobbying,equal employment opportunity,human rights and protecting health,safety and the environment.The Code also addresses cybersecurity,data privacy and the use of company information systems.New employees are required to complete online ethics and compliance training as part of the onboarding process.This training covers the Code and policies referenced in the Code.Annually,employees are required to acknowledge their responsibility to read,understand and comply with the Code,company policies,and ethical standards.In 2023,over 99%of active employees completed this certification.Through a combination of live and virtual platforms,we also offer training on the Code and other ethics and compliance topics throughout the year.The Code explains the many ways that questions or concerns may be raised,including Oxys Integrity Helpline,a toll-free compliance line with web reporting options,which is available 24/7 and managed by an independent third party.Oxy maintains an ethics and compliance homepage on our intranet,where employees can also ask questions and seek approvals,and a policy alert system to notify employees of the issuance of new policies.Oxy strives to work with partners,suppliers and contractors who share our commitment to ethical business practices,health and safety and the well-being of people and the environment.As a part of our compliance program,Oxy evaluates prospective business partners,contractors,suppliers and agents and conveys our expectation that they must comply with Oxy policies,including the Code.For example,our international procurement contracts include provisions related to human rights,ethical business conduct and other relevant policies.Code of Business ConductEthical Business Standards with Partners,Suppliers and ContractorsOxy investigates all credible reports of suspected policy violations and has zero tolerance regarding threats or acts of retaliation for raising a concern in good faith or cooperating in an investigation.Grievances are logged and responded to by the appropriate department or investigator,if warranted.Escalation protocols are in place for serious issues to be flagged to the Audit Committee and other applicable Board committees,as warranted.In addition,the status of reports,if they are open or closed,substantiated or not,is provided to the Audit Committee on an annual basis.Oxy prohibits bribery in all forms.Employees must understand and comply with the Foreign Corrupt Practices Act,the UK Bribery Act and any other applicable anti-bribery laws,regardless of their location or nationality.Anti-Corruption and Bribery24Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemOur Supplier Code of Conduct sets specific ethics and compliance expectations for suppliers on topics including,but not limited to,bribery,gifts,solicitation of favors,accurate and transparent accounting records and controls,human rights and subcontractor due diligence.Oxy has zero tolerance for the disregard or circumvention of Oxy policies or engaging in unethical dealings in connection with Oxys business.Our dedicated Oxy Integrity Helpline facilitates reporting of suspected or actual violations and concerns.Review our Supplier Code of Conduct for Oxy and Supplier Code of Conduct for OxyChem.Read more on how we manage our supply chain.Oxys commitment to respecting and upholding human rights is set forth in our Human Rights Policy.Our formal policy includes Oxys commitment to promoting rights and freedoms as universally recognized in international and national law in our business activities.It also addresses our expectations for employees,contractors and suppliers,security personnel and other key stakeholders regarding awareness,due diligence and risk management practices to safeguard human rights in our operations.All employees must acknowledge and commit to following the policy as a condition of employment.Oxy is attentive to concerns raised by stakeholders,including the needs of the communities in which we operate,and is committed to working with stakeholders to support human rights within the spheres of Oxys activity and influence.Supplier Code of ConductHuman RightsOperate in accordance with universally recognized rights and freedoms set forth in the Universal Declaration of Human Rights,the UN Guiding Principles on Business and Human Rights(UNGPs),the Voluntary Principles on Security and Human Rights,the International Labour Organization(ILO)Declaration on Fundamental Principles and Rights at Work,the UN Declaration on the Rights of Indigenous Peoples,and the ILO Convention 169 Concerning Indigenous and Tribal Peoples in Independent CountriesConduct due diligence on contractors and suppliers regarding human rightsProvide a workplace free of child labor,forced labor,harassmentand discriminationRespect the cultural values of the communities where we operate,including indigenous communitiesConduct social impact assessments,as necessary,to identify potential risks to human rights in Oxys international activities,and to evaluate Oxys ability to make a positive impact in the communities where we operateProvide feedback mechanisms to allow stakeholders to raise concerns or grievances,including through Oxys Integrity HelplineUnderstand and appropriately address concerns raised by stakeholdersInvestigate allegations or complaints that involve a potential violation of Oxys Human Rights Policy.Oxys Human Rights Policy reinforces our dedication to:25Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemOxy works with partners,suppliers and contractors who share our commitment to ethical business practices.We routinely evaluate suppliers and contractors to assess whether they meet our standards of ethics and HSE&S,as well as human rights.As part of the Compliance Program,we require our suppliers and contractors to comply with applicable policies,including our Code of Business Conduct and Human Rights Policy.Oxy requires due diligence be conducted on non-U.S.contractors and suppliers.This vetting process includes background checks designed to identify past corruption or fraud as well as human rights violations that have been confirmed through publicly available resources.Our procurement contracts routinely include provisions regarding the observance and protection of human rights and adherence to ethical business conduct.International procurement contracts include provisions with respect to the observance of human rights,as warranted,based on the nature and risks of the types of goods or services to be provided,as well as applicable laws relating to human rights.Certain locations and types of activities receive additional due diligence or training.For example,OxyChems programs are summarized further in its Statement Regarding California Transparency in Supply Chains Act available on our website.Oxy strongly encourages employees and contractors to report suspected violations of company policies,including the Human Rights Policy.We provide several avenues for such reporting,including Oxys Integrity Helpline which anyone may use to anonymously report suspected policy violations.Read more in our Human Rights Policy Statement.Human Rights in Our Supply ChainHobbs,NM HSE monitoring26Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemPublic Policy Engagement and Lobbying Oxy often engages with governments,including internationally and at the U.S.federal,state and local levels,as well as a range of organizations and entities in the public and private sectors,to advance Oxys priorities.These ongoing engagements are an important driver of our business strategy.By working with these partners,we strive to create value for Oxy,our shareholders and key stakeholdersincluding host governments and community leaders.In addition to engaging with host governments and local communities,Oxy engages in lobbying efforts on legislative and regulatory issues that impact Oxy,our shareholders and other stakeholders.Oxys policy regarding political contributions and lobbying activities by or on behalf of Oxy is specified for our directors and workforce in the Political Contributions and Lobbying Policy.Our policy is also outlined in the Code of Business Conduct and on our Political Contributions and Lobbying webpage,both of which are accessible to external stakeholders on .Regulatory and legislative challenges and opportunities often arise in the political process at international,federal,state and local levels.These challenges and opportunities can directly affect Oxys businesses.Oxy informs policymakers and legislators of such issues in an ethical and transparent manner.Part of this process involves lobbying activities and making political campaign contributions.We have robust policy and procedures for the oversight and management of Oxys participation in the political arena and believe that Oxys advocacy efforts are in the best interest of Oxy and our shareholders.The Boards Sustainability and Shareholder Engagement(S&SE)Committee oversees Oxys Political Contributions and Lobbying Policy and reviews the companys political activities and expenditures,as described in the S&SE Committees charter,which is publicly available on the companys website.Furthermore,at the direction of the Board,Oxys executive-level Government Affairs Committee,which the Vice President of Government Relations chairs,approves political contributions made using company funds,reviews and assesses trade association memberships,and approves such memberships with annual fees of$50,000 or more.Led by the Vice President of Government Relations,Oxys Government Relations team provides the day-to-day international and domestic government affairs services for the company.In carrying out its function,the Government Relations team must comply with the parameters set forth in the companys Political Contributions and Lobbying Policy.On a quarterly basis,Oxy reports our federal and state lobbying activities to the U.S.Congress in lobbying disclosure reports publicly available on the U.S.Senates Lobbying Disclosure Electronic Filing System website.These reports include Oxys direct lobbying expenses(salaries,office rent,etc.),as well as the portion of the dues paid to trade associations that is used for lobbying purposes.More details on our climate-and sustainability-related political and lobbying activities can be found in our Climate Policy Positions and Climate Advocacy and Engagement documents on with information on our general political contribution and lobbying efforts available on the Political Contributions and Lobbying webpage Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemClimate Policy PositionsAt Oxy,we recognize the need to lower both GHG emissions and atmospheric concentrations of CO2.Oxy endorses the goals of the Paris Agreement,including its aim to limit the global temperature increase to less than 1.5C above pre-industrial levels,and has developed our Net-Zero Strategy to align with those goals.Our Climate Report summarizes our Net-Zero Strategy to apply our experience in carbon management and storage in EOR to develop and commercialize technologies that reduce emissions and remove CO2 from the atmosphere to advance our net-zero goals and those of the Paris Agreement.We also recognize the importance of effective public policy as we advance our Net-Zero Strategy,goals and ambitions.We do not take a prescriptive view as to which policy approach could most efficiently meet societys climate goals.Rather,we support a range of policies that aim to achieve the goals of the Paris Agreement.As noted in Oxys Climate Policy Positions,our efforts are focused on policies seeking to advance technological solutions that can deliver significant reductions in current CO2 emissions and atmospheric CO2 concentrations by leveraging existing infrastructure,while continuing to supply consumers with affordable,reliable energy sources and essential products.OLCV and its development company,1PointFive,are working to commercialize carbon removal technologies including CCUS and DAC.We believe that these technologies can,with incentives necessary for their development and deployment,provide essential CO2 reductions in the medium term.We believe maturing compliance and voluntary carbon markets will strengthen carbon pricing signals and expand commercial pathways for investments in CCUS,DAC and a growing suite of low-carbon products,while governments evaluate proposals to upgrade or retrofit electricity infrastructure and transportation systems over the long term.Oxy is committed to being part of the solution to climate change and developed our Net-Zero Strategy that we believe aligns with the goals of the Paris Agreement.Artist rendering of STRATOS Direct Air Capture facility28Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemOXYPACPer federal election law,Oxy may not contribute corporate funds directly to U.S.federal candidates or political parties.The Occidental Petroleum Corporation Political Action Committee(OXYPAC)is an employee political action committee at the federal and state levels.Oxys political contributions promote only the interests of Oxy and our shareholders,and not the personal political preferences of our officers or directors.We have adopted robust policies to help ensure these activities and expenditures comply with applicable lobbying and disclosure laws in each applicable jurisdiction.On an annual basis,Oxy discloses OXYPACs contributions,categorized by jurisdiction,candidate and amount for the most recently ended fiscal year,including any contributions with respect to ballot initiatives.These annual reports of OXYPAC and non-OXYPAC contributions are available in the Political Contributions Archive.For more details on these contributions,please refer to information posted on our website.29Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemTrade Associations and Industry GroupsOxy is a member of and an active participant in several domestic and international trade,industry and professional associations.Membership in these groups is necessary to stay abreast of the wide range of issues impacting Oxys business segments.While generally not the primary purpose of these organizations,many actively engage in lobbying on industry issues.These organizations represent numerous members and interests,and Oxy does not always share the views of these organizations and their other members.Each year,Oxy publishes a list of U.S.trade associations of which Oxy is a member and to which it paid annual dues in excess of$50,000 in the prior fiscal year.Under Oxys Political Contributions and Lobbying Policy,the Government Affairs Committee must approve all trade association memberships with annual fees of$50,000 or more.For associations involved in federal lobbying,issues on which these associations lobbied are listed in the disclosure forms filed by the organizations.These are available online via the U.S.Senates Lobbying Disclosure Electronic Filing System website.30Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemAn organizations mission,vision and values have purpose when they truly guide everyday activities.This is why the ongoing modernization and consolidation of Oxys management systems through our Operating Management System(OMS)remains one of our core initiatives.The OMS promotes HSE&S excellence by providing a consistent,accessible framework of standards,procedures,guidelines,tools and training for our workforce to implement Oxys HSE&S Policy,advance our HSE&S Principles and identify,assess and address HSE,social and operational risks across our diverse business segments,operations and support functions.The evolution to Oxys OMS was initiated in 2021 from a spirit of continuous improvement to build upon Oxys longstanding Health,Environment and Safety Management System.The architecture of the OMS is based primarily on leading global guidelines in our industry sectors,including the International Association of Oil and Gas Producers(IOGP)OMS Framework,API Energy Excellence program,American Chemistry Council(ACC)Responsible Care program,World Economic Forum(WEF)Stakeholder Capitalism Metrics and Ipieca Principles,as well as key regulatory programs.The OMS framework is composed of four fundamentals:leadership,risk management,continuous improvement and implementation.These are applied to ten elements ranging from commitment and accountability to asset integrity and design to assurance,review and improvement.Expectations are set for intended outcomes and organized around the four sustainability pillars.This framework helps provide a consistent focus on health and safety,the environment and the communities where we live and work.The OMS methodology is global,guiding the activities of Oxys business segments and support functions around the world,including joint ventures over which Oxy has operational control.The OMS helps us communicate our expectations,share knowledge and align with our contractors and suppliers to enhance our combined efficacy,economics and HSE&S performance.Sustaining a strong HSE&S culture empowers people at every level.The OMS starts with high-level expectations and performance-based tools that aid our workforce in recognizing and addressing potential risks across our diverse businesses and assets,and then incorporates regulatory requirements and standards,procedures and guidelines applicable to specific types of operations or activities.The OMS incorporates Oxys HSE&S risk management policies and procedures,including those addressing personal safety,process safety,asset integrity and environmental management.Higher-level risks are reported,validated and prioritized for potential mitigation through the management chain of command and reviewed annually by senior leadership in the ERM Council and the EH&S and Audit Committees of the Board.As a result,the OMS facilitates compliance with laws and regulations and the management of HSE&S risks to help improve overall business performance.It encourages individual responsibility,values quantifiable results and promotes communication among employees,contractors,neighboring communities,government authorities and other stakeholders.Each business segment applies a tailored version of the OMS to integrate the HSE&S strategies,goals,requirements,risks and opportunities specific to that segment in a manner that implements Oxys HSE&S Policy,advances the HSE&S Principles and aligns to the Oxy OMS framework.For example,OxyChem has deployed the ACCs Responsible Care program,which has many OMS attributes.OMS program leaders have carefully bridged the two,mapping precisely where each aspect of the ACC framework applies under the OMS to provide clarity and alignment.Oxys Operating Management System31Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemThe Oxy OMS is aligned with the framework of the International Association of Oil&Gas Producers(IOGP)and incorporates APIs Energy Excellence program,ACCs Responsible Care program,the WEFs Stakeholder Capitalism Metrics and theIpieca Principles.FOUR FUNDAMENTALSFOUR PILLARSTEN ELEMENTSLeadership,Risk Management,Continuous Improvement and Implementation are the essential Management System components that support an effective OMS.These fundamentals are not sequential,and they apply equally to every Element of the Oxy OMS.Focusing on each Fundamentaldrives HSE&S performance andoperational excellence.Oxy organizes our reporting on HSE&S topics in the following four Sustainability Pillars,aligned with the WEF Stakeholder Capitalism Metrics:Governance,People,Planet and Prosperity.The Elements organize actions by managers and employees in Oxys operations and business functions to apply the OMS andits Fundamentals in their daily activities.This graphic shows how Oxy integrates the OMS Fundamentals,Elements and Pillars to support HSE&S performance and operational excellence and advance our sustainability strategy.32Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemThe OMS helps Oxys workforce as we strive to fulfill our mission,vision and core values across our diverse businesses everywhere we operate.Outperform Expectations is an Oxy core value.By regularly assessing performance and striving to execute with better results,we live this value each day.The OMS applies a proven technique,the Plan-Do-Check-Act(PDCA)cycle,which has been adopted across industries by leading organizations such as the IOGP and the International Organization for Standardization(ISO).The OMS PDCA cycle provides clarity around each step,from setting clear expectations to sharing relevant learnings.Thorough integration of the PDCA cycle by leaders and thoughtful participation by employees help the OMS enhance Oxys HSE&S performance and operational excellence.The OMS is regularly reviewed and updated to integrate new information,fresh insights,business and operational changes,as well as the latest industry-wide practices.Oxy employees and our contractors recognize the importance of adhering to the OMS so that we can deliver on Oxys mission,vision and core values.There are several training and development resources available to our workforce.Published with the latest updates annually,the OMS provides key information our workforce uses to sustain Oxys strong HSE&S culture,whether they work in an oil field,plant,platform or office.Our workforce has full access to OMS documentation pertaining to their business segment,along with valuable training tools,videos and practical tips that review OMS processes and guide business unit and peer-to-peer conversations.The site also offers“micro-learnings”that help provide quick,easily understood information,insight and context into HSE&S-related subject matter.Oxy managers or supervisors and HSE&S professionals are also equipped to answer questions about how to implement the OMS in their operation or facility.Continuous ImprovementOMS Training and Learning Resources33Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCE34Board Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemHIGHLIGHTThe OMS in Oman:Supporting Local BusinessesWith a 40-year legacy in the country,Oxy is Omans largest international producer,with more than one billion gross barrels of oil produced within the Sultanate.We pride ourselves on our local investments and initiatives.Our regional OMS,which has a long legacy,continues to play an important role.As part of our in-country value(ICV)strategy,Oxy identifies and engages with small and medium-sized businesses with the potential to deliver strong support for Oxys local operations.Oxy Omans OMS provides a framework that helps these suppliers and service providers meet quality,HSE and sustainability guidelines.Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCE35Board Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemHIGHLIGHTInternational Operations Integrate Third-Party Certifications into Their OMSWherever Oxy operates,we help set the standard for safe and environmentally responsible operations and strive to meet the expectations of our communities and other stakeholders.We bring our passion for innovation,deep experience,robust processes under our OMS and our suite of technologies to the job.In addition,Oxy maintains third-party certifications including ISO standards at several facilities to support the local OMS.Oxy Omans operations,for example,have received ISO 14001 certification for the environmental management system at the Mukhaizna waste management facility in South Oman,as well as ISO 39001,45001 and 50001 certifications in both North and South Oman for road traffic safety,occupational health and safety and energy management systems,respectively.OxyChems plants in the United States,Niagara Falls,Canada and Talcahuano,Chile are certified under ISO 9001 and other standards associated with their assurance programs for various products they manufacture.In addition,OxyChems Chilean plant is certified under ISO 14001.By maintaining these certifications,numerous Oxy facilities help reinforce the OMS,compliance programs and internal quality assurance processes and support dialogue with host governments,customers and other stakeholders.OxyChem Chile officeOxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESGOVERNANCEBoard Compositionand PracticesEnterprise Risk ManagementCybersecurity Business Ethics andHuman RightsPublic Policy Engagementand LobbyingOxys OperatingManagement SystemClarify objectives of the activity,organize appropriate resources and engage relevant stakeholders.Identify risks and potential measures to control or mitigate them to inform project design andresource allocation.Execute and control the activity based on plans and procedures,including those to manage risk.Monitor to ensure plans and procedures are being followed and to confirm risk controls,barriers or other mitigation measures are effective.Measure progress and assess processes for improvement opportunities and assurance.Review outcomes and performance.Establish improvement actions,incorporate into future plans for the activity and share relevant learnings.Continuous ImprovementPLANACTDOCHECKContinuous improvement is fundamental to the Oxy OMS.As with Oxy and Anadarkos legacy management systems,the Oxy OMS applies the Plan-Do-Check-Act(PDCA)cycle,which has also been adopted by the IOGP,ISO and other organizations.PDCA starts with careful planning,followed by controlled execution,which is monitored for effectiveness,leading to the inclusion of improvement actions in further planning in a continuous cycle.The four steps of the PDCA framework can be applied to systematically and continuously improve performance.36Making bold moves means finding the best people and helping them thrive.79NATIONALITIESWEEKS14Parental LeaveHOURS21.9Average mandatory HSE training per employee per yearPERCENT23.5U.S.employees with promotions or transfers in 2023TRIR0.21Total Recordable Injury Rate per 100 full-time employees Expanding Professional and Personal Development Powerful Innovations in HSE Thriving Diversity and Inclusion Robust Emergency Planning New Milestones in Health and WellnessIn 2023,Oxy continued to enhance the employee experience and performance through:PEOPLEOxy Sustainability Report 202437PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESOxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipPEOPLEHuman Capital and Workforce Development:Delivering Progress with PurposeOur FocusTalent Attraction,Retentionand AdvancementDiversity,Inclusion and BelongingHealth and Safety of our Workforceand CommunitiesOxys human capital and workforce development strategy is rooted in Oxys core values,unequivocally empowered by the support of our leadership and executed in collaboration with business unit leaders across the organization.We believe our diverse global workforce creates value for our shareholders,business partners and host communities,provides a competitive advantage and delivers real progress toward Oxys mission and vision.In our fast-paced,competitive industry,we strive to provide safe,supportive and high-quality work environments that reward innovation,aligned with UNSDG 3:Good Health and Well-Being and UN SDG 8:Decent Work and Economic Growth.Our exemplary safety performance reflects our commitment to protecting the health and safety of the people at our facilities and in the communities where we operate.Attracting,retaining and advancing top talent with a passion for achieving our ambitious goalsValuing the perspectives of our multicultural workforceFostering a supportive environment for open communication through our Diversity,Inclusion and Belonging ProgramAdvancing employee inclusion and the sense of belonging with our Employee Resource GroupsTraining and supporting our workforce with safe work systems and technologyApplying proactive process safety management and asset integrity programsRespecting the laws and values of communities where we operateRecruiting from a diverse pool of candidates through local job fairs,professional societies and campusesDeveloping programs to enhance the continuing personal and professional growth ofour employees38Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipAttracting,Retaining and Advancing Top TalentBringing in the Best of 2023 college hires were conversions from our intern program.ATTRACTRETAINADVANCE48%Interns at OxyContribute meaningfully to work that mattersCollaborate with real-world teams solvingtough problems Perform work directly relating to their fieldof studyAccess exclusive,leading-edgetechnologiesWork on groundbreaking projects39Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipAttracting,Retaining and Advancing Top TalentWe expanded our recruiting and employee engagement in 2023 so that we can continue to compete successfully for talent,experience,capability and thought leadership in our competitive industries.These activities are led by our Human Resources department,in cooperation with business unit leadership across the organization.Oxys Talent Acquisition Group takes the lead in finding and recruiting high-quality candidates through strategic workforce planning,proactive recruitment,employer branding and sustained engagement with colleges,universities,trade schools and professional societies.In the United States,Oxy maintains strong ties with 25 major universities,collaborating with university leaders,participating in events and offering best-in-class internship opportunities to compete for university graduates.Our university internship participation has grown for three consecutive years.We strive for repeat internships.In 2023,48%of our college hires were conversions from our intern program.Oxy interns contribute meaningfully to projects that matter,collaborating with real-world teams solving tough problems directly relating to each students field of study.They also have access to Oxys exclusive leading-edge technologies and groundbreaking projects.We believe Oxys culture,track record,Balanced Workplace Program(BWP),clear and attractive career paths and competitive benefits help us compete effectively for both interns and recent college graduates.We recognize the tremendous talent,drive and potential of trade school graduates.These students gain essential skills that drive productivity and help strengthen the economy and society.Oxy collaborates with trade schools in a range of disciplines,providing cooperative relationships for their students that integrate coursework with applied on-the-job training,industry certifications and vital steps toward technical qualifications.We are currently developing one of only a handful of technical apprenticeships in the field of Direct Air Capture.40Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipOxy values a diversity of backgrounds,experience and thought to yieldhigh-performance teams.We actively recruit diverse candidates,both in our communities and across the countries where we operate.We partner with numerous organizations in our outreach efforts,including the National Society of Black Engineers,Women in Energy,the Society of Hispanic Professional Engineers,the Society of Women Engineers,the Association of Chinese American Professionals and other leading representative groups.Oxy regularly attends several U.S.military veteran recruiting events each year for the honor of becoming the next chapter in the lives of those who served.Of course,hiring the best people is only part of the job.Oxy also takes talent retention seriously,bringing long-term commitment and communication to the multifaceted work required to help employees thrive.This means providing for the physical,mental,financial,social and career well-being of our employees around the globe.Approximately 23.5%of our U.S.employees experienced job moves in 2023 due to promotions or transfers which continue to increase Oxys ability to up-skill and grow our workforce.Our approach to succession planning emphasizes the importance of nurturing leadership from within.To stay competitive,Oxy has developed numerous ways to support employees,ranging from leading health and medical programs(such as supplementary virtual primary care)to competitive financial benefits(such as a generous retirement plan),and opportunities for work-life balance.We regularly review our compensation and benefits programs to promote strong competitiveness.We believe a comprehensive salary and benefits package,combined with development pipelines,helps Oxy retain our top talent.In our international operations,we strive to conduct comprehensive succession planning including the proactive recruitment,training and development of local employees to help increase each regions capabilities and expand local hiring.This effort stands as a tangible demonstration of our commitment to knowledge sharing with our host government partners.By focusing on the development of local talent and providing a seamless transition of expertise,we work to foster a sustainable business model while contributing to the growth and development of the communitieswhere we operate.Investing in education and skills-based training in countries where we operate helps Oxy develop and sustain the local technical,operational and commercial talent required to build,operate and maintain critical infrastructure for our work in those markets.For example,Oxy is a leading employer of nationals in Oman,enthusiastically expanding on programs such as the“Omanization”of the Oxy workforce.This is a government initiated program that seeks to increase employment of Omani nationals in the public and private sectors.Oxy has comprehensive initiatives to recruit and train Omani citizens and is committed to developing and promoting Omani citizens in positions from entry-level to executive management.41Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipCompetitive Compensation and BenefitsBy committing to employees through competitive salaries,performance incentives and plentiful opportunities for advancement,Oxy aims to keep our world-class talent motivated and innovating to solve multi-dimensional challenges.In 2023,Oxy added a new feature to our health,financial and work-life benefits:enhanced access to mental health support through Lyra Health.Lyra Health makes it easy for Oxy employees and their families to get mental and emotional support through several care options.The program includes access to guided self-care,coaching,skills learning,therapyincluding an on-site therapistand more,all in a way that is confidential and free to employees,spouses or domestic partners,and their dependents.Oxy supplements our competitive medical,dental and other health coverage with a variety of digital platforms that help manage conditions such as diabetes and hypertension.One of the most powerful of such technologies is the Virgin Pulse platform.Virgin Pulse is an app that helps employees and their spouses or domestic partners track physical activity,participate in fitness challenges and earn rewards for maintaining an active lifestyle.Oxy employees using Virgin Pulse frequently report benefits such as lower blood pressure,better blood sugar metrics,weight loss and a better overall state of mind.Oxy employees are also enabled to continue to improve their lives through the companys commitment to education assistance.Over the years,hundreds of employees have advanced their careers by taking advantage of this tremendous benefit,whereby employees are reimbursed for up to$50,000 upon the successful completion of pre-approved courses at accredited universities,technical schools or other institutions.From MBAs to engineering degrees,learning new skills or changing careers,Oxys educational assistance program is consistently used worldwide.At Oxy,we take pride in supporting those who have honored us with their hard work and accomplishments over the years with an Oxy-funded retirement plan,service awards and special seminars on retirement which cover issues such as investment strategies,estate planning,healthcare,long-term care,lifestyle considerations and more.Milestones in an employees life are a great opportunity for Oxy to show our support.That is why Oxy offers employees paid leave that includes up to 14 weeks of time off for birth moms,as well as up to six weeks of time off with full pay for non-birth parents.Paid parental leave is more than a courtesy.Studies have shown a direct correlation between infant health and the paid leave of a parent,including reduced risk of numerous adverse health conditions.For this reason,and because its the right thing to do,we give our employees and their families this essential support when theyneed it most.42Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipBenefits and Total RewardsHealth FinancialWork/Life Medical,dental and vision coverage401(k)PlanFlexible work schedules,including Balanced Workplace hybrid schedule*Health savings accounts Retirement Plan Free health support programsLife Insurance Competitive base payPaid Family Leave Mental health support Accidental Death&Dismemberment InsuranceShort-and Long-Term Disability InsuranceEmployee discounts on products and servicesPaid vacation timePaid Parental LeaveEducational assistance Community support Fitness subsidy programRetiree medical We believe helping employees achieve work-life balance promotes both physical and mental well-being,increases job satisfaction,enhances productivity and helps Oxy retain top talent.That is why we work hard to help our employees around the world stay centered at the intersection of their personal andprofessional lives.*For eligible office-based employees.43Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipMidland Technical Training CenterOxy is dedicated to empowering our people to make the most of their careers and capabilities.To that end,we offer extensive training and development programs for employees in numerous roles,specializations and stages of their professional journey.From performance assessments to leadership development,recognition programs and more,our dedication to helping our employees live and work to their fullest potential is evident each and every day.The companys EMPower domestic mentoring program gives all employees a chance to connect with mentors from anywhere in the organization.Participants can search for and select their desired mentors in a 100%digital process.Once accepted by their chosen mentor,they can get invaluable advice on training,business skills,career management and more.In its third year,the EMPower program already has hundreds of participants across the United States.The EMPower program aims to enable mentees to network more effectively,learn more about the company,feel more confident,make more informed professional development decisions and receive more personalized support.Delivering Comprehensive Workforce Development44Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipTechnical Development and Rotation ProgramsOxy Engineering Development ProgramGeoscience RotationProgramOperations and Maintenance Staff DevelopmentLeadership-Focused DevelopmentWe believe that being at the forefront of technical development will support Oxys competitive edge and help us overcome challenges,safely and sustainably.To that end,we offer a number of competency-based technical programs designed to give our teams comprehensive understanding and skills they can use every day.These include:This two-to three-year program is for the development of incoming engineers.Rotations are based on selected and associated disciplines,business focus and employee interest.The program involves individualized technical mentoring,including on-location opportunities.With dedicated support,the program helps participants thrive and add value early in their careers.Our geoscience workforce identifies new hydrocarbon and CO2 storage resources and improves economic returns.This four-to five-year program for early career geoscientists helps provide an advantage through improved integration into the organization,accelerated development and increased speed to proficiency through a defined roadmap of competencies.Oxy also gives technicians,specialists and operators the opportunity for company-and discipline-specific training via a globally consistent and industry-leading program.Participants are provided with technical skills and opportunities for individual development,along with a focus on safety systems and safe work practices.This program includes instructor-led and online training,simulation,practical activities,supported on-the-job trainingand mentoring.Several accelerated leadership programs help Oxy nurture our next generation of decision-makers.Oxys new Early Career Development program allows employees with fewer than six years at Oxy to receive 40 extra hours of training specific to their professional development and career path.We are also continuing with our Foundations of Management program for new leaders,providing participants a week-long comprehensive assessment of knowledge gaps so they can help round out their understanding through focused workshops and other training opportunities.These programs are custom designed and delivered by Oxys expert Training and Development staff along with subject matter experts from various functions and business units.45Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipHIGHLIGHTStrategic Technical Excellence Program(STEP)We believe technical expertise is the cornerstone of our industry.However,nurturing this knowledge can be difficult from a career management standpoint.Like everyone else,brilliant engineers,technicians,researchers and scientists want to progress their careers forward.Oftentimes,career advancement options for technical personnel have involved leaving behind the technical study they know and love in favor of managing people and teams.Thats where STEP comes in,providing a career path for advancement and development of technical personnel that eschews previously mandatory management roles in favor of doubling down on the elevation of their technical expertise.The program includes mentoring,networking,career development,training and more,all led by a select group of Fellows and Principals who work directly with senior management rather than trying to become them.Now in its fourth year,the Strategic Technical Excellence Program(STEP)continues to gain momentum.By designating Oxys technical leaders as Fellows and Principals,the program provides career paths in technical disciplines beyond a management track in a way that supports fulfilling careers and ongoing organizational knowledge-sharing.46Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipWell-Being Education and AwarenessThroughout 2023,the OxyHealth team provided well-being awareness,education and activities on a number of different topics including:Oxy makes significant investments in the overall health and well-being of our employees by providing a suite of benefits that include quality healthcare coverage,health screenings,fitness programs,mental health support and services,peer networks and more.These investments align with our values and we believe result in a resilient,high-performing workforce that can deliver consistent long-term value.Oxys well-being program,OxyHealth,coordinates on-site biometric screenings and flu shot events at various Oxy office,plant and field locations to bring routine preventive care to employees.Employees,spouses and domestic partners are able to get these preventive screenings for free at their local doctors office or wellness clinic.In May 2023,OxyHealth campaigned for Mental Health Awareness Month.Throughout the month,numerous activities were held at various office locations inviting employees to be more mindful of their own and others mental well-being.Oxy supports employees physical well-being with free membership to several on-site fitness centers.Employees can also receive a monthly reimbursement for in-person facilities or virtual programs if they utilize their membership a minimum of four times within the month.We also support fitness in the office itself,offering ongoing virtual“brain break”sessions each week.Employee Well-Being HydrationEducationMental Well-BeingNutritionWell-Being ChallengesHeartHealthStep ChallengesDiabetes AwarenessPreventive Healthcare and more47Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipPromoting Work-Life BalanceHIGHLIGHTIn April 2023,OxyHealth partnered with and supported Team Oxy for the Texas MS150 ride.The largest single annual fundraiser for the National Multiple Sclerosis Society,the ride involved 62 Oxy riders tackling the two-day,150-mile open road course,raising$185,000 in 2023 and reaching cumulative donations of$1.96 million total during Team Oxys 21-year participation history.48Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipInvesting in Employee Outreach and EngagementIn June 2023,we launched a new team,the Talent Engagement and Employee Experience team,charged with enhancing the employee experience and playing an important role in job satisfaction,morale and retention.Our motivated workforce helps us to continue delivering the bold strategies,complex problem solving and strong execution for which Oxy is known.A foundational part of our employee engagement is Oxys Quarterly Executive Virtual Conversation(QEVC).These events give employees the opportunity to hear operational,financial and HSE&S updates directly from our President and CEO and other senior leaders at Oxy.They also allow for the submission of questions by employees,which leadership can answer during these company-wide conversations.The Talent Engagement and Employee Experience team also makes a systematic effort to solicit and respond to employee feedback in a timely manner.The team applies a new artificial intelligence(AI)driven platform to conduct workplace surveys in a more scalable,precise and actionable way.The system analyzes survey data in real-time and reports these findings on employee views and mindsets to stakeholders on topics ranging from inclusion to compensation and beyond.The broader Human Resources department also uses this AI platform for matters ranging from University Relations intern feedback to employee exit interviews.This supports our shift from periodic gauging of employee sentiment to the leading practice of ongoing data collection and analysis.This approach helps our Human Resources leadership address issues promptly as they arise,solve challenges proactively and tailor solutions and communications more closely to individual employee needs.Oxy plans to increase employee engagement surveys to create more robust action plans across a variety of business functions.49Oxy Sustainability Report 2024PLANETPEOPLEPROSPERITYGOVERNANCEINTROABOUT THIS REPORTAPPENDICESPEOPLEHuman Capital and WorkforceDevelopmentHealth and Safety Process Safety andAsset IntegrityEmergency Preparednessand Response Promoting TransportationSafetyProduct StewardshipMaking Progress in Diversity,Inclusion and BelongingThrough our Diversity,Inclusion and Belonging(DIB)program,Oxy strives to be a place for everyone to learn,work and grow.As an international company,we value the ability to communicate and work effectively with people from a wide variety of backgrounds,perspectives and cultures.Oxy has attracted,and continues to recruit,a diverse workforce of exceptional talent,including employees from over 75 nations.We believe this diversity enriches our culture and our employees experience in the workplace and contributes to an innovative and effective business model that benefits our shareholders as well as the local communities where we operate.The intent of Oxys DIB culture is to sustain an environment where employees differences are appreciated,celebrated and encouraged.We believe DIB fuels our innovation and spirit of excellence,as well as our knowledge and results.Embedding DIB into our culture enhances Oxys collaboration,performance and growth,and helps uphold our mission,vision and values.Oxys DIB culture starts at the top of our organization.The DIB Advisory Board,which is chaired by our President and CEO and includes members of senior leadership,provides DIB governance and oversi
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SUSTAINABILITY REPORT 20232023 SUSTAINABILITY REPORT|2 INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIXAbout this reportThe content and structure of this report provide stakeholders a comprehensive update highlighting NRGs dedication to people,commitment to environmental stewardship,and the governance principles that inform our work.Sustainability has become increasingly integrated into the fabric of who we are as a company;this report reflects its importance and impact across all parts of our business.This sustainability report is aligned with our fiscal year(FY)and is a snapshot of the period from January 1 to December 31,2023,unless otherwise noted in individual disclosures.Featuring highlights from the reporting period as well as relevant data and disclosures,our report contains information and issues pertinent to NRG and complements our other reporting and financial filings.Unless otherwise stated,NRG refers to NRG Energy,Inc.as well as its subsidiaries and affiliates.While this reports scope is FY 2023,some longer-term projects and goals are discussed,as are certain significant current events that occurred between the end of FY 2023 and the time of publication.Where applicable,sustainability-related disclosures are in line with the Sustainability Accounting Standards Board(SASB),which was recently incorporated into the International Financial Reporting Standards(IFRS)Foundation,and the United Nations Sustainable Development Goals(SDGs).Additional details on NRG can be found in our Environmental,Social,and Governance(ESG)Data Download as well as in our reports and proxy statement on the NRG Investor Relations website.The Appendix section contains our SASB table and resources with more information linked throughout the report.2023 SUSTAINABILITY REPORT|3 INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIXTable of contentsENVIRONMENTAL 17Powering a lower-carbon future 18Our climate goals and progress 19Environmental management and operations 22Advancing a sustainable supply chain 25Looking ahead 25SOCIAL 26Supporting and empowering our people 27Upholding safety and well-being 30Fostering diversity,equity,and inclusion(DE&I)32Giving back to communities 36Vivint Gives Back 37Looking ahead 39INTRODUCTION 4CEO letter 5CSO letter 6About NRG 7Sustainability at NRG 8FACILITATING AN INTENTIONAL 10 ENERGY TRANSITION Our balanced approach 11Customer-driven solutions 12Sustainable products and services 13Technology and data analytics 15Public policy and advocacy 16Looking ahead 16GOVERNANCE 40Corporate governance 41Board of Directors 41Governance approach for environmental 42 stewardship and social responsibility Stockholder and stakeholder engagement 46Public policy 48Data,technology,and security 48APPENDIX 49Glossary 50Further reading 51UN Sustainable Development Goals(SDGs)52 and progress SASB standards 54Key issues assessment 602023 SUSTAINABILITY REPORT|4 INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIXIntroductionCEO letter 5CSO letter 6About NRG 7Sustainability at NRG 8IN THIS SECTION:2023 SUSTAINABILITY REPORT|5 INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIXCEO letterDear Stakeholders,Today,NRG is proud to be working at the intersection of energy and consumer services,placing sustainability at the core of everything we do.Our strategy ensures we make responsible decisions that consider every aspect of our business.In 2023,we achieved some great milestones,thanks to the steps weve taken in recent years to strengthen our business.NRG made significant progress in advancing our long-term energy transition and electrification strategy.We achieved a 58%reduction in GHG emissions,bettering our 2025 target,and our demand response programs effectively helped to balance market needs and reduce grid demand.The NRG teams commitment to the community remained steadfast,contributing 31,000 volunteer service hours across North America.The integration of NRG and Vivint has been a better together story,enriching both our offerings and our teams.Reflecting our new collective identity,we introduced an updated purpose statement:To power a brighter future together.One that is safe,smart,and sustainable.Looking ahead,there is still much to accomplish.Our goals for the coming years are ambitious as we enter a new era of energy,driven by increasingly cleaner supply,continued electrification,and tremendous demand-side growth.NRG is harnessing technology,our customer-centric approach,and incredible talent to advance our business.We are not just adapting to changewe are leading it,championing an intentional energy transition that is safe,affordable,reliable,and beneficial for future generations.Thank you for your continued support and interest in NRG.It is your belief in our vision that inspires us to do better every day.I am grateful for our employees,partners,customers,and communities dedication.Together,we are shaping a bright future.Larry CobenChair,President and Chief Executive Officer2023 SUSTAINABILITY REPORT|6 INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIXCSO letterDear Stakeholders,Looking back on my first nine months as Chief Sustainability Officer for NRG,I am filled with hope and excitement.I feel honored to have joined a sustainability program with such a strong legacy.The opportunity to now spearhead NRGs sustainability initiatives as we shape the future of energy is a privilege.Today,I am proud to share with you both our progress over the past year and our vision for a more sustainable future.In 2023,we achieved many milestones and expanded our portfolio to offer more sustainable alternatives for both homes and businesses.Our efforts to progress our emissions targets were reflected in a 58crease in GHG emissions from our base year,including a 30%cut from 2022 in our Scope 1 emissions.We retained our top-decile safety performance,and our commitment to our people and communities was strengthened through integration with our Vivint colleagues.Throughout an atypical year for our business,we maintained shareholder engagement and strong governance principles and ensured our strategies remained aligned with stakeholder values and expectations.My time in this role has deepened my commitment to advancing NRGs sustainability agenda and reinforced my belief that sustainability is not a destination,but rather a journey that requires constant adaptation,learning,and dedication.I am anticipating many more opportunities to engage with customers in new ways.Our whole-home experience delivers comprehensive,tech-forward energy management to our customers.For our gas business,we are exploring ways to evolve our customer solutions as we continue reducing our carbon intensity.The anticipated power demand increase driven by the technology sector presents both challenges and opportunities.NRGs strategic shift to sit at the intersection of energy and technology marks a new chapter in our sustainability story.As we navigate this next phase of NRG and the energy industry as a whole,I remain focused on maintaining our unwavering commitment to putting our customers first as we continue to elevate our sustainability approach and set a benchmark for the industry.I am proud of the progress to date,which is a testament to our companys dedication and to those leaders before me who paved the way.As we move forward,I will continue to collaborate closely within NRG to ensure that sustainability remains at the core of our business.I am grateful for the support and engagement of our stakeholders as we pursue our sustainability goals and for the opportunity to lead as we drive tangible results through our collective efforts.Together,we can create a more prosperous and sustainable future for all.Lynda ClemmonsChief Sustainability Officer2023 SUSTAINABILITY REPORT|7 INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIXAbout NRGNRG sits at the intersection of energy and home services.With our customers needs and aspirations at the forefront,we are bringing peace of mind,customization,and convenience to the home.Our leading brands and customer experience as an energy provider have paved the way for trusted relationships inside the home,and today,we are much more than simply a power and natural gas retailer.We are empowering consumers with a unique platform that combines innovative energy services and controls with home automation,smart devices,and protection.ESSENTIALS FOR THE HOME AND BEYONDThroughout 2023,we focused on the integration of Vivint Smart Home as a catalyst in accelerating our consumer-focused growth strategy to bring customers a best-in-market home services platform fueled by unparalleled insights,proprietary technologies,and complementary sales channels.NRG serves approximately eight million residential consumers in addition to commercial,industrial,and wholesale customers,supported by approximately 13 GW of energy generation capacity as of December 31,2023.We sold 152 TWhs of electricity and 1,892 MMDth of natural gas in 2023,making us one of the largest competitive energy retailers in the U.S.As of 2023s end,we had recurring electricity and/or natural gas sales in 25 U.S.states,the District of Columbia,and eight provinces in Canada.Other products and services are available nationwide in both the U.S.and Canada.Vivint served customers in all 50 U.S.states.NRGs retail brands collectively have the largest share of competitively-served residential electricity customers in Texas and nationwide.NRG PURPOSE STATEMENTTo power a brighter future together.One that is safe,smart,and sustainable.Our power valuesOUR PURPOSE AND VALUES Our purpose and values inform how we move forward and achieve more for the people we serve.We constantly aim higher to provide a better experience for our customers,employees,and communities.In 2023,we rolled out a new purpose statement.This new statement reflects our growth,aspirations,and the evolving needs of our stakeholders.Safety and well-beingCustomer focus Collaboration AccountabilityDiversity,equity,and inclusion2023 SUSTAINABILITY REPORT|8 INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIXSustainability at NRGSustainability is a philosophy that underpins and facilitates value creation across our business for all stakeholders.It is an integral piece of our corporate strategy and ties directly to business success,reduced risk,and enhanced reputation.We are committed to affecting positively the communities in which our customers and employees live and work.We are focused on reducing our environmental footprint while ensuring the long-term reliability,competitiveness,and success of NRG.As we help to drive the energy transition through increasingly more sustainable products and solutions,our goal is to provide more clean energy choices to our customers and help reduce overall environmental and social impacts associated with the use of our products.This includes:Providing sustainable energy solutions to customers,optimizing our generation on an ongoing basis Reducing the carbon footprint of our operations Leveraging cleaner energy technologies such as battery storage and the incorporation of renewables Supporting the advancement of our employees through initiatives spanning health,safety,personal and professional growth,and DE&IOUR SUSTAINABILITY GOALSIn addition,we have established three ambitious targets for reducing NRGs environmental footprint and reporting our progress:50%reduction in GHG emissions by 20251Net-zeroemissions by 2050100%electrification of company-owned,light-duty fleet vehicles by 20301 From our 2014 base year,includes scopes 1,2,and 3 business travel2023 SUSTAINABILITY REPORT|9 INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIXYEAR IN REVIEWWere on a mission to power,protect,and intelligently manage all things home and business and 2023 was another year of outstanding progress.We advanced our strategic priorities,expanded our sustainability initiatives,and reinforced our support for NRG employees,partners,and the communities we serve.Together,we are building a brighter,cleaner,and more resilient future.SELECTED 2023 AWARDS AND RECOGNITION Newsweeks Most Responsible Companies Forbes Americas Best Midsize Employer Forbes Global 2000 Forbes Best Employer for Diversity Forbes Americas Best Employer by State(Texas)Fortune Global 500 HRO Todays Talent Acquisition Leader of the Year,Lifetime Achievement Finalist HRO Todays Talent Acquisition Team of the Year IABC Houston Bronze Quill Award of Excellence Illumi:Creative Development Award(UserTesting)Ragan Communications CSR&Diversity Awards FinalistA Fortune150CompanyApproximately$28.8Bin revenueApproximately18,000employees13 GWtotal generation capacity8MM customers1,892 MMDthnatural gas sold152 TWhelectricity sold58%reduction in GHG emissions154%Board of Directors ethnic or gender diversity1.9 GWof renewable power purchase agreements(PPAs)Top decilesafety performanceApproximately$7.2 MMdonated to charitable organizationsApproximately31,100hours of volunteer service by employees1,160 charitable organizations impacted by volunteers and donations2023 by the numbers1 From our 2014 base year.INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|10Facilitating an intentional energy transitionOur balanced approach 11Customer-driven solutions 12Sustainable products and services 13Technology and data analytics 15Public policy and advocacy 16Looking ahead 16IN THIS SECTION:INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|11Our balanced approachThe energy industry is at an inflection point,transitioning from a century-old system built upon combustible fuels to one that fulfills the requirements of a world contending with climate change and being reshaped by technological innovation.At NRG,we are committed to the responsible transition to a lower-carbon economy.Our sustainability strategy recognizes and embraces that together with NRGs customers and partners,we have an unprecedented opportunity to rethink what power can be.While much of todays energy landscape is transforming,our fundamental approach delivering energy that is safe,affordable,and available when its needed still holds true.From development to strategy,our customers are crucial in helping us navigate and find success in an ever-evolving sector.We all want to leave a better world for the next generation.By using the technology we have now to manage our resources,we believe we can turn the tide on climate change.”Lynda ClemmonsChief Sustainability Officer INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|12Customer-driven solutionsWe are empowering NRG customers to play a greater role in shaping a sustainable energy future.From data center growth to continued electrification,our customers are inspiring industry change and influencing how we think about solutions to meet the needs of their homes and businesses.To empower and mobilize our customers to achieve their sustainability goals,we are aligning smart home technologies that manage usage with cleaner energy options.Whether generating power from our fleet with diverse fuel sources and geographic proximity to our customers,selectively purchasing power from the market,or entering long-term power purchase agreements(PPAs)for renewables,were sourcing power in ways that meet our customers needs and values.Energy-saving innovations in the tech-smart homeAs modern living spaces become increasingly electrified and technologically interconnected,consumers have unprecedented opportunities to manage their residential energy usage more flexibly.Aided by our Vivint products,we are accelerating this shift toward a more demand-driven model through our combined solutions.By controlling their thermostat,lighting,appliances,electric vehicle(EV)charging,and other in-home devices from anywhere via a single app,our customers have greater control over their energy usage without sacrificing comfort or convenience.In addition,the Vivint platform supports our broader efforts to level out demands on the energy grid by offering attractive incentives for customers to change their electricity usage.In 2023,we continued to advance our customer EV rate plan offerings.This includes a new EV interface that helps customers connect their cars automatically with a time-of-use electricity plan.Our new interface also gives customers the option to see both gasoline and CO2 savings.This is just one example of how NRGs products are making customers energy experience seamless.Our vision is to orchestrate all of these instruments wind power,solar panels,smart thermostats,EV charging,and more to continue providing energy whenever and wherever people need it.In concert with our customers,we can make sustainable energy usage a way of life.”Mark ParsonsHead of Texas,Consumer Energy INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|13Sustainable products and servicesWe are continually innovating to support the energy transition with more responsive products and services that put greater control in customers hands.SOLUTIONS FOR THE HOMEWe believe smart home solutions are an essential catalyst in the transition to a lower-carbon energy future.Our retail brands are built around making sustainability easy for customers.Gone are the days where being efficient was seen as sacrificial,old-fashioned,and difficult.Instead,thats been replaced by technology,transparency,and flexibility.Our offerings include:Degrees of Difference,Reduce Your Use,and Ready Set Relax These demand response programs adjust customers electricity use during times of high demand.In 2023,NRGs programs resulted in nearly 1,155 MWh saved across 24 demand response events and an additional 520 MWh saved through customers voluntary participation.Flextra Credits.As part of this 100%solar electricity plan,Reliant customers receive their two highest-use days each week for free.The program also provides up to$200 in bonus bill credits over the length of a customers term.Solar buyback programs.In 2023,we grew our Reliant solar buyback portfolio by nearly 20%while also enhancing customers experience with online account management.For example,the Reliant app now provides insights on solar savings,KWh imported and exported,environmental impact,and weather.In addition,we launched a new buyback program,Solar Unlimited,for our Direct Energy customers.EV charger plan.EV owners receive a discounted rate every night between 9 p.m.and 5 a.m.to support overnight charging.The plan is supported by 100%renewable energy and comes with a complimentary Level 2 EV charger.Renewable energy add-on.This program allows our customers to add renewable energy to cover 25%,50%,or 100%of their load.SolarSPARC.When customers enroll in this plan,they help fund a variety of projects that make solar energy more accessible in local communities.In addition,we have participated in small pilot projects that provide insight into expanded demand side management capabilities that benefit both consumers and the grid.These efforts include:A pilot project that allows Reliant customers in Texas to enroll their energy storage system in the states aggregated distributed energy resource(ADER)program Involving NRG employees with EVs in a proof-of-concept test to integrate“smart car”technology as a lever for EV charging Conducting an assessment among select Reliant customers to gauge how they perceive the value of receiving a smart thermostat with free installation.The results of this study will help us further hone our integration of Vivint Smart Home capabilities INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|14SOLUTIONS FOR BUSINESSWe guide our business customers to whats optimal for their unique goals and needs leveraging our energy industry knowledge,a technology-agnostic mindset,and our customer-first approach.Our ultimate goal is to make each customers energy strategy a competitive advantage for their business.NRGs diverse portfolio for businesses includes:Carbon intensity-reducing and socially-responsible solutions Community solar brokerage Renewable Select Renewable power purchase agreements(PPAs)and virtual power purchase agreements(VPPAs)Renewable Energy Credits(REC)Carbon offsets ESG advisory services Fleet electrification advisory servicesCustomizable demand-side solutions Demand response Responsive Economic Dispatch Energy efficiency and management tools Peak load managementEnergy storage and resilience solutions Emergency back-up generation Distributed energy resources(DERs)We also have several teams dedicated to helping our commercial and industrial customers optimize sustainability in their operations:Our sustainability advisory group educates commercial and industrial customers on how to reach their sustainability goals by providing insight into their carbon footprint,helping them to decide the appropriate way to access renewable energy as well as the tools available for benchmarking and reporting.This team helps customers establish a solid strategy and make it easier to navigate the evolving clean energy landscape,understand the ESG implications of energy commodity and services procurement,and improve business performance.Our renewable brokerage team focuses on assisting Fortune 500 companies with VPPAs,community solar portfolio origination and management,transferable tax credit financing solutions,distributed generation solutions,and long-term REC purchases.With over two GW in recent transactions,the team continues to assist clients in an ongoing effort to maximize both ESG and financial benefits.Our renewable and new product innovation team works with NRG business operations to bring new products such as renewable energy credits,carbon offsets,renewable natural gas(RNG),and certified gas(CG)to market.They identify customer needs and market opportunities and collaborate with internal and external partners to design,develop,and launch innovative solutions that address sustainability challenges.This team also supports the scaling and adoption of these products across different regions and sectors,ensuring they deliver value to our customers and stakeholders.Community solarNRG takes a market-leading approach to maximizing the value of community solar and minimizing the effort required.We work with organizations to scale community solar based on unique footprints.An offsite solar facility generates electricity thats delivered directly to the grid.Afterward,bill credits are assigned to specific customer sites and the customer pays a discounted price.Support for a customers climate planning journeyAs a trusted advisor on implementing ESG and disclosure strategies,NRG recently helped a large consulting firm successfully apply for several respected climate planning and sustainability certifications.These efforts included:Assisting with the customers latest CDP submission Helping the firm prepare for a climate scenario planning analysis in accordance with the International Sustainability Standards Board(ISSB)Assisting with deliverables to the Taskforce on Climate-Related Financial Disclosures(TCFD)Supporting the firms Science-Based Targets initiative(SBTi)submission,which led to final certification in December 2023 Helping the firm create its playbook for achieving sustainable longevity and continuing to quantify its climate change-related activities Supporting the firms assessment and verification of metric data for upcoming sustainability deliverables INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|15Technology and data analyticsData,technology,and security play a major role in our business.We have the data to make informed decisions,the technology to support business execution and optimization,and internal security controls based on the U.S.National Institute of Standards and Technology Cybersecurity Framework(NIST CSF).The unique power of harnessing data,technology,and security keeps us on the cutting edge of our business,allowing us to deliver excellence.Our approach groups data and technology under the same roof.Through this combination,we are building enterprise-wide platforms to capture individual consumer insights and behavioral trends that enable us to continue innovating and enhancing customer engagement and satisfaction with our products and services.Some of our key accomplishments in 2023 include:Expanding the customer data platform,providing industry-leading insights,and enabling real time personalization Delivering enterprise-wide data projects to strengthen the core business,executing on the digital strategy to personalize offers,and advancing our Artificial Intelligence(AI)capabilities to unlock value within the business Continuing to develop preventative protections,identifying and remediating information security risks and vulnerabilities,testing incident response procedures,and providing ongoing employee cybersecurity training and awarenessIn addition,we are committed to facilitating customers sustainability efforts through solutions that make renewables,energy efficiency,and home management more accessible to everyone.Our robust technology platform helps customers be better energy users by providing data and insights into their consumption.Paired with the right electricity plan,we reward customers for leveraging this information to modify energy use without disrupting their lives.With the help of smart home technology,consumers can easily control their power usage with a simple tap on a phone app.Lower power usage can mean lower bills,less strain on the grid,and less environmental impact.This literally puts control over their sustainable energy use in the palm of a customers hands.Multiplied by thousands or millions of households,the potential impact is substantial.INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|16Public policy and advocacyRenewable energy policies are rapidly evolving,due in part to the need to address climate change.These policy changes present challenges and solutions for businesses operating in the energy sector.We recognize that consumer choice is an important component in achieving a sustainable energy transition.Therefore,NRG advocates for legislation and policy pillars that allow customers to leverage the power of the free market to influence and shape the energy future.Four overarching policy principles guide our political advocacy work:Competition and consumer choice.Consumers should be able to choose their electricity and natural gas providers.Competition promotes a customer-centric approach to business and drives companies to innovate and develop products and solutions,while helping to keep them affordable.Sustainability and lower-carbon-intensity energy.Competitive markets allow energy providers to cater to consumers who would like to support renewable electricity from wind and solar resources,and meet their energy efficiency goals.Innovation and technologies.Retail innovation-focused policies improve consumer experiences by spurring the development of innovative technologies,products,and services.Resilience and reliability.Retail energy-focused policies help ensure customers have access to energy when they need it,helping support a market system where reliability and resiliency are prioritized.More specifically,we advocate for state and federal policies that give customers access to a greater array of renewable and emissions-free energy options,with the right to choose their preferred providers and shop for the lowest prices.We also help customers optimize their use of renewable energy incentives created under the Inflation Reduction Act(IRA),which includes tax credits for adopting decarbonization technologies such as wind and solar power.NRG has been a market leader in guiding businesses toward opportunities to save money while achieving their sustainability goals through renewable energy tax credits.In addition,we commission and prepare energy policy research to help guide legislators,regulatory agencies,and non-governmental organizations in making decisions that affect our business,customers,and broader industry.Learn more on our Energy Policy page.Looking aheadTechnology continues to expand the opportunities for at-home and business customers to take charge of their energy choices and usage.We are focused on continuing to equip and mobilize NRG customers to achieve their sustainability goals through the combination of advanced digital smart home technologies and renewable,resilient energy.INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|17EnvironmentalPowering a lower-carbon future 18Our climate goals and progress 19Environmental management 22 and operations Advancing a sustainable supply chain 25Looking ahead 25IN THIS SECTION:INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|18Powering a lower-carbon futureWere committed to managing our business in an environmentally responsible way while also offering energy products and services that help our customers achieve their environmental goals.Our focus on reducing greenhouse gas(GHG)emissions to achieve our climate goals remains at the forefront of NRGs strategic planning as we transition to a decarbonized global economy.In addition,we continue to invest in water-saving and waste-reducing innovations.58crease in GHG emissions compared to our 2014 base year,from approximately 58 million metric tons CO2e to approximately 24 million metric tons71crease in water withdrawal associated with NRG operations compared to our 2014 base yearApproximately 36 GWfossil fuel-fired power generation capacity retired or divested since 201468%of coal combustion residuals(CCRs)generated by our facilities were recycled for beneficial reuse in 2023 INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|19Our climate goals and progressOur emissions reduction goals encompass Scope 1,Scope 2,and the employee business travel portion of Scope 3 emissions.To ensure consistency and relevance,our 2014 base year GHG emissions are reviewed annually and recalculated as warranted to reflect any changes to our generation asset portfolio.Such recalculations are made according to The Greenhouse Gas Protocol:A Corporate Accounting and Reporting Standard,Revised Edition,2004.hicle fleet by 2030Since 2014,our CO2e emissions have decreased 58%,from 58 million metric tons to 24 million metric tons.Key drivers of this change include reductions in our fleet-wide annual net GHG generation and a market-driven shift from coal to natural gas as a primary fuel for power generation.We achieved a 30%reduction in our Scope 1 emissions in 2023,primarily resulting from reduced output by our power plants along with a 34cline in net electricity generation from our coal-powered facilities compared to 2022.While we are excited about our 58%reduction in 2023,the achievement of NRGs 2025 emissions reduction targets could be impacted by volatility within the power markets,driven by market conditions and changes in regulatory policies.We target the continued achievement of this goal.Please see our Annual Report on Form 10-K for additional discussion on NRGs generation from all fuels natural gas,coal,nuclear,oil,and renewables represented in our portfolio.1 Compared with our 2014 base year.2 These numbers have been updated since publishing our 10-K,and therefore do not match what is listed in the 10-K.US tCO2e/$M revenue2US GHG emissions(MT CO2e)FY2133,004,37634,708,79124,375,429FY22FY2335,000,00030,000,00025,000,00020,000,00015,000,0005,000,0000FY211,2231,100846FY22FY2315001200900600300050rbon emissions reduction by 20251Net-zerocarbon emissions by 2050100%electrification of our vehicle fleet by 2030NRG GOALSIn 2023,less than 5%of our consolidated operating revenues were derived from coal-fired operating assets,and our carbon intensity by revenue has decreased 31%since 2021.INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|20CLIMATE TRANSITION STRATEGY LEVERS We are using four main levers to advance our carbon transition strategy:Decarbonization of existing business lines,which includes retiring fossil fuel generation assets when they reach end of life Diversification into low-emissions businesses,which includes providing our customers with renewable electricity and options to reduce the carbon footprint associated with their natural gas consumption Divestment of select high-emissions assets Deployment of new technologies and innovationsAsset retirements and divestituresSince 2014,we have retired or divested approximately 36 GW of fossil fuel generation,a reduction of 73%.In 2023,we sold or retired natural gas-fired capacity equivalent to approximately 2,200 MW.As part of our portfolio optimization strategy,we intend to retire all remaining fossil power plants in Illinois in time to comply with the Illinois Climate and Equitable Jobs Act,which mandates that private coal-and oil-fired electric generating units reach zero emissions by no later than January 1,2030.Our overall plan includes deactivating the 410 MW Indian River Unit 4 coal-fired power plant in Delaware upon the termination of a Reliability Must-Run(RMR)agreement with the PJM regional transmission organization(RTO).The end of RMR service is dependent upon notice of termination by PJM and successful completion of certain transmission system upgrades which is currently expected no earlier than December 2024.The 1,538 MW Powerton coal facility in Illinois is projected to close by December 31,2028 to comply with ELG regulations.In Maryland,the 167 MW Vienna oil facility is planned for retirement in June 2025.In Texas,we plan to cease operating Cottonwood,a 1,166 MW natural gas-fired facility when our lease expires in May 2025 and operations revert to the facility owner.Additional details about our asset retirements and divestitures are available in our Form 10-K.Total capacityCumulative retired and divested capacity201448,79250,000-10,00040,000-20,00030,000-30,00020,000-40,00010,0000201727,097-21,695202021,343-27,449201546,247-2,545201821,527-27,265202116,524-32,268201644,037-4,755201921,272-27,520202215,164-33,628202312,998-35,794Retired and divested fossil fuel-fired power generation capacity(MW)INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|21BROADENING RENEWABLE ENERGY OPTIONSKnowing that our customers increasingly want sustainable energy solutions,we partner with developers to bring new renewables to the grid through medium and long-term PPAs.At the end of 2023,NRG had signed agreements for 1.9 GW of renewable power capacity through these PPAs,of which all were online as of July 2024.The average tenor of these agreements is 11 years.We expect to continue evaluating and entering into additional PPAs that support our business needs as well as the objectives of our customers.NATURAL GASNatural gas remains an important part of the overall energy mix,and we support its continued use within our diversified portfolio.We expect that natural gas will become less carbon-intensive over time through advancements in emerging forms such as RNG,CG,and hydrogen.NRG delivers reliable,competitively priced natural gas supply and related solutions to households,companies,and state and local governments,helping them to achieve their climate goals.We also work to help reduce the carbon impact of gas consumption with products like high-quality carbon offsets.Fleet electrificationWe employ a test-and-learn framework to develop new electric vehicle(EV)products and services for our customers.In addition,EV innovations help us advance toward our 2030 climate goals.In 2023,we grew our fleet of EVs by 14,adding all-electric trucks.Also,we applied lessons from our own fleet electrification and home charging experiences in the development and deployment of new solutions.Our framework included testing these concepts at the Houston Boat&Auto Show.INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|22Environmental management and operationsWe integrate environmental considerations into our strategic decisions as part of our commitment to operating sustainably and complying with all applicable environmental requirements.Our Environment-Over-Production policy sets a clear understanding among NRG employees that environmental compliance takes precedence in the companys operational decision-making.For more details,see our Environmental Policy Statement.BIODIVERSITYRecognizing the potential impact of our operations on the local natural ecosystem,we strive to support and protect biological diversity in the areas where we operate.All active NRG plants have a site-specific Biodiversity Plan that outlines practices to limit the local impact of operations.In 2023,our plants completed 31 econrgSM projects,with each plant completing at least one.Project highlights:$18,000 in scholarships focused on environmental matters provided to high school students Lighting upgrades(installation of solar lighting,motion sensors,and LEDs,all reducing energy use)Beach/creek/community cleanup volunteer events Planting native grasses/wildflowers Recycling materials that had historically gone to landfill Annually,each plant chooses,designs,and implements one econrgSM project,and this work contributes to the plants environmental key performance indicators(EKPIs)score.Our econrgSM projects span multiple program areas including biodiversity,climate change,and resource reduction,reuse,and recycling.ENVIRONMENTAL PERFORMANCEWe carefully measure and track compliance with environmental requirements and NRG standards using our EKPIs,which measure leading and lagging indicators such as Notices of Violation(NOVs),reportable spills,and compliance with laws.We report on EKPIs to our management monthly,and our Board also receives regular reports.In 2023,93%of our generation fleet met or exceeded their respective performance targets.Our environmental performance metric counts environmental incidents such as reportable spills,permit deviations,and receipts of NOVs.Having fewer incidents results in a lower,more favorable score.The chart below shows the companys EKPI score by year as a percentage of base year 2014,which is indexed to 100%.1 The score associated with the base year is updated as the composition of the NRG generation fleet changes.In some cases,this has resulted in differences from percentages previously reported.Intelex Environmental Management Information System(EMIS)We use a system called Intelex to track,assign responsibility,and report on our full range of environmental tasks and requirements.This EMIS system helps us maintain environmental compliance by efficiently capturing data related to incident management,audit findings,corrective actions,root cause determinations,and the performance of our generation fleet.We continuously analyze this information to identify opportunities for improvement.2014100806040200201720202015201820212016201920222023Environmental performance record1 (%compared to base year 2014,100%)100773494536376594942 INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|23AIR EMISSIONSOver the last decade,our annual air emissions have declined significantly.These improvements were driven in part by actions like emission controls and decommissioning of coal-fired units.We expect to achieve similar results from future plant retirements.SO2 emissions(million KG)202120222023%change since 2014 baseline394132-71%NOx emissions(million KG)202120222023%change since 2014 baseline161812-59%Mercury emissions(US tons)202120222023%change since 2014 baseline0.080.070.04-96%WATER WITHDRAWAL AND DISCHARGE To effectively operate our power plants,we use fresh,recycled,brackish,and ocean water to cool condensers during electricity power generation and create steam for the turbines that produce electricity.Water usage,scarcity,quality,and the effects of these factors on biodiversity are important site-specific considerations for us.To conserve freshwater,we use non-potable options like brackish and grey water from sewage treatment plants and leachate collection,and reuse water in plant cooling and process systems.In addition,we invest in water-saving technologies such as cooling towers that mitigate effects on aquatic life and significantly reduce water consumption at generating stations.Since 2014,we have reduced our total volume of water withdrawal by approximately 71%and our total volume of water discharge by approximately 72%.Our net amount of water consumed has decreased by approximately 37%since 2014.In addition to our conservation efforts,NRGs water usage is affected by variables such as weather,plant capacity utilization,and plant retirements.NRG water withdrawal,discharge,and recycling(million cubic meters)202120222023Freshwater withdrawal1,8071,101487Non-freshwater withdrawal1,0651,0391,067Total water withdrawal2,8722,1401,554Freshwater discharge1,727991394Non-freshwater discharge1,0591,0231,067Total water discharge2,7862,0141,461Total water consumption286126932 Total water consumption represents the net difference between total water withdrawal and total water discharge.INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|24NOVs and spills in 20237 NOVs from events occurring between 2021 and 2023;3 with fines totaling$15,7801 reportable oil spill to land of approximately 3 gallons during the demolition of a site.Oil remained in the immediate area of the spill and the oil and impacted soil was removed from the property0unauthorized discharges of process water0reportable chemical spillsWASTEWe work to reduce,reuse,and recycle materials used in our daily operations to help preserve natural resources,save money,and improve operational efficiency.The scope of our waste management programs includes both corporate offices and generation facilities.Coal combustion residuals We continually research options for the beneficial reuse of CCRs from NRG operations.Examples include diverting CCRs for use in construction products,concrete,and cement.This practice helps reduce the need for mining virgin resources like native soil,gravel,and gypsum.In 2023,NRG facilities generated approximately 743,253 metric tons of CCRs,68%of which more than 504,000 metric tons were beneficially reused.The remainder was disposed of in accordance with applicable state and federal regulations.Electronic wasteNRG works with Compucycle to recycle electronic waste(e-waste)such as old computers and other electronic products.We recycled 60 US tons of e-waste in 2023 raising our total since 2014 to more than 530 short tons.The increase in e-waste in 2023 was primarily driven by office closures and decommissioning efforts at the Waukegan,Will County,and Joliet plants.NOVs and spillsAn NOV can be issued for any violation of law,regulation,permit,certification,or license,regardless of significance,and may or may not result in a fine.Historically,the vast majority of NOVs issued to NRG have not included a fine.All NOVs issued to NRG,regardless of final disposition,are recorded as an incident against our EKPIs.Coal combustion residual recycling rate(%)202120222023728068Electronic waste recycled(US tons)202120222023102260 INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|25Advancing a sustainable supply chainWe strive to work with suppliers that share our commitment to sustainability.Some of our supply chain initiatives include:Promoting environmental disclosure practices for those with whom we do business Developing strong manufacturing standards and internal policiesLooking aheadNRGs supply strategy and fuel mix will continue to evolve to meet the needs of our customers and the electric grid,as we are committed to supporting the transition to a lower-carbon-economy.Recognizing our essential role in the energy system,our approach will continue to balance the important affordability,reliability,and sustainability factors of our products.Opportunities to support this approach will include leveraging innovations in both the supply and demand side of the energy equation,helping support a cleaner natural gas and power supply chain,and continuing to be good stewards of the environment and efficient,safe operators of our facilities.In 2023,we continued advancing transparency and disclosure by participating in the world-leading CDP(formerly known as Carbon Disclosure Project)Supply Chain engagement program.This initiative is very important to NRG and supports our vision to create a sustainable energy future.2023 marks NRGs seventh year participating in CDPs Supply Chain Engagement program.We have also been disclosing to CDP our climate change information for 15 years and our water management information for nine years.As members of this program,we ask all suppliers that comprise the top 90%of our total spend to participate and report their water-and climate-related information in the CDP Climate Change and Water Security Questionnaires.2023 CDP Supplier Response highlights82%suppliers reporting to CDP that have an active target for reducing their emissions,compared to 76%in 202288%suppliers reporting to CDP that are integrating climate-related issues into their long-term objectives INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|26SocialSupporting and empowering 27 our people Upholding safety and well-being 30Fostering diversity,equity,32 and inclusion(DE&I)Giving back to communities 36Vivint Gives Back 37Looking ahead 39IN THIS SECTION:INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|27Supporting and empowering our peopleNRG employees are the heartbeat of our purpose and the engine that drives our success.Were dedicated to fostering a workplace where every person can thrive with a dynamic corporate culture,a dedication to safety and well-being,and a keen focus on diversity and inclusion.Together with our employees,we also foster strong communities through philanthropic and volunteer projects.ALIGNING CULTURES AND MULTIPLYING STRENGTHSOur acquisition of Vivint Smart Home in 2023 added a groundswell of new talent,viewpoints,and practices to NRGs workplace culture.We brought more than 11,000 Vivint employees into our corporate family with a goal of melding the best traits within both organizations.This intentional process continues to evolve through efforts such as:Finalizing a new set of companywide values that align Vivint and NRGs foundational beliefs and behaviors Making Vivints extensive training and professional development resources available to all employees within one system Standardizing our benefits packages and other support for employees across NRG business groups Strengthening our performance management,leadership development,and succession planning opportunitiesBringing the best of Vivint and NRG together has created many opportunities for enhancing our culture by allowing diverse perspectives to come through in conversations.Looking at our business through new lenses has been so rewarding for my team and me.”Jennifer BrunelleVice President,Talent Acquisition and DE&ITop decilesafety performanceApproximately31,1001hours of volunteer service by employees1,160 1charitable organizations impacted by volunteers and donationsApproximately$7.2MM1donated to charitable organizations1 Figures include positiveNRG and Vivint Gives back.INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|28ATTRACTING AND RETAINING THE BEST AND BRIGHTEST To stay competitive in our industry and continue delighting our customers,we need innovative and talented people who are excited about building their careers with NRG.Our recruitment and hiring programs focus on attracting highly-qualified candidates whose diverse backgrounds,interests,and perspectives reflect the communities that we serve.We cultivate a robust pipeline of future talent by raising NRGs profile through regional job fairs,university programs,on-campus events,and recruiting websites.In addition,we provide internships in many of our corporate locations.Through the NRG Historically Black Colleges and Universities(HBCU)Academic Excellence Scholarship program,we award$10,000 annually($100,000 total)to ten students at Prairie View A&M and Texas Southern University.Administered by the Thurgood Marshall College Fund and supported by our BELIEVE(Black Employees Leading in Inclusion,Excellence,Vision,and Education)Business Resource Group(BRG),the scholarship program also provides career development,mentorship,and networking opportunities.This partnership helps empower talented individuals from historically underrepresented backgrounds to pursue their academic and professional aspirations.Learn more about our diverse and inclusive recruitment practices.Patrol to PowerNow in its fourth year,our Patrol to Power internship program helps former military personnel transfer their valuable experience and skills into career opportunities at NRG.With support from the U.S.Department of Defense,Patrol to Power gives participating veterans a 12-week paid work experience in fields such as instrumentation and control,engineering,plant operation,and equipment operation.Of the 14 interns who completed Patrol to Power through the end of 2023,we have hired 11 into full-time positions.While these service members gain on-the-job training and a deeper understanding of what our industry does,the traits that they bring including leadership,integrity,commitment,and a strong work ethic benefit our company just as much.Building on the two-way value that Patrol to Power creates,we are currently expanding it to include other positions and locations across the company.Getting to come home a little early from my enlistment and getting that time back with my family has been absolutely amazing.I really appreciate my manager and NRG for making this possible for me.”James WalkerMilitary Veteran,U.S.Marine Corps,Patrol to Power Recruit INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|29Total RewardsWe aspire to grow and improve as a company for decades to come powered by employees who feel recognized and rewarded for contributing to NRGs success.Our Total Rewards compensation and benefits program reflects the value that we place in cultivating a highly talented and deeply engaged workforce for the long term.To help us retain high-performing talent,we regularly benchmark our offerings against those of NRGs industry peers as well as other employers in the communities where we operate.As a result,we enhanced several categories of benefits in 2023.Changes included raising our 401(k)matching contribution from 4%to 6%and increasing paid parental leave to six weeks,regardless of gender.Also,we instituted fully employer-paid disability leave for our workforce in Canada.Leadership and professional developmentWe provide a broad and growing array of professional development experiences designed to help NRG employees pursue meaningful career growth.Along with presenting various in-person courses and role-specific training throughout the year,we offer more than 10,000 on-demand resources through our online learning portal.Recognizing that many of our future executives and senior managers are already part of todays NRG workforce,we invest in preparing high-potential employees for leadership roles.Each year,we select 30 people to participate in our Emerging Leaders Program(ELP).They spend the next two years working on business-critical projects and receiving mentorship from current NRG executives and past ELP graduates.In addition,our people managers support the development goals of their direct reports through annual performance reviews and ongoing conversations.Our talent and culture department also works closely with business leaders on succession planning,management coaching,and organizational design initiatives.NRG talent lead honored by HRO TodayRobyn Antoine,director of talent acquisition,received a prestigious Lifetime Achievement honor from HRO Today as part of the organizations 2023 Talent Acquisition of the Year Awards.During her 11 years with NRG,Robyn has been instrumental in many of our initiatives to enhance diversity,inclusivity,and employee engagement.We are proud of Robyns exceptional work and this well-deserved recognition.Each time I hear of a candidates reaction,I am reminded of how fortunate I am to lead a team that delivers the good news,impacts lives positively,and helps NRG acquire the talent needed to succeed in our strategic goals.Its a humbling experience that always warms my heart.”Robyn AntoineDirector of Talent Acquisition INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|30Upholding safety and well-beingKeeping all personnel safe and well is our top priority.This includes employees physical,emotional,and mental wellness,which we support through our holistic well-being programs and comprehensive safety standards.ALWAYS STAYING SAFE Our power plant-based employees work tirelessly to provide uninterrupted energy to our customers.However,our Safety-Over-Production policy prioritizes all safety rules and requirements even if generation facilities must stop production.Our comprehensive safety program includes anyone working within an NRG facility.We continually evaluate our safety practices to ensure all NRG programs satisfy regulatory requirements.Every year,we strive to rank in the top decile for total recordable incident rate(TRIR),which is defined as the number of work-related injuries per 100 full-time workers during a one-year period.NRG ended 2023 with a 0.20 TRIR1,well under the Edison Electric Institute top decile benchmark of 0.36 and 26%lower than our 2022 TRIR.It also marks our fifth consecutive year of top decile safety performance and fifth straight year-over-year reduction in TRIR.KEEPING CONTRACTORS SAFEWe engage a third-party service provider that specializes in providing detailed reviews of contractor-written safety programs to ensure regulatory compliance and uphold safety performance criteria.This robust review process ensures contractors demonstrate the safe practices that we expect.We audit contractors in the field to verify they are working in accordance with their written safety programs.In early 2023,we introduced a contractor program focused on reducing incidents with serious injury and fatality(SIF)potential.The SIF program focuses on preventing incidents associated with working at heights,dropped or falling objects,and lines of fire.Contractors are required to identify a hazard mitigation plan to address the SIF potential prior to performing their work.FY190.490.320.270.300.20FY20FY22FY21FY230.600.500.400.300.200.100.00NRG%-year safety recordBetter than top decileTotal case inquiry rateNRG actualEEI top decile target1 Excludes Vivint and Airtron.Safety by the numbers26owned or operated plants with zero recordables status6facilities with OSHA Voluntary Protection Program(VPP)Star status600contractors completing safety courses30.5K hours of safety training2,200 employees completing safety courses26crease in total recordable incident rate INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|31WELLNESS RESOURCESWe offer resources that promote our employees physical,emotional,and financial wellness to help them achieve a healthy and secure future.In 2023,we continued partnering with EHE Health to provide an annual physical for employees who may not have a primary care doctor.EHE Health physicians completed nearly 1,500 exams in 2023;82%of the metabolic conditions identified in these exams were previously unknown to the patients,giving people an opportunity to address issues early.EHE Health also followed a cohort of 636 returning patients from our company.Of the 298 people who were diagnosed with unhealthy conditions in 2022,only 247 still had the same condition in 2023 a 17%improvement.Among our other wellness initiatives in 2023:We maintained well-being goals within our Annual Incentive Plan as further motivation for participants to improve their physical,emotional,and financial well-being We continued the Mental Health First Aid(MHFA)at Work program,which trains employees to serve as mental health ambassadors and help colleagues find trusted support professionals.Currently,NRG has nearly 200 MHFAs across the company We offered free support to find childcare,manage finances,obtain legal guidance,and locate counseling through the Employee Assistance Program(EAP)We provided education on retirement planning,mortgages,and other financial wellness topicsJUST TRANSITION We are committed to ensuring a just transition in the event of a large plant downsizing or closure.Therefore,our plant operations leaders take a proactive approach to notifying employees of upcoming changes and explaining available options.Plant Operations and corporate leaders maintain an open dialogue with union leadership,share job openings at NRG,prioritize displaced qualified internal employees for open roles at other plants,and relocate impacted employees willing to take those positions.In addition,NRG offers outplacement services,resume writing skills workshops,and tuition assistance for retraining.INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|32Fostering diversity,equity,and inclusion(DE&I)At NRG,we celebrate the power of DE&I as a catalyst for building stronger teams and inspiring better performance across our business.Through encouraging diverse perspectives and cultivating a work environment in which all people feel empowered to contribute as their best selves,we grow more adaptive and responsive to our customers and communities.ASSESSING OUR PROGRESSWe track the ethnic and gender makeup of NRGs workforce as one means of building greater accountability behind our efforts to identify and remove any barriers for recruiting and retaining the most talented people available.To help accelerate progress in cultivating a progressively more diverse workforce,we spearheaded the development and successful integration of a focused space within our PowerUp talent hub in 2023.This dedicated space not only showcases our diverse culture but also serves as a comprehensive resource encompassing our daily initiatives,continuous learning opportunities,and the adoption of inclusive hiring practices.We also conducted our second annual DE&I-focused employee survey to gauge the effectiveness of our initiatives and identify areas for improvement.Team members candid feedback on how they experience DE&I in our company culture helps sharpen our focus on continuous improvement.Ethnic diversity at NRG in 2023Ethnic diversity in leadership roles in 2023Gender diversity in leadership roles in 2023Gender breakdown of NRG employees in 2023Total NRG employeesCorporate (16%of all employees)Generation (11%of all employees)Middle management (19%of all employees)Residential and business (62%of all employees)Services (11%of all employees)VP and above (1%of all employees)White(non-Hispanic or Latino)Two or more (non-Hispanic or Latino)Black or African AmericanAmerican Indian or Alaskan NativeHispanic or LatinoAsianNative Hawaiian or other Pacific IslanderMaleFemaleMaleFemale700h2VDi%71yy!%6%3%1a%Total NRG employees18%9Y%Corporate (16%of all employees)17%4%4%Residential and business (62%of all employees)13%7%3u%Generation (11%of all employees)1%1%Services (11%of all employees)1%6r%Middle management (19%of all employees)VP and above (1%of all employees)3%4%9%4%2%2%1%1(%8%4W%1%1%)of NRGs emission sources are subject to mandatory U.S.federal(Environmental Protection Agency EPA)greenhouse gas reporting regulations.In addition,some of these emission sources(0.6%specified under IF-EU-110a.1(2)and(3)also report to regional and state CO 2e reporting programs(RGGI,AB32)that are disclosed annually as part of NRGs financial reporting data.INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|55CodeCategoryUnit of MeasurementMetricResponseAir QualityIF-EU-120a.1QuantitativeMetric tons(t),Percentage(%)Air emissions of the following pollutants:(1)NOx(excluding N2O),(2)SOx,(3)particulate matter(PM10),(4)lead(Pb),and(5)mercury(Hg);percentage of each in or near areas of dense population Air Quality SASB tableAir emissions sourceAir emissions (metric tons)Percentage from production facilities within urbanized areasNOx12,33939%SOx131,99081%PM1021,25267%Pb30.14050%Hg30.04036%Water ManagementIF-EU-140a.1QuantitativeThousand cubic meters Percentage(%)(1)Total water withdrawn,(2)total water consumed;percentage of each in regions with High or Extremely High Baseline Water StressTotal water withdrawnWater SourceTotal(in millions of cubic meters)PercentFresh water48731%Non-Fresh water51633%Ocean55135%Total1,554100%(2)93(in thousands of cubic meters)Discussion of accounting,estimations,and uncertainty for Air Emissions:Data collection varies based on the generation facility and may include engineering calculations or continuous emissions monitoring systems(CEMS).1 NRG only has SO2 emissions so SOx emissions are equivalent to SO2 emissions.2 The requirement to report PM10 emissions in annual emissions inventories or emissions statements varies across states.In addition,the earliest reporting deadline for a reporting year is July 1 of the following year.For sites in NRGs fleet that have not yet,or are not required to,report PM10 emissions at the time of publication of this SASB table,NRG has used the U.S.EPAs AP-42 emission factors to estimate emissions.3 In the case of lead and mercury emissions,volumes are estimated for some facilities due to incomplete data at time of publication.4 NRG uses the WRI Aqueduct tool to model and help assess water basin risks in combination with regional internal expertise 5 Non-fresh water has a total dissolved solids greater than 1,000 mg/l and is not used for agriculture or municipal water supply.Percentage of Each in Regions with High or Extremely High Baseline Water StressBaseline Water Stress High(40-80%)or Extremely High(80%)4Percent of Total WaterPercent that is Non-Fresh5Withdrawal from areas with High/Extremely High Baseline Water Stress0.01%0%Consumption from areas with High/Extremely High Baseline Water Stress0.10%0%INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|56CodeCategoryUnit of MeasurementMetricResponseIF-EU-140a.1 continuedQuantitativeMetric tons(t),Percentage(%)(1)Total water withdrawn,(2)total water consumed;percentage of each in regions with High or Extremely High Baseline Water StressType of Generating Facility in Baseline Water Stress AreasNumberFossil fuel(natural gas,coal,oil)2Renewable(solar and wind)1Nuclear0Thermal(district heating and cooling)0Total3IF-EU-140a.2QuantitativeNumberNumber of incidents of non-compliance associated with water quality permits,standards,and regulations4IF-EU-140a.3Discussion and analysisN/ADescription of water management,risks and discussion of strategies,and practices to mitigate those risksNRGs definition of substantive risk from water is the possibility that an event will occur and significantly affect the achievement of NRGs business goals.Risk identification and assessment process applies to both direct operations and supply chain.NRG uses measures,metrics,and indicators for water risk assessment leveraging management and professional judgment from the perspective of:Financial impact:including,corporate earnings,capital expenditure on technologies to reduce water consumption and riskEnvironmental impact:including,availability,quality of river basis,and regulations that impact supply and/or management of waterPlant operations:including,operation disruption due to shortage,increase in water costs,or supply chain risksWe use the WRI Aqueduct tool annually to develop high-level views of basin-level risk that informs strategic decision-making and the setting of goals and targets.This tool is open source and provides ease of use.Because each generating facility is unique,the risk approach identifies and addresses risks related to water availability and quality,relevant regulatory,financial,operational,and environmental concerns,as well as stakeholder and supply chain impacts.Water risk is monitored by risk owners(individual plant operators)and reported to management upon material changes,with a threshold of 20%in water consumption and withdrawal levels.Plant Operations team members review modeling scenarios to identify if a water supply risk could impact projected generation levels at any point within a two-year time frame.If so,risk mitigation efforts are identified and economically evaluated for implementation.Plant water usage is reviewed annually by the senior leaders of NRGs Operations,Engineering,and Commercial Operations teams.Risk response decisions are primarily made and executed by managing plant operations to maintain compliance with all relevant regulations.NRG also reports supply chain water risk annually through the CDP Water Security Questionnaire.INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|57CodeCategoryUnit of MeasurementMetricResponseCoal Ash Management IF-EU-150a.1QuantitativePercentage(%),Presentation currency(1)Amount of coal combustion products(CCPs)generated,(2)percentage recycled(1)743,253(2)68%IF-EU-150a.3Discussion and analysisN/ADescription of coal combustion products(CCPs)management policies and procedures for active and inactive operationsCoal combustion residualsEnergy AffordabilityIF-EU-240a.1QuantitativeRateAverage retail electric rate for(1)residential,(2)commercial,and(3)industrial customersThis topic pertains to regulated electric utilities,and NRG is not a regulated utility.Therefore,this disclosure is not applicable to NRG.IF-EU-240a.3QuantitativeNumber,Percentage(%)(1)Number of residential customer electric disconnections for non-payment,(2)percentage reconnected within 30 daysThis topic pertains to regulated electric utilities,and NRG is not a regulated utility.Therefore,this disclosure is not applicable to NRG.IF-EU-240a.4Discussion and analysisN/ADiscussion of impact of external factors on customer affordability of electricity,including the economic conditions of the service territoryThis topic pertains to regulated electric utilities,and NRG is not a regulated utility.Therefore,this disclosure is not applicable to NRG.Workforce Health&SafetyIF-EU-320a.1QuantitativeRate(1)Total recordable incident rate(TRIR),(2)fatality rate,and(3)near miss frequency rate(NMFR)for(a)direct employees and(b)contract employees(1).201(2)01(3)8.21,2End-use Efficiency&DemandIF-EU-420a.2QuantitativePercentage(%)by megawatt hours(MWh)Percentage of electric load served by smart grid technologyThis topic pertains to regulated electric utilities,and NRG is not a regulated utility.Therefore,this disclosure is not applicable to NRG.IF-EU-420a.3QuantitativeMegawatt hours(MWh)Customer electricity savings from efficiency measures,by market This topic pertains to regulated electric utilities,and NRG is not a regulated utility.Therefore,this disclosure is not applicable to NRG.1 Data excludes Airtron and Vivint2 Process for classifying,recording,and reporting:#of Near-Misses Reported/Total Hours Worked x 1,000,000=Near Miss Frequency Rate.The National Safety Agency defines near-misses as“an unplanned event that did not result in injury,illness,or damage,but had the potential to do so.”NRG uses an electronic Incident Management System to document,communicate,track,and trend specific factors about each event including causal factors and corrective actions;this system provides automated fleet-wide notifications.The number of near misses is derived from a report pulled from the Incident Management System.NRGs Operational Health and Safety(OHS)management system applies to 100%of U.S.operations.The system also includes notifications to executive management when significant safety events occur that meet the defined criteria for a Significant Event notification.The system also generates weekly reports to communicate any events from the previous week to NRG personnel INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|58CodeCategoryUnit of MeasurementMetricResponseNuclear Safety&Emergency ManagementIF-EU-540a.1QuantitativeNumberTotal number of nuclear power units,broken down by results of most regent independent safety reviewNRG South Texas Project LP(STP)was a 44%owner of a joint undivided interest in STP.As As of November 1,2023,NRG Energy,Inc.sold its interest in STP.Page 13 of 2023 10-K.Reactor UnitAction MatrixCurrent Regulatory OversightSouth Texas 1License ResponseBaseline inspectionSouth Texas 2License ResponseBaseline inspectionIF-EU-540a.2Discussion and analysisN/ADescription of efforts to manage nuclear safety and emergency preparedness As a former holder of ownership interest in STP,NRG South Texas Project LP operated under NRC licensing and regulations.However,NRGs license only granted possession rights,not operational control.As a non-operating co-owner,NRGs compliance with NRC regulations primarily concerned financial and decommissioning funding assurances.To fulfill these obligations,NRG and its subsidiaries had a support agreement,committing up to$120 million for STP operations.As of November 1,2023,NRG Energy,Inc.sold its stake in STP.SourceGrid ResiliencyIF-EU-550a.1QuantitativeNumberNumber of incidents of non-compliance with physical or cybersecurity standards or regulationsNRG does not have transmission and distribution operations.Therefore,this disclosure is not applicable to NRG.IF-EU-550a.2QuantitativeMinutes,Number(1)System Average Interruption Duration Index(SAIDI),(2)System Average Interruption Frequency Index(SAIFI),and(3)Customer Average Interruption Duration Index(CAIDI),inclusive of major event daysNRG does not have transmission and distribution operations.Therefore,this disclosure is not applicable to NRG.Activity MetricsIF-EU-000.BQuantitativeMegawatt hours(MWh)Total electricity delivered to:(1)residential,(2)commercial,(3)industrial,(4)all other retail customers,and(5)wholesale customers2023 Form 10-K page 7IF-EU-000.DQuantitativeMegawatt hours(MWh),Percentage(%)Total electricity generated,percentage by major energy source,percentage in regulated markets2023 Form 10-K page 102023 ESG Data Download INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|59FeedbackIf you have any comments or questions about this report or would like more information on NRG,please visit or email .Safe harborThe information presented in this report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act.These statements involve estimates,expectations,projections,goals,assumptions,known and unknown risks and uncertainties and can typically be identified by terminology such as“may,”“should,”“could,”“objective,”“projection,”“forecast,”“goal,”“guidance,”“outlook,”“expect,”“intend,”“seek,”“plan,”“think,”“anticipate,”“estimate,”“predict,”“target,”“potential”or“continue”or the negative of these terms or other comparable terminology.Such forward-looking statements include,but are not limited to,statements about NRGs future revenues,income,indebtedness,capital structure,plans,expectations,objectives,projected financial performance and/or business results and other future events,and views of economic and market conditions.Although NRG believes that its expectations are reasonable,it can give no assurance that these expectations will prove to be correct,and actual results may vary materially.Factors that could cause actual results to differ materially from those contemplated herein include,among others,general economic conditions,hazards customary in the power industry,weather conditions and extreme weather events,competition in wholesale power,gas and smart home markets,the volatility of energy and fuel prices,failure of customers or counterparties to perform under contracts,changes in the wholesale power and gas markets,changes in government or market regulations,the condition of capital markets generally and NRGs ability to access capital markets,NRGs ability to execute its supply strategy,risks related to data privacy,cyberterrorism and inadequate cybersecurity,the loss of data,unanticipated outages at NRGs generation facilities,NRGs ability to achieve its net debt targets,adverse results in current and future litigation,complaints,product liability claims and/or adverse publicity,failure to identify,execute or successfully implement acquisitions or asset sales,risks of the smart home and security industry,including risks of and publicity surrounding the sales,subscriber origination and retention process,the impact of changes in consumer spending patterns,consumer preferences,geopolitical tensions,demographic trends,supply chain disruptions,NRGs ability to implement value enhancing improvements to plant operations and companywide processes,NRGs ability to achieve or maintain investment grade credit metrics,NRGs ability to proceed with projects under development or the inability to complete the construction of such projects on schedule or within budget,the inability to maintain or create successful partnering relationships,NRGs ability to operate its business efficiently,NRGs ability to retain customers,the ability to successfully integrate businesses of acquired companies,including Vivint Smart Home,NRGs ability to realize anticipated benefits of transactions(including expected cost savings and other synergies)or the risk that anticipated benefits may take longer to realize than expected,NRGs ability to execute its capital allocation plan.NRG undertakes no obligation to update or revise any forward-looking statements,whether as a result of new information,future events or otherwise,except as required by law.The foregoing review of factors that could cause NRGs actual results to differ materially from those contemplated in the forward-looking statements included in this report should be considered in connection with information regarding risks and uncertainties that may affect NRGs future results included in NRGs filings with the Securities and Exchange Commission at www.sec.gov.INTRODUCTION FACILITATING AN INTENTIONAL ENERGY TRANSITION ENVIRONMENTAL SOCIAL GOVERNANCE APPENDIX2023 SUSTAINABILITY REPORT|60Key issues assessment NRG strives to report decision-useful information to our stakeholders in an efficient and concise manner.We recognize that we have many different stakeholder groups which may each require information presented in a variety of ways and on numerous topics.We engage proactively with our key stakeholders to understand the type of information that is of greatest interest and the processes that will most effectively deliver data to them.However,given rapidly growing interest in voluntary sustainability reporting,we must also focus on compiling the most relevant information while achieving greater transparency.As part of the above process,we periodically conduct a key issues assessment to ensure that we identify potential strategic and operational risks and opportunities as well as specific sustainability issues that are relevant to our current and potential future business and operating environment.The key issues assessment provides a foundation of topics from which to prioritize our sustainability goals and initiatives,prepare annual sustainability reporting,as well as provide insight into emerging issues that our stakeholders care about.To conduct the key issues assessment,we monitor the competitive,regulatory,and media landscapes.For the purpose of this Sustainability Report,these findings are also compared with external best practice publications on sustainability metrics,such as from the Electric Power Research Institute,TCFD,and SASB/IFRS.We use this independent analysis to better inform business decisions and shape our voluntary reporting process.For the purposes of sustainability reporting,NRG has considered the GRI framework to report on issues of importance to the company and its stakeholders.Relevant financial implications,as well as a discussion of risks and opportunities associated with some of these issues,can be found in Part 1,Item 1A in our 2023 form 10-K.Additional financial statements or equivalent documents can be found here.
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Sustainability Report2024Table of contentsIntroduction39Sustainability strategy14Innovate for good17 Delivering solutions for global challenges25 Enabling a circular economy31 Innovating safe and sustainable by design37Protect people and the planet39 Acting on climate47 Leading water stewardship54 Delivering world-class environmental,health,and safety performance6285A1Empower people to thrive63 Accelerating diversity,equity,and inclusion71 Cultivating well-being and fulfillment 77 Building thriving communitiesGovernanceAppendicesA3 GRI content indexA38 SASB content indexA41 TCFD disclosure indexA52 Forward-looking statementsIntroductionSustainability strategyIntroductionEmpower people to thriveAppendices3DuPont 2024 Sustainability ReportInnovate for goodProtect people and the planetGovernanceLetter from our Executive Chairman and CEOEd Breen Executive Chairman and Chief Executive OfficerTo our stakeholders,Im proud to share our 2024 Sustainability Report that details progress we have made toward achieving our 2030 Sustainability Goals and highlights the hard work by our DuPont team to meet our commitments across all aspects of Environmental,Social,and Governance(ESG).At DuPont,sustainability is integral to our strategy,embedded in every aspect of our businessfrom our innovation pipeline,to our manufacturing and supply chains,to how we engage with our people and communities.As a global innovation leader and multi-industrial company,were developing new products and solutions in exciting growth areas.Importantly,were focused on meeting customers needs for both innovation and sustainability,including products for cleaner water,energy-efficient buildings,electric vehicles,and advanced computing.Today,more than 80%of our innovation portfolio is expected to advance sustainability with solutions that address important global challenges.Reflecting these efforts,DuPont was named Best ESG Partner by Samsung Electronics.DuPont delivered another year of strong performance on our bold climate goals,which are aligned with the ambition of the Paris Agreement to limit global warning to 1.5 C and have been validated by the Science Based Target initiative(SBTi).We achieved a 58%reduction of Scopes 1 and 2 emissions from the 2019 baselineexceeding our 2030 goal of 50%ahead of schedule,and we exceeded our 2030 Scope 3 emissions reduction goal of 25%from the 2020 baseline.In addition,we met our 2030 goal of sourcing 60%of electricity from renewable energy,through the purchase of additional Renewable Energy Credits(RECs).Our 2023 results underscore our commitment to partnering across our value chains to meet the climate challenge.This past year,we made strong progress in the continued deployment of our enterprise-wide Operational Excellence framework designed to drive continuous improvement and unlock growth and productivity.In 2023,our manufacturing sites advanced deployment plans focused on creating value through standardized tools,best-in-class technologies,and robust practices that stabilize workflows,reduce errors,and minimize waste.This relentless focus on continuous improvement resulted in our safest year on record for employees and contractors.Our strong governance practices underpin our sustainability strategy.DuPont remains committed to transparently reporting on our sustainability policies and performance through oversight from our Board of Directors.A key focus in 2023 was strengthening the DuPont Supplier Code of Conduct with our new responsible supplier program called“Together for the Planet”.The commitment of our global team to our core values,customers,and communities is essential to our sustainability journey.Through multiple workplace initiatives,we are delivering opportunity,experience,and purpose for our employees across the globe.This is reflected in both internal survey performance and external recognition.Our IMPACT Survey indicates our employees are highly engaged with purposeful work in an inclusive environment.In 2023,DuPont achieved Great Place to Work certification and was named to Forbes list of Best Employers for Diversity and Bloombergs Gender-Equality Index,among others.While our sustainability journey doesnt have an end,were pleased to share our progress and celebrate our milestones.Thank you for taking the time to learn more about our achievements and for your continued interest in DuPont.Sincerely,Sustainability strategyIntroductionEmpower people to thriveAppendices4DuPont 2024 Sustainability ReportInnovate for goodProtect people and the planetGovernanceOur company and purposeDuPont de Nemours,Inc.(DuPont)is a publicly traded,premier multi-industrial company based in Wilmington,Delaware,United States of America.We are a global innovation leader in technology-based materials and solutions that help transform industries and everyday life.Our passion for,and proven expertise in,science and innovation enable us to partner with our customers to create sustainable solutions for the complex challenges facing our world.Our core values With four core values anchoring our commitment to sustainable innovation,weve designed and maintained a foundation for long-term growth,connection with local communities,and an environment that attracts the best and brightest talent to help us deliver solutions to our customers.Our core values are timeless and foundational to everything we do and every decision we make every day.Our employees around the world come to work each day with a shared purpose:to empower the world with the essential innovations to thriveMore information about our organization,corporate governance,Board of Directors,operational structure,markets served,and geographical footprint as of December 31,2023,is available in our 2023 Annual Report on Form 10-K(the“Annual Report”)and in our 2024 Proxy Statement(the“Proxy Statement”),which are both filed with the U.S.Securities and Exchange Commission and available at .Safety and health Were committed to protecting the safety and health of our employees,our contractors,our customers,and the people in the communities where we operate.Respect for people We treat our employees and all our partners with professionalism,dignity,and respect,fostering an environment where people can contribute,innovate,and excel.Highest ethical behavior We conduct ourselves in accordance with the highest ethical standards,and in compliance with all applicable laws,always striving to be a respected corporate citizen worldwide.Protecting the planet We find science-enabled,sustainable solutions for our customers,always managing our businesses to protect the environment and preserve the earths natural resources for today and for future generations.Sustainability strategyIntroductionEmpower people to thriveAppendices5DuPont 2024 Sustainability ReportInnovate for goodProtect people and the planetGovernanceDuPont at a glance35%U.S.and Canada47%U.S.and Canada43%Asia Pacific33%Asia Pacific18%Europe,Middle East,and Africa17%Europe,Middle East,and Africa4%Latin America3%Latin AmericaDuPont sales worldwide1DuPont employees worldwide2DuPont segment sales$12.1B net sales24,000 employees worldwide$5.6Bnet sales$5.3Bnet sales1 Sales on a continuing operations basis as reported in the 2023 Annual Report on Form 10-K.2 Approximately,as of December 31,2023.Not all of these employees are reflected in the employee demographic data presented in this report,as the effects of acquisitions and divestitures are incorporated into data systems at various points post-transaction.Refer to the Reporting Scope table on page 95 for details.$12.1B2023 net sales50 countries where we operate 100manufacturing sites25Global Technical Centers24,000employeesWater and Protection45%Safety Solutions29%Shelter Solutions26%Water SolutionsElectronics and Industrial35%Semiconductor Technologies39%Industrial Solutions26%Interconnect SolutionsSustainability strategyIntroductionEmpower people to thriveAppendices6DuPont 2024 Sustainability ReportInnovate for goodProtect people and the planetGovernanceDuPont business today Today,our business portfolio has been transformed as we have become a premier multi-industrial company.Following the completion of recent divestitures,our portfolio is largely set,and we are now squarely focused on driving growth.Our current business portfolio strategically aligns with our innovation strengths and industry-leading products.Our customers rely on us as a partner for delivering technology and applications development expertise and sophisticated,integrated solutions.Our product portfolios,capabilities,and customer relationships are aligned to five strategic growth areas.12%of net salesWe provide technologies that help purify more than 50 million gallons of water every minute around the world and enable water reuse and recycling,desalination,and the safe access to both ground and surface water.Our solutions address a variety of water and sustainability challenges through a broad portfolio of water purification and separation technologies.WaterOur innovative products,technologies,and performance materials are used to supply the leading manufacturers in the semiconductor,circuit board,display,digital and flexographic printing,healthcare,aerospace,industrial,and transportation industries.Electronics29%of net salesFrom first responders to industrial workers,we provide a wide range of personal protection solutions,including some of the most trusted and innovative brands in the industry,such as Kevlar,Nomex,Tyvek,and Tychem.We also develop solutions for managing the air,water,and thermal performance of buildings and residences,helping our customers build energy-efficient,resilient,and durable shelters in a rapidly changing world.Protection21%of net salesOur automotive products deliver a broad range of technology-based products and solutions for current and advanced mobility.Solutions supporting battery assembly,thermal management,and technology for e-motor and power electronics are part of a customizable portfolio that can enhance vehicle performance,reduce weight,improve efficiency,and enable development of next generation vehicles.Next generation automotive 10%of net salesOur innovative products include specialty medical devices and components,silicones for healthcare and industrial applications,precision parts for aerospace,industrial and automotive applications,and specialty industrial materials for printing plates.We partner with customers to provide advanced materials and solutions that are designed to help meet their performance and quality requirements in some of the most demanding industrial environments.Industrial technologies28%of net salesNote:Percentages above reflect estimated end-market exposure based on 2023 net sales on a continuing operations basis.Sustainability strategyIntroductionEmpower people to thriveAppendices7DuPont 2024 Sustainability ReportInnovate for goodProtect people and the planetGovernanceAwardsInnovate for goodProtect people and the planetEmpower people to thriveReceived four 2023 R&D 100 Awards for advancements in science and innovation.The awards,sponsored by R&D World magazine,recognize the 100 most innovative technologies of the previous year.Named to the Clarivate Top 100 Global Innovators list for the 11th consecutive year.This recognition demonstrates the strength of our innovation-led growth in the markets we serve.Received two Silver and one Bronze Edison Awards.The awards recognize excellence in new product and service development,marketing,design,and innovation.Received A-score on our CDP climate assessment and named for the first time to CDPs Supplier Engagement Leaderboard.Received perfect score on the Human Rights Campaign Foundations 20232024 Corporate Equality Index,earning designation as recipient of the Equality 100 Award:Leader in LGBTQ Workplace Inclusion.Received Top Employer Award in China for second consecutive year.Certified as a Great Place To Work based on the results of the Trust Index survey which assesses employee satisfaction.Earned a perfect score on Disability:IN and AAPDs Disability Equality Index and named Best Place to Work for Disability Inclusion for the 8th year in a row.Named to the 2023 Forbes lists for Worlds Top Companies for Women,Worlds Best Employers,and Americas Best Employers for Diversity.DuPont Experimental Station,Wilmington,DE awarded the Wildlife Habitat Council(WHC)Gold Certification and special recognition for Landscaped Project in 2023.Named to The Wall Street Journals Management Top 250,which ranks companies on customer satisfaction,employee engagement and development,innovation,social responsibility,and financial strength.Named to the 2023 Bloomberg Gender-Equality Index(GEI)for the sixth consecutive year,recognizing our commitment to support gender equality through policy development,representation,and transparency.Named a Top Corporation for Womens Business Enterprises from Business Enterprise National Council.Named the Global Water Intelligence(GWI)“Water Technology Company of the Year.”The award recognizes the innovative solutions in our water technology portfolio to address global water challenges.Named to the Clean200 2023 list of major corporations that are leading the way by putting sustainability at the center of products,service,business models,and investments.Sustainability strategyIntroductionEmpower people to thriveAppendices8DuPont 2024 Sustainability ReportInnovate for goodProtect people and the planetGovernanceSustainability strategyIntroduction9DuPont 2024 Sustainability ReportSustainability strategyInnovate for goodProtect people and the planetEmpower people to thriveGovernanceAppendicesQ&A with Alexa Dembek,Chief Technology&Sustainability Officer Q:How critical is the intersection between innovation and sustainability for achieving our 2030 Sustainability Goals?A:Driving innovation and delivering sustainable solutions do not operate on parallel paths;its at their intersection where we strengthen and grow our impact on society and solve for some of the biggest societal challenges.As CTSO,I have a unique role in guiding our innovation and stewarding sustainability that plays out in how we advance circularity,decarbonize,and solve for our customers and partners.The exciting part of the intersection is the results and impact we create in the markets we servewere developing new technologies and products to make water cleaner,enable advanced computing,make buildings and homes more energy efficient,frontline workers safer,and healthcare solutions more advanced.Its also in the remarkable progress weve achieved in meeting our climate action goals well ahead of schedule.In many ways,the intersection serves as the gateway to endless possibilities,presenting opportunities for growth,innovation,meaningful exchanges with stakeholders,and bringing about positive change for society.Q:What does it mean to achieve shared value with your customers?A:Our approach to delivering solutions for global challenges is grounded in a disciplined customer engagement process that enhances collaboration with strategic customers and global end users.Through this process we align and strengthen our targeted innovation investment choices.We become their partner of choice by enabling them to achieve their own sustainability targets and goals.In 2023,we improved the discipline of our strategic customer engagement and insight generation by expanding our structured engagement program to 120 strategic customers across our global businesses.We also implemented a process to manage requests from customers for sustainability information that improves our responsiveness and enables us to incorporate the requests as input to understanding of customer sustainability priorities.By embedding customer insight in our research and development process,we believe we can increase the commercialization success of innovation programs and foster stronger growth and relationships with our customers.Q:What are you most proud of from the sustainability work achieved this past year?A:Im so proud of the progress on our goals,but this report is really about the dedicated teams across DuPont that put their energy,passion,and pursuit on display every day to support our customers and support each other.Im fortunate to lead some of these teams and see firsthand how they are fostering an inclusive culture and are living our core values and embedding them in every decision we make,every action we take.Its in their stories that this report comes to life.“I view sustainability as an opportunity for value creation;not a risk to be managed.More than ever,were putting sustainability at the core of our overall strategy,and the powerful combination of innovation,sustainability,and digital means more value for our customers,employees,shareholders,and communities.”Q:How has DuPonts transformation supported its sustainability strategy?A:Over the past several years,weve reshaped and transformed our business portfolio,positioning the company as a premier multi-industrial.As weve completed the transformation,were focused on addressing and capturing high-value opportunities in five strategic growth areas:Electronics,Water,Protection,Industrial technologies,and Next generation automotive.These growth areas are driven by technology,require innovation,and have sustainability as a foundation.Q:How is DuPont aligning its business strategy with its sustainability strategy?A:The number one way that we can lead sustainably is through innovation that addresses global challenges.It goes back to our purposecreating the innovations that help people thrive.Throughout my career,I have increasingly viewed sustainability as an opportunity for value creation;not a risk to be managed.More than ever,we are putting sustainability at the core of our overall strategy,and the powerful combination of innovation,sustainability,and digital means more value for our customers,employees,shareholders,and communities.Q:What do you see as the next steps in DuPonts sustainability journey?A:We have done the hard work of reshaping and sharpening our portfolio in alignment with our five strategic growth areas.The next step in our journey is aligning our investment choices on technologies where sustainable innovation is needed to meet important societal and sustainable development challengesand where we can best leverage synergies across our global businesses.Whats the next challenge?Were witnessing an astounding rate of change in the world;we need to capture and harness opportunities with greater speed and urgency.That means better understanding the market,anticipating customer needs,and delivering timely solutions,all of which are critical to keeping DuPont in front of the innovation curve.Introduction10DuPont 2024 Sustainability ReportSustainability strategyInnovate for goodProtect people and the planetEmpower people to thriveGovernanceAppendices Empower people to thrive Protect people and the planet Innovate for goodThree-pillar sustainability frameworkTo manage the complex and quickly evolving sustainability landscape,weve built our strategy on three pillars:Innovate,Protect,and Empower.Our nine 2030 Sustainability Goals reside within these three pillars and shape our innovation portfolio,our operations strategy,and our commitment to our people and communities.As a premier multi-industrial company,DuPont recognizes that to achieve sustainable value creation we must address societal challenges across our entire value chain.We develop innovations with our diverse customers,incorporate sustainability in our own operations,and advance sustainability in our supply chains.Established in 2019,our sustainability strategy harnesses our deep understanding of science and technology and our close collaboration with stakeholders to create impactful and enduring outcomes.Innovate for good Innovate for good is our commitment to use our talent,resources,and innovation expertise to work on meaningful and valuable solutions to societal challenges.We address the worlds most pressing sustainability challenges by delivering innovative solutions in four key impact areas:climate action,enabling a more circular economy,creating products that are safe and sustainable by design,and advancing water stewardship.Our customer engagement initiatives help us understand our customers needs from each of our global businesses and shape our innovation priorities and investments to meet them.Protect people and the planet Protect people and the planet is our commitment to take action to ensure the safety of our employees,contractors,customers,and communities while improving our impact on the environment.Ultimately,the most valuable and enduring business outcomes are the ones that enable people and the planet to thrive.Our goals in this pillar focus on the challenges of climate change,water stewardship,and achieving world-class environmental,health,and safety performance.Empower people to thrive The Empower pillar of our sustainability strategy addresses how we enable our employees and communities to experience well-being,purpose,opportunity,equity,and connection.At DuPont,our employees are at the heart of our sustainability efforts and drive our results and impact.We cultivate an inclusive work environment that allows our employees to make a difference,grow professionally,and thrive.To further our impact,we encourage active participation in the communities where we work through key partnerships,collaboration with nonprofit organizations,skills-based volunteering,and board service.Introduction11DuPont 2024 Sustainability ReportSustainability strategyInnovate for goodProtect people and the planetEmpower people to thriveGovernanceAppendicesOur 2030 Sustainability Goals Protect people and the planetInnovatefor goodEmpowerpeople to thriveDelivering solutions for globalchallengesInnovate products to meaningfully address the worlds sustainability challenges,with positive impacts for customers and societyEnabling a circulareconomyIntegrate circular economy principles into our business models considering life cycle impacts in the markets we serveInnovating safe and sustainable bydesignAdvance sustainable chemistry in the design of our products and processes,addressing substances of concern and communicating with stakeholders on our performanceActing on climateReduce our Scopes 1 and 2 greenhouse gas emissions by 50%by 2030 from the 2019 base year and deliver carbon neutral in operations by 2050Reduce our Scope 3 emissions from purchased goods and services and end of life of sold products by 25%by 2030 from 2020 base yearSource 60%of power to our operations from renewable sources by 2030 as part of our RE100 commitmentLeading water stewardshipImplement holistic water strategies at sites in high-risk watersheds and at high consumption sitesEnable millions of people access to clean water through leadership in advancing water technology and enacting strategic partnershipsDelivering world-class environmental,health,and safety performanceFurther our commitment to zero injuries,occupational illnesses,incidents,waste,and emissionsAccelerating diversity,equity,andinclusionBecome one of the worlds most inclusive companies,with diversity well ahead of industry benchmarksCultivating well-being and fulfillmentCreate a workplace where employees report high levels of well-being and fulfillmentBuilding thriving communities Improve over 25MM lives through targeted social impact programs Introduction12DuPont 2024 Sustainability ReportSustainability strategyInnovate for goodProtect people and the planetEmpower people to thriveGovernanceAppendicesDuPonts employee-led sustainability network engages and activates employees across the globeIn 2023,DuPont established a sustainability network,Good Earth Stewards(GES),led by our employees.GESs mission is to enrich DuPonts sustainability culture and drive meaningful changes to create a positive impact.GES empowers employees through engagement,education,and activation.Within GES,sustainability is championed by dedicated employees who have driven the adoption of sustainable practices throughout the organizations businesses,regions,and manufacturing sites.GES supports a more connected workplace for employees to collaborate,build competency,and network.The High-Performance Building(HPB)Team,part of DuPonts Facilities Services and Real Estate function,is at the forefront of driving significant change in building standards across the corporation.The HPB Team is leading the way in developing and implementing innovative standards that improve energy,water,emissions,waste efficiency,and well-being in both new and existing buildings.In collaboration with the By the Bay community,our Singapore Sustainability Task Team(STT)participated in a beach clean-up volunteer event with the goal of increasing awareness about marine pollution.Singapore STT successfully collected and responsibly disposed 197.3 kg of plastic and general waste.The Edina Sustainability Team has played an instrumental role in the establishment of a reliable energy management system by partnering with Xcel&CenterPoint Energy.The team is excited to start a University of Minnesota Technical Assistance Program to host summer interns,who will engage in site sustainability projects.In 2023,the Experimental Station received the Wildlife Habitat Councils(WHC)Landscaped Project Award and achieved WHCs Certified Gold Conservation Certification,which is the highest level of conservation certification offered by WHC.The Aramids Sustainability Committee is a global cross-functional team that partners to increase education on technical sustainability topics.The Committee offers valuable insights to employees on customer engagement,ESG ratings,and GHG emissions.330 employees united as Good Earth Stewards23 GES chapters located across the world driving a connected workplaceIntroduction13DuPont 2024 Sustainability ReportSustainability strategyInnovate for goodProtect people and the planetEmpower people to thriveGovernanceAppendicesInnovating safe and sustainable by design Enabling a circular economy Delivering solutions for global challenges Innovate for goodAt DuPont,we believe the greatest positive impact we have on the world is through our innovations.We believe scientific advancement is critical in addressing the worlds most pressing challenges and delivering on the promise of the United Nations Sustainable Development Goals.Our innovation strategy and 2030 Sustainability Goals focus on the powerful intersectionsand synergiesbetween advances in technology and sustainability,application development and human development,value for our customers and stakeholders,and value to society.Innovate for good14DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesDuPont 2024 Sustainability Report14Our approach to innovating for good As a premier multi-industrial company with a strong portfolio of market-leading businesses,we understand that growth is dependent on the intersection of sustainability,digital solutions and enablement,and innovation.In 2023,we continued to strengthen our portfolio by investing in each of these to deliver business growth,value creation for our customers,and benefits to society.Our approach to innovation starts with learning and insight generation:understanding the current and emerging technological and sustainability challenges in our markets,from raw materials to consumer use.We collaborate with our customers and partners across our value chains to deliver solutions that improve product performance and life cycle sustainability.As we innovate for growth,customer and value chain insights enable our businesses to identify and deliver new innovations and position our products in high-growth markets.Across our global businesses,we invest in innovation based on each of our businesses unique strategies,growth drivers,and opportunities.Our investment in innovation is approximately 4%of net sales and primarily targets high-growth opportunities in our eight innovation platforms,which are described in the Delivering solutions for global challenges section of this report.Furthermore,we apply a disciplined learning approach to assess opportunities in emerging markets.For example,in 2023,we assessed the emerging hydrogen value chain to determine if it fits within our strategy and capabilities.We focus on investments to enable future capabilities that will improve our speed to market,competitiveness,and impact.One of the key capabilities were investing in is digital tools and enablement,which complements our leading scientific and application development expertise.Where innovation,sustainability,digital,and an inclusive culture come together,a future-focused business growth mindset thrives.Powerful intersections deliver value creationInnovate for good15DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesMore than 1,400 employees participated in six virtual live sessions offered as part of our Technology Learning Academy in 20232023 Lavoisier&Pedersen AwardeesEach year we honor DuPont innovators whose work and commitment have had significant results for our businesses,our customers,and the world.We apply digital solutions,such as lab connectivity,integrated lab data management,knowledge management and materials discovery using generative artificial intelligence,digital process mining,predictive analytics,and optimization to help our world-class scientists accelerate learning and value creation for our customers.We combine digital enablement with cutting-edge science to solve complex challenges in thermal management,miniaturization,electromagnetic interference(EMI)shielding,advanced separation and filtration,advanced construction technologies,user interfaces,and more.In 2023,we took several actions to foster a global,inclusive culture of innovation.We held several internal technical conferences with virtual participation across regions,focused on sharing innovation success stories,digital strategies,and sustainability topics.The technical conferences offer our innovators the chance to share ideas and best practices and provide an opportunity to recognize excellent work.The sessions covered emerging topics such as financial acumen,competitive landscape assessment,climate action,innovating with customers,and project leadership.Through the Technology Learning Academy,we aim for learning to be a source of competitive advantage.We also held our annual Dead Projects Day to shrink the stigma of project failure and feature innovation projects that we made the right but tough choices to end.Additionally,we announced the 2023 winners of our Lavoisier&Pedersen Awards,recognizing scientists and engineers who have demonstrated the highest level of innovation achievement at DuPont.Paul Bernatis,Ph.D.Paul led the formulation development for semiconductor advanced cleaning technologies,which have become the industry standard for advanced device nodes of 14 nm.Reiyao Zhu,Ph.D.As the lead developer for Nomex thermal apparel,Reiyaos prolific work in fiber blends has increased DuPonts engagement in industrial protection via atransformation shift to multi-hazard protection.Deyan Wang,Ph.D.Senior Research Laureate,DuPont Electronics&IndustrialAcross a 30-year industrial career,Deyan has been a lifetime achiever in creating pathfinding technology for semiconductor and circuit board manufacturing.His pioneering technology in 193 nanometer(nm)immersion lithography for semiconductor fabrication has become mainstream industrial technology for its high throughput and low material cost.Advancements in embedded barrier layer and novel leveler materials for plated copper interconnects are just some of the other areas Deyans innovations have impacted semiconductor manufacturing.Jon Johnson,Ph.D.Jon led the design of spiral-wound reverse osmosis(RO)and nanofiltration elements and components that comprise them.His leadership in linking fundamental engineering principles to element limitations and capabilities has materialized in value-adding products for our customers.Lavoisier Medal for Lifetime Technical Achievement recognizes scientists and engineers who have demonstrated a career of creative technical contributions with significant business impact.Named in honor of the 18th century French chemist,Antoine Laurent Lavoisier,this award is the pinnacle recognition for DuPont innovators.Pedersen Medal celebrates technical knowledge,skill,and commitment in areas that have resulted in important new innovation for DuPont customers.The award is named in honor of Charles J.Pedersen,who received the 1987 Nobel Prize for his discovery of a novel class of chemical compounds called macrocyclic polyethers.Awards ceremony,November 2023Innovate for good16DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesAccomplishments in 2023Delivering solutions for global challengesReceived the 2023 AIChE Energy and Sustainability Award for FilmTec Prime RO,a family of energy-efficient reverse osmosis(RO)membranes that contributes to the decarbonization of water purification.Recognized as Best ESG Partner by Samsung Electronics and received eight additional supplier of the year awards from semiconductor customers for achievements in innovation and sustainability.Launched a new enterprise-wide initiative,along with introducing new products aimed at high-value challenges in the emerging hydrogen value chain.Expanded strategic customer sustainability engagements focusing on climate and safe and sustainable by design(SSbD)needs,which are critical imperatives for customers.Innovate products to meaningfully address the worlds sustainability challenges,with positive impacts for customers and society.Our 2030 goalMore than 80%of our innovation portfolio value is expected to deliver sustainability value for our customers or advance solutions to global challenges based on analysis using an updated portfolio sustainability assessment(PSA)methodology.New product offerings delivered positive sustainability and performance impact in each of our innovation platforms,enabling customer outcomes in areas such as advanced computing,vehicle electrification,and water purification.7R&D 100 and Edison Awards received for products delivering positive performance and sustainability benefits for customers and society.Read on for our approach tosolutions for global challengesInnovate for good17DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesDuPont 2024 Sustainability Report17CollaborateWith our customers and across our global value chains to accelerate learning and innovation to address sustainability challenges in the markets we serve AlignWith our customers and across our business growth strategies and differential investment choices in our core businesses and eight innovation platforms with customer insight and global sustainability challenges DeliverSustainable product and application innovations that create quantifiable positive impact for customers and society Our approach to solutions for global challengesDuPont Kevlar EXO for body armor Our approach We believe the most meaningful way DuPont can advance sustainability is by providing the world with essential innovations to thrive.Our innovation investments align with our purpose and are a key driver of growth for our global businesses.We work across value chains and industries and leverage resources and partnerships with private,public,and nongovernmental organizations to deliver solutions for customer and societal challenges.Our approach to delivering solutions for global challenges is grounded in a disciplined customer engagement process that enhances collaboration with strategic customers and global end users.Through this process we align and strengthen our targeted innovation investment choices in our core businesses and eight innovation platforms.We choose to invest in innovations that deliver solutions to valuable scientific,technical,and sustainability challenges in the industries and markets we serve.We recognize the need for agility and the urgency of addressing climate change,access to clean water and healthcare,resource efficiency,and sustainable production,as well as enabling connectivity and high-performance computing globally.Strategic insight fromour customersIn 2023,we improved the discipline of our strategic customer engagement in three key areas.First,we continued our structured engagement program with strategic customers across our global businesses,sharing the results through an interactive internal dashboard to facilitate analysis and insight generation.Second,we integrated our customer engagement program with DuPonts portfolio sustainability assessment(PSA)methodology,enabling our innovation teams to identify and address important and valuable customer sustainability challenges.Third,we implemented a process to manage requests from customers for sustainability information that improves our responsiveness and enables us to incorporate the requests as input to understanding of customer sustainability priorities.The results of our customer sustainability engagements in 2023 confirm prior findings that climate change remains the top sustainability priority for most of our customers.What this prioritization of climate action means in practice,however,varies significantly across our global businesses and markets and leads to different innovation investment choices.Over 60%of our strategic customers have set climate targets validated by the Science Based Targets initiative(SBTi)or other non-SBTi Net Zero commitments.Innovate for good18DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesIn 2023,we saw an increase in customer requests for product carbon footprint data and carbon reduction strategies,which are directly connected to our customers upstream Scope 3 commitments.These requests are aligned with our SBTi-validated commitment to reduce the carbon footprint of the raw materials we purchase to make our products.The other opportunity we identified is to address climate change through innovation.This means collaborating with customers to reduce their manufacturing footprint and develop applications and product designs to enable use-phase GHG emissions reduction.Examples of both are highlighted throughout this report.While the high-level results of customer engagement help our teams understand global sustainability trends,the real power of our structured approach is the ability to analyze the data in detail and gain insights specific to individual business units,customers,and growth markets.By embedding customer insight in our research and development(R&D)process,we believe we can increase the commercialization success of innovation programs and foster stronger growth and stronger relationships with our strategic customers.DuPont recognized as best ESG partner by Samsung ElectronicsSamsung Electronics named DuPont as the Best Partner in Environmental,Social,and Governance(ESG)category during Samsungs Materials-day event.DuPont is recognized for significant contributions in establishing a sustainable supply chain by collaborating to develop more sustainable semiconductor materials.For example:yIn our interconnect solutions business,research teams continue to focus on the development of recycled copper-based flexible laminates that reduce the raw material carbon footprint and life cycle energy consumption.yAcross personal protection markets and value chains,circular economy solutions continue to grow in importance,driving innovation in materials and design opportunities.Business sustainable innovationgrowth strategiesDue to the diversity of our global businesses,sustainable innovation strategies and the differential investment choices needed to drive growth will always vary considerably across our businesses.What is common across our businesses and strategic growth areas is the importance of listening to our customers,developing value chain insights,and building partnerships to scale innovative solutions for global challenges.In 2023,we leveraged strategic customer insight to refine our market and business-level sustainable innovation growth strategies.Each business focuses on key sustainability drivers that align with the four 2030 Sustainability Goals embedded in DuPonts portfolio sustainability assessment(PSA)methodology:Acting on climate,Enabling a circular economy,Innovating safe and sustainable by design,and Leading water stewardship.By improving our strategic customer engagement and insight generation and working with our global business teams,we were able to build differentiated strategies that address the highest priority sustainability challenges faced by our customers.In the semiconductor value chain,for example,our customers are looking for sustainable solutions across the entire product life cycle:ySource low-carbon raw materials from our suppliers;yReduce or eliminate substances of concern(SoC);yProvide industrial wastewater treatment solutions for semiconductor fabrication plants;and yEnable energy efficiency in product design and use.Insights into the complex sustainability challenges faced by our customers and society lead to expanded collaboration between our global businesses in terms of both technical expertise and product synergies.Solutions for global challenges:DuPont innovation platformsAt DuPont,were taking intentional and targeted action on global challenges to address the current and emerging needs of customers and stakeholders to deliver solutions with impact.As a premier multi-industrial company,were focused on growth through innovation across five key strategic growth areas:Electronics,Water,Protection,Industrial technologies,and Next generation automotive.Within,and sometimes across,these key strategic growth areas,our eight innovation platforms focus and align our investment choices on technologies and growth markets where innovation is needed to meet important societal and sustainable development challengesand where we can best leverage synergies across our global businesses.In 2023,investment in our innovation platforms was more than 65%of our total R&D budget.Innovate for good19DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesBy 2030,it is estimated that there will be close to 30 billion connected devices,and this connected ecosystem,enabled by 5G,will continue to revolutionize the world and transform the way weand our devicescommunicate.Our innovations provide total solutions for advanced circuit fabrication and enable fast reliable transmission of data for high signal integrity,high bandwidth(data),EMI shielding,and other critical technologies.Sustainability drivers:y Improve energy efficiency and durability in devices;and y Improve material and process circularity.High frequency connectivityInnovation platformRecycled copper-based flexible laminate enables digital crown for smartwatch Pyralux Flexible Copper Clad Laminate with recycled copper reduces energy consumption and carbon footprint by replacing some of the mined new copper with recycled copper.This sustainable solution offers comparable processibility and performance to traditional copper-based laminates.An early application of this total solution is being used in a flexible circuit to enable functionality of a digital crown in a smartwatch.A digital crown is a small circular button on the side of the smartwatch that allows the user to activate several features and settings.By using copper-based flexible laminate that includes recycled content,energy efficiency is improved,and the carbon footprint of the device is reduced.Helping customers optimize semiconductor polishing During the semiconductor fabrication process,excess material from each layer of the wafer is removed to create a smooth surface through chemical mechanical planarization(CMP).DuPonts biased pulse groove(BPG)is a new design for CMP pads to optimize the flow of slurry during polishing.Pads featuring the BPG design can improve CMP performance and productivity by reducing flow rate or the amount of slurry used in the process while maintaining process quality.This innovation is helping customers reduce waste and can be used with many of DuPonts leading CMP pad families,including the Visionpad and Ikonic CMP pad families.Enabling advanced node processing solutions Our EPIC Photoresist Series is an essential component of our commitment to revolutionize the world of high-performance computing through innovative lithography technologies.Specifically designed to meet the demands of more advanced but complicated 193 nm lithography processes,our unique immersion lithography process and innovative material design ensure precise high-resolution patterning performance for high-end memory and logic devices,resulting in greater manufacturing efficiency,accuracy,and quality.Improving efficiency and plating performance with Solderon BP TS 7000 series Smaller and more powerful semiconductor chips continue to drive innovation for printed circuit boards.The Solderon BP TS 7000 series is a newly redesigned,lead-free1 formulation for tin-silver plating chemistry.This formulation delivers industry-leading plating rates,enhanced plating performance,bath stability,and greater process flexibility in next generation micro-bumping technology for advanced packaging applications.R&D 100 Green Tech recognitionFor ultrapure water filtration in microelectronics Ultrapure water free from impurities remains a vital component for advanced semiconductor manufacturing.AmberTec UP4000PD OH Ion Exchange Resin uses a strong a base anion exchange with highly active palladium nanoparticles to remove impurities,such as hydrogen peroxide.This recently launched technology received an R&D 100 Award and a Special Recognition Silver Medal in the Green Tech category.This recognition exemplifies the interconnectedness across DuPonts Innovation Platforms,wherein Clean Water innovations directly enable other industries to progress their sustainability initiatives.The intersection between high-performance computing and sustainable development centers on access to the computational advances needed to build resilient and sustainable industries and infrastructures.Our innovations enable advanced node processing solutions for smaller devices,printed circuit board designs,and advanced packaging architectures.Sustainability drivers:y Reduce or eliminate substances of concern;y Improve energy efficiency and reduce value chain greenhouse gas emissions;and y Improve material and process circularity.High-performance computing Innovation platform1 Formulated without such component.Innovate for good20DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesInnovation platformAs a global leader in purification and specialty separation technologies,we provide solutions that help make drinking water safer and cleaner for homes and communities;help industries and markets operate more effectively and efficiently;and make water scarcity challenges more manageable,wherever they arise.Our innovations lead in water purification,conservation,and reuse technologies.DuPont is collaborating for a water-optimized world and innovating to change the way the world thinks about water.Sustainability drivers:y Reduce energy consumption needed for water and wastewater treatment;and y Improve process circularity through wastewater reduction,recycling,and reuse,as well as recovery of valuable raw materials from wastewater or seawater.Clean waterInnovation platformFilmTec Fortilife CR200 element receives 2023 Edison Silver Award To help address the challenges of wastewater reuse and increase access to clean water,DuPont developed a high-productivity membrane to maximize operational efficiency and combat biological and organic fouling.Fouling is the accumulation of unwanted materials that create the need for chemical cleaning to maintain operational efficiency.FilmTec Fortilife CR200 elements work in some of the worlds most challenging waters through combinations of membrane and module technologies.Compared to standard reverse osmosis elements,the CR200 can help purify wastewater with up to 20%reduction in energy consumption and 50%reduction in number of cleanings.DuPont Personal Protection brings together some of the most trusted names in personal protective equipment(PPE)and solutionsTyvek,Nomex,and Kevlarto provide unparalleled solutions that protect workers against chemical,thermal,electric arc,mechanical,and other workplace hazards.Our innovations focus on advanced multi-threat protection with optimal comfort and durability for industrial workers,front-line responders,and military personnel.Sustainability drivers:y Improve material carbon footprint,process,and product circularity;and y Reduce or eliminate substances of concern.Personal protectionInnovation platformProtection is expected;mobility and comfort are demanded Introducing Kevlar EXOPerformance and comfort are often at odds in PPE.The weight and bulkiness required in PPE for ballistics,fire protection,arc,and other hazards limits physical motion,the length of time PPE can be worn,and the wearers comfort.Kevlar EXO is a new aramids technology platform to help our customers solve problems that require demanding performance beyond our legacy fibers.This high strength fiber enables an optimal combination of protection,comfort,mobility,and flexibility in a lightweight solution.Kevlar EXO has the highest ballistics performance among all aramid fibers.Innovation across healthcare applications is evolving rapidly,requiring high-performance materials and applications expertise to enable smarter healthcare and positive patient outcomes.Our advanced materials solutions drive innovation for healthcare applications like drug delivery,biopharmaceutical processing,advanced fluid handling,medical devices,and medical packaging.Sustainability drivers:y Improve material and process circularity;and y Reduce or eliminate substances of concern.Applied healthcare solutionsInnovation platformLiveo MG 7-9960 adhesives for advanced wound care and adhering medical device applications Wound care and transdermal drug delivery systems require bandages and patches that adhere to skin reliably and comfortably for days,even weeks.New Liveo MG 7-9960 Soft Skin Adhesive(SSA)has the highest peel adhesion in the Liveo SSA family.It offers better conformability,easy removal,high repositionability,and improved wear performance and design flexibility.In addition,low-cyclics Liveo MG 7-9960 SSA is non-sensitizing,non-irritating,and non-cytotoxic,making it ideally suited to protect the highly sensitive and fragile skin of populations including children,the elderly,and patients with skin conditions or open wounds.Innovate for good21DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesKapton MT based and Nomex 710 Slot Liner Solution improves efficiency in high-voltage E-Motors Slot liners protect the copper wires in an E-Motor from the outer steel wall,dissipating heat to the outside and enabling the motor to operate efficiently at a cooler temperature.This solution utilizes a three-ply laminate,which sandwiches Kapton MT polyimide film between two layers of Nomex paper,delivering superior electrical insulation,optimal heat dissipation,and high thermal conductivity.Kapton MT thermal conductive and electrically insulating film Within the battery pack,Kapton MT films are utilized in busbars,cooling plates,and between modules.These films help maintain optimal temperature during battery operations which results in increased power output and efficiency for peak performance.Their use ultimately leads to a longer lifespan and more reliable operation for battery systems.MOLYKOTE Specialty Lubricants for high-voltage connections As the automotive industry undergoes its biggest change in decades,manufacturers are facing new lubrication challenges.Electrified vehicles have an increasing number of high-voltage connectors to protect from electrical erosion,oxidation and aluminium corrosion,along with friction and wear.Maximizing charging performance in electric vehicles with Silveron GT-210 EV charging connectors require a durable and conductive finish to maintain a stable and low electrical-resistance connection throughout the life cycle and in harsh environments.Silveron GT-210 high durability silver is made using an electroplating process that creates a silver-rich deposit with a low and stable coefficient of friction and the excellent electrical and thermal properties of pure silver.Laird Performance Materials optimize energy transfer for reliable performance in battery control units Battery Management Control systems modulate the energy in the battery to protect against deep discharge and maintain operating conditions.These complex electronic circuit boards need high-performance thermal management and EMI shielding materials to operate vehicles.From brine to batteryDirect lithium extraction leads to new resources for lithium FilmTec LiNE-XD nanofiltration elements offer high lithium recovery from new sources,such as geothermal brines,salt lakes,and surface and sub-surface clay.Lithium mass recovery is optimized,with enhanced purity,as metal ions not needed are filtered out.Importantly,lower energy consumption and up to 30%in energy savings can be realized with use of the FilmTec LiNE-XD nanofiltration elements compared to other filtration solutions.Vehicle electrification is projected to continue its double-digit growth.1 Requirements for improved vehicle range,battery performance,charging time,and charging infrastructure continue to drive the need for sustainable solutions that dont compromise on safety,durability,or performance.Our solutions are targeted at enabling electric and smart vehicles by solving critical challenges in thermal management,battery assembly,and reliable connectivity.Sustainability drivers:y Reduce transportation carbon emissions;y Improve systems and charging efficiency;and y Improve durability,reliability,and material circularity.Advanced mobility Innovation platformBETAMATE broad-bake structural adhesives enable sustainable manufacturing of next generation electric vehicles Battery weight in electric vehicles(EVs)calls for more robust body structures,including the sill,or rocker panel.On EVs,the sill has to support a higher load than with internal combustion vehicles due to functional requirements and design complexities for supporting the weight of the battery pack.BETAMATE broad-bake structural adhesives allow a reduction of the e-coat oven temperature by 25 C,enabling significant energy savings while durably bonding the high mass underbody of EV body structures in the body shop.1 Cossins-Smith,A.(2023,August 15).Analysis:global electric vehicle market set to grow 16%by 2035.Power Technology.Innovate for good22DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesContributing solutions to high-value challenges in emerging hydrogen value chain Emerging innovationHydrogen is an emerging energy source that is expected to play a major role in decarbonizing hard-to-abate emissions from industrial processes,such as heat and steam generation and commercial transportation.DuPonts close partnerships across many industrial value chains and our innovation capabilities provide opportunities to advance hydrogen,as well as other new and emerging clean energy solutions.AmberLite P2X110 ion exchange resin designed for water electrolyzers Electrolysis is the process of electrically splitting the water molecules into hydrogen and oxygen gas.While there are various types of electrolyzers,they all rely on high-purity water as the feedstock to produce hydrogen.Our newly introduced AmberLite P2X110 ion exchange resins are designed to endure the thermal and chemical challenges present in an electrolyzer.This solution can offer durable and reliable water quality that helps prevent contaminant build-up in the electrolyzer loop.Vespel polyimide parts and shapes are well suited for hydrogen sealing and storage Hydrogen as an alternative energy source brings about a set of challenges not easily addressed with fossil fuel infrastructure.Hydrogen is highly reactive and is often compressed or cooled to liquid form for transportation and use.Hydrogen leakage prevention and thermal insulation or active cooling must be maintained over long periods of time.Vespel has a unique blend of thermal,mechanical,and tribological properties that are well suited for these challenges.Innovation platformAdvancing sustainability in the built environment requires innovative construction solutions that help drive whole life carbon of buildings to net zero,increase circularity of materials,and utilize safer chemistries,to realize our shared vision of sustainability within the built environment.Our innovations enable integrated building and envelop solutions that drive energy efficiency,weatherization,durability,fire resilience,build cycle reduction,and quality of installation.Sustainability drivers:y Reduce material carbon footprint and life cycle greenhouse gas emissions;and y Improve material circularity and eliminate substances of concern.Sustainable and productive construction Innovation platformGame changing performance for customers and the environmentStyrofoam Brand Plazamate XR foam insulation With 30%higher R-value per inch than traditional extruded polystyrene roofing insulation,Styrofoam Brand Plazamate XR foam insulation is the winner of a 2023 R&D 100 Award.This insulation has a low global warming potential and offers Leadership in Energy and Environmental Design(LEED)Embodied Carbon/Life Cycle Assessment(LCA)Optimization credit.Weve partnered with American Hydrotech to offer a combination product:American Hydrotechs Monolithic Membrane 6125 combined with Plazamate to provide architects and commercial building owners an exceptional R-value,design flexibility,and peace of mind,all covered by a single source warranty.Skyton conductive adhesive for smartphone displaysManufacturers of the newest smartphone displays require technologies to solve challenges with complicated manufacturing processes,including production losses due to static electricity.Skyton conductive adhesive provides a grounding pathway to resolve this issue,contains less solvent,and requires less solvent in device manufacturing.The new formulation reduces cost,enhances performance,and reduces waste for our customers.Displays in smartphones,computers,televisions,and increasingly in cars,are the human interfaces to technology and need to be functional,durable,and energy efficient.Our innovations enable transformational improvements in user interfaces,optical display materials,and augmented reality,including organic light-emitting diode(OLED),emerging MicroLED technology,and organic passivation materials.Sustainability drivers:y Improve energy efficiency in devices and displays;and y Improve material and process circularity.User interfaceInnovation platformInnovate for good23DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendices y Eliminate or reduce substances of concern(SoCs).y Ensure(and improve)manufacturing safety.y Enable customers to reduce SoCs or improve manufacturing safety.y Enable safer by design products for consumers.Advancing our ability to quantify the impacts of sustainable innovation Our DuPont portfolio sustainability assessment(PSA)methodology1 provides a sustainability lens for our innovation portfolio and supports embedded sustainable innovation growth strategies at the business level.For our eight innovation platforms,our PSA drives a deeper understanding of market and customer sustainability challenges,fostering growth and stronger relationships across our global value chains.DuPonts PSA methodology provides a framework to assess innovation opportunities and quantify impacts across the product life cycle in four sustainable impact categories:climate action,enabling a more circular economy,creating products that are safe and sustainable by design,and advancing water stewardship.In 2023,we continued to refine and implement DuPonts PSA methodology.First,we refined the assessment process and scoring criteria for each of the four sustainability impact categories,focusing on meaningful opportunities and risks.Second,we integrated our customer engagement program with the PSA methodology,enabling our innovation teams to identify and address important and valuable customer sustainability challenges.Using the refined methodology,we assessed all innovation projects past the ideation stage,developing a representative view of sustainable projects,market signals,and customer and value chain challenges across our global businesses.1 Aligned with the World Business Council for Sustainable Development Chemical Industry Methodology for Portfolio Sustainability Assessment.The assessment results in 2023 were broadly consistent with our 2022 pilot and customer insights,confirming alignment with customer and market sustainability priorities.More than 50%of the identified sustainable innovations focused on climate action while roughly 25%focused on providing solutions that are safe and sustainable by design.Deeper analysis at the business and market level revealed differences consistent with our differentiated sustainable innovation growth strategies,such as finding that 40%of identified sustainable innovations for the EV market are circular economy solutions.The portfolio-level scoring results demonstrate that our innovation portfolio is both strongly aligned with the sustainability priorities of our strategic customers and sustainably advantaged versus competitive market solutions.Approximately 70%of DuPonts innovation portfolio is advantaged(score of 1)in at least one sustainability impact category,and approximately 10%of the portfolio is highly differentiated(score of 2)in terms of sustainable value creation.Less than 5%of total innovation projects by value were scored as disadvantaged(score of-1)or at risk(score of-2),and most of these scores were related to the presence of substances of concern.While this number is far less than the 25%of projects by value that provide solutions that are safe and sustainable by design,it is indicative of the chemical stewardship and regulatory challenges faced by our customers and in our industry verticals.As detailed in the Innovating safe and sustainable by design section of this report,weve strengthened our management approach and are focused on building strong,supportive,and transparent relationships with our suppliers and customers that integrate external“safe and sustainable by design”principles to deliver value,support transparency,and drive competitiveness.In 2024,we will continue to advance our PSA methodology with a short-term focus on improving quantification of footprint and handprint.In the future,we will assess the broader alignment of our commercial product portfolio with customer and market priorities.y Reduce product carbon footprint.y Manufacture using renewable energy.y Enable carbon reduction for customers.y Enable use phase efficiency or other climate solutions.y Reduce product water footprint.y Improve operations water use efficiency.y Enable water efficiency improvements for customers.y Enable improved water outcomes for the world,including expansion of access to clean water.Climate actionWater stewardshipPSA impact categoriesSafe and sustainable by design y Manufacture using recycled or bio-based materials.y Reduce or repurpose operational waste.y Enable waste reduction or efficiency for customers.y Design for circularity.Circular economyInnovate for good24DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesRead on for our approach to circular economyAccomplishments in 2023Enabling a circular economy15%of our innovation portfolio is expected to address circular economy drivers in diverse markets based on a 2023 portfolio sustainability assessment(PSA).Launched COASTALUME in partnership with U.S.Steel,offering increased durability and reliability roofing and wall systems for coastal buildings exposed to hurricane force winds and saltwater spray.Collaborated with multiple customers to develop new Tyvek-enabled medical device packaging designs that improved customers manufacturing operations using less material and improved recyclability.Advanced partnerships with strategic suppliers by organizing a Packaging Summit that yielded new innovative ways to advance circularity,increase recycled content,and address extended producer responsibility for DuPont packaging.Achieved International Sustainability and Carbon Certification(ISCC)PLUS certification at the Tyvek manufacturing facility in Luxembourg for developing sustainable supply chains through the incorporation of bio and/or circular materials.Our Manufacturing&Technology Center in Taiwan was recognized as a“Resource Recycling Excellent Enterprise”by the Taiwanese Ministry of Environment for conversion to reusable waste storage containers that reduced waste volume.Over 1,100employees engaged in virtual circular economy learning seminars led by DuPont subject matter experts,focused on the four elements of our circularity approach.Integrate circular economy principles into our business models considering life cycle impacts in the markets we serve.Our 2030 goalInnovate for good25DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesDuPont 2024 Sustainability Report25Source circular raw materials y Develop partnerships with strategic customers and suppliers to scale circular opportunities for critical raw materials y Advance sourcing and use of low-carbon,recycled,and bio-based raw materials y Implement robust traceability and certification practicesOptimize our manufacturingprocesses y Design efficient processes y Maximize yield and minimize losses in our manufacturing operations y Advance 4R waste reduction opportunities(reduce,reuse,repurpose,and recycle)Design circular products y Collaborate with our customers on circular process and design opportunities y Advance circular LCA and product marketing claims competencyRecover and reprocess materials at end-of-use(to enable circular value chains)y Collaborate with strategic customers,suppliers,and third parties to establish fully circular value chains y Advance product takeback,reverse logistics,and material reprocessing capabilities Our approachto circular economyDuPont Tyvek T500 for garments Our approach Our circular economy approach guides how we address waste,material use efficiency,and design challenges across our innovation platforms and global businesses.Our approach defines how to incorporate circular economy principles at four different points in product life cycles.Each stage in the product life cycle requires different types and levels of investment and presents both unique and complementary challenges.Circular economy strategies will differ for each of our global businesses and innovation platforms depending on their targeted innovation and sustainability challenges.Establishing a cultureof learningIn 2023,we advanced a circular economy learning culture to support our businesses and customers.Based on insights from stakeholder engagements,we affirmed the elements of our approach to circular economy and identified internal subject matter experts to develop learning modules for key themes.We convened a series of virtual interactive circular economy learning seminars with DuPont practitioners on topics including circular product case studies,life cycle assessment(LCA)for circular product marketing claims,mass balance accounting and certification,and recycling partnerships.The internal seminars directly engaged over 1,100 employees in 2023 and were recorded for employees who were not able to attend,as well as for future learning opportunities.Strategic insights on circular economy from our customersThe results of our customer engagements in 2023 confirmed the importance of circular economy drivers in our global value chains,with 60%of our strategic customers citing the issue as a high priority.Specific issues in order of importance include waste and environmental pollution,circular product design,and recycled and bio-based raw materials.The results of our first comprehensive portfolio sustainability assessment(PSA)show alignment between our innovations and market drivers,with more than 15%of our innovation projects providing circular economy benefits for our customers and value chains.Across automotive value chains,circular economy is an even higher priority,driving innovation in design for recycling solutions and transparency as the industry prepares for Digital Product Passport(DPP)and related European Union regulations.Throughout this section,we highlight circular economy actions and innovations from across our global businesses that demonstrate the differential drivers and investment decisions needed for a multi-industrial company serving many markets and value chains.Innovate for good26DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendices Design circular productsOne of the most impactful ways DuPont can enable a more circular economy is through designing innovative circular products and processes with customers and value chain partners.Through our scientific and application development expertise,we work with customers to improve how products are designed,processed,and used by consumers.When designing circular products and processes,we:yCollaborate with our customers on circular process and design opportunities;and yAdvance circular LCA and product marketing claims competency.The following are examples of circular product and process design delivered in 2023.Partnering for extended lifetime in roofing applicationsBuildings account for a significant amount of global energy consumption,and coupled with changes in climate and weather patterns,improvements in roofing performance,energy efficiency,and lifetime can have a dramatic impact on sustainability and consumer wallets.Two examples of DuPont partnerships with roofing suppliers illustrate our collaborations to drive improvements in circularity:The Duro-Life 600 Roofing System is a sustainable,50-year commercial low-slope roofing solution that significantly reduces replacement costs and minimizes the amount of building materials that enter the waste stream.Powered by Styrofoam Brand XPS insulation,this roofing system offers 50 years of consecutive thermal performance compared to conventional polyisocyanurate insulation,which offers only 15 years.The roofing system was developed through a collaboration between Duro-Last and DuPont,two trusted leaders in commercial roofing and sustainable construction.Nearly 40%of Americans who live in coastal communities are facing an increasing chance of damage caused by hurricane force winds and saltwater spray.U.S.Steel and DuPont launched COASTALUME,which combines the strength of U.S.Steels GALVALUME material with the resilience and flexibility of DuPonts Tedlar PVF film.Tedlar withstands saltwater corrosion,UV damage,cracking,impact and more.COASTALUME carries the longest available coastal warranty for metal panels,ensuring buildings look new and last for many decades,even in the harshest environments.Driven to continuously improve operational excellence,the Global Packaging Group at Teleflex Incorporated(Teleflex),undertook a package redesign project to improve manufacturability and sustainability of its Central Venous Catheter(CVC)Arrow ErgoPack Complete System product package.Like many other medical device manufacturers of large kits,Teleflex relied on a preformed tray,but the legacy packing process design was laborious and dependent on manual operations.Teleflex identified this as an ideal opportunity to improve life cycle efficiencies and reduce packaging waste.The Teleflex team looked to a form-fill-seal(FFS)packaging process;however,the number of configurations and overall weight and size of these kits presented unique challenges.The transition in both the package format,design,materials,and manufacturing process demonstrates the adaptability and functionality that Tyvek Healthcare Packaging brings.Tyvek was an integral part of this packaging solution due to its superior strength and durability.Tyvek resists tearing and puncture damage while providing an outstanding microbial barrier to help ensure patient safety.The new flexible FFS package design reduced the packaging weight by an average of 67%leading to an avoidance of nearly 120 tons of plastic packaging on an annual basis.Improving manufacturability and sustainability with new packaging designInnovate for good27DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesStarting in early 2024,the packaging for some Tyvek,Tychem,and ProShield garments will transition to being made with a minimum of 50%PCR content.Some European Union countries have already implemented new packaging regulations with the aim of reducing the use of virgin grade polymers and enforcing the use of PCR raw materials.While the regulations are currently country specific,DuPont Personal Protection is proactively working to collaborate with customers and prepare its operations for increasing packaging and packaging waste regulations.DuPont Personal Protection will continue to roll out this new packaging throughout the year.The new coverall product packaging,pictured here,uses 50%less virgin grade low density polyethylene(LDPE).We are also eliminating the transparent outer bags used in Tychem garment packaging,which will further reduce the use of LDPE.These changes enable DuPont and our customers to meet regulatory requirements and advance circular raw material utilization goals.Increasing post-consumer recycled(PCR)content for Tyvek,Tychem,and ProShield garment packaging1Our Tyvek manufacturing facility in Luxembourg received the International Sustainability and Carbon Certification(ISCC)PLUS certification in 2023.ISCC PLUS is a globally recognized certification system for developing sustainable supply chains through the incorporation of bio and/or circular materials.This certification verifies and validates the adoption of clear,transparent,and traceable practices for organizations using the mass balance approach for maintaining chain of custody.“ISCC PLUS enables the use of sustainable raw materials derived from renewable and recycled sources through the mass balance approach.This helps enable the gradual replacement of fossil fuel-based raw materials and a lower carbon footprint for Tyvek products,which can be transferred to our value chain partners who continue to eagerly seek more sustainable products.”David E.Domnisch,Vice President and General Manager,DuPont Tyvek and TyparTyvek Luxembourg facility achieves ISCC PLUS certification for use of circular raw materials1 Minimum 50%PCR in packaging.Source circular raw materials Circular inputs to production have decreased over the past five years from 9.1%to just 7.2%,while resource consumption continues to increase1.For society to move from wasteful linear value chains to a more circular economy,its imperative that we begin scaling the production of economically viable,circular raw materials.This will require new partnerships and increased value chain collaboration,innovations in post-consumer waste processing,and the separation and purification of valuable components.In addition to waste reduction,there is a strong connection between circularity and efforts to develop and scale low-carbon raw materials.In sourcing circular raw materials,we:yDevelop partnerships with strategic customers and suppliers to scale circular opportunities for critical raw materials;yAdvance sourcing and use of low-carbon,recycled,and bio-based raw materials;and yImplement robust traceability and certification practices.We have several projects in our innovation pipeline that advance the sourcing and utilization of circular raw materials.The following are examples of results we delivered in 2023.In addition to the featured initiatives,were working with our strategic suppliers to understand and identify opportunities to reduce the carbon footprint of raw materials.1 The Circularity Gap Report 2024 by Circle Economy Foundation,which is available at https:/www.circularity-gap.world/2024#download under a Creative Commons Attribution-ShareAlike 4.0 International License.Full terms of the Public License are available at https:/creativecommons.org/licenses/.Innovate for good28DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesOptimize our manufacturingprocesses As we work to advance circularity across our global value chains,we recognize the importance of optimizing our own manufacturing processes and sites.To optimize our manufacturing processes,we:yDesign efficient processes;yMaximize yield and minimize losses in our operations;and yAdvance 4R(reduce,reuse,recycle,repurpose)waste reduction opportunities.By 2030,we aim to have 4R(reduce,reuse,repurpose,recycle)waste management and reduction programs implemented at all our sites.To do this,our teams work across businesses and with customers to identify opportunities to develop and deliver technical solutions that simultaneously reduce waste to landfill and realize financial or societal benefits.To learn more about our environmental and waste management programs,see the Delivering world-class environmental,health,and safety performance section of the report.Our Asia CMP(Chemical Mechanical Planarization)Manufacturing&Technology Center was selected as a“Resource Recycling Excellent Enterprise”by the Ministry of Environment in Taiwan.This site was recognized because it designed reusable chemical containers to replace disposable ones and significantly reduce hazardous waste generation.Some of the waste generated during manufacturing required special handling and was stored in paper drum containers,necessitating incineration of the containers along with the waste.The site replaced disposable containers with stainless steel reusable containers and streamlined waste disposal by eliminating transfer to a secondary shipping carrier.An automatic loading system equipped with a valve and a monitoring system to accurately measure the amount of waste loaded also improved efficiency and enhanced work process safety.The upgrades eliminate 4.4 tons of waste volume annually.Asia CMP Manufacturing&Technology Center recognized as outstanding resource recycling enterprise Waste solvent is generated in many industrial manufacturing processes,including in the production of advanced display materials at DuPonts plant in Cheonan,Korea.Most of the sites waste solvent has historically been sent to a third-party for incineration,which produces GHG emissions.The DuPont team adopted a cross-functional approach to create impact through our 4R program:yProcurement helped the site identify a new third-party vendor who can take the waste solvent and secondly,a refinery facility that can recycle the solvent to a suitable quality for reuse in other applications;yProduct Stewardship helped the site team understand local auditing regulations and used the DuPont EH&S Standards for qualifying the third-party vendor,transportation,and refinery facility;and ySite Operations helped to collect samples and worked with the third-party vendors to assess options for recycling and reuse.The pilot program successfully recycled 20%of the sites waste solvent,which was converted into raw materials for other chemical products.The team plans to double the volume in 2024.Recycling waste solvent from advanced display materials manufacturing in Korea77%of our sites had 4R programs in place in 2023Innovate for good29DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesRecapture valuable materials at end of use As recycling rates have declined over the past five years,solid waste generation continues to grow.According to the World Bank,the world generates slightly more than 2 billion tons of municipal solid waste annually,with at least 33%not managed in an environmentally safe manner1.In response to this growing challenge,leading companies have developed product takeback programs to recover valuable materials and have worked with public and private sector organizations to address waste collection and recycling infrastructure.Globally,government agencies have responded by enacting or proposing waste recycling and extended producer responsibility(EPR)regulations.The societal and environmental challenge is that waste generation from single use products and products with limited lifetimes is built into our systems of production and consumption and will not be addressed without significant effort to create more circular value chains.At DuPont,were advancing initiatives and collaborating with strategic customers to recapture valuable materials at end of use.To recover valuable materials and enable circular value chains,we:yCollaborate with strategic customers,suppliers,and third parties to establish fully circular value chains;and yAdvance product takeback,reverse logistics,and material reprocessing capabilities.The following case studies highlight results we delivered in 2023.1 World Bank,“Trends in Solid Waste Management.”https:/datatopics.worldbank.org/what-a-waste/trends_in_solid_waste_management.html”DuPont launched an industry-first program for take back of solid surface samples.Customers use small sample tiles of Corian Solid Surface products to assess the aesthetic of colors and patterns they are interested in.Our take back program allows customers to return these samples free of charge for repurposing into new samples or recycling into new Corian Solid Surface products.This approach reduces the use of new material and the costs to dispose of or remove scraps.We are currently seeking TRUE certification,which will validate our commitment to turning waste into savings and environmental responsibility.In 2024,we plan to increase the reach of this program by involving more value chain partners to help us divert even more material from landfills.Launch of Corian design sample take back program Disposable personal protective equipment(PPE),from face masks to coveralls,is essential to protect workers across many industrial sectors.However,this vital equipment is generally more complex to recycle than other textiles.While chemically or biologically contaminated PPE must be appropriately disposed,uncontaminated items are potentially recyclable.Most disposable garments are manufactured using blends of plastics,which can make the recycling process complex.Even when garments are recyclable,the outcome is often low-quality plastics with limited applications.Tyvek PPE is made using a single materialhigh-density polyethylene(HDPE)through a patented flash-spinning technology.Therefore,Tyvek is easier to recycle than other multi-material fabrics and enables the production of higher quality HDPE end products.The new recycling program enables German companies to work directly with plastic recyclers and ship used clothing directly to them in large batches.Participating Tyvek customers reduce plastic waste while limiting transport emissions and reducing landfill and incineration costs.DuPont launches recycling initiative to reduce PPE waste in EuropeInnovate for good30DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesRead on for our approach tosafe and sustainable by designInnovating safe and sustainable by designAdvance sustainable chemistry in the design of our products and processes,addressing substances of concern and communicating with stakeholders on our performance.DuPont BETASEAL 1585 automotive glass adhesiveOur 2030 goalAccomplishments in 202325commercialized products that avoided or eliminated the use of substances of concern(SoC).y Completed PFAS and Bisphenol-A phase-out plans for E.U.BETAMATE Structural Adhesives portfolio that will expand globally with new product commercialization.y Completed effort to replace 2-pyrrolidone solvent in DuPont Artistri digital printing inks with safer non-regulated alternatives in over 70 products for key customers ahead of expected regulatory restrictions.y Reformulated Thermax Non-Halogen(NH)Series of insulation products,achieving Living Building Challenge(LBC)Red List Approved certification,meaning that 99%of ingredients contain no Red List chemicals.Strengthened our list of SoC with current or future potential restrictions on uses relevant to DuPont to include endocrine disruptors,heavy metals,heavy metal salts,and substances that are persistent and bioaccumulative.Products that contain substances on this list are subjected to additional governance and mitigation plans.Advocated for the establishment of external science-based frameworks and regulations for SoC that support innovation,economic growth,and human health and safety.30R&D projects funded to phase out SoC in targeted products and applications.Note:At DuPont,we define a SoC as a substance that is known to have an inherent capacity to cause significant adverse effect on humans or animals,and with known routes of human and/or environmental exposure and are subject to current or future regulatory action.Innovate for good31DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesDuPont 2024 Sustainability Report31Semiconductor chips being sliced for use in printed circuit boards Drive efforts to avoid,eliminate,or minimize substances of concern(SoC)across our portfolioUse green chemistry principles when designing new products and processesDesign next generation products cognizant of evolving regulatory trends and consumer preferencesOur approach to safe and sustainable by designOur approach At DuPont,it is our responsibility to ensure our products are safe and sustainable by design.As a principle,we seek to avoid,eliminate,or minimize substances of concern(SoC)where safer or more sustainable alternatives exist.We have developed a culture focused on building transparent relationships with our suppliers and customers and integrating safe and sustainable by design principles to deliver value,support transparency,and drive competitiveness.Our culture drives us to critically evaluate our operations,value chains,and raw materials to ensure continued improvement in the safety,sustainability,and societal benefits of our products.Advancing a culture of safe and sustainable by designTo advance a culture of safe and sustainable by design,we:yApply science-based approaches:Our scientists and product stewards use science-based approaches to assess and appropriately mitigate risk early in the design phase and trigger additional assessments for existing products as new science-based data becomes available;yUse green chemistry principles:Our scientists utilize our Kingston Technology Centre expertise in Green Chemistry to identify opportunities to eliminate or reduce the use of SoC,minimize the burden on resources,and eliminate or reduce the generation of hazardous waste;yAssess risk:We continue to advance the skills needed to evaluate risk versus societal benefit throughout the entire life cycle of our products from raw material selection,product design,formulation,manufacture,sales,product use,and disposal;yManage SoC:We utilize a SoC list,conduct risk assessments,and implement risk mitigation plans to avoid or phase out of SoC in raw materials,processes,and products where possible;DuPont Automotive TeamStuttgart,GermanyInnovate for good32DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendices yEngage customers:Our customer engagement survey showed more than 80%of our customers identified safe and sustainable chemistry as a priority sustainability topic.We use customer engagement protocols to align our products with the safety and sustainability expectations of our customers;yEngage suppliers:We partner with our suppliers to drive transparency regarding the presence of SoC in the materials we procure and evaluate opportunities to reduce or eliminate SoC in our inputs;yDesign for circularity:We assess the impacts SoC may pose on circularity and ensure we collaborate with our suppliers and customers to consider SoC in the design for circularity where practical;yDrive continuous improvement:Using a portfolio sustainability assessment(PSA),we drive a culture of continuous improvement not only informing the design of new products but also to inform opportunities for mitigation and phase out plans for SoC in our existing portfolio;and yUtilize multigenerational product plans:We are using multigenerational product plans to replace or minimize the use and presence of SoC,including per-and polyfluoroalkyl substances(PFAS).Dyeing and printing is an important part of textile production;however,20%of industrial water pollution globally is attributable to the dyeing and treatment of textiles.With environmental concerns in mind,many manufacturers in the printing industry are moving toward digital printing methods using pigment inks because of the water savings and waste reduction they can achieve with this technology.A solvent,2-pyrrolidone,is commonly used in the inks formulation with an important role in polymer binders and dispersant.However,it is a precursor to N-methyl-2-pyrrolidone and is part of a global harmonization of SoC for consumer applications.Artistri scientists have completed a three-year effort to replace 2-pyrrolidone solvent in inks with safer,non-regulated alternatives while maintaining equivalent performance and shelf life.Through new synthetic strategies to produce polymer binders,dispersants,and inks,and with a cross-functional team,Artistri renewed and brought its offerings to the market ahead of regulatory restrictions.In all,the impact of this program results in the elimination of 2-pyrrolidone in over 70 binders,dispersions,and inks used in digital printing for key customers.This work supports the overarching trends of printers moving to digital printing for consumer products and demonstrates DuPonts commitment to being ahead of the curve with regard to SoC across our portfolio.Innovating safer and more sustainable alternatives into water-based digital printing inks Case studyBETAMATE Structural and BETASEAL Elastic Adhesives multigenerational product plans drive SoC elimination across entire portfolio y Completed PFAS and Bisphenol-A phase-out plans for E.U.BETAMATE Structural Adhesives portfolio that will expand globally with new product commercialization.y Completed N-methyl-2-pyrrolidone phase-out plans in all new BETASEAL Glass Bonding adhesives technologies.Pictured above:DuPont Artistri Digital Textile InksInnovate for good33DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesProduct stewardship commitment Our product stewardship commitment drives us to ensure that the products we bring to the market are safe for use across their life cycle and contribute to a sustainable environment.Our rigorous and comprehensive Product Stewardship and Regulatory(PS&R)Management System is at the core of our commitment to product safety and risk management.Built on the framework of the American Chemistry Council Responsible Care Product Safety Code and International Council of Chemical Associations principles,this system plays a critical role in our product and application development processes.Every DuPont business uses the PS&R Management System to assess and manage potential risks and identify improvement opportunities.The adequacy and effectiveness of the PS&R Management System is reviewed annually to ensure continuous performance improvement throughout the organization.Product Stewardship ReviewsCentral to the PS&R Management System are Product Stewardship(PS)Reviews.As part of our PS Reviews,a cross-functional team of business,science/technology,and regulatory subject matter experts use the protocols established in our PS&R Management System to assess and address the impact of any new,or modified,product or process.All new and existing products,applications,and services undergo Product Stewardship Reviews,which include detailed health,safety,and environmental impact assessments.Detailed PS Reviews are then conducted on a set cadence for products that have not undergone any modifications.Reviews are tailored to encompass product use and potential application areas.PS Reviews evaluate risks during transportation and during customer use based on a detailed assessment of the chemical,physical,and biological impacts of substances.Risk assessment includes evaluation of toxicology data,environmental fate,and worker and customer exposure,as well as non-human and environmental impacts.Broadly inclusive,PS Reviews focus on the full product life cycle from product design and manufacture to customer use,safe handling,and disposal.As a result,we decide whether to continue developing or modifying a product,application,service,or process.If the findings from a PS Review identify a negative impact,the affected product or process is either redesigned or discontinued.Product transparency andlabeling Safe handling and use of products is foundational to product safety.DuPonts PS&R Management System ensures compliance with global and local safety data sheet(SDS)and labeling information requirements.As a result,every DuPont product includes SDSs and labels providing essential information.We continue to increase product transparency through enhanced documentation,including sustainability and transparency declarations,certifications,and analyses for products in our portfolio.25 products that avoided or eliminated the use of SoC were commercialized in 202330 R&D projects funded during 2023 to phase out SoC in targeted products and applications1,100 Product Stewardship Reviews were held across DuPont businesses globally in 2023DuPont Cyrel Flexographic PlateInnovate for good34DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesReducing the environmental impact of boron nitride in thermal interface materialsBoron nitride(BN)is one type of high-performing,thermal conductive filler widely used in thermal interface materials for heat dissipation.Laird Performance Materials has transitioned to a new manufacturing process that replaces the original boron nitride.Currently,five of 12 product lines using original boron nitride have been replaced,reducing 17 MT of landfill,3.8MM liters of wastewater,and 65,000 liters of acids/bases from the processing.In addition to plans for converting the rest of the product lines,there is also a cost savings benefit realized with this raw material replacementdemonstrating that sustainability progress can be good for business competitiveness.Responding to industry recommendations for reductionof methanol DuPont has been proactive in addressing the needs of its semiconductor chip end-users who are members of the Responsible Business Alliance(RBA).RBA has listed methanol on its Industry Focus Process Chemical List and has recommended reducing its use and keeping it to less than 0.1%in final product.DuPonts Interconnect Solutions business identified the metallization products that use methanol,and several teams,including engineering,manufacturing,and technology,worked together to remove methanol completely.Our teams identified an acceptable solution that surpassed customer and industry requirements while maintaining the quality and performance of the product.Reduction of sulfuric acid peroxide mixture(SPM)usage in Ceria post-CMP cleaning Chemical mechanical planarization(CMP)is a critical process in the production of semiconductor devices.However,the steps following Ceria slurry CMP polishing are highly demanding and require an additional sulfuric acid peroxide mixture(SPM)process.In order to address concerns over hazardous waste,toxic chemicals,and tightened environmental regulations,customers want reduced SPM volumes.DuPonts solution involves streamlining the Ceria post-CMP cleaning process to a single step,simplifying the entire procedure.This approach not only reduces SPM usage,but it also frees up valuable footprint space for other semiconductor production tools.Annually,environmental benefits include 400,000 gallons less of deionized water usage,200,000 gallons less of SPM,and 100 MTCO2e less of GHG emissions.A year of impactful contributionsInnovating safe and sustainable by design for semiconductor manufacturingEngineered for both concealed and exposed wall insulation applications,Thermax Sheathing is an easy-to-use nonstructural rigid insulation board with a fiberglass-infused foam core that helps improve fire performance and dimensional stability.Reformulated Thermax Non-Halogen(NH)Series makes DuPont the first Class-A polyisocyanurate sheathing manufacturer to phase out halogenated flame retardants from our formulations,setting a new standard for the industry.Our commitment to green chemistry innovations has driven us to remove priority substances from our portfolio,and the Thermax NH Series is a remarkable example.We are proud to say that this product line has achieved Living Building Challenge Red List Approved certification under the Declare label,meaning that 99%of the ingredients present and disclosed at above 100 ppm in the product contain no Red List chemicals.Setting a new standard:Thermax Non-Halogen Series insulationInnovate for good35DuPont 2024 Sustainability ReportSustainability strategyIntroductionProtect people and the planetEmpower people to thriveGovernanceAppendicesInnovate for goodAdvancing equity and inclusion of women law enforcement officers with science Traditionally,large numbers of law enforcement officers were male and protective body armor was designed for their sizes and shapes.Female officers often use ill-fitting garments that put their own safety at risk.Gear designed for male torsos leaves exposed areas under the shoulders,back,and upper chest that arent adequately protected.Additionally,torso differences could inhibit waist and hip movement when fast action is needed.Scientists at ETC have developed Kevlar and Kevlar EXO products with a thermoforming process to allow for the design of customized vest molds and other ballistics solutions,like helmets and shin guards.These thermoformed Kevlar products provide better fit for individuals across varying body shapes and sizes,an
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Table of Contents03 Making Good for Our Future04 A Message from Our CEO05 A Message from Our CSO06 Double Materiality Assessment07 Our ESG Approach and Priorities08 Progress Toward Our Priority Goals09 Stakeholder Engagement and Select Memberships and Partnerships10Our ESG Governance11Awards and Recognition12 Our Company13Our Snacks Portfolio14Satisfying Consumer Needs15Excellence in Food Safety16Ethics and Compliance17Data Protection and Cybersecurity18Marketing Responsibly19Our Progress21 Cocoa22Cocoa For Good23 Cocoa For Good in the World24 Cocoa Partners26 Improving Farmer Income and Livelihoods28 Childrens Well-being32 Creating a More Resilient Supply Chain34 Our Progress37 Responsible Sourcing and Human Rights 38 Human Rights Across Our Value Chain39 Concentrating on Our Most Salient Human Rights40 Action on Human Rights43 Responsible Recruitment and Employment44 Living Wage and Income45 Responsible Sourcing46 Responsible Sourcing Supplier Program48 Sourcing Our Priority Ingredients and Materials53 Our Progress59 Environment60 Action on Climate Change61 Managing Climate Risk62 Progress on Emissions63 Reducing Emission in Our Operations64 Reducing Emissions in Our Value Chain66 Hersheys Climate Action67Water:An Invaluable Resource69 The Significance of Biodiversity 71Making Progress on Packaging72New Solutions for Waste73Employees Catalyzing Change74Our Progress83 Our People84 Lead Today,Create Tomorrow85 Employee Well-being and Development87Investing in Development to Create Tomorrow88 Safety First89 Accelerating Togetherness Efforts90 More Pathways to JOIN92 More Pathways to REACH OUT93 More Pathways to GROW95 Our Progress103 Youth104 Projects for Well-being105 Empowering the Next Generation106 Education and Opportunity107 Our Progress108 Community109 Hershey For Communities112 Employee Impact113 Our Progress114 About This Report115 Material Issue Definitions117 Salient Human Rights Issues Definitions ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report2The Hershey Company 2023 ESG ReportOur purpose is to Make More Moments of Goodness for consumers today and for future generations.Our global sustainability strategy,Our Shared Goodness Promise,is integral to our long-term success in achieving that purpose.In this report we show how we are embedding sustainability into our operations to build business resiliency and create a better future for all.In this chapter:04A Message from Our CEO05A Message from Our CSO06Double Materiality Assessment07Our ESG Approach and Priorities08Progress Toward Our Priority Goals09Stakeholder Engagement and Select Memberships and Partnerships10Our ESG Governance11Awards and Recognition ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report3The Hershey Company 2023 ESG ReportA Message from Our CEOWe are about so much more than chocolate,candy and snacks.We are about creating experiences filled with emotional connection.Those moments inspire us and define who we are and we are proud of the way our products are created.”Michele Buck,Chairman,President and CEO The Hershey CompanyAchieving our vision of being a Leading Snacking Powerhouse requires leadership,agility and discipline inacomplex and dynamic marketplace.At Hershey,we have had some incredible years of growth.Continuing this requires significant,smart and exciting transformations within our business.Underpinning our business goals and success is the focus we have on our most material risks,opportunities and how we hold ourselves to the highest integrity,quality and safety standards.We remain committed to driving positive impact in our six sustainability focus areas:cocoa,environment,responsible sourcing and human rights,people,youth and community.This report highlights Hersheys progress and challenges asweintegrate sustainability further into our business operations to reduce our environmental footprint.Our actions are aimed at improving the ecosystems critical for the ingredients that go into our products and making a positive impact inthe lives of those along ourvalue chain.While we have more to do on this journey,I am proud of how our teams have come together.We have worked to address the needs of cocoa farmers with the Hershey Income Accelerator Program,reduce our greenhouse gas emissions and packaging materials,and strengthen our due diligence andreporting systems and processes.I have often stated that our people are the secret ingredient to our competitive advantage.We are motivated by our purpose of Making More Moments ofGoodness and our business success and growth is reflective of our core values:Togetherness,Integrity,Making a Difference and Excellence.We remain focused on learning and development for all employees,building an inclusive workplace where everyone can contribute and be rewarded,and we continue to be actively involved in our communities.In particular is our unique relationship with Milton Hershey School that supports children with a world-class education.Hershey has a long history of successfully adapting to rapid change and uncertainty.As a leading chocolate manufacturer,the volatility in cocoa is unprecedented.Cocoa remains our top priority and while there is more todo,we are proud of our continued progress toward greater visibility and engagement with the farmers who grow this important ingredient.Fast-moving regulatory actions continue to shape the sustainability landscape.We are strengthening our due diligence and reporting capabilities,as evidenced by our Disclosure and Assurance Reporting Center of Excellence and the cross-functional teams that are anticipating and preparing for these new regulations.As we transform and lead in the marketplace we are always seeking new business opportunities and our sustainability initiatives are being further embedded inhow we run our operations,including plant level targetsfor reducing emissions and water usage.Thecollective efforts of our team,in partnership withleading organizations and key stakeholders,willcontinue to propel us forward.We are about more than chocolate,candy andsnacks.We are creating experiences filled withemotional connection.Those moments inspire usanddefine who we are,and we are proud of the way ourproducts are created.Its Goodness in Action.The world we want tomorrow starts with the action we take today.There is no shortage of global issues that havethe potential to impact or disrupt our business.That is why we are action-oriented and impact driven.Asyoull read in the pages to follow,we remain focused onleading where we can make the biggest impact and working hard each day to bring goodness to the world.Michele BuckChairman,President and CEOThe Hershey Company ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report4The Hershey Company 2023 ESG ReportA Message from Our CSOWe remain focused on delivering today and creating the future.In 2024,we are refreshing our sustainability strategy as part of our Leading Snacking Powerhouse vision,a fast-moving regulatory environment and the maturation of many of our commitments.”Leigh Horner,Chief Sustainability OfficerThe Hershey CompanyTheres no question the world is rapidly evolving around us,whether its through the advancement of new technology,more agile ways of working or a dynamic marketplace and emerging consumer trends.Changes inthe sustainability landscape are plentiful innovations and best practices,policy and regulatory shifts,new frameworks to drive impact.We continue to advance our priority issues as we anticipate,digest and incorporate best practices and emerging standards.This report shares the actions that embody our values asacompany and are critical to our long-term ability tocreate the sweet and salty snacks that consumers love.Throughout this report,we share how we are working toachieve progress within our priority issues and overcome challenges.Cocoa continues to be our highest priority as it is central to our iconic chocolate brands.In 2023,we launched the Hershey Income Accelerator Program which aims to improve farmers livelihoods and reduce poverty in cocoa-growing communities.The program offers premiums for farmers cocoa,expands Village Savings&Loan Associations and ambitious initiatives to build schools inrural farming communities in Cte dIvoire.We made continued progress in reducing Hersheys emissions with a keen business focus on our owned emissions and expanded efforts to reduce emissions inourvalue chain while advancing nature-based projects tocombat climate change.We set water usage reduction targets for priority sites where water is most scarce.Ourrun of success in reducing packaging waste sent to landfills continued in 2023,as we phased out more than 1.7 million pounds of material by eliminating,redesigning and reducing packaging.We continue to operate with high integrity and build an inclusive workforce.We are proud of recognitions like being certified as a Great Place to Work in the U.S.,Canada,Mexico,Brazil,India and Malaysia,named as one of the Worlds Most Ethical Companies by Ethisphere,and most recently taking the#1 spot on Fair360s top companies for diversity in 2024.We also share obstacles we are encountering as we work and adapt to changes both within our business and in theworld around us.With change comes opportunity.AtHershey,we have grown exponentially over the last five years to bring our values and sustainability practices and processes to a growing portfolio of products through recent acquisition.We remain focused on delivering today and creating the future.In 2024,we are refreshing our sustainability strategy aspart of our Leading Snacking Powerhouse vision,a fast-moving regulatory environment and the maturation of many of our commitments.We are centered on becoming long-term partners to cocoa farmers,families and communities,giving us a deeper understanding of how tobuild a more economically resilient supply chain.We are also updating oursustainable packaging strategy focused onreducing materials and packaging emissions,andimproving circularity.My colleagues here at Hershey are committed to business excellence and making a difference for the planet and people.We take action.When we encounter challenges orbarriers to achieving our goals,we problem solve,learn from our experience and adapt.We make progress.As you review our report,we welcome your insight and feedback as we continue on this journey and build a successful and sustainable future.Leigh HornerChief Sustainability OfficerThe Hershey CompanyMilton Hershey SchoolOne of our founders most compelling contributions is the Hershey Industrial School for orphaned boys.Founded by Milton and his wife Catherine,they built the school with the intention of providing young boys with a productive and fulfilling life.Now named Milton Hershey School(MHS),this institution fosters the academic and social potential ofmore than 2,100 boys and girls,providing them with the skills and resources for success in all areas of life.Prior to his death,Milton Hershey left the entirety ofhis fortune with the school to ensure its continued success.MHS nurtures and educates children to lead fulfilling and productive lives.A familys income should not determine a childs outcome and MHS offers a cost-free education to qualifying students.The companys special relationship with the school means that ourbusiness success directlybenefits the school and studentslives.Learn more about our work with MHS on page106 in the Education and Opportunity page within the Youth chapter.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report5The Hershey Company 2023 ESG ReportDouble Materiality AssessmentWe completed a double materiality assessment in 2022,and continue to use its insights to maximize our strategys impact for our business,people and the planet.Our double materiality assessment followed a best-in-class process,building on previous assessments to provide a firm foundation for our commercial and ESG strategies.The assessment:Identified and ranked the ESG issues that affect us financially,and the ways our operations affect the world Confirmed we remain focused on the right ESG issues for our business,the planet and society An extensive list of ESG issues was distilled down toanarrower list of 27 issues.We further identified,prioritized and ranked the 14 issues most material toourESG and business strategies.All identified material issues remain core to our strategy.They are where we continue to focus most as we identify key risks,opportunities and emerging issues to inform OurShared Goodness Promise.The table on this page includes our final list of prioritized material topics.Some material issues are fundamental expectations andnon-negotiable elements of responsible corporate citizenship(e.g.,data protection and cybersecurity,ethics and compliance,workplace health and safety,and food safety and quality,to name a few)while others require even greater time and attention as we continue to developour long-termbusiness strategy(e.g.,traceability,soil health).For more details on our Double Materiality process,see page 7 of our 2022 ESG Report.For a full list of definitions for each material issue,see pages 115-116 of our 2023 ESG Report.Very High ImpactHigh ImpactModerate ImpactEnvironmental BiodiversitySoil healthDeforestationWaste managementEnergy managementGHG emissions and climatechangePackaging and end-of-lifeWater useSocialChild laborEmployee attraction,retention and development Animal welfareDiversity,equity and inclusion(DEI)Labor relationsWorkplace health andsafetyFarmer livelihoodsSupporting communitiesHuman rights(supply chain)Responsible sourcingGovernanceBusiness operations and supply chain resilienceBoard and executive oversightAdvocacy and lobbyingFood safety and qualityEthics and complianceData protection and cybersecurityNutrition and healthResponsible marketing andlabelingTraceability ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report6The Hershey Company 2023 ESG ReportOur ESG Approach and PrioritiesOur actions are informed by our material issues and organized around sixpriority areas(shown at right).Thesepriorities guide our ESG strategy,arecritical to ourbusiness operations and align with core principles from our founders legacy.Addressing these priorities is essential for Hershey tothrive.ESG is being integrated into the way we do business and included in our policies,strategies and operations.This is how we ensure we can deliver on our commitments and drive long-term sustainability growth.Creating a more resilient world and business requires work on many fronts.While each of Hersheys priority areas is given adedicated chapter in this report,the work is deeplyinterconnected.Environmental impacts,including climate change,threaten the livelihoods of the farmers and communities we rely on for our most important ingredients.Improving farmer incomes and professionalizing farming practices promotes cocoa-growing communities well-being and the long-term security of cocoa supply.Economically secure communities are less likely to make choices that would damage natural ecosystems and impact our procurement and responsible sourcing work.Systems thinking ensures we leverage our size and scale whenever possible to help create afuture full of goodness for all.We will continue to embrace this interconnectivity as we reset our sustainability strategy in 2024 in line with the evolution of our business,a changing regulatory environment and maturation of commitments in 2025.Building on our progress,and learning from challenges and successes,Hershey will continue to advance our legacy ofgoodness.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report7The Hershey Company 2023 ESG ReportUnited Nations Sustainable Development Goals(SDGs)With the companys extensive global reach,our work supports many of the United Nations SDGs from managing the impact of our supply chain to nurturing resilient communities.Our ESG priorities contribute toachievingthefollowing SDGs:Operating PrioritiesFoundational PrioritiesCocoaCreating thriving communities and environments behind our most essential ingredient.YouthGiving youth the tools tocreate compassionate,successful and connectedfutures.Responsible Sourcing andHuman RightsUsing robust due diligence and leading standards toprotect people across our value chain.CommunityActively making adifference where weliveand work.EnvironmentEnhancing our operations to meet high-impact climate,waste,water andpackaging goals.Our PeopleCreating more ways for more people to be themselves and thrive.Progress Toward Our Priority Goals Priority AreaPriority GoalsTargetProgress(as of Dec.31,2023)StatusNotesCocoa 100%independently verified cocoa2020 10000%sourcing visibility of Hersheys cocoa volume in Cte dIvoire and Ghana 2025 8900%of farmers producing Hersheys cocoa volume in Cte dIvoire and Ghana are polygon mapped by our suppliers to improve traceability and monitor deforestation2025 70%1,2100%of farmers producing Hersheys cocoa volume in Cte dIvoire and Ghana are covered by Child Labor Monitoring and Remediation Systems(CLMRS)to prevent,monitor and remediate child labor2025 79%1,3Responsible Sourcing and Human Rights100%of priority ingredients and materials to be responsibly and sustainably sourced(by volume)2025 86H5%of in scope supplier sites meet Hersheys Responsible Sourcing Supplier Program requirements2025 56%Environment50solute reduction in Scope 1 and 2 GHG emissions against a 2018 baseline2030 43R5solute reduction in Scope 3 GHG emissions against a 2018 baseline2030 15a00%of plastic packaging to be recyclable,reusable or compostable2030 32% million pounds of packaging to be eliminated203015.4 million pounds7Our PeopleAchieve pay equity for similar job categories across our global salaried employees 2025We have maintained aggregate salary U.S.gender pay equity since 2019 and aggregate U.S.salary POC pay equity since 2020.84750%women representation across all employees globally2025 48.2040%People of Color(POC)representation across U.S.employees2025 28.5%8,950%hazard reduction for job functions with ergonomic risks through process improvements2025 24.6Youth50 million children globally supported through education,nutrition,and social and emotional well-being202534,820,750 children11100,000 children take Heartwarming actions and impact their communities2025251,152 children12Community$105 million donated in cash and products to community partners focused on education,community economic development,inclusive communities and health and human services where we live and work2025$103.7 million131Data reflects results as provided by Hershey suppliers and implementing partners.Hershey strives to align our KPIs to industry best practices and methodologies,including those recommended by the International Cocoa Initiative(ICI),which are constantly improving and evolving.Sourcing visibility means cocoa from known farmers is segregated and traceable to the first buyer(i.e.,to the port or the factory in origin).From here cocoa may be mixed,and independently verified cocoa flows into our supply chain under a mass balance traceability model.When we talk about farmers producing Hersheys cocoa volumes,these are the known farmers where we have sourcing visibility.2Beginning in 2023,we are reporting progress based on an analysis of supplier-provided polygon maps.This analysis follows World Cocoa Foundation definitions and checks that all farm plots managed by a farmer are linked to received polygon maps before we consider a farmer to be mapped.3This refers to households covered by CLMRS.4This result represents the percentage by volume of Hersheys five priority ingredients,which met our definition of responsibly and sustainably sourced in 2023.This definition varies by ingredient and is subject to change as Hersheys responsible sourcing programs evolve.5Hersheys GHG emissions reduction goal for 2030 is based on Scope 1 and Scope 2(market-based).Our 2023 Scope 1 and Scope 2 data received limited assurance by EY.6Our 2023 Scope 3 data is verified by Quantis.7Cumulative packaging waste eliminated(2021-2023)is 15.4 million pounds.This value includes Candy,Mint,and Gum products.It excludes all other product packaging and any non-Hershey purchased packaging materials.8Aspirational ranges based on economic labor analysis and Hersheys business outlook.9POC refers to Black,African American,Hispanic/Latino,Asian/Asian Pacific Islander,Hawaiian Pacific Islander and those who identify as two or more races.10 In 2023,this goal was expanded to include our North America Salty Snacks segment.As such,the denominator for this calculation has changed.All sites are on track to complete hazard reduction for ergonomic risks as planned.11 More than 34 million children were supported cumulatively from January 1,2020 to December 31,2023.12 More than 250,000 children took action and impacted their communities,cumulatively from January 1,2020 to December 31,2023.13 Hershey donated nearly$104 million in cash and products cumulatively from January 1,2020 to December 31,2023.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report8The Hershey Company 2023 ESG ReportAchievedOn TrackIn ProgressStakeholder Engagement and Select Memberships and PartnershipsWe operate our business with all stakeholders in mind and with a view toward long-term sustainability andvalue creation,even asour business and society face avariety of existing andemerging challenges.We leverage our expertise,along with external partners,tohelp address these challenges and opportunities so that wecancontinue to delight consumers and help make apositive impact in the world today and into thefuture.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report9The Hershey Company 2023 ESG ReportStakeholder GroupsStakeholder GroupExamples of how we engageCommunities where weoperate and non-governmental organizations(NGOs)Community event sponsorships Corporate philanthropy Employee giving and matching gifts Employee volunteerism and giving(e.g.,Board service,Good to Give BackMonth)In-kind/product donations Regular site visits and ongoing dialogue with community leaders and NGOpartnersConsumers&Customers Business review meetings with dedicated Hershey sales teams Corporate website including Hershey blogs and press releases Consumer Relations Global Customer Insights Center(GCIC)Hershey Insights Network(HIN)Mobile Customer Insights Center(MCIC)Employees Annual performance reviews and quarterly performance discussions Business Resource Groups(BRGs)Code of Conduct Employee Listening Strategy:Surveys,feedback,Q&A,listening sessions Employee Relief Fund Ethics&Compliance Concern Line Learning and development opportunities including company-wide training androle-specific courses Town Halls Volunteering and philanthropic activities(Matching Gifts,Dollars for Doers)Government,policymakersand regulators Advocacy through trade associations and/or in partnership with other companies Direct legislative advocacy Grassroots advocacy Industry association involvement and events Informational discussions with government officialsInvestors&Shareholders Annual shareholder meeting Investor Days or Investor Conferences Investor-facing website Engagement calls Quarterly earnings calls and webcasts SEC filingsSuppliers and other business partners including Farmers Ethics&Compliance Concern Line Industry events Supplier capability building trainings including webinars and in-person events Supplier Code of Conduct Supplier relationship management Select Memberships and PartnershipsPriority areaPartnersCocoaA list of cocoa partners may be found on page 24 ofthis 2023 ESG Report.Responsible Sourcing andHuman Rights AIM-Progress Airbus Alliance for the Chesapeake Bay Earthworm Foundation Living Wage For US New Foresights Responsible Labor Initiative Sustainable Dairy Partnership Sustainable Dairy PA Trusted Advisor PartnershipEnvironment Arbor Day Foundation Chesapeake Bay Foundation PUR Science Based Targets Network(SBTN)World Research Institute(WRI)Our People Asian Americans Advancing Justice Manufacturers Association of South Central PA NAACP ACT-SO Achievement Program Thurgood Marshall College Fund The Center for Innovation&Entrepreneurship(CIE)atHarrisburg UniversityYouth and Community American National Red Cross(ANRC)Boys&Girls Clubs of America Childrens Miracle Network(CMN)Crisis Text Line Feeding America Girl Up Girls on the Run Global Nomads Group Hazleton Integration Project(HIP)Junior Achievement Memphis Music Initiative Milton Hershey School United Service Organizations(USO)Youth Service AmericaOur ESG GovernanceWith ESG becoming more integrated throughout our business,we use a multi-level operating structure to prioritize andallocate resources to deliver onOurShared GoodnessPromise.The governance of Hersheys ESG program is structured to drive strategic alignment and operational execution against our priorities.Pursuant to our Corporate Governance Guidelines,ultimate responsibility for our ESG and sustainability governance oversight resides with our Board of Directors,which oversees all ESG matters,including our ESG strategies,priorities,progress,and risks and opportunities.Oversight of specific ESG responsibilities and reporting requirements are assigned to relevant Board committees,as stated in their respective committee charters.Board committees conduct regular reviews of significant ESG issues to help carry out these responsibilities.Accountability for ESG and sustainability resides with our CEO,with shared responsibility across the management team.Program strategy and operations are led by our Chief Sustainability Officer(CSO).Board of Directors The full Board oversees our ESG strategies and priorities,along with the most important emerging ESG trends,risks and opportunities.ESG-related oversight responsibilities are divided among the Boards committees,with oversight for ESG governance residing with the Governance Committee.Management and ESG leaders provide deep dives on ESG issues for the full Board at least once a year,with relevant committee updates occurring frequently throughout the year.As of May 2024,approximately 55%of our Board of Directors has ESG and human capital management experience.Audit Committee Reviews the companys public reportingwith respect toESG matters within the Audit Committeespurview.Compensation and Human Capital CommitteeOversees consideration of ESG matters in executive compensation program;oversees human capital management practices,including talent management,Diversity,Equity and Inclusion(DEI)and pay equity.Finance and Risk Management CommitteeReviews and oversees policies and procedures with respect to human rights,environmental stewardship andresponsible sourcing/commodities practices within the companys supply chain.Governance Committee Oversees governance of the companys ESG policies andprograms,including establishment of targets,standards and other metrics used to measure and track ESG performance and progress.Executive TeamOur CEO and her direct reports review Our Shared Goodness Promise strategies,data and progress against our commitments and targets,as well asemerging ESG and sustainability challenges and opportunities.The executive team ensures our sustainability initiatives are aligned with business strategy and finalizes ESG-related investments.The compensation of Hersheys executive team is tied to our ESG Priority Goals.This supports our efforts to achieve Hersheys carbon reduction goals,and islinked to our DEI aims,akey differentiator for ourindustry.Disclosure CommitteeHersheys Disclosure Committee,led by our Chief Accounting Officer and comprised of senior management in key functions,including our CSO.This committee ensures that our public disclosures,including those related to ESG,are consistent,accurate,complete andtimely.Sustainability Steering CommitteeComposed of key business leaders and ESG subject matter experts,this cross-functional group meets at least quarterly to evaluate ESG strategy effectiveness and interdependencies,provides input on investments to support ESG program deliverables and reviews progress toward goals and key performance indicators relevant toour global ESG and sustainability programs.Global Sustainability TeamLed by our CSO,this team is composed of ESG experts who manage the strategy,implementation and reporting of our global ESG and sustainability initiatives,including climate change and human rights.The Global Sustainability team communicates regularly with internal and external stakeholders who provide valuable perspectives on our strategies,program decisions andfocus.For more information on Board committees,ESG oversight and responsibilities and Hersheys approach to executive compensation,see our 2024 Proxy Statement.Enterprise Risk Management ESG topics are regularly evaluated as part of our Enterprise Risk Management(ERM)process driven andcoordinated by our Resiliency team.Hersheys ERM program identifies,evaluates,manages and mitigates thecompanys exposure to a wide range of risks includinghuman rights and environmental topics.ESG isastandalone key business risk within our broader enterpriserisk universe,alongside Human Capital andClimate andEnvironment.Our Board oversees the ERM program and our management team is responsible for its implementation.The Boards Finance and Risk Management Committee reviews key enterprise risks identified through the ERM process,aswell as risk-mitigation plans.Whats Next in ESG Governance Tracking and responding to the changing global ESGlandscape Sustainability disclosures and compliance for regulatory reporting requirements Increased limited assurance and third-party data verification Continuing our BOD and Executive education onESGand Sustainability topics 55%of Hersheys Board of Directors have ESG and Human Capital management experience(as of May 2024)ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report10The Hershey Company 2023 ESG ReportAwards and Recognition ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report11The Hershey Company 2023 ESG ReportFor 130 years,our values have guided how we do business.Operating as an ethical company is fundamental to building trust with our stakeholders.It is consistent with our focus on creating value for all stakeholders and transforming our business into a Leading Snacking Powerhouse.We are guided by a suite of carefully crafted policies and processes,developed to ensure that we operate responsibly and remain prepared,resilient and competitive.As our company innovates to meet the needs of confection and salty snack lovers,we continue to evolve and strengthen our approach to transparency and disclosure,adopting leading standards to ensure that Hershey keeps pace.Our decisions regarding business strategy,operationaldecisions and resource allocation are guided by our purpose androoted in ourvalues.In this chapter:13Our Snacks Portfolio14Satisfying Consumer Needs15Excellence in Food Safety16Ethics and Compliance17Data Protection and Cybersecurity18Marketing Responsibly19Our ProgressOur ValuesTogethernessMaking a DifferenceIntegrityExcellence ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report12The Hershey Company 2023 ESG ReportOur Snacks PortfolioWe craft snacks that work for every occasion from indulgent treats for special moments to options that support a healthy lifestyle.We use quality ingredients andleading manufacturing standards and provide user-friendly nutrition information on our packaging to offer trusted snacks that are safe and delicious.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report13The Hershey Company 2023 ESG ReportSatisfying Consumer NeedsFulfilling our purpose to Make More Moments of Goodness means delighting consumers with snacks that fit a variety ofnutritionand lifestyle choices.There are many different consumer preferences and lifestyle choices.While 72%of Americans snack at least once a day,52%followed a specific eating pattern or diet in 2023.1 Important issues include sharing with family,balanced nutrition,affordability and the availability of plant-based products.Hershey deeply understands our consumers and offers awide range of options to satisfy their needs.We invest inresearch to propel product innovation,create better retail experiences and expand supply chain infrastructure.Consumer ChoiceFor 130 years,Hershey has created snacks that consumers love,even as tastes have evolved.We provide classic Hershey treats like our Hersheys bars and Reeses Peanut Butter Cups,but we are also creating more products to satisfy a variety of needs and lifestyles.Whether consumers aim to limit sugar,add protein or lead a more sustainable lifestyle,Hershey offers a wide range of options.Our portfolio is tailored to empower consumers to choose snacks that work for them,providing:Portion control Reduced-and zero sugar Plant-based andother options To meet present and future consumer expectations,wemonitor emerging needs and make investments inthefuture of our business.Everytouchpoint is an opportunity to drive growth by serving consumers and customers in more personal,innovative and effective ways.Our team of nearly 200 research and development employees focus on innovation in formulations,finding ways to create new options that,for example,reduce theamount of sugar and salt in our products,which someconsumers prefer to avoid.Having the right information to make choices is also essential for consumers.We remain committed to transparency about what is in our products.We helped develop the SmartLabel technology for U.S.products,giving detailed information by scanning a QR code on packaging.We maintain more than 2,250 SmartLabel product pages with details such as allergens,product claims,nutrition and ingredients.As our portfolio grows we will continue to add SmartLabels.Low and Zero SugarSugar intake is on many consumers agenda:72%are trying to limit or avoid it.1 With Lilys,Dots and Skinny Pop now in the Hershey portfolio,we are even better positioned to offer options that are lower in both sugar and saturated fat.In 2023,we launched several better-for-you options:Lilys Peanut Butter Chips Reeses Zero Sugar Baking Chips Lilys Peach Rings Lilys Watermelon SlicesProtein SnacksResearch shows that increasing numbers of consumers areaiming to add protein to their diet 67%,up five points in just two years.1 We offer a growing number of high-protein,better-for-you snacks,alongside the FULFIL Nutrition and ONEprotein bars already in our portfolio.ONE Puffs was launched in 2023 and we plan to launch new flavors of ONE bars in 2024.Whats Next in Satisfying Consumer Needs Continue meeting consumer interest in sugar reduction and protein enhancements across our better-for-you confection portfolio Continue funding research to develop sugar alternatives thatdeliver the same taste,quality and experience consumers expect from our cherished brands,such asour investment in rare-sugar maker,Bonumose Plant-based for the WinAs more consumers look for dairy-free alternatives,we introduced two delicious new plant-based options in 2023 Hersheys Plant Based Bar and Reeses Plant Based Cups.Consumers have been enthusiastic,and the data backs this up.Our plant-based Reeses item has a higher rate of repeat purchase than any other Reeses product in recent years,according to one of our major retailers.TheHersheys Plant Based Bar won an award for Favorite Vegan Chocolate in the 2023 peta2 LibbyAwards.Recipients are selected based onnominees enthusiasm for animal rights and votesfrom consumers.Hersheys unwavering commitment to customer satisfaction is exemplified by our relentless pursuit of innovation,constantly adapting to evolving tastes and preferences to deliver unparalleled choices.”Charlie Chappell,Vice President,Innovation and R&D,The Hershey Company ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report14The Hershey Company 2023 ESG ReportMaterial ESG issue:Nutrition and health1 2023 Food and Health Survey,International Food Information Council.Excellence in Food SafetyCommitment to the highest food safety andquality standards is critical to ensuring our products create more goodness forconsumers.Our Proactive Approach to Food SafetyOur Product Excellence Program(PEP)takes a preventive approach to managing food safety and quality.It identifies food safety,product quality and regulatory opportunities at every stage of our value chain.This ensures Hershey products comply with all applicable laws and regulations and are manufactured under strict requirements.We will continue to use PEP assessments and integrate recently acquired sites in our North America Salty Snacks segment in 2024.The Quality Center of Excellence team oversees the PEP to ensure its rigorous controls,monitoring and auditing practices are applied throughout the value chain.The Global Regulatory team regularly monitors emerging regulations and industry practices so Hershey stays ahead.The PEP meets or exceeds current Global Food Safety Initiative(GFSI)standards and all Hershey-owned manufacturing facilities are GFSI-certified.Food Safety is Everyones Responsibility We are proud of our systems and third-party verifications but people are the real guardians ofgoodness.Every person at a food manufacturing companyis responsible for food safety.We therefore trainpeople in every type ofrole,with:Standardized onboarding for all manufacturing facility personnel,with annual refresher training.In 2023,this compulsory training was provided to all production employees at confectionery manufacturing sites.Weanticipate rolling out the training to manufacturing employees in our North America Salty Snacks segment in 2024.Food safety basics training is part of our required onboarding for all new salaried employees,in any role.Itwas assigned to all existing salaried employees in 2023,and is now an ongoing annual awareness module.Approximately 98%of global salaried employees completed the module in 2023.We will roll out an updated module in 2024,corresponding with World Food Safety Day.Training targeted to equip people in specific roles towork and advocate for food safety,such as the onboarding and annual refresher training for Quality Assurance,Engineering and R&D personnel.Our Value Chain and BeyondThe Supplier Quality Management Program is set up to ensure compliance with applicable GFSI and regulatory requirements.In 2023,we sourced 100%of ingredients from suppliers approved through the program.As well as meeting quality standards,we improve practices in our value chain by helping suppliers achieve GFSI certification.As at December 31,2023,97.2%of our suppliers globally are GFSI certified,covering 99.5%of our sourced ingredients by spend.We also want to promote food safety among consumers and the wider industry.We therefore collaborate with others as a member of the Alliance to Stop Foodborne Illness(ASFI)to provide resources such as free food safety webinars and an onlinetoolkit.Whats Next in Food Safety Continue to strengthen food safety knowledge and practices through employee onboarding and annual awareness modules for all employees Continue to integrate our North America Salty Snacks segment into the PEP,and do the same for any other sites the company acquires Continue leveraging data systems and digital tools to enable data-driven predictive and proactive decision making for food safety,regulatory and quality activities in our manufacturing operationsFor a summary of our data on Food Safety and Nutrition and Health,seepages 19-20.For more on our programs and training,visit our Food Safety Partners in Quality website.One hundred and thirty years ago,Milton Hershey said give them quality,thats the best advertising.That still rings true today.This commitment to our consumers drives us to deliver a product that exceeds their expectations every time.Our teams focus on leveraging technology and instilling that quality first mindset across our entire organization.”Mike Lapioli,Vice President,Quality,Food Safety andRegulatoryCompliance,TheHersheyCompany ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report15The Hershey Company 2023 ESG ReportMaterial ESG issue:Food safety and qualityEthics and Compliance Commitment to the highest standards of ethics and integrity is key to our success.Acting ethically is the right thing to do and good for business.Employees value working somewhere they are encouraged to speak up and know the company will do the right thing.We have been recognized among the 2024 Worlds Most Ethical Companies one of nine honorees in the Food,Beverage&Agriculture category.Itis the third time we have been included in this group ofcompanies known for outperforming peers financially,demonstrating the value of doing the right thing.The Code,Policies and Speaking UpOur Code of Conduct(the“Code”)sets out who we are,what is important to us and our commitment to acting ethically.It guides how we do business,detailing our approach in areas such as human rights,anti-corruption,antitrust,whistleblower protection and health and safety.We also have a range of policies on:Responsible sourcing of key ingredients Standards we expect from our suppliers ESG issues of key concern to us,such as environmental management,human rights and food safety All Directors and professional employees are trained on the Code at onboarding and annually thereafter.They must confirm they have read and agree with it.Our Ethics and Compliance training program is designed to guide employees and provide information on how to adhere tothe Code,our purpose and values.It includes required online training,targeted training and live sessions.We audit our compliance program every two years,supported by regular fraud and corruption audits and riskassessments.Hershey encourages employees and external stakeholders to raise concerns and ask questions through our reporting channels if they ever notice something that may not follow our ethical business practices.One such reporting channel is the Concern Line,for anonymous,confidential ethics and compliance-related questions and reports.The Concern Line is available 24/7,in over 60 countries and more than 47 languages,with toll-free numbers available in each of our locations.More detail on our process to raise and address concerns is available here.Lobbying and TransparencyConsistent with our Code,Hershey does not make political contributions using corporate funds and only engages in political giving through The Hershey Company Political Action Committee(Hershey PAC).Funds raised through the Hershey PAC,which consist ofvoluntary employee contributions,are used to supportcandidates for elected office who demonstrate acommitment to:The growth of our business and the communities where our employees live Values and goals that align with our vision and Code All contributions are disbursed in accordance with our internal contribution guidelines and applicable election laws.The Hershey PAC is bipartisan and distributes funds equally between both major political parties at federal and state levels.See the Hershey PAC Annual Report 2023 for more information.Corporate funds are used to support and advocate for issues,legislation or referenda of importance to Hershey.These funds,classified under the U.S.Internal Revenue Code as non-deductible lobbying expenditures,are paid primarily to industry trade associations and as salaries toour internal Government Relations personnel.Hershey files all lobbying reports required under U.S.federal andPennsylvania law,outlining the companys federal andstate-based advocacy work.See our Annual Report ofLobbying and Advocacy Expenditures for moreinformation.Hersheys purpose of Making More Moments of Goodness is founded upon our company values.Integrity is core to our commitment to ethical business practices,which has allowed us to sustainably grow for 130 years.The earned trust with our employees,investors,customers,consumers,suppliers,communities and stakeholders is integral to our ability to continue that legacy and achieve our Leading Snacking Powerhouse vision.”Lauren Lacey,Vice President,Deputy General Counsel,Asst.Secretary and Chief Compliance Officer,TheHersheyCompany ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report16The Hershey Company 2023 ESG ReportData Protection and CybersecurityThe trust people place in us when providing their data is something we continually strive to earn,every day.Consumers,customers and employees rely on Hershey tobe responsible with their data.We earn their trust by respecting the privacy of everyone whose data we have access to,maintaining high data protection standards andhandling their personal information with care.That includes endeavoring to avoid any negative impacts fromdata mismanagement.We comply with data privacy laws prescribing how to collect,store,use,share,transfer and dispose of personal information responsibly,wherever we operate.Our Privacy Center of Excellence(Privacy Center)prepares Hershey to comply with any new or expanded data privacy rules.The Privacy Centers cross-functional team,established in 2021,designs and implements appropriate physical,technical and administrative measures to prevent the unauthorized access,use,disclosure,alteration or destruction of personal data.Through the expanded Governance,Risk and Compliance team within our Information Security function,we are also committed to adapting quickly to the ever-changing landscape of cybersecurity risk,laws,regulations and disclosure requirements.The companys Incident Response Plan is reviewed annually.It includes business continuity and contingency plans related to data protection and cybersecurity.Engaging Employees in SecurityEmployees play a critical role in safeguarding data.Weregularly educate and engage our people on this topic.Every professional employee at Hershey is required tocomplete training on:Acceptable Use Data Classification The importance of cybersecurity for safeguarding our digital assetsIn January 2023,we dedicated our annual Integrity Day todata privacy and cybersecurity,and promoted Cybersecurity Awareness Month.These enterprise-wide events keep employees updated on the latest cybersecurity news and best practices,and raise their awareness of how important it is to respect privacy,safeguard data and earn trust.Learn more about cybersecurity at Hershey on pages 16-17 of our 2023 Form 10-K.A Robust Privacy PolicyHersheys Privacy Policy is available on all our websites.Itdescribes in detail:How we use personal information collected when consumers interact with us The types of information we collect How,in line with the Fair Information Practice Principles,we limit information collection to what is reasonable and necessary to achieve the intended purpose for collectionIf there is a need to use personal information for purposes beyond the scope previously disclosed to consumers,we provide additional notice or seek consumer consent where required by applicable laws.We also have a job applicant privacy policy on our website.Whats Next in Data Protection and Cybersecurity Continue embedding data protection and cybersecurity into every part of our organization to cultivate a privacy-first mindset Monitor the changing data privacy landscape to ensure we comply Continue leveraging technology to build a state-of-the-art information security programIntegrity Day:Privacy Matters Ethics,compliance and privacy risks can come upatany time:every employee needs to be able toidentify,act,report and ask for help.Integrity Day helps everyone be ready,should they need to act.Building on the success of 2022s inaugural event,we held our second enterprise-wide Integrity Day inOctober 2023 with a focus on the importance of privacy and cybersecurity.This collaboration between the Ethics,Compliance&Privacy team andlocal Compliance Ambassadors across all Hershey locations engaged colleagues in activities that promoted awareness of data privacy practices and how to enable digital trust.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report17The Hershey Company 2023 ESG ReportMarketing ResponsiblyWe remain committed to marketing responsibly to consumers.Hersheys strong values guide our behavior in all aspects of our brand-building work and consumer communications.We respect that caregivers play a crucial role in teaching children positive eating habits and the appropriate role of treats and snacks in a balanced diet.Adult consumers equally deserve access to clear,credible information about the nutritional content and other attributes of our wide array of snacks and confections.Our teams are trained in and must follow detailed internaladvertising guidelines,including on advertising tochildren.The guidelines govern how we advertise,whowetarget and specific advertising guardrails.High StandardsHershey complies with self-regulation programs through:Membership in the U.S.Childrens Food and Beverage Advertising Initiative(CFBAI)Participation in the Canadian Childrens Food and Beverage Advertising Initiative(CCFBA),overseen byAdvertising Standards CanadaCFBAI is designed to improve food advertising directed atchildren in the U.S.Under our individual CFBAI pledge,we commit not to advertise in a way primarily directed at children 13-and-under unless advertising products that meet CFBAIs nutrition criteria.For measured media,like television,inthe U.S.,we do not advertise on shows where 30%ormore of the expected audience on average comprises children aged under 13.Our annual submission to CFBAI demonstrates compliance with our commitments.Hershey has also committed to Canadas CCFBA.As with CFBAI,this means we willnot primarily direct advertising toward anyone under13 unless the advertised product meets CCFBA nutrition criteria.We license the use of our trademarks through agreements with selected third parties in the U.S.and other countries.These agreements oblige licensees to submit all proposed uses of licensed trademarks in packaging and promotional materials to Hershey for our review and prior approval.We are also proud our products are used to help raise funds for a range of organizations and programs,including elementary and secondary schools.However,keeping to our voluntary pledges in the U.S.and Canada,we do not advertise products in elementary schools and licensees are not permitted to use our brands on educational material or materials intended for use primarily in elementary schools.Clear,Credible ClaimsHershey remains committed to giving consumers clear,honest,accessible information on all products,including on ingredients,nutrition and origin.Our U.S.-based Food Claims Review Council guides teams on many topics,including nutrition,ingredients,sustainability and productcertifications.The council works closely with marketing and product development teams so all new products meet or exceed relevant third-party certifying bodies standards,e.g.,U.S.Department of Agriculture(USDA)Organic and Non-GMO Project Verified.It also ensures that all claims and required labeling elements on any updated packaging comply with applicable law and regulations.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report18The Hershey Company 2023 ESG ReportOur ProgressFinancial PerformanceUnit202320222021NotesCountries in which our products are marketed#of countries 808080Countries in which our products are manufactured(Hershey-owned facilities)#of countries 666Manufacturing facilities(Hershey wholly owned/joint ventures)#of manufacturing facilities 161515Consolidated net salesUSD in millions$11,165$10,419$8,971One year net sales growth%7.2.1.1%Shareholder return%(18.3)!.9).6djusted diluted earnings per shareUSD$9.59$8.52$7.19Income taxes paidUSD in millions$303.9$221.3$275.2Worldwide payrollUSD in millions$1,178$1,069$924Investment in R&DUSD in millions$50.0$46.9$40.1Brands#of brands90100100Weight of products soldMetric tons1,078,1501,101,9191,085,7201For more information,please see page 21 of Hersheys 2023 Form 10-K.Nutrition and HealthUnit202320222021NotesRevenue from products labeled and/or marketed to promote health and nutrition attributesUSD(in millions)$1,256.7$1,203.6$644.41Revenue from products labeled non-GMOUSD(in millions)$702.3$643.6$412.521These values represent revenue from our snacks portfolio,which includes ready-to-eat popcorn with no artificial ingredients,baked and trans-fat-free snacks,protein bars and other better-for-you snacks.2This result includes non-GMO confectionery and salty snack products.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report19The Hershey Company 2023 ESG ReportFood SafetyUnit202320222021NotesFacilities certified against a GFSI standard#of facilities2114141Food safety-Major non-conformances identifiedNumber1002Food safety-Major non-conformances rateRate000Food safety-Minor non-conformances identifiedNumber8544443Food safety-Minor non-conformance rateRate4.03.13.14Product recalls#of recalls211Product recalls-Total amount of food product recalledMetric tons 90.4022.455.9851All Hershey-owned manufacturing facilities are certified against a recognized GFSI standard.As such,all facilities are audited annually to assess compliance against the provisions of the standards.In 2023,the facilities certified against a GFSI standard included 21 Hershey-owned plants manufacturing confectionery and salty products.2In 2023,there was a single major food safety non-conformance identified at our El Salto,Mexico,location.3The likelihood of non-conformances increases as the number of facilities included in this metric also increases.4This rate is calculated based on the total number of audits completed in the calendar year,and total number of minor non-conformances identified for the same time period.5On a global basis,two recalls of Hershey product occurred during 2023 for Hersheys Syrup Indulgent Caramel flavor and Hersheys Caramel Syrup,when incorrect labeling resulted in a food safety risk for consumers with a milk allergy.These two recalls resulted in 12,125 cases,the equivalent of 90.4 metric tons of product,being recalled.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report20The Hershey Company 2023 ESG ReportCocoa remains Hersheys highest ESG priority.Through Cocoa For Good,our sustainable cocoa strategy,we work alongside communities,governments,non-governmental organizations(NGOs)and peers in the cocoa industry to create amore resilient supply chain and address the systemic challenges posing risks tothe sector.Enabled by a 12-year$500 million investment,we are working to create a supply chain where farmers,and their children and families,can prosper.In 2023,welaid the groundwork for a new approach to building long-term partnerships with farmers where they can professionalize and thrive.As of December 2023,wehave invested 51%ofour$500 million commitment.In this chapter:22Cocoa For Good23Cocoa For Good in the World24Cocoa Partners26Improving Farmer Income and Livelihoods28Childrens Well-being32 Creating a More Resilient Supply Chain34Our Progress ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report21The Hershey Company 2023 ESG ReportCocoa For GoodWe strive to have our cocoa come from communities where farmers and their families have a bright future.We are focused on supporting the people who make our products possible.A significant part of todays cocoa supply chain is made up of millions of smallholder rural farmers with low yields and low incomes,especially in West Africa.Limited economic opportunities in rural areas can lead toahost of challenges:Poverty and difficult living conditions for cocoa farmingfamilies Lack of incentives to improve existing farms,which may prompt expansion of farm land into new areas,potentially leading todeforestation Children doing inappropriate work,especially on family farms,instead ofgoing to schoolAddressing the root causes of poverty requires an enabling environment supported by collaboration between all actors in the public and private sectors.Toinform our cocoa sourcing and sustainability strategies,Hershey leverages leading experts and research in:Poverty alleviation Agriculture Rural development Human rights and childrens well-being Applied behavioral science and other innovations We engage with origin governments and NGOs regarding how leading practices from across different agricultural sectors can be applied incocoa.This guides our on-the-ground efforts to make ameaningful impact within our supply chain.Impact AreasImproving Farmer Income and LivelihoodsAs part of the Hershey Income Accelerator Program(HIAP)launched in Cte dIvoire in April 2023,we are increasing incomes through cash transfers to farmers,inaddition to the premiums we pay for independently verified cocoa.Our efforts to increase farmer household income also seek to economically empower women to improve their livelihoods.We are working with CARE International(CARE)and the government to strengthen existing Village Savings&Loan Associations(VSLAs)and establish new ones.Learn more on pages 26-27.Childrens Well-beingWe work with governments,our supply chain partners,expert civil society organizations and farming community members to help prevent and eliminate child labor and encourage children toremain in school.We invest in communities to make it easier for children to access and continue their education.That includes improving education infrastructure,improving school nutrition,delivering school supplies and helping children obtain birth certificates.Learn more on pages 28-31.Creating a More Resilient Supply ChainWe are building long-term partnerships with smallholder farmers and their families,working closely with our partners to professionalize cocoa farming.We advance environmentally responsible agricultural practices,combatdeforestation and promote economically viable agroforestry and shade-grown cocoa.We use polygon mapping to understand how and where cocoa is grown,and satellites to monitor deforestation risk.Learn more on pages 32-33.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report22The Hershey Company 2023 ESG ReportCocoa For Good in the WorldCocoa For Good investments originally prioritized Cte dIvoire and Ghana,where60%of all cocoa is grown.Over theyears,we have expanded to Brazil,Cameroon,Ecuador,Indonesia,Mexico andNigeria.Visit our website for more information onwhere we source cocoa.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report23The Hershey Company 2023 ESG ReportMexicoEcuadorBrazilCte dIvoireGhanaCameroonNigeriaIndonesiaCocoa PartnersHershey has an important role to play inasustainable supply chain and the livelihoods of cocoa farming families.It takes an environment of supportive practices and broad cooperation.No single company can do this alone,so we remain committed to collaborating to tackle the complex issues facing the industry.Wepartner with origin governments and many organizations,some ofwhich arehighlighted here.Weacknowledge it is fundamental tohave input from andact in collaboration with a full range of stakeholders,especially farmers,their families and communities.Learn more on our Cocoa Sourcing website.Our Suppliers Albrecht&Dill Trading Company Atlantic Cocoa Company Barry Callebaut Blommer Chocolate Company Cargill Cocoa&Chocolate Ecuakao Processing SA FCStone General Cocoa Company Guan Chong Cocoa Indcresa Productos del Cacao JB Cocoa KSW LIFE BV Olam International Plot United Cocoa Processor,Inc.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report24The Hershey Company 2023 ESG ReportOur Partners 60 Decibels Aceres Aflatoun Airbus Association of Chocolate,Biscuit and Confectionery Industries of Europe(CAOBISCO)CARE International Children of Africa Foundation Conseil du Caf-Cacao(Cte dIvoire)Cte dIvoires CNS(National Oversight Committee of Actions Against Child Trafficking,Exploitation and Child Labor)Earthworm Foundation EU Cocoa Coalition Farmerline Foundation for the Parks and Reserves of CtedIvoire German Agency for International Cooperation(GIZ)Ghana Cocoa Board Government of Cte dIvoire Ministry of Water Resources and Forests(MINEF)Government of Cte dIvoire Rural Land Agency(AFOR)Government of Ghana Ministry of Gender,Children and Social Protection Government of Ghana Ministry of Lands and NaturalResources Government of Ghana Ghana School Feeding Program(GSFP)Government of Ghana The Forestry Commission INADES Formation International Cocoa Initiative(ICI)Ipsos Ivorian Office of Parks and Reserves Jacobs Foundation Meridia National Council for Nutrition,Feeding and Early Childhood(Cte dIvoire)Nature Conservation Research Centre(NCRC)ProducerPlus Foundation PUR Rainforest Alliance Save the Children Sourcemap Sustainable Food Lab UBS Foundation Verit World Cocoa Foundation(WCF)Cocoa PartnerscontinuedSector-wide PartnershipsHershey is a founding member of the World Cocoa Foundation(WCF).We participate in numerous sub-committees and advisory panels,and key WCF-coordinated initiatives,alongside industry peers.Together,we pursue WCFs vision of a thriving and equitable cocoa sector with prospering farmers,empowered communities and a healthy planet.We also participate in groups such as the National Confectioners Association,the Association of Chocolate,Biscuit and Confectionery Industries of Europe(CAOBISCO),the EU Cocoa Coalition and the Child Labor Cocoa Coordinating Group.This enables us to engage,as an industry,and work alongside other stakeholders with governments and policymakers in WestAfrica,the U.S.,the European Union and elsewhere ona wide range of sustainability challenges in cocoa.Hershey works with the International Cocoa Initiative(ICI),as a member of its Forced Labor Sub-Group and founding member of its Expert Working Group on Protecting Children from Pesticides.ICI has driven the industrys approach to child and forced labor for over 20years,particularly as a thought-leader on child labor,publishing numerous studies.ICI also partnered with us,along with Cte dIvoires CNS(National Oversight Committee of Actions Against Child Trafficking,Exploitation and Child Labor),to build a dozen Hershey-funded public primary schools in Cte dIvoire by the end of 2025.We are active partners with the Child Learning and Education Facility(CLEF),a public-private coalition toimprove access to quality education for children inthecocoa-producing areas of Cte dIvoire.CLEF supports industry human rights due diligence,as described in the United Nations Guiding Principles on Business and Human Rights,other international standards and legislation in a growing number of countries.We support the work of the Cte dIvoire-Ghana Cocoa Initiative(CIGHCI)to develop recommendations aimed atimproving cocoa farmer income and the long-term sustainability of the cocoa sector in both countries.Engaging with our PartnersOngoing dialogue with our partners and our executive leadership is essential to achieving a more resilient,sustainable cocoa supply chain.In 2023,senior Hershey executives visited Cte dIvoire tomeet cocoa sector leaders,policymakers,cocoa farmers,supply chain partners andcommunity leaders.The visit launched several cornerstone pieces of our work:The announcement of our$40 million Income Accelerator in partnership with the Conseildu Caf-Cacao,CARE and Rainforest Alliance(see page 26 for more details)Signing a landmark agreement with Cte dIvoires CNS and theICI to invest$1.4 million to build 12 new schools in cocoa-growing communities Initiating our$1 million investment,with the Foundation for the Parks and Reserves of Cte dIvoire,for preservation and reforestation at the Mabi-Yaya NatureReserveThrough the visit,executives witnessed the resiliency ofcocoa farming communities first-hand and saw how Cocoa For Good investments are offering much-needed resources and support.While achieving lasting impact takes time andstrong partnerships,determined communities andindividuals can create positive impact even inthemost challenging environments.The farmer is central to Hersheys entire cocoa strategy.Without the farmer,the family and the community operating in a way thats profitable and allows them to have a prosperous future,we wont have cocoa.So it is core to our strategy,how we think about the work,and shapes who we partner with.”Tricia Brannigan,VP Procurement,TheHershey Company ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report25The Hershey Company 2023 ESG ReportImproving Farmer Income and LivelihoodsOur cocoa strategy centers on farmers andtheir families.Our investments in a more resilient cocoa sector andthriving cocoa communities are a core business imperative.Given the complex challenges facing cocoa smallholder farmers,we take a collaborative approach through our Cocoa For Good strategy.Hershey continues to:Make premium payments to farmers for their cocoa as part of our contracts to purchase cocoa from suppliers Through our suppliers,Hershey also pays the Living Income Differential(LID)for all cocoa volumes purchased from Cte dIvoire and Ghana,which is the equivalent of$400 per metric ton of beans(as of March 2024)Hershey Income Accelerator ProgramIn April 2023,we launched the Hershey Income Accelerator Program(HIAP)in Cte dIvoire.This multi-faceted program:Provides farming households with supplemental income Incentivizes adoption of sustainable farm managementpractices Invests in cocoa community-based resourcesThrough HIAP,aim to support at least 20,000 households.We are investing$40 million over fiveyears for HIAP,in addition to the$500 million already committed to Cocoa For Good.Designed and implemented with the Conseil du Caf-Cacao,the Rainforest Alliance and CARE,HIAP offers aproven approach to addressing poverty while supporting sustainable farming practices.It focuses on two proven interventions conditional cash transfers(CCTs)and VSLAs and isaligned with objectives in the government of Cte dIvoires National Strategy for Sustainable Cocoa.Working With Committed Farmer CooperativesIn partnership with a local organization,we conducted arapid assessment of farmer group receptiveness to HIAP.Five farmer groups were invited to apply,and following asession explaining the benefits and responsibilities ofthe program,three confirmed their interest in HIAP.Within each farmer group,farmers invited to participate inHIAP already:Had polygon-mapped farms Were registered with theirfarmer group Were part of a Child Labor Monitoring and Remediation System(CLMRS)Cash TransfersCCTs are a proven poverty reduction strategy that provide additional income.Rainforest Alliance is our partner in delivering an adoption observation(AO)model.The AO model enables coaching of farmers in sustainable agricultural practices.Itthen pays CCTs based on direct observation that afarmer has adopted the practices.CCTs are paid on top ofthe price set by local governments and any premiums for independently verified cocoa.The AO model goes beyond technical training,with sustained support from agronomist-coaches who work side-by-side with farming households to designand implement ambitious,achievable improvements.Tosupport this change,HIAP training of agronomist-coaches focused on building trust with farmers(see Coaching Cocoa Communities to Improve Household Incomes on this page).HIAP field work commenced in August 2023,and in November,we began working directly with farmers.ByDecember 2023,over 900 farmers had worked with coaches on the initial farm diagnostic.By March 2024,HIAP had reached 1,850farmers forinitialdiagnostics and paid a first wave of CCTs to1,426farming households.Coaching Cocoa Communities to Improve Household IncomesHIAP supports implementation of an innovative coaching model aimed at improving farmers socialand agronomic skills.Trained coaches create trusted relationships with farmers in a personalized,one-to-one format.Coaches are also trained in the AO model,so theycan effectively identify agronomic issues onfarms.HIAP Coach Amon Chiapo Yves said ofhistraining:“I am now able to enter acocoa farm and then highlight the various problems and opportunities of the farm throughadoption observations.”Once farmers meet their coaches and identify areas forimprovement,they work together to create animprovement plan aiming to increase farm productivity and the household income.Coaches then support farmers to better manage the income of both their farm and their entire household.The connection and collaboration between coach and farmer is fundamental to achieving HIAPs objectives.HIAP Coach Konan Kouassi Constant noted that because of their close relationships,“farmers often call me to send me words of thanks and let me know they would like to see me again intheir communities.I feel loved by the farmers.”The Income Accelerator,like the overall Cocoa For Good strategy,is a long-term commitment by Hershey to support farmers and their families.No company alone can solve the problem of poverty that occurs too frequently in rural areas.Measurable improvements will require time,a sustained investment and collaboration with a wide range of government,private sector,civil society and community-based partners.”Jason Reiman,Senior Vice President andChief Supply Chain Officer,The Hershey Company ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report26The Hershey Company 2023 ESG ReportMaterial ESG issue:Farmer livelihoodsSalient Human Rights issue:Living wage and incomeImproving Farmer Income and LivelihoodscontinuedCASE STUDYVSLAs Help Local Businesses GrowMadame Coulibaly has lived with her farming husband and12-year-old son in Lh-Djiboua,Cte dIvoire,since 2012.She opened a shop selling shoes,textiles,fabrics,bed sheets,mattresses,bags and more.Looking for ways to grow her business,she joined aCocoa For Good-supported VSLA in 2020.AsaVSLA member,she accessed a series of loans ofupto$1,000 each,whichshe used to strengthen her business and find newrevenue opportunities.In December 2022,she added a poultry business with acapacity of 1,250 chicks.This nets more than$2,500 peryear in profit.In 2023,she expanded the poultry business to a second site,doubling her profit.Being able to grow her business,using VSLA finance,hasnot only stabilized her shop and diversified her offerings,but has also enabled her tobring on an employee tohelp run it.She is currentlyworking toward becoming awholesale distributor of goods tosupply other merchants in herregion.Village Savings&Loan Associations VSLAs are championed by international humanitarian organizations as a way to raise incomes in rural areas where formal banking services are typically not available.These community-based groups build social cohesion andincrease economic stability through member-based savings and loans.Through VSLAs,CARE is supporting women and their families to increase:Household savings and access to finance Entrepreneurial,leadership and financial literacy skillsIn 2023,CARE assessed 298 VSLAs in Hersheys supply chain,engaging 690 community leaders.They identified 200 VSLAs as functioning effectively and suited to further capability building.These VSLAs are managing savings and loans effectively,but can benefit from support linking them to the formal financial sector.Income Accelerator Learning Advisory CommitteeHershey created the Hershey Income Accelerator Learning Advisory Committee to review learnings from HIAP implementation and bestpractices to improve farmer income and economic resiliency.The committee ischaired by the Conseil du Caf-Cacao and will include representatives from Cte dIvoires Ministry of Social Cohesion,Solidarity and the Fight Against Poverty,our implementing partners and farmer groups.Learn more about Hersheys baseline study on Improving Income Resiliency and Livelihoods on page 30 of our 2022 ESG Report.Additional Premiums and SupportWe invest in our visibly sourced cocoa supply chain including paying cash premiums to farmers and farmer groups.This investment is incremental to the farmgate price.In 2023,premium payments in Cte dIvoire and Ghana equaled more than$15 million.Whats Next in Farmer Income and Livelihoods Work with CARE and the government of Cte dIvoire tostrengthen the 200 identified VSLAs and support theestablishment of new ones Expand HIAP toadditional farming households,introducing further incentives forschool attendance Use HIAP learnings to contribute new,evidence-backed models for cocoa both in Cte dIvoire and other origins ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report27The Hershey Company 2023 ESG ReportChildrens Well-beingHershey works with many stakeholders to seek the better outcomes children deserve.Too many cocoa farmers and their families continue to live in poverty,without the access to education,healthcare and financial services that they need to thrive.Limited economic opportunities in rural areas can lead to many challenges,including inappropriate child labor.We are committed to eliminating inappropriate child labor in our supply chain,working with governments,suppliers and farming communities to prevent and remediate these issues.This requires tackling root causes by improving farming families livelihoods,supporting health and well-being in cocoa-growing communities and increasing access to quality education.We continue to engage with leading childrens rights experts to enhance our work and apply what we have learned from years of investing inprograms in cocoa-farming communities,to achieve greater impact.We collaborate with communities,governments,NGOs and experts for better outcomes for children through:Improving livelihoods of farming families Enhancing the quality of education Providing community resources such as water,health and child protection services Progress Toward Eliminating Child LaborIn addition to tackling root causes,we address instances of child labor in cocoa farming communities through CLMRS,theleading method of child labor detection andremediation for children aged 5-17 years.CLMRS are implemented in local communities in CtedIvoire and Ghana.Suppliers are responsible for collecting and reporting on CLMRS data.Hershey has used industry-aligned best practices,implemented bysupply chain and community partners,since 2018.Hershey sets forth Cocoa Key Requirements for suppliers,which means that CLMRS implemented by Hersheys suppliers include at least thefollowing core activities:Awareness Raising and TrainingRaising awareness at community and household level,targeting both adults and children,remains important because children are less likely to perform inappropriate farm tasks when farmers and their families understand exactly what constitutes child labor.Monitoring and IdentificationTrained individuals conduct active and regular monitoring,through repeated visits to households inthesupply chain.Provision of SupportChildren identified in child labor,and others at risk,receive support.This includes activities to remediate current child labor cases and prevent future ones,cooperating with relevant public institutions that have amandate to provide such support when possible.What is Child Labor?We use the International Labour Organization(ILO)definition:Child labor is work that:Is mentally,physically,socially or morally dangerous and harmful to children and/or Interferes with their schooling Some work performed by children,such as helping their parents around the home and assisting in a family business,is not classified as child labor.Such activities are sometimes referred to as“light work.”The worst forms,putting children at the greatest risk,are the highest priority for elimination.Most instances of inappropriate child labor involve tasks such as carrying heavy loads like firewood or water,contact with agrochemicals or clearing land with sharp tools.Child labor is distinct from forced labor,which the ILO defines as:Situations in which persons are coerced to work through the use of violence or intimidation,or by more subtle means such as accumulated debt retention of identity papers or threats of denunciation to immigration authorities.As a member of the International Cocoa Initiatives(ICI)Forced Labor Sub-Group,we work with peers and technical experts to advance knowledge,skills and action to prevent,monitor,identify and address forced labor in cocoa supply chains.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report28The Hershey Company 2023 ESG ReportMaterial ESG issue:Child laborSalient Human Rights issues:Child labor Forced laborChildrens Well-beingcontinuedFollow-upCLMRS requires a case management system that allows foractive follow-up on an individual basis with children identified in child labor.Follow-up involves at least twovisits at intervals of several months after identification,to allow time for support to take effect and ensure that any improvement is not short-lived.Cases of child labor are considered remediated when children have reported not engaging in child labor at the two most recent follow-up visits.By“remediated”we mean that,through our implementing partners,a child:Has received mitigation efforts appropriate to their situation,such as being enrolled in school As a result,no longer participates in activities defined asinappropriate child labor Is no longer at risk of being enlisted to undertake potentially hazardous activitiesSuccessful remediation strategies vary and must respond to the needs of individual children and their families.They may also depend on whether government social welfare agencies are present to receive referrals for additional follow-up.Based on case-by-case differences,remediation can bedone at the child,household or community level.Therefore,remediation responsiveness can range from almost instant(e.g.,household awareness training conducted when data is collected and/or cases found)tosix to 18 months(e.g.,renovating classrooms or school canteens to get kids back to school).We also support the establishment of community-level child protection committees.Composed of trusted community members,these groups are well-positioned to:Raise awareness Identify cases of child labor Implement the most appropriate remediation In 2022,Hershey initiated discussions with the ICI that led to the establishment in 2023 of a multi-stakeholder expert working group on protecting children from pesticides.Thegroup,funded exclusively by Hershey,is expected toissue its findings and recommendations in mid-2024.We have a goal to reach 100%of farmers in our supply chain in Cte dIvoire and Ghana with CLMRS by 2025.Atthe end of 2023,79%of farmers producing Hersheys visibly sourced cocoa volume in those countries were covered by CLMRS to prevent,monitor and remediate child labor.Atthe two most recent follow-up visits,2,284 children were identified as no longer doing inappropriate work or had aged out of the CLMRS.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report29The Hershey Company 2023 ESG ReportHow CLMRS Helps Keep Kids SafeChildrens Well-beingcontinuedEducational Infrastructure and SuppliesHershey invests in farming communities to make iteasierfor children to access and continue their education.Manyrural cocoa-growing communities lack access to educational infrastructure and may not have adequate resources a root cause of child labor.Our strategy aimsto eliminate those barriers.That includes:Sponsoring construction and renovation of schools andclassrooms to improve infrastructure Providing school supplies in line with origin governments national action plans Helping children obtain birth certificates that arenecessary to access educationIn April 2023,Hershey signed an agreement with CtedIvoires CNS and the ICI to fund construction of12primary schools in cocoa-producing communities that currently lack school infrastructure.Thiswill add 72classrooms.Thefirst school opened inDrissap,CtedIvoire,in December 2023.In addition,we are partnering with the Jacobs Foundation,Cte dIvoire Ministry of Education and Literacy and 14other companies to build 2,500 new classrooms through CLEF.This will improve literacy and numeracy forfive million primary school children.In 2023,CLEF made progress on these fronts:Contributed to developing modules and materials for over 400 national and regional trainers to be trained inevidence-based teaching practices.These trainers areplanned to start training teachers in 2024.Put agreements in place to start 145 bridge classes in2024 for over 3,500 children found out of school.New School for DrissapA new public primary school stands at the entrance to the village of Drissap,a hard-to-reach cocoa-growing community of 1,412 people located 68km from Man,Cte dIvoire.The school hassixclassrooms,aprincipals office,a canteen,ateachers quarters,awell and threelatrineblocks.This is the first of 12 schools to be constructed byHershey funding by the end of 2025.The formal inauguration on December 18,2023,wasattended by the sub-prefect of Gbonn,aswell as representatives of the Ministry of National Education and Literacy,other Ivorian government institutions,the Conseil du Caf-Cacao,the ICI andHershey.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report30The Hershey Company 2023 ESG ReportChildrens Well-beingcontinuedSchool-Based Nutrition Nutrition is vital to childrens well-being and influences education in cocoa-growing communities.Not only does satiety improve a childs ability to concentrate and learn,it can also be the deciding factor between whether or not a child attends school.Collaborating with supply chain partners,school principals and national and local government in Cte dIvoire and Ghana,in 2023 we provided the ViVi vitamin-fortified snack daily to over 53,291 children in 174 schools in cocoa-growing communities.Access to HealthcareIn early 2023,Hershey funded the first renovation of the Gnama-Dis Health Center,Divo,Cte dIvoire,since itwas built in 2004.The work was completed with SCOOPAKAM,a local farming group.The health center is part of a nationwide network.It provides primary care for approximately 350 patients each month,including maternal and prenatal care.Preparing a New Generation of LeadersTo break the intergenerational cycle of poverty,a new generation of farmers in cocoa communities(defined as 15to 35-year-olds)need the life,technical and vocational skills,and the practical knowledge and tools,to become self-sufficient community leaders of the future.We support young farmer economic empowerment through access to vocational training,land tenure documents and income-earning opportunities like community pruning teams.Pruning teams are groups of up to 10 young adults who help provide essential pruning services to cocoa farmers intheir communities.Regular pruning helps prevent cocoa tree mold and diseases.It also reduces the need for agrochemicals and pesticides.As well as being an invaluable service to farmers,community pruning teams provide young farmers with valuable skills,experience and knowledge about cocoa farming.The extra income also helps them support theirfamilies.Whats Next in Childrens Well-being Maintain focus on building long-term partnerships with farmers and their families Work more closely with farmers and their families totackle the root causes of child labor Continue to invest and partner with governments,NGOs and industry peers to help create brighter futures for youth and communities in cocoa-growing regions Incorporate recent lessons from school food programs,working with the governments of Cte dIvoire and Ghana to develop a new approach thatresponds togovernment-identified needs and reflectslatestthinking on achieving lasting impact inchildhoodnutritionKey metrics from 2023:396birth certificates obtained to enable access to school4,924school kits provided27classrooms built or renovated ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report31The Hershey Company 2023 ESG ReportCNS,ICI and Hershey build modern school infrastructure in Drissap,Cte dIvoireCreating a More Resilient Supply ChainWe are working closely with our supply chain partners,including smallholder farmers and their families,to protect the environment and restore ecosystems for long-term sustainability and a resilient cocoa supply.Our ability to deliver results is also dependent on the enabling environment,the presence of systems that incentivize doing the right thing for the planet and effective collaboration among partners.Hershey is committed to a deforestation and conversion-free supply chain.We actively protect biodiversity and natural ecosystems,and work to reduce the climate-related impacts of cocoa farming.Preserving Natural EcosystemsDeforestation,forest degradation and natural ecosystem conversion remain major global challenges.They have broad,far-reaching implications for future generations.They compound the climate change challenge by:Altering localized rainfall patterns Removing trees and reducing biodiversity Eroding soils that capture carbonDeforestation is a manifestation of a complex set of root causes including:Lack of incentives to improve existing farms,which mayprompt expansion into new farming land Absence of land titles and lack of clarity on land tenurearrangements Resource-challenged law enforcement agencies Protecting existing forests is imperative to preserve the local environment,mitigate the effects of climate change and ensure the cocoa supply chain is resilient for the long term.Hershey concentrates on making a positive impact on thiscomplex system.We advance sustainable agricultural practices,promoting climate-smart techniques and economically viable agroforestry and shade-grown cocoa.Hershey has pledged to achieve a deforestation and conversion-free supply chain,including cocoa,by the end of 2025.Working toward this target we:Partner with suppliers to polygon map 100%of farms that produce Hersheys cocoa volume in Cte dIvoire and Ghana.As of December 2023,we are 70%of the way to our goal.Embarked on a new partnership with the Earthworm Foundation and Airbus in 2023 to achieve no-deforestation verification across several ingredients we source,including cocoa.Committed to Protecting BiodiversityWe support multi-year forest protection activities for the Mabi-Yaya Nature Reserve in Cte dIvoire and the Kakum National Park in Ghana.Both are intact forest areas,home to endangered plant and animal species.Mabi-Yaya Nature ReserveIn 2023,we partnered with the Foundation for Parks and Reserves of Cte dIvoire on conservation efforts in the Mabi-Yaya Nature Reserve,where the presence of the critically endangered West African chimpanzee has recently been confirmed.We are funding:Mapping of the reserves flora and fauna Equipment and training for the reserves rangers as they conduct anti-poaching and anti-encroachment activities Restoring forest on 687 hectares of degraded land within the reserves boundaries The establishment of environment clubs in schools near the reserve Kakum National ParkWe continued projects toprotect biodiversity and promote the financial well-being of people who live and farm near the National Park.Kakum is one of the most biologically rich forests in Ghana and part of the West Africa Guinea Forest Biodiversity Hotspot Area,which isamong the most biodiverse areas in the world.Building on previous efforts to monitor bird diversity within and around the park,in 2023 community-based teams conducted surveys.They identified 188 species of birds across the dry and wet seasons.That included six species of hornbills the same number observed in 2021.Hornbills are a keystone species and a good indicator of overall biodiversity due to their dependence on an intact forest habitat.We also support the Kakum Cocoa Agroforestry Landscape Program(KCALP).KCALP is part of Ghanas Cocoa and Forest REDD Program(GCFRP),which is funded by the World Bank.The GCFRP is jointly coordinated by the Forestry Commission of Ghana and Ghana Cocoa Board.The GCFRP aims to reduce carbon emissions from cocoa expansion and forest conversion by promoting climate-smart techniques.With our support,KCALP promotes:Climate-smart cocoa production Increased collaboration among stakeholders and landscape-level governance and land-use planning Monitoring forests and increased patrolling,with rapid response units Monitoring social and environmental safeguards We also promote sharing benefits with farmers.In 2023,KCALP invested$344,000 in buying tools and inputs,such as fertilizer,distributing them to farmers in the Kakumarea.Making the Cocoa-Climate ConnectionAchieving a deforestation and conversion-free supply chain is critical toachieving ourgoal for a 25solute reduction in Scope 3 GHG emissions by 2030 against a2018baseline.Learn more about how we are Reducing Emissions in Our Value Chain on pages 64-65.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report32The Hershey Company 2023 ESG ReportCreating a More Resilient Supply ChaincontinuedFrom Struggling to Thriving:Generating a Living Income Through Sustainable Cocoa ProductionAprianto is a cocoa farmer from Sumatra,Indonesia,and cocoa farming is his familys legacy.Afew years ago,Apriantos farm wasnt doing very well.Trees were old,yields were low.In 2022,Aprianto joined the Landscape Approach toSustainable and Climate Change Resilient Cocoa and Coffee Agroforestry(LASCARCOCO)program to learn about better farming techniques,such asproper pruning and fertilization.Through the program,he received pest control training to protect his cocoa trees and knowledge on agroforestry and cocoa farming.As Aprianto implemented these new methods,he saw a significant improvement during harvest.The quality of his cocoa beans improved considerably,and he was able to sell his cocoa at a better price.Encouraged by this success,Aprianto continued toinvest,replanting some old trees with younger,more productive ones.He is beginning to diversify,growing other fruits and vegetables alongside cocoa,for a more resilient and sustainable farm.In his community,he shares his knowledge about cocoa and agroforestry with other farmers in his village,as he wants to restore cocoaslegacy in Sumatra.Apriantos success showshow training and support can impact cocoafarmers positively.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report33The Hershey Company 2023 ESG ReportReflecting on 2023,our focus was centered on the farmer perspective,their interests as well as the well-being of their children and their communities.More broadly,we have sharpened our understanding of what we can do and where and how we need to partner.This is helping us better communicate our rationale,commitments and progress.Behind the scenes,we are strengthening our metrics,increasing alignment with sector-wide initiatives and deepening our data analysis and assurance.This enables greater learning and impact and making progress towards a more resilient cocoa sector.”Angela Tejada-Chavez,Head of Sustainable Sourcing,Cocoa,The Hershey CompanyOur ProgressCocoa1,2Target YearProgress(as of Dec.31,2023)Goal StatusNotes100%independently verified cocoa2020 100hieved100%sourcing visibility of Hersheys cocoa volume in Cte dIvoire and Ghana 2025 89%On Track 100%of farmers producing Hersheys cocoa volume in Cte dIvoire and Ghana are polygon mapped by our suppliers to improve traceability and monitor deforestation2025 70%On Track 3100%of farmers producing Hersheys cocoa volume in Cte dIvoire and Ghana are covered by Child Labor Monitoring and Remediation Systems(CLMRS)to prevent,monitor and remediate child labor2025 79%On Track41Data reflects results as provided by Hershey suppliers and implementing partners.Hershey strives to align our KPIs to industry best practices and methodologies,including those recommended by the International Cocoa Initiative(ICI),which are constantly improving and evolving.2Sourcing visibility means cocoa from known farmers is segregated and traceable to the first buyer(i.e.,to the port or the factory in origin).From here cocoa may be mixed,and independently verified cocoa flows into our supply chain under a mass balance traceability model.When we talk about farmers producing Hersheys cocoa volumes,these are the known farmers where we have sourcing visibility.3Beginning in 2023,we are reporting progress based on an analysis of supplier-provided polygon maps.This analysis follows World Cocoa Foundation definitions and checks that all farm plots managed by a farmer are linked to received polygon maps before we consider a farmer to be mapped.4This refers to households covered by CLMRS.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report34The Hershey Company 2023 ESG ReportPreventing Child Labor1Unit202320222021NotesHouseholds covered by CLMRS#of households72,73740,377Data not available2Children monitored#of children 114,25966,164Not comparable3Children identified via CLMRS in Cte dIvoire and Ghana doing inappropriate work and in process of remediation#of children 7,5625,389Not comparable3Children identified as no longer doing inappropriate work at most recent follow-up visit#of children 5,2252,676Not comparable3Children identified as no longer doing inappropriate work at two most recent follow-up visits#of children2,2841,591Data not available4Capacity Building Monitoring and Remediation Agents and Community Liaisons(paid and volunteers)#2,2831,686841Children receiving ViVi on a daily basis(Cte dIvoire and Ghana)Total#of children 53,29152,86645,0005Children enrolled in primary schools that benefited from quality education interventions#of children 4,50934,85112,6276School kits provided#of school kits4,9249,2031,883Birth certificates obtained to enable access to school#of birth certificates 3966321,466Classrooms built or renovated#of classrooms 27172571Data reflects results as provided by Hershey suppliers and implementing partners.Hershey strives to align our KPIs to industry best practices and methodologies,including those recommended by the International Cocoa Initiative(ICI),which are constantly improving and evolving.2Results for the number of households covered by CLMRS are cumulative and begin with the establishment of CLMRS in each community.After the first three years of implementation,these cumulative figures may be reported on a rolling basis.As such,the 2022 value for this metric has been restated in alignment with the definitions recommended by ICI.3Results are cumulative and begin with the establishment of CLMRS in each community.After the first three years of implementation,these cumulative figures may be reported on a rolling basis.The 2022 result for this metric has been restated to align with the 2023 data,which leverages the ICI recommendation that each supplier report this information as a cumulative figure.4Results are cumulative and begin with the establishment of CLMRS in each community.After the first three years of implementation,these cumulative figures may be reported on a rolling basis.5These figures represent the distribution of ViVi(a vitamin-fortified,peanut-based,ready-to-use therapeutic food)up until June 30,2023.62023 was a year of change in how Hershey delivers interventions to support quality education.We are now directly investing in quality school infrastructure in addition to our work through supply chain partners.7This includes classrooms built or renovated under the agreement between Hershey,Cte dIvoires CNS and the ICI.ContentsMaking GoodOur CompanyCocoaResponsible Sourcing and Human RightsEnvironmentOur PeopleYouthCommunityAbout This Report35The Hershey Company 2023 ESG ReportLifting Up Rural Livelihoods1Unit202320222021NotesCocoa For Good CommitmentUSD(in millions)$254$200Not Disclosed 2 Farmer groups supported through Cocoa For Good#of farmer groups 149129102 Farmers supported through Cocoa For GoodTotal#of farmers(male)119,847(12male)105,664(10male)94,309(11male)Farm development plans%(Total#of plans)32%(38,781 plans)41%(39,961 plans)33%(31,281 plans)Farmers receiving individual coachingTotal#of farmers coached(%)30%(36,174 farmers coached)38%(39,768 farmers coached)44%(41,385 farmers coached)3 Community members trained on nutrition and healthTotal#of members trained 3,074 11,033 17,200 4 Community members trained in alternative income-generating activity#of community members 2,724 4,036 2,658 1Data reflects results as provided by Hershey suppliers and implementing partners.Hershey strives to align our KPIs to industry best practices and methodologies,including those recommended by the International Cocoa Initiative(ICI),which are constantly improving and evolving.2$254 million is the cumulative amount invested since 2018 as part of our Cocoa For Good commitment.This does not include our additional commitment and spending for the Hershey Income Accelerator Program.3The 2022 value for this metric has been restated.4The decrease in trainings is related to a decision to develop an updated approach in childhood nutrition that responds to government-identified needs and reflects latest thinking on achieving lasting impact.Supporting Women in Achieving Economic Independence1Unit202320222021NotesVSLAs supported#of VSLAs384362199 VSLA members-Total#Total#of members(male)11,964(77male)10,073(77male)5,879(79male)Total savings and interest accrued annuallyUSD$1,354,120$1,693,285$1,112,456 1Data reflects results as provided by Hershey suppliers and implementing partners.Hershey strives to align our KPIs to industry best practices and methodologies,including those recommended by the International Cocoa Initiative(ICI),which are constantly improving and evolving.Fighting Deforestation1Unit202320222021NotesNon-cocoa trees distributedTotal#of trees 877,1571,073,933554,3262Cocoa seedlings distributed across global cocoa originsTotal#of seedlings 216,50573,4501,020,850Land titles acquired with Hersheys assistance#1221,1881,2443Farmers with all their farm boundaries mapped via GPS pol
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2023 ANNUAL&SUSTAINABILITY REPORTTable of ContentsCompany at a Glance.3Financial Highlights.4SustainabilityHighlights.52023 in Review.6Our Core Values .8Materiality-Based Approach.9Sustainability Commitments.10Engagement.11Governance.13Corporate Governance.14Enterprise Risk Management.17Ethics and Compliance.20Anti-Bribery,Anti-Corruption,and Fair Competition.21Supply Chain Governance.22Public Policy.25Environmental.26Emissions Reduction Progress.27The Future of Energy.29Environmental Management.36Social.39Health and Safety.40Our People.44Training and Development.49Human Rights.52Local Communities.53Appendix.58Data Tables.59Awards and Recognition.71About the Report.72Halliburton 2023 Annual&Sustainability ReportIntroduction 2 COMPANY AT A GLANCE136Nationalities47,885Employees70 CountriesNorth America2 Countries15,608 2023 Headcount5 Major Technology CentersLatin America10 Countries7,858 2023 Headcount1 Major Technology CenterEurope/Africa/CIS36 Countries8,160 2023 Headcount2 Major Technology CentersMiddle East/Asia27 Countries16,259 2023 Headcount4 Major Technology CentersAt December 31,2023COMPANY AT A GLANCEHalliburton 2023 Annual&Sustainability ReportIntroduction 3FINANCIAL HIGHLIGHTSMillions of U.S.Dollars(USD)and Shares,Except Per Share Data202112022120231Revenue$15,295$20,297$23,018Total Operating Expenses$13,495$17,590$18,935Operating Income$1,800$2,707$4,083Income Before Taxes$1,252$2,110$3,363Amounts Attributable to Company Shareholders:Net Income Attributable to Company$1,457$1,572$2,638Basic Income Per Share from Continuing Operations$1.63$1.74$2.93Diluted Income Per Share from Continuing Operations$1.63$1.73$2.92Cash Dividends Per Share$0.18$0.48$0.64Basic Common Shares Outstanding892904899Diluted Common Shares Outstanding892908902Net Working Capital2$5,637$5,607$5,935Total Assets$22,321$23,255$24,683Total Debt$9,138$7,928$7,636Total Shareholders Equity$6,728$7,977$9,433Cash Flows from Operating Activities$1,911$2,242$3,458Capital Expenditures$799$1,011$1,379Depreciation,Depletion,and Amortization$904$940$998Total Capitalization3$15,866$15,905$17,069Debt to Total Capitalization458PE%Geographic Revenue Diversity25%Europe/Africa/CISMiddle East/Asia17F%Latin AmericaNorth America1.Reported results during these periods include impairments and other charges of no amounts recorded for the year ended December 31,2023;$366 million for the year ended December 31,2022;and$12 million for the year ended December 31,2021.2.Net working capital is defined as total current assets less total current liabilities.3.Total capitalization is defined as total debt plus total shareholders equity.4.Debt to total capitalization is defined as the total debt divided by the sum of total debt plus total shareholders equity.Adjusted Return on Capital Employed19%9 2120222023Excludes certain charges.Average capital employed is a statistical mean of the combined values of debt and shareholders equity for the beginning and end of the period.Adjusted ROCE is defined as adjusted operating profit,after-tax divided by average capital employed.Strong Free Cash FlowMillions of Dollars$1,3692021$1,431$2,27420222023Halliburton generated$2.3 billion of free cash flow*in 2023,demonstrating our ability to generate strong free cash flow in different business environments.*Management believes that the non-GAAP measure of free cash flow,defined as operating cash flows less capital expenditures,plus proceeds from sale of equipment,is an important liquidity measure that is useful to investors and management for assessing the companys ability to generate cash.Halliburton 2023 Annual&Sustainability ReportIntroduction 4SUSTAINABILITYHIGHLIGHTSPercentage of Suppliers Assessed for Human Rights Risks99%Training Hours for COBC,Anti-Corruption,and Enhanced Procurement Fraud in Countries Designated as High-Risk60,107GOVERNANCEGOVERNANCE60,068Total Energy Consumption(Thousand gigajoules(GJ)Recordable Environmental Incident Rate(Incidents per 200,000 hours worked)0.02ENVIRONMENTALCharitable Giving$1.5Billion(USD)Preventable Recordable Vehicle Incident RateIncidents per Incidents per million miles million miles traveledtraveled0.10CPA-Zicklin Index Score93GHG Emissions Intensity Scope 1 and 2(MTCO2e/operating hours)0.2431GHG91%Overall Percentage of Localized Workforce19male Diversity in STEM RolesSOCIALSOCIALSAFETYSAFETYLost-Time Incident Rate(Incidents per 200,000hours worked)2023 International Association of Drilling Contractors(IADC)industry rate0.070.070.150.15Halliburtons 2023 rateTotal Recordable Incident Rate(Incidents per 200,000hours worked)2023 International Association of Drilling Contractors(IADC)industry rateHalliburtons 2023 rate0.250.250.510.51Halliburton 2023 Annual&Sustainability ReportIntroduction 52023 IN REVIEWservice lines.Our international operations today represent just over half of our total business.Halliburtons international revenue grew 17%in 2023 and delivered improved margins and higher returns throughout the year,despite our exit from Russia in 2022.Throughout the international markets in which we operate,we deliver shareholder value through disciplined capital allocation,which means we strategically deploy assets to markets where customers recognize the value of our reliable execution and collaboration.Our next-generation equipment delivers leading-edge performance for our customers and structurally improved returns for Halliburton.Our 2023 results demonstrate the success of our profitable international growth strategy.In the international markets in which we operate,we expect higher international spending for multiple years.To deliver strong shareholder returns through this multi-year upcycle,we will execute on our value proposition,deploy leading technologies,and exercise disciplined capital allocation.Maximize Value in North AmericaHalliburton is the only globally integrated service company with the leading presence in North America,the worlds largest oil field services market.Our leadership means we have the resources to invest in next-generation technologies,infrastructure to commercialize these technologies at scale,and expertise to execute at the highest levels of efficiency.Today,the North America market continues to evolve with a growing segment of customers focused on productivity,efficiency,and reserve recovery.This growing customer segment employs long term development programs,targets improved reservoir recovery through technology,and minimizes operating cost through service efficiencies.We expect Halliburton to extend its technology leadership,deliver unmatched efficiency through our design innovations,and execute on its strategy to maximize value in North America.Accelerate Digital and AutomationHalliburtons strategy to advance digital and automation has transformed both our service delivery and our business performance.Digital and automation lower our costs,improve safety for our personnel,and lower our carbon footprint.Today,that investment in digital and automation exists in our product lines including innovations such as remote offshore cementing jobs,automated directional drilling,and predictive pump maintenance.2023 was a great year for Halliburton and its shareholders.The power of Halliburtons strategy delivered some of the best business performance we have seen in a decade.We recorded revenue of$23 billion,operating income of$4.1 billion,operating margin of 18%,and return on capital employed of 19%.In addition,we generated$3.5 billion of cash flow from operating activities and$2.3 billion of free cash flow.Consistent with our shareholder returns framework,we returned$1.4 billion to shareholders in the form of dividends and stock repurchases and we retired approximately$300 million of debt.We achieved these results through execution on Halliburtons five key strategies Deliver Profitable International Growth,Maximize Value in North America,Accelerate Digital and Automation,Improve Capital Efficiency,and Advance a Sustainable Energy Future.By delivering on our value proposition:to collaborate and engineer solutions to maximize asset value for our customers,we deepened our relationships with customers,improved profitability,and delivered on our strategy.Our commitment to doing business the REDWay:Responsibly,Ethically,and Diligently guided this strategic execution and these results.Deliver Profitable International GrowthHalliburton operates in over 70 countries around the world in both on-and off-shore markets,and across all major product Chairman,President and CEO Jeff MillerHalliburton 2023 Annual&Sustainability ReportIntroduction 6Halliburtons service quality leadership and leading approach to digital and automation strengthens our execution for customers.To further advance our digital and automation strategy,Halliburton has accelerated development and deployment of new digital and automation technologies that will benefit our business and that of our customers.Improve Capital EfficiencyCapital efficiency improvement means we deploy innovative solutions to do more with less.Our technology and development pipeline focuses on technologies that structurally improve our capital efficiency like our iCruise intelligent rotary steerable system and Zeus electric fracturing fleets.These technologies require fewer spare parts,lower maintenance expense,and structurally deliver higher returns for shareholders.Advance a Sustainable Energy FutureAccess to secure and reliable energy remains fundamental to economic and social development,and Halliburton is committed to advancing a sustainable energy future.Our approach to advancing this future aligns squarely with our core competencies.We work to help our customers decarbonize their operations.We advance a sustainable future through operations directly adjacent to our core operations.Finally,through Halliburton Labs,we collaborate with early-stage companies to advance the future of energy.Into the FutureWe are grateful for our employees and the work they do each day.Together,we look forward to the opportunity to deliver profitable international growth,maximize value in North America,develop and deploy digital and automation solutions,increase capital efficiency,and advance a sustainable energy future.Strategic Priorities at a GlanceDeliver industry-leading returns and strong free cash flowProfitable International GrowthMaximizing Value in North AmericaDigital and AutomationSustainable Energy FutureCapital EfficiencyMark J.RichardPresident,Western HemisphereShannon Slocum President,Eastern HemisphereVan H.BeckwithExecutive Vice President,Secretary and Chief Legal OfficerEric J.CarreExecutive Vice President and Chief Financial OfficerJeffrey A.MillerChairman of the Board,President and Chief Executive OfficerLawrence J.PopeExecutive Vice President of Administration and Chief Human Resources OfficerShannon Slocum President,Eastern HemisphereVan H.BeckwithExecutive Vice President,Secretary and Chief Legal OfficerWe are excited about 2024 and beyond.We remain focused on delivering strong returns to our shareholders as we execute on our value proposition to collaborate and engineer solutions to maximize asset value for our customers.Halliburton 2023 Annual&Sustainability ReportIntroduction 7OUR CORE VALUES Our Value Proposition:We collaborate and engineer solutions to maximize asset value for our customers.To learn about our mission,vision,values,and sustainability guiding principles,visit the About Us page on our website.MissionOur mission is to achieve superior growth and returns for our shareholders by delivering technology and services that improve efficiency,increase recovery,and maximize production for our customers.ValuesOur values guide everything we do,underpinning how we relate to each other and everyone with whom we interact.Our values are our corporate DNA,the foundation for how we relate to each other and every individual and entity with whom we interact.These are the principles that every Halliburton employee is expected to use,live by,and demonstrate on a daily basis.Guiding Principles for SustainabilityBuilt on our values,the Halliburton Guiding Principles for Sustainability provide the framework for our operations and our future.Field employees in Mexico on rig siteHalliburton 2023 Annual&Sustainability ReportIntroduction 8MATERIALITY-BASED APPROACHHalliburton defines sustainability materiality based on structured dialogue with our stakeholders,consideration of the topics they find important,and in concert with our existing commitments.We review our materiality assessment annually and it is approved by senior management before it is used to define our sustainability priorities.Our 2023 matrix remains unchanged from 2022,and continues to serve as a foundation for our sustainability strategy.The sustainability materiality mapping is presented in the following visual matrix.Dow Jones Sustainability Indices2023 marks the third consecutive year Halliburton has been named to the Dow Jones Sustainability North America Index.DJSI assesses the sustainability performance of companies using a transparent,rules-based process based on the annual S&P Global Corporate Sustainability Assessment(CSA).Among its industry peers,Halliburton ranked in the 99th percentile or higher for Transparency and Reporting;Innovation Management;Resource Efficiency and Circularity;and Talent Attraction and Retention.FEPFinancial and Economic PerformanceGHGGreenhouse Gas EmissionsSCHRSupply Chain Human RightsBEDBoard Experience and DiversityCSCybersecurityLRCLegal and Regulatory ComplianceCGCorporate Governance,Business Ethics,and TransparencyTDRTalent Attraction,Development,and RetentionLEILocal Environmental Impact and Risk ManagementEMEnergy MixDIDiversity and InclusionWTRWater StewardshipWHSWorkplace Health and SafetyCMChemicals ManagementERMEnterprise Risk ManagementImpacts to IndustryImportance to StakeholdersGovernanceSocialEnvironmentalHighModerateVery High ERMLRCSCHRCMCSWHSTDREMCGBEDFEPDILEIWTRGHGHalliburton 2023 Annual&Sustainability ReportIntroduction 9SUSTAINABILITY COMMITMENTSTopicsCommitmentMaterial IssueMetricsClimate Change Achieve a 40%reduction of Scope 1 and 2 emissions by 2035 from 2018 baseline.Partner with Tier 1 suppliers to track and reduce Scope 3 GHG emissions.Energy Mix Greenhouse Gas Emissions GHG EmissionsEnvironmental Management Establish and achieve activity-based waste-reduction targets in our major facilities.Create water-use improvement plans in our major facilities located in water-stressed areas.Chemicals Management Water Stewardship Local Environmental Impact and Risk Management Waste Disposal Water Consumption Spill Volume and RateInnovation Lead the industry in innovation and conscientious stewardship of global resources.Provide solutions that support decarbonizing our customers production base.Financial and Economic Performance Energy Mix Greenhouse Gas Emissions Chemicals Management Patents Granted R&D Spend Financial PerformanceHuman Rights Support universal human rights as defined by the United Nations Universal Declaration of Human Rights through fair and ethical employment practices and our Code of Business Conduct.Supply Chain Human Rights Supplier Human Rights AssessmentsOccupational Safety-Journey to ZERO Target outperforming total recordable incident rate and lost-time incident rate in the International Association of Drilling Contractors sector benchmarking.Achieve HSE training compliance 95%,driver competency 95%,and 100%completion of our annual Journey to ZERO strategic objectives.Workplace Health and Safety Fatalities,Injuries,Safety Incidents,and Rates HSE Training Hours HSE Training Compliance Driver CompetencySkilled and Committed Workforce Have a skilled and committed workforce by listening and responding to our employees feedback and committing to an engaged workforce that feels valued with the right support and resources to be successful.Talent Attraction,Development,and Retention Training Hours Business Leadership Development Program and Presidents Leadership Excellence Program Attendees New Hires(#,%)Turnover Rates Engagement IndicesDiversity and Inclusion Provide a diverse and inclusive environment that upholds our core values of collaboration and respect,and provides all employees opportunities for growth and development.Board Experience and Diversity Diversity and Inclusion Female%New Hire by Region Localized Workforce%by Region Female Diversity Board Diversitymale in STEM Roles%Racial Diversity in STEM Roles(U.S.only)Risk Management Streamline risk categories,risk identification,and risk management to ensure alignment with Halliburton strategy and place a focus on what matters most.Enhance cross-functional visibility to and collaboration among key stakeholders throughout the organization to ensure consistency,uniformity,and strategic approach to risk assessment,identification,and mitigation.Corporate Governance,Business Ethics,and Transparency Workplace Health and Safety Cybersecurity Legal and Regulatory Compliance Local Environmental Impact and Risk Management Enterprise Risk Management Board Independence Board Meeting Attendance Risk Matrix Security AssessmentsEthical Operations Conduct business with integrity,choosing the ethical course of action when confronted with challenging circumstances,promoting a speak-up culture free of retaliation,and treating our employees and stakeholders honestly and fairly.Corporate Governance,Business Ethics,and Transparency Local Ethics Officers and Engagements/Trainings Ethics Training Code of Business Conduct(COBC)StatisticsSupplier Conduct and Responsible Procurement Cultivate a sustainable supply chain through the continuous improvement of internal processes,by performing proactive risk assessments,and by working collaboratively with our diverse mix of global and local suppliers.Supply Chain Human Rights Tier 1 Suppliers(#,$)Spend with Small and Female Diverse Suppliers%Spend with Local SuppliersCommunity Relationships Enhance the social value of communities in which we live and work through effective engagement and social investment.Talent Attraction,Development,and Retention Local Communities Charitable GivingHalliburton 2023 Annual&Sustainability ReportIntroduction 10ENGAGEMENTHalliburtons management and Board of Directors receive a wide range of feedback about our business performance,strategic priorities,and initiatives.We engaged in regular discussions with our shareholders,customers,employees,and others in 2023.The Halliburton website plays an important role in our outreach efforts and transparency.ShareholdersWe engage in consistent,open dialogue with our shareholders.In fall of 2023,our independent Directors hosted off-season meetings to better understandour shareholder priorities and concerns.We offered opportunities for engagement to shareholders who represented approximately 60%of ourshares.Halliburton Directors and management communicated with 20 shareholders who represented approximately55%of our shares and with the two largest proxy advisors,Institutional Shareholder Services Inc.and Glass Lewis.We hostedvideo-conferences and in-person meetings that included engagements with either Murry Gerber(Chair of the Compensation Committee)or Robert Malone(Lead Independent Director)and Halliburton senior management.We made our refreshed shareholder presentation available tothe shareholders we offered to engage with even if they could not attend one of ourvideo calls or meetings.We also offered to follow up to discuss any questions or concerns.Our 2023 updates to these materials highlight the most recent available informationwith regard to topics like Board oversight and engagement;executive compensation;our people;health,safety,and the environment;and sustainable energy solutions.We solicited additional shareholder feedbackwith our annual and quarterly reporting cycles,earnings conference calls,and investor meetings.To engage with analysts and institutional investors,Halliburtons senior management and Investor Relations team hosted regular meetings and conference calls.As part of our ongoing cadence of shareholder outreach,we participated in16 sell-side conferences,one non-deal roadshow,and 304 investor meetings in 2023.All of this feedback was presented to and discussed among the full Board of Directors for execution of its oversight responsibility.CustomersCustomer feedback plays an important role in Halliburtons ability to make improvements to current solutions and to align our research and development(R&D)investments with customer needs and goals as we develop new products and solutions.Halliburtons executive leadership,business development team,and product lines conduct regular customer engagement to develop and maintain in-depth understanding of the strategies,priorities,and requirements relevant to our customers.We gain a thorough understanding of customers short-and long-term efficiency,technology,and sustainability goals through direct communication with them.Our collaboration with our customers provide insights into ways we can best develop and offer solutions that both maximize asset value and aid efforts to further the future of energy.CEO Jeff Miller conducts site visit Halliburton 2023 Annual&Sustainability ReportIntroduction 11EmployeesWe promote a welcoming and inclusive work environment in order to ensure the well-being of our employees and our own continued success.To encourage an environment of openness and teamwork across our global workforce,we engage in activities and initiatives like town hall meetings,Check-ins(our performance-management process),workshops,employee resource groups,performance feedback,and a biannual Employee Pulse Survey(EPS).These activities and initiatives,which occur in local geographies or at the global level for individual product service lines or functions,help usstrengthen a workplace culture in which Halliburton employees feel their voices are heard.Halliburton considers our biannual EPS an important opportunity to hear from employees about what matters to them.The input we receive helps us identify ways we can improve our workplace for all employees.Our August 2023 EPS yielded a record-high response rate.Read more in the Employee Pulse Survey section of this report.SuppliersHalliburtons ability to provide world-class service to our customers is enabled in part by our cultivation of a resilient,sustainable supply chain that creates value for Halliburton and our customers.We engage with an array of suppliers,both locally and globally,who share our commitment to integrity and ethical business practices.Toensure our ethical standards are upheld,we gather feedback from and collaborate with our suppliers on matters that include health and safety procedures,human rights compliance,and environmental impact.Our sustainability approach and sourcing platforms,meetings,workshops,and training sessions help facilitate consistent,in-depth engagement with suppliers.RegulatorsHalliburton is a global company,and our operations take place in countries and jurisdictions that have varying regulatory requirements.We remain actively engaged with the regulators and agencies that create and enforce regulatory standards to protect the environmental,social,and economic fabrics of the countries where our operations take place.Halliburtons Government Affairs program focuses on helping government officials,policymakers,and local operations management teams understand our technologies and products.The program makes in-depth information about our business available.It also facilitates collaboration with them on issues our customers,employees,and other stakeholders prioritize.Government officials and policymakers contact us to learn from our knowledge and experience about energy-related topics.In recent years,these conversations have often focused on our new technologies,electric fracturing,carbon capture,and geothermal energy opportunities.At times,we also assist foreign service offices,consulates,and embassies around the world as a resource on questions about technology and local content.Local Communities and Non-Governmental OrganizationsHalliburton promotes the economic and social well-being ofthe communities where we work.We meet with non-governmental organizations,community groups,and nonprofits to better understand their concerns and requirements;engage in charitable giving to local community organizations through corporate giving initiatives and charitable foundations;and host volunteer opportunities focused on education,health and safety,environmental cleanup and awareness,and social services to give back to our communities.Halliburton 2023 Annual&Sustainability ReportIntroduction 12GOVERNANCEGood corporate governance builds trust with our shareholders,customers,and employees.Halliburton designed its corporate governance structure to increase transparency and shape our approach to ethical business conduct.Halliburtons Board of Directors oversees our work to establish governance structures,policies,and practices that help foster accountability and reduce risk.For more information about corporate governance at Halliburton and our Board of Directors including roles and responsibilities,committee structure,and individual Director qualifications visit the Corporate Governance page of the Halliburton website orour 2024 Proxy Statement.G1CORPORATE GOVERNANCEG2ENTERPRISE RISK MANAGEMENTG3ETHICS AND COMPLIANCEG4ANTI-BRIBERY,ANTI-CORRUPTION,AND FAIR COMPETITIONG5SUPPLY CHAIN GOVERNANCEG6PUBLIC POLICYHalliburton 2023 Annual&Sustainability ReportGovernance 13G1CORPORATE GOVERNANCEIn addition to Halliburtons Articles of Incorporation and By-laws,Halliburtons Board of Directors Corporate Governance Guidelines provide governance structure for our business.The Board reviews these guidelines on an annual basis.DEEP EXPERIENCEHalliburtons Board of Directors oversees our long-term strategy.Its Directors bring deep and diverse experience to their roles from a variety of industries that include energy,finance,science,technology,legal,human resources(HR),and health,safety,and environment.The Board includes current and former chief executive officers of public and private companies and a former university president.The Directors diverse professional backgrounds include academia,science,publicly and privately held businesses,government,startup entrepreneurship,and governance.Halliburtons Board of DirectorsHalliburton 2023 Annual&Sustainability ReportGovernance 14SUSTAINABILITYOVERSIGHTThe Halliburton Boards Nominating and Corporate Governance Committee provides general oversight for sustainability.Other Board committees assist with sustainability oversight as shown in their respective charters.BOARD OF DIRECTORS(1-Audit Committee;2-Compensation Committee;3-Health,Safety and Environment Committee;4-Nominating and Corporate Governance Committee)Maurice S.Smith(2,3)President,Chief Executive Officer,and Vice Chair,Health Care Service CorporationJanet L.Weiss(1,4)Former President,BP AlaskaTobi M.Edwards Young(1,4)Senior Vice President,Legal,Regulatory,and Corporate Affairs,Cognizant Technology SolutionsAbdulaziz F.Al Khayyal(1,3)Former Director and Senior Vice President of Industrial Relations,Saudi AramcoWilliam E.Albrecht(2,3)President,Moncrief Energy,LLCM.Katherine Banks(3,4)Former President,Texas A&M UniversityAlan M.Bennett(1,4)Former President and Chief Executive Officer,H&R Block,Inc.Milton Carroll*(2,4)Former Executive Chairman of the Board,CenterPoint Energy,Inc.Earl M.Cummings(2,3)Managing Partner,MCM Houston Properties,LLCMurry S.Gerber(1,2)Former Executive Chairman of the Board,EQT CorporationRobert A.Malone(2,4)Executive Chairman,President and Chief Executive Officer,First Sonora Bancshares and the First National Bank of SonoraJeffrey A.MillerChairman of the Board,President and Chief Executive Officer,Halliburton CompanyBhavesh V.Patel(1,3)President,Standard Industries*Mr.Carroll notified the Board on February 13,2024,of his intent to not stand for re-election at the 2024 Annual Meeting of Shareholders.He will serve as director until his term ends immediately prior to the Annual Meeting of Shareholders on May 15,2024.Halliburton 2023 Annual&Sustainability ReportGovernance 15EXECUTIVE COMPENSATIONHalliburtons executive compensation program focuses on incentivizing performance,maximizing returns,and building shareholder value.It is integrated with our overall business strategy and management processes,and is performance-based,at-risk,and long-term.Our long-term incentive plan includes relative performance measures,and our annual incentive plan combines financial and non-financial strategic metrics.For additional information,visit our 2024 Proxy Statement.Halliburtons commitment to shareholder input resulted in numerous,substantive changes to the structure and governance of our executive compensation program in the last few years.Most recently,we implemented a payout cap in our long-term incentive plan for negative Return on Capital Employed(ROCE)performance and increased the target performance level for relative ROCE.These changes directly reflect feedback we received from our shareholders and further strengthened the programs design through alignment of pay opportunities,business performance,and pay outcomes,and demonstrated our commitment to put forth a market-competitive program that produces the results our investors expect.Nominating and Corporate Governance CommitteeAudit CommitteeHealth,Safety and Environment CommitteeCompensation Committee Overall sustainability Corporate Governance Guidelines Director self-evaluation process and performance reviews Board refreshment Boards mix of skills,characteristics,experience,and expertise Director compensation Management succession planning Political and lobbying spending Principal independent public accountants Internal Assurance Services and the Ethics and Compliance group Financial statements and accounting systems and controls Enterprise risk,including information security and cybersecurity*Control structure for externally reported non-financial metrics HSE matters and sustainability HSE risk-management processes HSE performance Environmental impact,including climate matters Overall executive compensation program Effectiveness of compensation program to attract,retain,and motivate Section 16 officers Pay and incentive plans metrics,including Non-Financial Strategic Metrics*The Board of Directors receives quarterly cybersecurity updates.Board of Directors and other leaders visit Halliburton test rig facility in TexasThe following chart details the primary oversight responsibilities held by each of Halliburtons Board committees:Halliburton 2023 Annual&Sustainability ReportGovernance 16G2ENTERPRISE RISK MANAGEMENTHalliburtons risk-assessment process relies on a consistent,systematic,integrated approach to risk,and includes a yearly review of items that have potential to impact our business continuity,strategy,and crisis management.Halliburton reports to the Board of Directors on the results of the risk-assessment process.This process is part of Halliburtons Enterprise Risk Management(ERM)program,which is designed to identify,mitigate,and manage enterprise-level risks to our organization as well as other strategic risks.Our Risk ManagementSustainability Commitments Streamline risk categories,risk identification,and risk management to ensure alignment with Halliburton strategy and place a focus on what matters most.Enhance cross-functional visibility to and collaboration among key stakeholders throughout the organization to ensure consistency,uniformity,and strategic approach to risk assessment,identification,and mitigation.ANNUAL ENTERPRISE RISK ASSESSMENTHalliburtons refreshed risk-assessment process continued in 2023.We conduct this process with our partnership with a global leader in ERM programs.This streamlined and collaborative approach to strategic risk assessments is one way we identify and prioritize top risks.The process consists of yearly workshops that facilitate open dialogue,debate,andexistent and emergent risk evaluation.This year,79 Halliburton executives participated to discuss,evaluate,and score risks based on their potential impact,likelihood of occurrence,and risk-mitigation preparedness.Workshopresults provided valuable feedback for focusing risk-mitigation attention and opportunities for process optimization.We incorporate insights gained into upcoming plans and utilize them to help Halliburton minimize risks and maximize opportunities as it achieves its strategic plans.GLOBAL IT INFRASTRUCTUREHalliburtons IT strategy includes modernized infrastructure,networks,and applications that provide agility,scalability,and flexibility to our business and customers.This design aligns with and supports our broader digital and automation strategy.We continue our efforts to optimize all applications deployed to cloud-based digital platforms.This includes applications that are new to the cloud as well as those we migrated from previous platforms.These efforts reduced the on-premise infrastructure required for our work.At the end of 2023,we achieved our goal to reduce our global data center footprint by 75%.Halliburton 2023 Annual&Sustainability ReportGovernance 17CYBERSECURITYHalliburton takes every threat to cybersecurity seriously.Our Board receives quarterly updates about cybersecurity matters and Halliburtons Audit Committee receives an in-depth annual review on the topic.Halliburton invests significant resources to protect our systems and data.We do this in ways that align with industry standards,such as the National Institute of Standards and Technology(NIST)Cyber Security Framework,NIST 800-53,NIST 800-82,and International Electrotechnical Commission 62443.The following are examples of measures taken to implement our Defense-in-Depth design philosophies for Information Technology(IT)and Operational Technology(OT)systems:Multi-factor authentication,which verifies users identities beyond their credentials“Zero trust,”which establishes layers of protection for users and devices“Least privilege,”which limits the content individual users can accessHalliburton continued to perform OT security self-assessments for all of our product lines in 2023.These assessments promote proper governance of cyber controls;help us evaluate evolving cyber risks;and improve our product line network segmentation,monitoring,and endpoint security management.We regularly evaluate advanced cybersecurity technologies with potential to help Halliburton expand our portfolio of OT security solutions.In 2023,we further enhanced our annual cybersecurity training program.We launched additional training on specific subjects,such as phishing and privileged access management,that are now required for select groups of Halliburton personnel and optional for the rest of our employees.The groups that are required to complete these new training courses do so alongside Halliburtons annual cybersecurity training course,which is required of all our employees and contractors.We also added a new OT Security training that is required for all Halliburton employees and contractors.Analyst monitors application and infrastructure performance using iEnergy platformHalliburton 2023 Annual&Sustainability ReportGovernance 18PHYSICAL SECURITYHalliburton takes active steps to protect the physical safety of employees.Where employees work responsibilities might cause risks to their physical safety,we have established safety procedures and infrastructure to minimize those risks.Our security team monitors and assesses current and developing global security risks where Halliburton operates.It works collaboratively with local management teams to develop and execute security plans.These efforts include controls designed to enhance the security of Halliburtons personnel and assets.Workplace Violence PreventionHalliburton works to maintain a secure and safe workplace environment for all of our employees.Our Code of Business Conduct(COBC)and security controls are the foundation of workplace safety at Halliburton.Through on-demand training,we communicate with employees and managers about the best ways to recognize,report,and manage threats of violence.Global Travel Risks Halliburton operates business on a global scale.We use our network of security specialists and our 24-hour Global Security Operation Center(GSOC)to monitor global security conditions and associated risks.Because we maintain vigilant attention to global security conditions,we can warn our employees about threats,incidents,or local developments that may affect them on business-related travel.Autonomous Security Technology In 2023,we continued to integrate security technologies to provide enhanced capabilities for security operations,emergency response,and autonomous access control.This included the extension of our drone program,which recorded over 1,000 miles flown and improved our overall situation awareness.Halliburton chemical reaction plant in Saudi ArabiaHalliburton 2023 Annual&Sustainability ReportGovernance 19Our Ethical Operations Sustainability Commitment Conduct business with integrity,choosing the ethical course of action when confronted with challenging circumstances,promoting a speak-up culture free of retaliation,and treating our employees and stakeholders honestly and fairly.G3ETHICS AND COMPLIANCEEverything we do at Halliburton is founded on respect and integrity,which are two of our core values.Our longstanding ethics and compliance program enables us to maintain this foundation.Halliburtons Global Ethics and Compliance group,which is led by the Chief Ethics and Compliance Officer and supervised by the Audit Committee,administers the ethics and compliance program.The program includes Halliburtons Ethics Helpline,whistleblower protections,and COBC.Visit theHalliburton COBC page of our website to learn more and find the full text of our COBC,which is available in multiple languages.LOCAL ETHICS OFFICERSHalliburtons Local Ethics Officers(LEOs)are employees who have chosen to assume an additional responsibility to promote awareness of ethics and compliance.Employees who are appointed to be LEOs receive training about ethical behavior modeling;best practices to answer employee questions and provide guidance;and how to receive and escalate reports of suspected misconduct.They work locally to help supplement our COBC-based ethics and compliance training program through their presentations on ethics topics and serve as community resources.At the end of 2023,51 LEOs in 35 countries served in this role.Halliburton LEOs provide relevant,timely,and targeted in-person and virtual ethics and compliance training around the globe.In 2023,Halliburton LEOs conducted 1,764 presentations.They are a critical avenue of communication for our global compliance program from the office to the wellhead.In addition,because our LEOs are present in local offices,our employees have one more resource they can go to if they wish to raise a concern or report a suspected ethics violation.ETHICS AND COMPLIANCE TRAININGHalliburton provides robust training for everyone at the Company,and in-person or online COBC training is required of all employees and contractors of Halliburton who have access to our systems.Our ethics and compliance training program ranges from managerial development programs hosted by corporate executives to site-specific training at job sites and a variety of other opportunities.1,764Number of LEO PresentationsField employee discussion in Aelo,ArgentinaTraining Hours for COBC,Anti-Corruption,and Enhanced ProcurementFraud in Countries Designated as High-Risk Number of Hours56,68920212022202358,07860,107Halliburton 2023 Annual&Sustainability ReportGovernance 20G4ANTI-BRIBERY,ANTI-CORRUPTION,AND FAIR COMPETITIONEveryone who conducts business on Halliburtons behalf from employees,contractors,and suppliers to agents,consultants,officers,and directors is required to follow our anti-bribery,anti-corruption,and fair competition policies and procedures.Our COBC references relevant policies and practices and our commitment to these principles.OUR REQUIREMENTSHalliburton employees are expected to conduct business with integrity and to be guided by our core values.Employees must comply with the U.S.Foreign Corrupt Practices Act,the UK Bribery Act 2010,and similar laws that apply to our business.Our employees also must engage in fair competition for business and win it in a legal and ethical manner.EMPLOYEE TRAININGEvery employee with relevant job functions,as well as employees who work in high-risk countries,must complete our anti-corruption and anti-bribery employee training course.The training course emphasizes Halliburtons core commitment to conduct business the REDWay and to engage in and win business fairly,professionally,and with integrity.It also reviews topics like business relationship management,due diligence,and how to ethically engage in business hospitality and charitable contributions.Halliburtons Global Ethics and Compliance group supports and supplements our web-based anti-corruption training courses with in-person and virtual trainings each year.Our Global Ethics and Compliance team visits with employees and contractors in our geographies,product service lines,and functions,including at manager boot camps,Halliburton corporate and operational facilities,and corporate gatherings.Global Ethics&Compliance team member leads in-person training in KuwaitHalliburton 2023 Annual&Sustainability ReportGovernance 21G5SUPPLY CHAIN GOVERNANCEHalliburton works with suppliers who share our commitment to integrity and ethical business practices.We use a standard approach to screen suppliers and measure their compliance with our rules,terms,and conditions.We also review and monitor our current suppliers practices to confirm they comply with Halliburtons policies.Learn more about our Supplier Management System,local supplier procurement policies,modern slavery and trafficking prevention,conflict minerals,and supplier compliance and training-related expectations on the Supplier Relations page of the Halliburton website.Our Supplier Conduct and Responsible Procurement Sustainability Commitment Cultivate a sustainable supply chain through the continuous improvement of internal processes,by performing proactive risk assessments,and by working collaboratively with our diverse mix of global and local suppliers.DRIVING A SUSTAINABLE VALUE CHAINHalliburton knows effective due diligence of our supply chain is essential to build and maintain sustainable operations.It is important to select suppliers that operate sustainably.Halliburtons work to select and qualify suppliers includes evaluations of suppliers sustainability commitments.We expect our suppliers to improve with us in sustainability matters.We also encourage our suppliers to track theirsustainability performance and proactively pursue continuous improvement.SUPPLY CHAIN MONITORING PLATFORMHalliburton continued to develop and implement a digital supply chain monitoring platform in 2023.This cloud-based platform collects and monitors sustainability data from suppliers on a wide range of topics that include human rights,conflict minerals,supplier diversity,and carbon footprint.Halliburton uses this system to engage with our supply chain partners on key sustainability issues,identify and prioritize risks,manage supplier corrective action plans,and track vendor progress on carbon footprint reduction.At present,Tier 1 suppliers representing 89%of Halliburtons annual spend have been engaged via the platform.Tier 1 suppliers representing 68%of Halliburtons annual spend are now fully registered in the platform and undergoing assessment.89%of Halliburtons annual spend engaged68%of Halliburtons annual spend registeredTier 1 suppliers representing:Halliburton 2023 Annual&Sustainability ReportGovernance 22PERFORMING DUE DILIGENCE IN OUR SUPPLY CHAINSPoliciesHalliburtons contracted suppliers must commit to protect and uphold the fundamental human rights of their employees as defined by the UN Universal Declaration of Human Rights.We use our Supplier Ethics Letter and Supplier Ethics Statement to communicate ethical expectations to our suppliers.In 2023,weenhanced our supply chain policies by embedding our sustainability commitments and requirements in them.Risk AssessmentDuring onboarding,we require potential suppliers to engage in a risk-evaluation process via our procurement system.Depending on supplier risk level,we collect information such as insurance documentation and safety risk assessments.We also conduct screenings for export controls.We then use our supply chain monitoring platform to conduct sustainability assessments.As a data collection and mapping tool,this platform plays an important role in making it possible for Halliburton to analyze data,pinpoint risks within our supply chain,and prioritize areas for follow up.When we work to determine which risk levels to assign to suppliers,we assess them based on relationship,category,and geography.Halliburton includes evolving international Human Rights legislation,particularly import and trade restrictions,in our risk assessment methodology.In the course of risk assessment,we consult international standards,such as the UN Guiding Principles for Business and Human Rights and The Organization for Economic Co-operation and Development Due Diligence Guidance for Responsible Business Conduct.The supply chain monitoring platformhas enabled Halliburton to expand our supplier human rights due diligence program and take effective action to reduce risks and improve sustainability performance over the long term.It administers questionnaires to suppliers about key Human Rights and Labor topics.We have used the platform to conduct Human Rights and Labor evaluation for 4,496 suppliers(which comprises 56%of our global spend).Human Rights Audit and Supplier EvaluationIn 2023,we continued to enhance our high-risk supply chain due diligence.Through Halliburtons ongoing collaboration with a third-party human rights auditor,we maintained our practice of on-site human rights audits of suppliers.We consider the scale of our business with particular suppliers and the nature of the goods or services they provide to determine the proper scope and form of our audits.We conduct Workplace Conditions Assessments,Labor Provider Audits,and Service Provider Audits,among others.Halliburton evaluates our critical suppliers annually.In these evaluations,we look at suppliers risks related to safety,quality,environment,social responsibility,economics,and corporate governance.Suppliers must respond to a questionnaire that asks about their level of compliance with Halliburtons COBC,safety standards,and requirements.If a supplier is found to be non-compliant with Halliburtons standards,our response actions can lead to supplier termination.Visit Chapter S4 Human Rights to read more about Halliburtons Human Rights policies.Risk Analysis Risk Mitigation/Remediation Impact AnalysisPerformanceMonitoringReporting&AccountabilityCommunication&TrainingOur Approach to Supply Chain SustainabilityEmbedding sustainability in supply chain processesHalliburton 2023 Annual&Sustainability ReportGovernance 23Conflict MineralsHalliburton is a member of the Responsible Minerals Initiative.We work with our suppliers to make sure they ethically source conflict minerals.Non-compliant suppliers are subject to termination or corrective actions.In 2023,our cloud-based supply chain monitoring platform enabled us to increase our supplier response rate from 78%to 86%.It also affords us better visibility into our suppliers actions;greater ease in collaboration with suppliers on appropriate remedial or corrective actions;and a more intuitive assessment platform.SUPPLY CHAIN TRAININGTo deliver training about sustainability and supply chain mapping to our internal personnel and external suppliers,Halliburton engages resources from professional training bodies that develop material focused on supply chain and procurement practices.In 2023,in collaboration with the Supply Chain Sustainability School,we piloted sustainability-related training to key internal employees and external stakeholders.The Supply Chain Sustainability School enables us to provide a wide range of sustainability training on a variety of topics,including modern slavery,ethical procurement,environmental protection,and climate change.This includes the International Petroleum Industry Environmental Conservation Association(IPIECA)Labor Rights Training,which covers topics such as fair recruitment,worker grievance mechanisms,and forced labor.We also continued our internal training on Supply Chain Sustainability Awareness for supply chain employees in 2023.This training covers a range of key sustainability topics relevant to our supply chain,including emissions,supply diversity,supply chain risk mapping,modern slavery and related legislation,the UN Sustainable Development Goals,and UN Guiding Principles on Business and Human Rights.LOCAL CONTENT AND SUPPLIER DIVERSITYHalliburton draws strategic and competitive operational advantages from its strong,established relationships with local suppliers.As we support them,we help expand national and local suppliers capacities and competencies,promote positive labor practices,and stimulate local economies.We engage in legal,ethical work with governments and customers around the world to meet our local content targets.Halliburton collaborates with industry counterparts and IPIECA to develop standardized local content measurement and reporting practices for the global oil and gas industry.We helped create new local content guidance for the oil and gas industry that was published in March 2023.In 2023,we engaged 5,992 suppliers with questions about diversity via our cloud-based supply chain monitoring platform.This inquiry was designed to validate data and identify diverse vendors in our network.We also expanded supplier diversity to includedisabled-and veteran-owned businesses.Halliburton 2023 Annual&Sustainability ReportGovernance 24G6PUBLIC POLICYThe global energy industry is subject to a set of complex,ever-evolving regulations.We engage on public policy issues relevant to Halliburton,our operations,and our workforce.TRANSPARENCY AND OVERSIGHTTransparency is a corporate priority at Halliburton.We maintain practices that enable transparency and implement new practices that increase our transparency each year.Our Boards Nominating and Corporate Governance Committee reviews and approves political engagements such as Halliburtons lobbying activities,payments to trade associations,and political expenditures,as provided by the Halliburton Policies for Political Engagement.The CPA-Zicklin Index assesses political engagement policies at S&P 500 companies for transparency and accountability.Companies scored on the CPA-Zicklin Index have their company policies and practices reviewed in 24 areas,including political contributions,trade associations,and political action committee(PAC)activities.CPA-Zicklin Index Trendsetter StatusIn 2023,Halliburton scored a 93 on the CPA-Zicklin Index with a raw score of 65 points.A score of 90 or above indicates robust disclosure and oversight and classifies a company as a Trendsetter,a status Halliburton obtained in 2022 and maintained in 2023.We are the only oilfield services company currently classified as a CPA-Zicklin Index Trendsetter.POLITICAL ACTIVITY AT HALLIBURTONHalliburton does not use corporate dollars to make direct contributions to political candidates or parties.Halliburtons political action committee,the Halliburton Company Political Action Committee(HALPAC),is multi-candidate and non-partisan.You can learn more about HALPAC on the Public Policy page of the Halliburton website.Halliburton 2023 Annual&Sustainability ReportGovernance 25ENVIRONMENTALGlobally,oil and gas continue to be critical sources of energy.The pursuit of a lower carbon future must account for their place in the global energy mix.Halliburton focuses on three fronts to drive decarbonization:deliver technologies that help reduce the emissions intensity of our own and our oil and gas customers operations;service growing markets such as carbon capture,utilization,and storage(CCUS)and geothermal energy through our Low Carbon Solutions business;and continue to help innovators and entrepreneurs scale across the broader energy system through Halliburton Labs,which also allows us to learn how we can add value to this broader space.Our efforts also go beyond carbon as we continue to implement measures to reduce waste generation and optimize water use.E1EMISSIONS REDUCTION PROGRESSE2THE FUTURE OF ENERGYE3ENVIRONMENTAL MANAGEMENTHalliburton 2023 Annual&Sustainability ReportEnvironmental 26843,376E1EMISSIONS REDUCTION PROGRESSHalliburton understands the oil and gas industry has an important role to play to help reduce the worlds emissions,and that affordable,secure energy is essential for global economic development.We are dedicated to our work to reduce emissions,improve efficiency,and advance the development of clean energy options.Our Chief HSE Officer has responsibility to define and execute our emissions reduction strategy,which the HSE committee of our Board of Directors oversees.The Board also receives regular updates about Halliburtons progress.You can read our Climate Change Statement,Climate Risk Scenario Analysis,and additional information about our emissions reduction efforts on the Halliburton website.FOCUS ON EMISSIONS REDUCTIONIn 2023,we continued to invest in innovations and initiatives that support progress toward our 2035 emissions reduction target.We expect total emissions to fluctuate in the near term as market dynamics,our hydraulic fracturing equipment mix,and operational efficiencies affect our emissions.Hydraulic fracturing accounts for about 80%of our carbon footprint,and strong demand for oil and natural gas supply drove demand for our services which resulted in a 15%increase in our absolute Scope 1 and 2 emissions year over year.However,our overall emissions intensity is down 13%compared to 2018,which suggests we are on track to meet our target.Given the continued expansion of our electric fracturing fleet,our Scope 2 emissions went from 11%of our total reported emissions in 2022 to 20%in 2023.We expect this shift to continue as more of our diesel-powered equipment is replaced by electric units over time.Continued electrification will open new avenues for emissions reduction given power source optionality.Our Climate Change Sustainability Commitments Achieve a 40%reduction of Scope 1 and 2 emissions by 2035 from 2018 baseline.Partner with Tier 1 suppliers to track and reduce Scope 3 GHG emissions.Fracturing ElectrificationWe continue to deploy new electric fracturing units,which reduce the emissions intensity of our fleet and 3,443,1743,503,4412021202220233,320,350Scope 1 GHG Emissions MTCO2e248,949202120222023405,114Scope 2 Market-Based GHG Emissions MTCO2ehelp customers reduce their emissions.Over the last two yearsof electric fracturing deployments,we have reduced our North America fracturing-related emissions intensity by a cumulative 4%.Our electric fracturing units provide a lower emissions profile relative to other units and offer power source optionality that include grid power and different sources of natural gas.Halliburtons customersrecognize our units as valuable options in their emissions reduction journeys.Fracturing electrification operationsHalliburton 2023 Annual&Sustainability ReportEnvironmental 27Mapping Carbon in Our Supply ChainIn 2023,Halliburton collaborated with IPIECA and other oil and gas companies to develop a standardized process to define and calculate embodied carbon for select purchased materials.Halliburton usesanalytical toolsto assess our suppliers carbon footprint management maturity.To date,Halliburton has assessed the maturity of over 4,116suppliers.Aided by direct discussions with our suppliers,we have also started to collect product carbon footprint data.Learn more about the cloud-based platform we use in the Supply Chain Monitoring Platform section of this report.FacilitiesSustainability is integrated into our real estate processes.Due to our efforts to assess and improve the efficiency of our facilities through initiatives such as solar energy,LED lights,renewable electricity procurement,and the optimization of other mechanical systems,we reduced over39 million kWh in 2023.Nine of Halliburtons sites located in Canada,India,and the U.S.currently purchase 100%renewable power.In 2023,Halliburton installed LED lighting at 26 sites globally,and we have contracted installations at nine additional sites.Thisongoing initiative has shown a62%average reduction in U.S.lighting-related electricity consumption.Halliburton Completion Technology and Manufacturing Center,Singapore(Lion Facility)Halliburton 2023 Annual&Sustainability ReportEnvironmental 28E2THE FUTURE OF ENERGYThe world requires a diversifieduse of all sources of energy,each of which has a role to play in the future.At Halliburton,we deliver value to the broader energy landscape.Our work is focused in three spaces:We provide goods and services to help our customers reduce the emissions footprint of their operations.We put our core competencies to work to deliver solutions to low-carbon energy projects such as CCUS andgeothermal energy.Through Halliburton Labs,we help early-stage companies in emergent energy sectors scale as we learnabout where we can strategically engage new markets.Our Innovation Sustainability Commitments Lead the industry in innovation and conscientious stewardship of global resources.Provide solutions that support decarbonizing our customers production base.LOWERING THE CARBON INTENSITY OF OUR CUSTOMERS OIL AND GAS OPERATIONSHalliburton helps our customers lower the carbon intensity of their operations through innovative,data-driven solutionsin the full well lifecycle.The oil and gas industry provides affordable,reliable energy that is necessary for the global society and its growth.The path toward a lower carbon futureincludes hydrocarbons produced more efficiently and with a reduced carbon footprint.Our approach to sustainability is embedded in our new technology development process and customer collaboration.We develop and deliver solutions that help our customers reduce emissions,maximize their assets,and build a sustainable future.Digital Emissions CalculationsIn 2023,we integrated the Envana emissions data management software with our service delivery workflows and equipment sensors.This integration was accomplished in several product service lines and enables us to generate reliable,repeatable,and detailed emissions data for jobs executed by these product service lines.Halliburton uses this data to report verifiable emissions data,collaborate with customers to identify opportunities to reduce emissions,and inform our product development.Our data-driven solutions positively impact our emissions footprint and are key to our end-to-end sustainability strategyHalliburton 2023 Annual&Sustainability ReportEnvironmental 29Sustainability in the Product Development ProcessAll new product-related research and development at Halliburton follows LIFECYCLE,our technology development process.LIFECYCLEs steps consider,among other factors,ways to minimize and quantify potential sustainability-related impacts.It is a rigorous,interdisciplinary,and collaborative stage-gate product development process that facilitates successful technology commercialization.In 2023,wesimplified how we identify products or services that help our customers reduce emissions and standardized how we qualify environmental impact early in the technology development process.We also improved our process controls,which monitors our project launches from inception to commercialization.If a product or service is determined to have a favorable sustainability impact during the LIFECYCLE process,it is then classified in one of the following categories:1.CO2e footprint reduction2.Direct/indirect input(i.e,electricity,raw materials,or logistics)and/or waste reduction3.CO2e footprint assessment and/or emissions mitigation4.Low Carbon SolutionsIntelevate PlatformIntelevate Platform,developed through LIFECYCLE,is a customizable digital platform that helps operators design,build,and operate end-to-end electrical submersible pump(ESP)monitoring solutions.It facilitates faster,more accurate goal setting and operating plan development.A customer that adopted the Intelevate Platform increased their average equipment run life by over 60%.It enabled the customer to remotely operate around one-third of their ESP operations in the Permian Basin and decreased the number of technician visits made by 50 visits per month.Combining design and monitoring expertise with data science to digitally transform ESP performanceHalliburton 2023 Annual&Sustainability ReportEnvironmental 302023TECHNOLOGY SUSTAINABILITY MATRIXHalliburton maps thelower environmental impact technologies we launch in our Technology Sustainability Matrix.This reference document identifies our environmental impact-reducing technology offerings according to every stage of the well lifecycle.The excerpt below highlights products and services we launched in 2023.More information can be found on the Sustainability page of the Halliburton website.Products/ServicesOperational EfficiencyElectrificationCustomer Emissions Inventory OptimizationWater Optimization and Waste ReductionMaterials and LogisticsCarbon Capture,Utilization,and StorageGeothermalARTIFICIAL LIFTIntelevate Platform BAROIDBaraFLC Nano nanoparticle wellbore sealant additive for water-based fluid systems COMPLETION TOOLSIsoRite-FT Multilateral completion system PRODUCTION SOLUTIONSHydra-Blast Pro wellbore cleaning service SPERRY DRILLINGPulseStar intelligent high-speed telemetry service GuideStar continuous definitive survey measurements service iCruise CX intelligent rotary steerable system EarthStar X near-bit,shallow,and ultra-deep resistivity service TESTING&SUBSEARemotely Operated Control System(ROCS)Subsea Controls and Intervention Light System(SCILS)WIRELINE&PERFORATINGCoreHD scientific imaging services PorosityHD imaging and digital routine core analysis FastSCAL digital special core analysis Halliburton 2023 Annual&Sustainability ReportEnvironmental 31LOW CARBON SOLUTIONSWe saw significant growth in 2023 as the global project opportunities for CCUS and geothermal energy increased.Our Low Carbon Solutions offerings apply our experience and preexisting technologies to develop and execute our customers projects.We include a few highlights below.CCUSHighlightsHalliburton provides solutions that help our customers analyze risk in complex CCUS projects.We offer tools that help companies understand the geological characteristics of a potential storage site.Our cementing and completions product lines offer a range of corrosion-resistant solutions that customers can use to construct storage wells.Halliburtons Neftex FairwayFinder software uses an informed approach to identify and screen potential storage sites.Our wellbore evaluation technologies,such as our IntelliSat pulsed neutron logging service,provide accurate assessments of carbon/oxygen saturation a critical step before CO2 injection.A range of formation pressures can be collected when these technologies are paired with our Reservoir Description Tool(RDT)formation tester,which provides information related to storage and containment quantification.Measurement,monitoring,and verification(MMV)is a required step in storing injected CO2 underground.Halliburtons solutions include tools that facilitate accurate MMV of formation pressures and temperatures,remote data access,and storage and leak detection alerts.Our DataSphere continuous monitoring suite delivers subsurface monitoring capabilities.The suite also collects live wellbore data that aids injection and reservoir model enhancement to fulfill CCUS MMV requirements.SPIDR Data Acquisition UnitHalliburtons SPIDR data acquisitionunit is a well-surveillance solution.Both the SPIDR data acquisition unit and SPIDRlive streaming surface pressure data retrievers capture high-quality pressure data at the wellhead without wellbore intervention.SPIDRlive streaming surface pressure data retrievers use the cloud to stream data and provide a wider remote visualization capability for CO2 injection sites.HyNet UK Carbon Storage ProjectIn 2023,Halliburton was awarded contracts for work on the HyNet North West CCUS project in the Liverpool Bay area,the first of its kind commissioned in the UK.This project will involve completions,liners,and monitoring products and services.Its goal is to reduce carbon dioxide emissions through use of depleted hydrocarbon reservoirs for geological storage and by providing the region access to low carbon energy.Halliburton 2023 Annual&Sustainability ReportEnvironmental 32Geothermal Energy HighlightsGlobal demand for sustainable heat and electricity has led to growth in conventional geothermal projects and advancements in geothermal systems.These advanced systems allow for geothermal energy production in areas without ideal geological conditions for conventional geothermal applications.Halliburtonstechnology portfolio,combined with our experience in the geothermal space,positions us to meet the growing geothermal energy markets demands.Our integrated and comprehensive approach to the geothermal project lifecycle delivers a low-cost-per-megawatt solution for our customers.From subsurface software,well construction,and artificial lift to well interventions,Halliburton has a portfolio of products and services to support operators in the geothermal sector.We develop new technologies to drive performance and reliability in this high-temperature,high-pressure environment to make geothermal energy more accessible and affordable.XaminerSonic Imager Logging ServiceHalliburtons wireline product line deployed Xaminer Sonic Imager logging service pairs with our borehole imaging offerings,such as StrataXaminerTM high-resolution images in oil-based mud,to characterize fracture networks in geothermal projects.The Xaminer Sonic ImagerTM logging service delivers high-resolution characterization of seismic properties,geomechanics,and completion requirements in a wide range of reservoirs.Data acquired by these advanced services is vital for planning induced fractures in the target geothermal zone.StrataXaminer imaging service delivers high-resolution images of the reservoir structureCape Station:Horizontal Geothermal Well ProjectWe worked with Fervo Energy in Utah,a leading geothermal energy company,to deploy the Halliburton VersaFlex XSL-ZE Liner Hanger system in the worlds first commercial enhanced geothermal greenfield development project.Fervo leverages horizontal drilling,distributed fiber-optic sensing,and multi-zonal completion techniques to enhance permeability and water flow through the subsurface,removing the need for naturally occurring hydrothermal resources that are required in conventional geothermal wells.A cross-functional team installed and successfully cemented the technology in three different horizontal wells.Our collaboration helped the customer achieve higher efficiency in their geothermal well projects.Halliburton 2023 Annual&Sustainability ReportEnvironmental 33HALLIBURTON LABS:THE FUTURE OF ENERGY.FASTER.Through Halliburton Labs,we provide a wide spectrum of energy system innovators and entrepreneurs with access to our capacity to scale and the vast resources in our global infrastructure and network.We come alongside these organizations to help them further their strategic goals.Participating startups include those engaged in industrial decarbonization;carbon capture and utilization;grid-scale and long-duration energy storage;energy generation and conversion;critical minerals recovery;hydrogen production and transportation;and circular economy.Halliburton Labs creates tangible value for early-stage companies in emergent energy sectors.We grant access to resources that support organizations efforts to scale and expand their industry networks.As we support these organizations,we develop new insights and discover opportunities for exploration,investment,and growth.Halliburton also gains institutional knowledge that will enable us to collaborate and engineer solutions to maximize asset value in the energy systems of the future.Participants enter a financial agreement that secures an equity stake for Halliburton Labs at their next round of institutional financing.Halliburton Labs closed out 2023 with 32participant and alumni organizations that represent all facets of energy production,storage,distribution,and efficiency,as well as the industrial decarbonization and waste-to-value sectors.We continue to see high levels of interest in Halliburton Labs from investors,startups,and academic institutions.Increasingly,our applicants are referred to us by companies and investors who have seen the value we create firsthand.Halliburton Labs Gives Clean-tech Startups VisibilityWe hosted twoFinalists Pitch Day events in 2023.At these events,we showcased 10 early-stage hard-tech companies that innovate solutions in many different sectors of the energy landscape.This was the first year we took our Pitch Day on the road.We collaborated with key energy organizations to deliver a Future of Energy Day atDenver Startup Week,which further expanded Halliburton Labs and our Finalists reach,visibility,and networks.Clean tech startups pitch at the Halliburton Labs Finalist Pitch Day for an opportunity to join their accelerator programHalliburton Labs also hosted its first Company Showcase event in May 2023 for nine of our participant startups.An audience of over 55 clean-tech venture investors attended.At this event,we facilitated live pitches for nine of our participants andmore than174curated meetings between startups and relevant investors.Halliburton Labs Participant and Alumni Organizations32Halliburton 2023 Annual&Sustainability ReportEnvironmental 34Halliburton Labs hosts panel discussions for its Innovation SeriesParticipant AchievementsIn 2023,many Halliburton Labs participants achieved important milestones in their work to scale their operations.LiNa Energy reduced its funding needs by 30%in consultation with Halliburton Renew Power Systems,Inc.produced its first commercial inverter units SunGreenH2 was a 2023 winner of the BloombergNEF Pioneers Award Disa Technologies,Inc.closed a$15 million fundraising roundThese examples demonstrate how Halliburton Labs creates tangible value for early-stage companies in emergent energy sectors.Halliburton Labs Innovation SeriesHalliburton held three Innovation Series events in 2023 that were open to all Halliburton employees.We invited panels of distinguished industry,academia,and startup speakers to have insightful,stimulating discussions at our Houston,TX,campus.Topics discussed included Nuclear Energy;Carbon Capture at Gigaton Scale;and Carbon Utilization.Employees gained an opportunity to hear new and diverse views about innovation,market drivers,and potential gaps in emergent value chains.Venture DevelopmentHalliburton began to incubate NaviScale in 2023.NaviScale is a Halliburton commercial venture that makes use of Halliburtons experience and expertise to help clean-energy and climate-tech ventures navigate their scale-up journeys.It assists them as they identify unseen risks in equipment design;optimize their designs for manufacturing;verify their readiness to scale,and secure suitable and reliable supplier relationships.With NaviScale,Halliburton will be able to extend the impact of Halliburton Labs beyond participants and alumni.NaviScale will deliver a commercial solution powered by Halliburton to the broader climate tech market.As Halliburton works alongside a broader range of innovative companies,we expand our access to and insight into promising value chains even further and spark additional opportunities to collaborate and engineer solutions for the energy systems of the future.Halliburton 2023 Annual&Sustainability ReportEnvironmental 35E3ENVIRONMENTAL MANAGEMENTWe use the Halliburton Management System(HMS)to facilitate our environmental management efforts.HMS identifies areas where we can reduce or mitigate our environmental impact.It also helps us manage environmental risks.Additionally,we conduct environmental evaluations during the due diligence phase of every potential M&A transaction.Work done at Halliburton which includes our environmental management work is guided by the policies,business practices,and procedures that are comprehensively detailed in HMS.Read more on the HMS page of the Halliburton website.Visit the Environment page of our website to learn about our chemical stewardship.Our Environmental Management Sustainability Commitments Establish and achieve activity-based waste-reduction targets in our major facilities.Create water-use improvement plans in our major facilities located in water-stressed areas.ENVIRONMENTAL FACILITY CERTIFICATIONSThe HMS complies with industry-standard certification programs including International Organization for Standardization(ISO)14001 and API RP 75 as do all the processes and procedures it contains.Many of Halliburtons product lines and facilities are externally certified in accordance with ISO 14001 and business requirements.In 2023,65Halliburton facilities held ISO 14001 certifications.SUSTAINABILITY AWARENESS TRAININGIn 2023,we launched a Company-wide Sustainability Awareness Training course.The course helps employees build foundational sustainability-related knowledge and educates them about Halliburtons guiding principles,commitments,and the initiatives we have undertaken in pursuit of our sustainability goals.The course has been completed by over 90%of our employees.A successful journey toward our goals includes educating employees about Halliburtons sustainability focus and progress.Lab employee in Saudi ArabiaBIODIVERSITYFor Halliburton,sustainability includes supporting our customers,employees,and communities.We recognize finding ways to reduce our impact on biodiversity plays a role in this work.Our efforts in this area include environmental evaluations to help reduce our impacts to our land;facility designs that meet regulatory requirements and are energy-and water-efficient;promotion of circularity in materials use;targeted water use and waste reduction programs;engagement with local communities to protect and restore sensitive habitats;and cultivation of a responsible supply chain in collaboration with suppliers.Halliburton respects World Heritage sites and the protections afforded to them.We do not own or lease operational sites on or within 10 km of the locations on UNESCOs World Heritage List.Halliburton 2023 Annual&Sustainability ReportEnvironmental 36WATER STEWARDSHIPHalliburton stewards waterin ways that reduce and optimize our use of water resources.We work internally and collaborate with our customers on a global scale to reduce,reuse,and repurpose or 3R fluid resources to the fullest possible extent.Halliburton improves water quality,conserves water,and advances sustainable,cost-effective water management processes for ourselves and our customers where we are able.We report water-use data for Company-owned and Company-leased locations in the U.S.,Canada,and most of Halliburtons global facilities.Halliburton has established a water-use reduction toolkit that is available for use at our facilities,which was implemented in 2023 by our top water-consuming facilities in potentially water-stressed areas.We used our Water Calculator to establish a water balance for each of these locations.The calculator helps a facility identify and quantify water sources used at the site,on-location uses of water,and the sites wastewater discharges.From this activity,we noticed that higher volumes of water tend to be required for in-product uses,auxiliary processes,domestic use,and/or landscape irrigation.We then used the Water Reduction Plan Template to evaluate water-use reduction opportunities at our top locations.This template facilitates the identification and evaluation of water-use reduction strategies and helps establish site-specific reduction targets.Water-use reduction strategies that have resulted from this process include,but are not limited to,improvements to leak awareness and identification;replacement or enhanced maintenance for older water-consuming appliances and fixtures;adoption of drought-friendly vegetation and xeriscaping;and implementation of systems that recycle and reclaim water.In 2023,we continued our engagement with sites in potentially water-stressed areas to facilitate improvements and monitor progress against location-specific reduction targets.Colombia Team Repurposes RainwaterHalliburton Colombias Real Estate team implemented rainwater collection systems at three of our major facilities.The systems feature tanks with a substantial storage capacity of 10 m3 and enable the team to efficiently collect rainwater that is then stored and filtered for use in our wash areas.The team expects rainwater collection and reuse to reduce its new water use by 120 m3 per year.These efforts support our strategy to minimize water use through circularity.1,697,4111,478,9212021202220231,751,094Water Withdrawal Cubic MetersEnvironmental rainwater project in Barrancabermeja,ColombiaHalliburton 2023 Annual&Sustainability ReportEnvironmental 37272,240WASTE MANAGEMENT AND REDUCTIONHalliburton has developed a number of tools that support waste management and reduction efforts at our facilities.Our 2023 waste generation data include all manufacturing locations;all U.S.locations;and any non-U.S.locations with building footprints larger than two acres(8,092 m)or that facilitate activities with potential to generate particularly high levels of waste.The Waste Data App makes it possible to more accurately collect and report on waste generation and disposal data.On a quarterly basis,Halliburton facilities enter data into the app for each waste stream that is sent offsite for treatment,storage,disposal,or recycling.The Waste Stream Identification Template is a step-by-step guide that supports the identification and classification of different types of waste and provides guidance on the segregation,handling,and disposal 305,031202120222023266,006Waste Disposal Metric Tonsmethods associated with that waste.Another template,Waste Segregation Posters,provides information on how to create easy-to-understand posters that guide facility personnel on proper waste segregation and storage.Halliburton has also developed a Waste Minimization Decision Guide to help facilities identify opportunities to prevent,reduce,reuse,and recycle waste from their highest-volume and highest-emissions waste streams.In early 2023,Halliburton locations that generate large volumes of waste used one or more of these tools to identify waste reduction opportunities,set reduction targets,establish reduction plans,and monitor progress against targets.Waste Minimization at Our Norway Tananger Main FacilityOur Norway Tananger Main Facility implemented a program in 2023 to segregate waste streams.The program led to a 73%year-over-year reduction in the amount of waste the site generated per hours worked.Extending the Life of Oil Used in Our Hydraulic Fracturing Pump FleetIn 2023,the Halliburton North America Equipment Maintenance organization and Production Enhancement Technology collaborated to maximize oil life for the internally maintained fleet vehicles.Our goal was to extend maintenance intervals and minimize waste from hydraulic fracturing pump oil changes while maintaining service quality and performance.The team tested different types and viscosity of transmission oil.The best oil blend proved able to improve performance and increase time between rounds of maintenance,which lengthened oil replacement cycles by 317%.This has reduced the amount of oil required to service our North America Land hydraulic fracturing pump fleet by165,819 gallons per year.The project helped our team reduce waste,reduce equipment downtime,and further improve the reliability of our equipment.Halliburton 2023 Annual&Sustainability ReportEnvironmental 38SOCIALOur people are the heart of everything we do at Halliburton.The success of our operations is a result of the dedication of our exceptional employees,leaders,contractors,and suppliers.Halliburton supports our employees worldwidethrough resources including our safety programs,training,competitive benefits,and career development opportunities.Halliburton invests in opportunities to support and enhance the economic and social well-being of our employees communities.We also rely on the support of our communities,which is why global citizenship is one of our guiding principles.We work to train and develop local talent,increase economic activity,promote sound work practices,and share knowledge.Our goal is to educate and inspire the next generation of Halliburton talent.S1HEALTH AND SAFETYS2OUR PEOPLES3TRAINING AND DEVELOPMENTS4HUMAN RIGHTSS5LOCAL COMMUNITIESHalliburton 2023 Annual&Sustainability ReportSocial 39S1HEALTH AND SAFETYAt Halliburton,the safety of our employees and contractors is our priority.Our long-term safety programs and processes are tried,tested,and well-established.These programs and processes are part of our Journey to ZERO.They include Halliburton Critical Focus Areas(CFAs),Life Rules,Stop Work Authority(SWA),Management of Change,Significant Incident Review,and Tiered Assurance.Learn more on the Health,Safety,Environment(HSE)and Service Quality(SQ)page of our website.In 2023,as business activity levels continued to rise,operational discipline to our Halliburton Management System(HMS)and focus on execution enabled us to outperform our industry group HSE indicators and improve our service quality performance.OurOccupational Safety-Journey to ZEROSustainability Commitments Target outperforming total recordable incident rate and lost-time incident rate in the International Association of Drilling Contractors sector benchmarking.Achieve HSE training compliance 95%,driver competency 95%,and 100%completion of our annual Journey to ZERO strategic objectives.JOURNEY TO ZEROThe Journey to ZERO approach to safety and service quality expresses our commitment to our employees,customers,and communities.It demonstrates that we prioritize high standards,embrace challenges,and make no compromises when we execute on our goals.Specific Journey to ZERO focus areas shift each year,but the guiding principles remain consistent:Leadership commitment Continuous improvement of the HMS Training and competency Communicate and address risks Technology and process improvement Verification of our HSE and SQ performanceOur2023 Journey to ZERO efforts included a continued focus on risk management,and we completed our first full year of leadership visit metric tracking.In addition,we tracked progress on our GHG emissions,waste,and water reduction efforts,which are highlighted in the Environmental section of this report.Halliburton completed 100%of our 2023 Journey to ZERO objectives.Journey to ZERO Our vision to achieve zero safety incidents,zero environmental incidents,and zero non-productive timeevery day,on every job.HMS Continuous Improvement Communicate and Address Risks Training and CompetencyTechnologyand ProcessImprovementVerifyPerformanceLeadershipCommitmentZEROJourney to ZERO Our vision to achieve zero safety incidents,zero environmental incidents,and zero non-productive timeevery day,on every job.HMS Continuous Improvement Communicate and Address Risks Training and CompetencyTechnologyand ProcessImprovementVerifyPerformanceLeadershipCommitmentZEROHalliburton 2023 Annual&Sustainability ReportSocial 40Field employee in west Texas participating in a risk-mitigation assessmentRISK MANAGEMENTOurfocus on risk management included the expansion of Halliburtonsin-person5 Checks to Go and Risk Management Execution training to all regions globally.To build on our successful 2022 updates to risk management training in North America,regional delegates recognized for HSE and SQ leadership completed a series of Train the Trainer modules in 2023 to become internally certified Risk Management 5 Checks to Go trainers.Globally,over 3,600 additional supervisors and frontline personnel completed the training.When HSE or SQ incidents do occur,our risk management process helps us embrace the opportunity tolearn from incident investigations.These investigations sometimes lead to process changes.At other times,they reaffirm the importance of continued execution on our existing lines of defense.In 2023,we supported these efforts with the publication of an HMS guidance document that standardized the categorization of our lines of defense and critical verification activities.This document provides a more consistent approach to using the results of our investigations to globally prioritize improvement opportunities.At Halliburton,our lines of defense categories include the industry standard Life Rules,Critical Focus Areas,and our product service line control points.Stop Work Authority(SWA)remains a critically important part of risk management at Halliburton.Our SWA program authorizes all employees and contractors to stop a task if they observe unsafe actions or conditions,or if they have concerns regarding the controls over an HSE or SQ risk.In 2023,employee engagement in SWA remained strong,and we saw a year-over-year increase in the number of SWA observations.Halliburton Life RulesKey Actions to Prevent Serious and Fatal InjuriesBypassing Safety Controls Confined Space0DrivingEnergy IsolationHot WorkLine of FireSafe Mechanical Lifting Work AuthorizationWorking at HeightStop Work Authority Observations205,868202120222023220,754234,511Halliburton 2023 Annual&Sustainability ReportSocial 41Halliburtons Five Critical Focus Areas Well Barriers:Manage well barriers to prevent uncontained release of formation fluids Hydrocarbons to Surface:Control the well to prevent unintended flow to the surface Pressure Control:Control pressurized systems at all times Well Proximity:Plan and maintain non-intersecting drilling trajectories to avoid a collision Radiation and Explosives:Adhere to global and local regulatory safety requirements at all timesIndonesia team conducts 5 Checks to Go-an easy approach to safetyReview Plan1Verify Readiness2Whats Different?3Validate Controls4Final Check55 Checks to GOStarting work is not Step#1Halliburton 2023 Annual&Sustainability ReportSocial 42LEADERSHIP VISITSLeadership visits focus on engagement with frontline employees to ensure processes are working as intended.Leaders review the execution of critical verification activities and gather process improvement feedback.2023 was the first full year of use of our leadership visit metric.The focus on completion of 5 Checks to Go before work begins and use of our leadership visits to reinforce desired behaviors helped deliver our year-over-year improvement in total recordable injury and lost-time recordable injury rates.HMS AND INDUSTRY STANDARD CERTIFICATIONSHMS plays a central role in putting our Journey to ZERO in action.The standards and work methods that form HMS define how we work and enable us to address potential risks inherent in our businesses.HMS incorporates major management system standards,including those for quality management(ISO 9001),environmental management(ISO 14001),and health and safety management(ISO 45001).The system also meets and exceeds requirements of the industry-specific API standards for manufacturing(API Q1)and providing services in the oil and gas production sector(API Q2)and the API RP 75 standard for offshore safety and environmental management.In addition to the global verification of HMS through our internal tiered-assurance program,Halliburton has numerous locations externally certified to API Q1,API Q2,ISO 9001,ISO 14001,and ISO 45001.Halliburton leads the industry with 35 API Q2-certified facilities located in 13 countries.2023 Health and Safety Facility CertificationsCertificationsNumber of countries with API Q1-certified facilitiesNumber of API Q1-certified facilitiesNumber of countries with API Q2-certified facilitiesNumber of API Q2-certified facilitiesNumber of ISO 45001 certified facilitiesTOTAL618133548Western Hemisphere President Mark Richard conducts leadership visit with team in SurinameHalliburton 2023 Annual&Sustainability ReportSocial 43Our Diversity and Inclusion Sustainability Commitment Provide a diverse and inclusive environment that upholds our core values of collaboration and respect,and provides all employees opportunities for growth and development.CULTUREHalliburtons workplace culture is built upon the foundation that includes commitment,humility,collaboration,and exceptional execution.Each employee at Halliburton knows they belong and that their contributions are valued,which makes it possible for everyone to perform their best.This culture draws and retains our talent,serves as the foundation of our Journey to ZERO,and leads us to develop innovative solutions to our customers challenges.Halliburton employees have access to our job descriptions,salary bands,and pay structures for a majority of the countries where we operate.When we equip employees with this information we help them understand how they can advance and chart ways to own their careers.Read more about talent development and succession management in Chapter S3 Training and Development.S2OUR PEOPLEHalliburton employees form a global team whose members respect each other.Our workforce is diverse,with136 nationalities in over 70 countries.Through their work with Halliburton,our employees gain exposure to a wide variety of people,projects,and cultures.We take care to provide every member of our global workforce with a work environment that is safe and inclusive,opportunities to develop their careers,and competitive benefits.This environment is supported by our Code of Business Conduct(COBC)and employment practices.Visit the Social page of the Halliburton website to read about Halliburtons workplace,culture,employee benefits,ethical employment practices,and compliance with applicable employment laws.Halliburtons Respect Value StatementRespect:We value diversity and equality.It makes us stronger,more competitive,and better positioned for success.We are committed to inclusion across race,gender,nationality,religion,identity,experience,and any other unique attribute.We are honest with ourselves,welcome different viewpoints,and empower each other to be authentic.Female Diversity in STEM Roles16 212022202317 23Racial Diversity in STEM Roles(U.S.staff only)34 212022369%Halliburton 2023 Annual&Sustainability ReportSocial 44Our Five ERGs Women Sharing Excellence(WSE)Black Employees Leading in Inclusion,Excellence,Vision,and Education(BELIEVE)Veterans Leadership Forum(VLF)iMPACT,a trusted community for employee engagement,collaboration,and progression PRIDE,our LGBTQ ERGEMPLOYEE RESOURCE GROUPSHalliburtons five Employee Resource Groups(ERG)give employees opportunities to network and collaborate on shared interests in certain topics or social causes.We engage with our ERGs as a way to listen to,empower,and educate our workforce.Participation in ERGs is voluntaryand open to all Halliburton employees.ERGs encourage employees to pursue professional development and play an important role in fostering a positive and inclusive work environment.See Chapter S5 Local Communities in this report for 2023 events in which our ERGs participated.BELIEVE ERG Recipient of a 2023 Diversity Impact AwardBELIEVE was the recipient of a 2023 Diversity Impact Award.The Diversity Impact Awards are awarded each year by the Global ERG Network to recognize,honor,and celebrate the outstanding achievements of ERGs,Business Resource Groups,and Diversity Councils.84%record-high EPS response rateEMPLOYEE PULSE SURVEYHalliburtons biannual Employee Pulse Survey(EPS)allows us to listen to employee perspectives.Employees are invited to share feedback about their performance,development,and work-life balance.Weinvite managers to consider whatimprovement opportunities in the work environment they wish to focus on before the next survey and provide them with suggestions for actions and training they might undertake.Leadership is able to conduct higher level analyses by country and product service line/function to spot trends and consider larger scale initiatives based on employee input.Largest improvement on the following EPS questions:Employees feel they are valued Employees receive meaningful and timely performance feedback Employees are supported in their development Employees have the tools necessary to perform their jobs wellGLOBALBENEFITSHalliburton provides our employees with competitive global benefits programs.Our programs are flexible,comprehensive,andmarket competitive.We design Halliburtons benefits packages to address the diverse needs of our employees and their families.Our packages include programs and services that range from comprehensive medical coverage,retirement plans,and disability coverage to paid time off,emergency childcare,and third-party discounts.Halliburton remains focused on updating benefits programs to help ensure they are competitive and provide meaningful Halliburton 2023 Annual&Sustainability ReportSocial 45benefits options for employees.Consistent with this objective,in 2023 we focused on further benefits refinements.For additional information about our benefits offerings,including the details of our Family Care Plan,please visit the Social page of the Halliburton website.MENTAL HEALTH EDUCATION AND AWARENESSHalliburtons Global Employee Assistance Program(EAP)team expanded employee-and management-focused training and education opportunities this year.An example of one such opportunity is our Lessons for Life monthly web series in which our employees can learn from expert opinions on a variety of mental health and well-being related subjects.Topics in2023 included grief and hope in the COVID-19 pandemic as well as maintenance of healthy boundaries in the workplace.2023Mental Health Awareness CampaignsIn 2023,Halliburton covered a variety of topics in our global mental health digital awareness campaigns that were tailored to address different regions specific needs.We continued to incorporate mental health-themed safety topics in our safety moments,and this inclusion further emphasized how important it is to care for ones mental health.Halliburton hosted global campaigns for Mental Health Awareness Month,World Sleep Day,and World Mental Health Day and executed a neurodiversity awareness campaign in April for Autism Awareness Month.Through these campaigns,we delivered messages designed to further increase mental health awareness among all of our employees.RECRUITMENTHalliburton takes thoughtful action to cultivate a globally diverse talent pipeline that represents the communities where we operate.This begins with our investment in science,technology,engineering,and mathematics(STEM)and oil and gas programs at schools and universities.When it comes time to hire early career talent,we rely on consistent relationships with colleges,universities,and other organizations that give more visibility to opportunities that are available at Halliburton.We utilize initiatives such as internship programs at colleges and universities with underrepresented populations to build connections among diverse communities,potential hires,and Halliburton,and to eventually hire full-time employees who represent the communities in which we work and live.Our build-from-within approach to recruitment and training helps us develop early career talent into future leaders.We augment this approach with targeted recruitment efforts for senior-level positions that help introduce specific expertise and emergent skillsets to Halliburton.OutreachOur Global Talent Acquisition team conducts candidate outreach in a variety of ways that include virtual career fairs,apprenticeship programs,relationship building efforts at universities,employee referrals,and partnerships with local job candidate programs.Halliburtons outreach includes our efforts to build interest in STEM and oil and gas careers among students,a strategy that also supports local workforce developmentin the areas where we operate.One example of our STEM-focused outreach in Latin America is ourrecruitment efforts with the Development Excellence Engineer Program(DEEP).Read more about DEEP in the Local Workforce Development section of this report.Talent AcquisitionIn 2023,Halliburton hired 8,714 new employees.Of our total hires to STEM roles,28%were female,a number that is higher than it was in 2022 and represents our highest number of female hires to STEM roles at Halliburton since 2010.This number compares favorably to the National Association of Colleges and Employers female graduation rates in the degrees we target in our search for new hires.Promoting female representation in these roles is a key focus at Halliburton,as our STEM roles tend to lead to operational Halliburton 2023 Annual&Sustainability ReportSocial 46PowerToFlyHalliburtons partnership with PowerToFly hasprovided us with opportunities to better tell our story to a global,diverse audience.In 2023,we worked with PowerToFly to recruit new candidates and host several events at which Halliburton speakers shared their experiences and views on opportunities at Halliburton and within our industry.Through PowerToFly,almost 400,000 people were exposed to Halliburtons open positions,events,or webpage.Development Excellence Engineer ProgramHalliburtons Development Excellence Engineer Program is a college graduate recruitment initiative we deploy in Latin America.DEEP began in 2012 in Brazil and has since expanded to multiple countries in Latin America.In 2023,we standardized DEEPs requirements and structure in countries where it is implemented.Eligible candidates include STEM students in their last semester of undergraduate study and/or individuals who are within 18 months of graduation from a STEM degree.Participants engage in a four-month development program and rotate between two product service lines at Halliburton.Since 2015,over 750 DEEPers have completed the program,of which 387 have been hired full-time.In addition,female representation has been consistently high.On average,about 43%of DEEP participants are female.DEEP has played an important role in increasing the number of STEM hires in Latin America.DEEP has also proven to be a successful avenue of entry for career longevity as 70%of DEEP participants hired full-time since 2015 are still working at Halliburton.LOCAL WORKFORCE DEVELOPMENTHalliburton invests in local workforce development with the aim of a positive impact on communities where we work.One way we do this is by regularly hiring local talent for open positions.We have made significant progress in recent years.As of 2023,91%of our workforce and 85%of managers are local to the countries where they work.As Halliburton strengthens investments in local workforces,we increase our ability to participate in improvements to local economies.Through job creation,skill advancement,and career development,we help enhance local quality of life for employees and their families and strengthen our ability to cultivate a workforce that represents local populations.leadership positions.Female representation also continues to be a strong feature of Halliburtons U.S.internship programs.The number of female inte
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