People&Planet 2023About this report2Letter from the President and CEO3Nokia today5Our approach6Sustainability highlights and challenges in 20237Our sustainability strategy9From impact to double materiality10Our ESG targets and performance11Engaging with our stakeholders16The UN Sustainable Development Goals and our business18Environment 20Climate21Decarbonizing our value chain24Circularity31Biodiversity36Cooperation in standardization38Industrial digitalization39The digital proposition40Enabling sustainable innovation44Bridging the digital divide67Connecting people and things68Digital skills-building solutions69Our social responsibility programs70University collaborations72Human rights73Addressing human rights74Responsible business innovation75Security and privacy76Security77Data privacy78Business conduct79Managing sustainability80Ethics and compliance83Our economic impact89Key data and reporting principles91Data-reporting principles92Independent practitioners assurance report108Key ESG frameworks110ContentsINTRODUCTIONENVIRONMENTALSOCIAL GOVERNANCEEnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights1Nokia People&Planet Report 2023Industrial digitalizationOur people46Our culture48People development49Fair workplace and our policies51Inclusion and diversity53Health and well-being56Sustainable supply chain57Responsible sourcing58Strengthening our health and safety performance65About this reportThe People and Planet report is Nokias sustainability report and is published annually.The scope of the 2023 sustainability report covers Nokia Group.In our reporting,we are committed to expanding our transparency and our coverage.Our report is prepared in accordance with the GRI Standards.As part of our reporting,we also recognize other sustainability-reporting frameworks,such as SASB Standards and the UN Global Compact.Our selected key sustainability indicators have been assured by Nokias independent auditor,Deloitte Oy.This report was published in March 2024 and is only available in digital format.The report can be found online.We have published annual corporate responsibility reports since 1999 and the reports are available in digital format from 2003 to the present in our online report archive.Nokias sustainability strategy,selected initiatives and ESG risks and opportunities are also discussed in our corporate annual reports,including the annual report on Form 20-F that is filed with the US Securities and Exchange Commission.The Board review of Nokias 2023 annual accounts by Nokias Board of Directors includes non-financial information as required by the Finnish Accounting Act implementing the EU Non-Financial Reporting Directive and disclosures required in accordance withthe EU Taxonomy Regulation.Financial and operational information in this report should be read in conjunction with the information provided in our interim reports and annual financial reports,as well as the risk factors and forward-looking statements included in such reports.For more information on our financial results,operations and reporting structure,please see here.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights2Nokia People&Planet Report 2023Industrial digitalizationLetter from the President and CEODeveloping ESG into a competitive advantageThis year Nokia formalized the vital role ESG plays in our business by including it as one of the six pillars of our refreshed strategy.This is an unequivocal statement about the importance we attach to sustainability.We believe there is space in our industry for us to become the trusted and responsible provider of choice and by doing so we believe we will create value for us,our investors,our communities and our planet.We launched our ESG Strategy in 2022.It is based around five topics where we believe Nokia can have an outsized impact.I am pleased to say that Nokia has made progress on each of them.Here are some highlights from 2023.Environment:We want to be the leader in energy efficiency and circular practices.We set a new target to reach net-zero greenhouse gas(GHG)emissions across our value chain1 including manufacturers making our products and customers using them by 2040.We aim to accelerate our existing target to reduce GHG emissions across our own operations2.Previously we targeted a 50%reduction by 2030 now we target a 83%reduction in the same timescale.We ensured 75%of our purchased electricity came from renewable sources.We delivered some of the most energy-efficient hardware in our history.Our Habrok massive MIMO radios use 30%less energy than previous models,and Nokias AirScale 5G base station average power consumption has been reduced by 50%compared to2019.Our sixth-generation photonic service engine,PSE-6s,uses the latest silicon integrated circuits to increase network scale and performance,while reducing total network power consumption by up to 60%in somesettings.Industrial digitalization:We want our solutions to make physical industries safer,more productive,more efficient and more sustainable.Nokia cemented its position as the leader in the private wireless market.We now have over 710 customers globally,helping industrials accelerate EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights3Nokia People&Planet Report 2023Industrial digitalizationtheir digital transformation.This compares to 560atthe end of 2022.Nokia partnered with IT company Kyndryl to enable Dow Chemical Company to digitalize the largest integrated chemical manufacturing facility in the western hemisphere in Freeport,Texas,removing paper from the manufacturing and maintenanceprocesses.Nokia Bell Labs and Aramco announced an R&D collaboration that is expected to develop advanced Industry 4.0/4IR digital use cases and validate proof of concept solutions for sectors including,but not limited to,energy.Security and privacy:We want security and privacy to be the cornerstones of our product proposition.We have set up Service Security as a separate domain to cover the full-service lifecycle with a properly defined Service Security framework,and we remain focused on the continuous certification of services teams in the ISO 27001 standard.Bridging the digital divide:We want our solutions to improve access to healthcare,education andemployment.We were the first telecommunications equipment vendor to announce fiber-optic broadband network electronic products and optical modules in the US for use in the Broadband Equity,Access and Deployment(BEAD)program,which dedicates more than$42 billion to expanding broadband access across the US.Over 130 000 people benefited from our social digitalization projects in 2023,which include initiatives to build digital skills,connect the unconnected and improve inclusion,equity and diversity.That means almost 700 000 people have benefited over the course of these projects.Responsible business:We want to be a trusted,ethicalcompany.We announced our Sustainable Finance Framework.This framework reinforces Nokias commitment to sustainable growth by ensuring our financing strategy supports the companys ESG strategy.We completed 141 supplier audits in 2023,compared to 63 completed in 2022.We were included in Sustainalytics 2024 ESG Top-Rated Companies list,and MSCI ESG Ratings gave us an AAA rating(on a scale of AAACCC).Both ratings provide information for investors assessing financially material ESG issues that affect the long-term performance of their investments.We were again recognized as a supplier engagement leader by CDPs Supplier Engagement Ratingprogram.I would like to thank everyone at Nokia for contributing to the progress we made on our ESG strategy.There is plenty to be proud of in this report and the bullets above are just the beginning.Please read on to discover more about how Nokia is working in the interests of people and planet.Pekka Lundmark,President and CEOWe believe there is space in our industry for us to become the trusted and responsible provider of choice and by doing so we believe we will create value for us,our investors,our communities and our planet.1 Scopes 1,2 and 32 This includes decarbonization of Nokias car fleet and its facilities.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights4Nokia People&Planet Report 2023Industrial digitalizationNet sales by business 2023,EURmMobile Networks9 797Network Infrastructure8 037Cloud and Network Services3 220Nokia Technologies1 085Group Common andOther130Total1 22 258The figures are derived from our consolidated financial statements prepared inaccordance with IFRS.Year-on-year change is in parenthesis.1 Net sales include businesses and exclude Eliminations and unallocated items.Net sales by region 2023,EURmAsia-Pacific2 291Europe25 873Greater China1 303India2 842Latin America1 046Middle East&Africa2 050North America5 733Submarine Networks1 120Total 22 2582 All Nokia Technologies IPR and Licensing net sales are allocated to Finland.Nokia todayEnhanced connectivity and digitalization can contribute to solving many of the planetary,people and business issues the world faces today.Through technology leadership,innovation and trusted partnerships we deliver critical networks that can support environmental,social and economic welfare.With our customers we deliver solutions that help the world respond to climate change through the more efficient use and reuse of the worlds resources,restore productivity growth by bringing digital to the physical industries it has not yet reached,and provide more inclusive access to opportunity work,healthcare,education and markets.In 2023,we delivered net sales of EUR 22 258 million and invested EUR 4 327 million in research and development.We have four core business groups:Cloud and Network Services,Mobile Networks,Network Infrastructure and Nokia Technologies.For more information see our financial reporting here.We have customers in most countries of the world.Digitalization and enhanced connectivity transform the way people communicate,work and live their daily lives.Our technology enables industries and cities to digitalize and automate,driving efficiency and productivity gains while enabling potential reductions in emissions and use of resources.It supports improved worker safety and more secure,inclusive and safer communities.At the end of 2023,we employed 84 549 people.More than 3%of employees were based at our headquarters in Espoo,Finland,and around 42%of our employees worked within our research and development in Europe,North America and Asia.At Nokia,we create technology that helps the world act together.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights5Nokia People&Planet Report 2023Industrial digitalizationOur approachOur approach to sustainability is built on our companys purpose to create technology that helps the world act together.In 2023,we took another step in bringing our sustainability strategy and initiatives closer to our corporate strategy by announcing the ambition to develop Nokias environmental,social and governance(ESG)initiatives into a competitive advantage.By making ESG the sixth pillar of our refreshed corporate strategy,we aim to accelerate our efforts in making it a competitive advantage for Nokia and therefore create long-term value for our customers and partners.Sustainability is integral to our 2030 technology vision and strategy,as well as the product and operational strategies of our business groups.All of these are underpinned by our unwavering focus on adhering to high standards of integrity and security that build trust and help create the capabilities needed for a more productive,responsible,sustainable and inclusive world.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights6Industrial digitalizationNokia People&Planet Report 2023Sustainability highlights and challenges in 2023What we did well.1 Scope 1,2,3.2 This includes decarbonization of Nokias car fleet and its facilities.What we need to do better.Emissions covered by our science-based target(SBT)were 34 319 800 tons CO2e,which is a 9crease from 2022.Despite this decrease,our current SBT emissions are now at the same level as the 2019 baseline year.This means that the 2030 SBT was not on track with a linear reduction trajectory.While we continue to accelerate innovations in product energy efficiency and supplier collaboration,the availability and take-up of renewable energy by Nokias customers must rapidly increase to support the achievement of the interim target.We recorded no(zero)work-related fatal incidents involving employees.However,we regret the three work-related fatal incidents resulting in the death of one contractor/subcontractor and two third-parties.This is not acceptable.We are taking steps to drive greater emphasis on life-saving rules and supplier capability EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights7Nokia People&Planet Report 2023Industrial digitalization We announced our new commitment to reaching net zero greenhouse gas emissions across the value chain1 by 2040.We also aim to accelerate our existing interim target to reduce emissions across our own operations2,to reach an 83%reduction by 2030.We submitted our net zero 2040 letter of commitment to the Science Based Targets initiative(SBTi).We announced our Sustainable Finance Framework.This framework reinforces Nokias commitment to sustainable growth by ensuring our financing strategy supports the companys ESG strategy.We achieved our 2023 renewable energy target with 75%of our purchased electricity across our facilities globally coming from renewable sources.Our logistics emissions saw a 54crease compared to 2019.We continue to work with innovative solutions such as sustainable aviation fuel(SAF)and collaborate with our customers andpartners.In Mobile Networks,we delivered the first Habrok massive MIMO radios,and in 2023,Nokias AirScale 5G massive MIMO BTS power consumption has been reduced by 50%compared to 2019.This is enabled by continuous improvements in software functionalities,and new 5G products based on latest-generation Nokia ReefShark System-on-Chip(SoC)technology.Nokia developed an innovative,turnkey Rural Connect solution.Service providers can use Rural Connect to bring mobile connectivity to remote areas with a cost-optimized radio site solution with high energy efficiency.We announced the availability of US based fiber-optic broadband network electronic products and optical modules for use in the Broadband Equity,Access and Deployment(BEAD)program.We completed 141 CR supplier audits in 2023 compared to 63 in 2022.We again achieved a ranking of A-from the CDP for our work on climate change and were recognized as a supplier engagement leader by the CDPs Supplier Engagement Rating program.During 2022 and 2023 we reached 691 534 total reported direct beneficiaries,including 130 832 added in 2023 through social digitalization projects,building digital skills,connecting the unconnected or underserved,and improving inclusion,equity and diversity.We were included in Sustainalytics 2024 ESG Top-Rated Companies list,and MSCI ESG Ratings gave us an AAA“Leader”rating(on a scale of AAACCC).Both ratings provide information for investors assessing financially material ESG issues that affect the long-term performance of their investments.Our company purposeAt Nokia,we create technology that helps the world act together.Our purpose provides a foundation for our future and defines how we see our role in the world.Through our technology we help realize the full potential of digital in every industry for a more productive,sustainable and accessible world.We take part in a number of ESG-focused ratings,indices and benchmarks.While all such initiatives have a slightly different focus,generally they are used by various stakeholders such as customers,investors and civil society to assess companies performance in a broad range of sustainability-or ESG-related topics.External ratings We take part in ESG-focused ratings,indices and benchmarks which are often used by stakeholders such as customers,investors and civil society to assess a companys performance across a broad range of sustainability-related topics.A full list of ratings and other recognitions can be found on our website.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights8Nokia People&Planet Report 2023Industrial digitalizationESG rankings and ratingsScore(range:top/bottom)Latest resultEuronext Vigeo Europe(Moodys)61/100-advanced2022 Feb83.03%(industry average:72.36%)2023 JanClean20082nd out of 2002023Feb24th out of 2002023 Martop 1%-Platinum2023 MarESG Score 4.7/5.02023 JunAAA(AAA/CCC)2023 AugESG rankings and ratingsScore(range:top/bottom)Latest resultPrime,B-(A /D-)2023 OctAmbassador status2023 Oct11.2(low risk of experiencing material financial impacts from ESG factors.).Jan 2024:Sustainalytics 2024 Top-Rated ESG Companies List.2024 JanDISCLOSURE INSIGHT ACTIONA-(A/D-)2024FebRecognized as one of the 2024 Worlds Most Ethical Companies 2024MarKey strategic ESG focus areasResponsible businessWe take a proactive and values-driven role in driving responsible business practices internally and in our value chainBe the leader in energy efficiency and circular practicesEnvironmentSecurity and privacy become a cornerstone ofour reputation and product propositionSecurity and privacyWe provide connectivity and digital solutions that sustainably transform physical industriesIndustrial digitalizationWe are a bridge for digitalinclusion through our connectivity and digital skills-building solutionsBridging the digital divideOur sustainability strategy In the Environment,we emphasize two areas:climate and circularity.We focus on energy efficiency in our products and value chain and circular practices through product and materials reuse and refurbishment.Industrial digitalization provides the opportunity to sustainably transform physical industries and cities through digitalization and connectivity.Our offering for industry and cities can support decarbonization,resource efficiency and improved safety.Security and privacy are together positioned as the cornerstone of our product proposition.Product development follows the Design for Security methodology,and Nokias security team partners with our customers to build and maintain secure networks,compliant with national regulations for criticatelecominfrastructure.In Bridging the digital divide,we use our broad product portfolio across terrestrial and non-terrestrial communication networks to connect the unconnected and underserved and invest in partnerships to support digital skills building.In Responsible business we work to ensure our business practices are aligned to our ethical and responsible values.We collaborate closely with customers and suppliers to engage on systemic issues related to the environment,mitigating the misuse of technology(and advocating for responsible AI principles),ethics,human rights,and working conditions.We strive to create value,exceed stakeholder requirements and expectations while complying with increasing regulatory requirements.Our approach to Responsible Business is covered in:Our people,Sustainable supply chain,Human rights,and Ethics and compliance.Our current sustainability strategy focuses on where we believe we can have the greatest impact on ESG risks and opportunities.Nokias sustainability strategy aims to ensure we maximize our impact in the ESG areas most important to our company.It is implemented through our business groups and relevant central functions and consists of five focus areas:Environment(climate and circularity),Industrial digitalization,Security and privacy,Bridging the digital divide,and Responsible business.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights9Nokia People&Planet Report 2023Industrial digitalizationFrom impact to double materialityOur handprint and footprintWe believe the technology we provide enables environmental and social benefits to individuals,industries,communities and econimies that can outweigh potential negative impacts.These benefits are the“handprint”of digitalization and connectivity.We have both a social and environmental handprint.We maximize this handprint.We must,however,continually strive to minimize any potential negative impacts of technology.This is our“footprint.”We have both an environmental and a social footprint.We collaborate throughout our value chain to continually minimize our footprint.More information on our approach to our handprint and footprint can be found online.These two aspects of our approach are underpinned by responsible and ethical business practices.We strive to be a trusted,responsible company that our employees,customers,suppliers,partners,governments and investors are proud to work for and with.In 2023,our sustainability approach was based on our existing impact materiality matrix,which was created in 2022 and can be found online.In Q4 2023,we completed our double materiality assessment as part of the preparation for the EU Corporate Sustainability Reporting Directive(CSRD)requirements and related standards.Maximizing our positive impact -our handprintOur ESG approach Decarbonizing other industriesandsociety Enabling the transition of theenergy sector Providing the critical networks forlife Connecting the unconnected through building digital skills Minimizing any negative impact-our footprint Continually improving product energy efficiency Driving circularity to reduce waste De-risking the potential misuse oftechnology Building sustainable operations and supply chainsEnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights10Nokia People&Planet Report 2023Industrial digitalizationAs part of our responsible approach,we aim for:Robust practices,procedures and policies that minimize risk Management accountability for sustainability and responsibility throughout the organization Trust,accountability,and ethical behavior as foundations on which we operate ISO-certified and-audited management systems A robust people strategy and mature processes to attract,retain and develop talent.Enabling and engaging our organization and value chainIn 2023,we continued sustainability enablement across our global organization through the ESG Community of Interest,a collaborative innovation platform for knowledge building particularly targeting employees working directly with customers.During 2023,the community organized sessions on energy efficiency,bridging the digital divide,reporting,sustainable sourcing,circularity and ESG standards.Our ESG targets and performanceWe set short-,medium-and long-term sustainability targets.The status of these targets at the end of 2023 is shown on the following pages.In 2023,we had 30 external sustainability targets,of which 27 were either achieved or on track.Two targets were not achieved,one target was not on track and one target was replaced.In 2023,we looked at how to accelerate our net zero ambition and the related pathway and levers.In December 2023,the Nokia Group Leadership team approved the plan to fast-forward both our net zero target(Scope 1,2 and 3)and our interim 2030 scope 1 and 2 targets.More details can be found in the Environment section.Our targets for 2024 and beyond are also presented after the 2023 target achievements.Progress of ESG targets in 2023Focus areaTarget yearBase yearTarget2023 resultsTarget statusEnvironment20302019Our science-based target(SBT)1:Reduce our greenhouse gas(GHG)emissions across our value chain(Scope 1,2 and 3)by 50tween 2019 and 2030,and reach net zero by 2050.Emissions covered by our SBT were 34 319 800 tons CO2e2,which is a 9crease from2022.Despite this decrease,our current SBT emissions are now at the same level as the 2019 baseline year.This means that the 2030 SBT is still not on track with a linear reduction trajectory.While we continue to accelerate innovations in product energy efficiency and supplier collaboration,the availability and take-up of renewable energy by Nokias customers must rapidly increase to support the achievement of the interim target.Not on track20302019Our final assembly suppliers reach zero emissions by 2030.Our final assembly suppliers emissions were 38 500 tons CO2e which is a 49%reduction from 2019.On track20302019Our suppliers3 reduce GHG emissions by 50%by 2030.Our suppliers GHG emissions were 540 500 tons CO2e which is a 82%reduction from 2019.However,as this includes emissions data from hundreds of suppliers and the quality of allocated emissions data has been of concern,we are conscious that some of the reductions may be due to the quality of the data reported.On track20302019Our logistics GHG emissions reduced by 73%by 2030.Our logistics GHG emissions were 140 900 tons CO2e which is a 54crease from2019.On track20252019GHG emission reduction of 65%from scope 1 and 2 market-based emissions,including 85%reduction of our facilities GHG emissions compared to 2019.GHG reduction of 56%from scope 1 and 2(facilities,car fleet,marine fleet),including 69%reduction of our facilities GHG emissions compared to 2019.On trackEnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights11Nokia People&Planet Report 2023Industrial digitalizationFocus areaTarget yearBase yearTarget2023 resultsTarget statusClimate2025N/AUse 100%renewable electricity in our own facilities.75%of electricity was renewable in our own facilities.On track20232019Reach 65%reduction of our facilities GHG emissions compared to 2019.Reached 69%reduction of our facilities GHG emissions.Achieved2023N/AReach 75%renewable electricity in our own facilities.Reached 75%renewable electricity in our own facilities.Achieved2023201950%reduction of average power consumption of 5G mMIMO Base Station by 2023 from 2019 baseline.In Mobile Networks,we delivered the first Habrok massive MIMO radios and in 2023,Nokias AirScale 5G massive MIMO BTS power consumption has been reduced by 50%compared to 2019.This is enabled by continuous improvements in software functionalities,and new 5G products based on latest generation Nokia ReefShark SoCs.AchievedCircularity2030201995%circularity rate for waste from our offices,labs,manufacturing,installation and product takeback by 2030.We have recognized areas where high circularity rate has already been achieved and also areas requiring further action.There are still data gaps to be closed but data accuracy has increased.Annual waste circularity outcome for 2023 was 86%.On track2030N/AIncrease recycled content in mechanical part source materials:Cast aluminum used in mechanical parts:to 90%.Wrought aluminum,steel and copper alloys,as well as polycarbonate plastics used in mechanical parts:to 50%.We continued awareness raising and data collection on recycled materials.In 2023,we reached data collection levels of 43st aluminum,10%wrought aluminum,7%low alloy steel,13%stainless steel and 3%on copper alloys.On trackBridging the digital divideConnecting the unconnected and under-served20302021Helping our customers to connect the next 2 billion measured by numberof subscriptions in Nokia radio customers networks by 2030.In line with Nokias long term goal,we work with our customers to provide broadband based digital services on more subscriptions.The number of mobile broadband subscriptions in Nokia radio customers networks has increased from 2022 to end of 2023 by 372 million(20212023:772 million)4.On track20252021Harness Nokia technology,capabilities and funds to improve the lives of 1 500 000 through social digitalization projects,digital skills building,and connecting the unconnected or underserved by 20255.We reached 130 832 reported direct beneficiaries6 through social digitalization projects,building digital skills,connecting the unconnected or underserved,and improving inclusion,equity and diversity.The current total reported direct beneficiaries for 2022 and 2023 is691534.On track2023N/ANokias fixed and broadband technologies connecting 400 million additional residential subscribers covering unconnected and underserved.2023 target did not have the baseline year;therefore,the target was replaced with a more quantifiable and measurable,medium-term target:Nokias Fiber-to-the-Home technology will connect 140 million new subscribers by 2030,helping break down the digital divide.The targets result for 2023:The target is on track.In 2023,we estimate we connected 18 million new subscribers.ReplacedEnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights12Nokia People&Planet Report 2023Industrial digitalizationEnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights13Nokia People&Planet Report 2023Industrial digitalizationFocus areaTarget yearBase yearTarget2023 resultsTarget statusSecurity and privacy2023N/A95%mandatory training completion related to privacy.In 2023,the mandatory training completion rate was 98%.AchievedIndustrial digitalization2025N/AIndustry verticals adopting private wireless customers(number ofcustomers,in line with business plan).Private Wireless adoption is continuing to pick up and accelerate and Nokia added 150 numbers of new customers during 2023.On trackResponsible businessHealth&Safety 20302016100%of suppliers delivering high risk activity to meet“H&S preferred supplier”status(score 4 or more out of 5)in our Health&Safety maturity assessment.18%of relevant suppliers met H&S Preferred supplier status.To reach the 2030 target,Nokia continues to work with our supplier base,engaging and promoting the supplier safety competences,offering safety training and setting supplier workshops in order to improve supplier Health and Safety awareness and capability.On track2025N/ATRIFR and LTIFR as industry benchmark.2024 will be the stabelization of the IFR to enable to be presented to other Industry stakeholders as benchmark.On track2024N/A95%of projects compliant with the strengthened requirements of our High-Risk Project Implementation Assessments(HRPIA)process.98%of High-risk projects were found to meet our minimum non-negotiable requirements.On track2024N/AReduction in Total Recordable Incident Frequency Rate(TRIFR)and Lost Time Incident Frequency Rate(LTIFR)for Nokia employees.In 2023,Nokia measured 2(two)employee safety related Incident Frequency Rates.LTIFR showed a reduction and the TRIFR showed a minimal increase.Nokia Employee LTIFR in 2023 end as 0.089(2022 result was 0.116)Nokia Employee TRIFR in 2023 end as 0.277(2022 result was 0.227)On track2023N/A100%of suppliers performing high risk activities pledge their commitment to Nokias life-saving rules.100%of suppliers delivering high risk activities pledged their commitment to Nokias life-saving rules.Achieved2023N/AZero critical or fatal incidents for employees and suppliers.In 2023,there were 0(zero)work-related fatal incidents involving employees and 3(three)work-related fatal incidents resulting in the death of 1(one)contractor/subcontractor and 2(two)third-parties.7Not achieved2023N/ACohort of 40 senior leaders conduct safety tours to sites to increase monitoring visibility.There were 144 safety tours executed and reported with senior leaders in 2023.AchievedNotes1 The current SBT covers the following activities:Scope 1:emissions from our facilities,car fleet and marine fleet,own vessels.Scope 2:market-based emissions from purchased energy.Scope 3:emissions from the customer use of sold products(covering almost 100%of our current portfolio)and emissions from logistics,final assembly factories in our supply chain,and marine fleet chartered vessels.2 CO2e=carbon dioxide equivalents.3 Refers to our material suppliers.4 Reference source:GSMA Intelligence.5 Improving lives refers to increased digital connectivity and inclusion for 1 500 000 people.6 Individuals that independent from any relationship with the company were directly benefited by Nokias contributions or activities related to digital connectivity and inclusion directly resulting from them.7 Nokia has revised its fatality-reporting criteria in 2023 to include third-parties such as members of the public who are assessed as being impacted by an incident that is deemed within Nokias control.This more closely aligns Nokias reporting with some of its closest industry stakeholders and competitors.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights14Nokia People&Planet Report 2023Industrial digitalizationFocus areaTarget yearBase yearTarget2023 resultsTarget statusInclusion&Diversity 20302021Increase the share of women to a minimum of 25%of total employees by end 2030.The ratio of women is gradually increasing over time.It was 22%at the beginning of 2021 and now its 23%at the end 2023.On track2023N/AReach a minimum of 27male hires in global external recruits.28%of external recruits were women.We achieved the 2023 target via increased marketing,communication and talent attraction activities to make Nokias employer brand stand out for diversity-friendly employment policies and attract diverse talent.AchievedEthics&Compliance 20302016Maintain 85vorability of employee/line manager engagement on ethics and compliance.In 2023,85%of employees said that their Line Manager talked to the team about the importance of ethics and compliance.Achieved2023N/AEthical Business Training(EBT)completed by 95%of employees.98%of employees completed the Ethical Business Training.AchievedResponsible sourcing2025N/A98%3TG traceability and conflict free status to smelter level in our supply chain as well as conflict free status of the smelters.Extended due diligence and conflict free status of cobalt,mica and 2 additionalminerals.As of 2023,we have achieved 81%traceability to the smelter level in our supply chain as well as conflict-free status of the smelters.We have also extended and conducted due diligence for cobalt and mica and mapped the supply chains for additional minerals.For those,due-diligence will follow in the next years.On track2025202080%of suppliers achieve satisfactory sustainability score(based on aggregated weighted share)from supplier performance evaluation(based on CR onsite audit programs,EcoVadis,CDP,Conflict minerals).80%of suppliers,on average,received a satisfactory sustainability score in our assessment programs.On track2023N/A98%tin,tantalum,tungsten and gold traceability and conflict-free status achieved and extended due diligence implemented for cobalt and mica.As of 2023,we have achieved 81%traceability to the smelter level in our supply chain as well as conflict-free status of the smelters.We have also extended and conducted due diligence for cobalt and mica.Not achievedOur ESG targets in 2024Environmental100%renewable electricity in our own facilities65%reduction of scope 1 and 2 GHG emissions,including 85%reduction of our facilities GHG emissionsIndustry verticals adopting private wireless customers (number of customers,in line with business plan)SocialHarness Nokia technology,capabilities and funds to improve the lives of 1 500 000 through social digitalization projects,digital skills building,and connecting the unconnected or underservedTRIFR and LTIFR as industry benchmark Governance98%3TG traceability and conflict free status to smelter level in our supply chain as well as conflict free status of the smelters.Extended due diligence and conflict-free status of cobalt,mica and 2 additional minerals80%of suppliers receive a satisfactory sustainability score from supplier performance evaluation20252040Environmental85%renewable electricity in our own facilities75%reduction of our facilities GHG emissionsEnvironmental50%reduction of our total GHG emissions(Scope 1,2 and 3)Final assembly suppliers reach zero emissions50%reduction of suppliers GHG emissions 73%reduction of logistics GHG emissions95%circularity rate for waste from our offices,labs,manufacturing,installation and product takebackIncrease recycled content in mechanical part source materials:Cast aluminum used in mechanical parts:to 90%Wrought aluminum,steel and copper alloys,as well as polycarbonate plastics used in mechanical parts:to 50%EnvironmentalCommitment to SBT to reach net zero emissions across value chainSocialProvide broadband based digital services with 2 billion more subscriptionsNokias Fiber-to-the-Home technology will connect 140 million new subscribers by 2030,helping break down the digital divide100%of suppliers delivering high risk activity to meet or exceed“H&S preferred supplier”statusIncrease the share of women to a minimum of 25%of total employees20242030GovernanceMaintain at least 85vorability of employee/line manager engagement on the importance of ethics and complianceGovernanceEthical Business Training(EBT)completed by 95%of employeesSocialA minimum of 28male hires in global external recruits96%of projects to be compliant with HRPIA standardsZero critical or fatal incidents for employees,suppliers and third-partiesReduction in Total Recordable Incident Frequency Rate(TRIFR)and Lost Time Incident Frequency Rate(LTIFR)for Nokia employeesCohort of 60 senior leaders1 conduct safety tours to sites to increase monitoring visibility1 For this 2024 KPI the definition of senior leaders was further specified to include only executives and leaders from the top 4 levels of Nokia management structureEnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights15Nokia People&Planet Report 2023Industrial digitalizationEngaging with our stakeholdersSupporting our customers sustainability goalsWe work with our customers,both communication service providers and enterprises,on sustainability topics ranging from energy and materials efficiency to supply chain transparency,human rights and community involvement.We emphasized this collaboration in 2023 by establishing two more ESG Customer Advisory Councils covering the Asia and India region and the Middle East and Africa region,complementing the existing council for Europe.The following table summarizes how we engage with key stakeholders.We also engage with the broader ecosystem,for example on climate issues.In December 2023,at COP28 in Dubai,at the launch event commemorating the inauguration of the Finland Pavilion,we presented on the importance of digital solutions for accelerating the response to climate change and their role in supporting hard-to-abate industries.To further underline the critical role of digital solutions in decarbonization,Nokia brought together representatives of the ICT sector together with the International Telecommunication Union(ITU)to outline commitments to decarbonizing digital and accelerating the green transition.Nokia as a partner for governments fortrusted digitalizationNokia is proud to be a partner for governments for trusted digitalization,and we continue to participate in discussions on global connectivity.We are active in the European Global Gateway initiative,aimed at developing sustainable infrastructure in the Global South.Global Gateway de-risks investments for projects that deliver social,economic and environmental value.We advocate for meaningful support for the Global South to conduct sustainable and inclusive digitalization.Nokia promotes transregional cooperation on technology,and our leadership actively support the EUUS Trade and Technology Council,the EUIndia Trade and Technology Council and collaboration between the EU and Latin America.Acting together Nokia engages in several multilateral processes in support of sustainable development at the global,regional and national levels.We work with a range of stakeholders and look for where we can increase collaboration and respond to requirements in building sustainable solutions.Collaboration is key to moving the needle on many sustainability topics from protecting the environment to bridging the digital divide and improving security.In May 2023,Pekka Lundmark co-chaired the years B20 Digital Transformation Task Force,which produced a set of recommendations aimed at bridging the digital divide and accelerating universal,future-proof and transformational connectivity across all regions and communities to deliver inclusive growth.As a UN Broadband Commissioner,Pekka Lundmark engages in publicprivate discourse on digital inclusion.We also remain a committed partner of the ITU Partner2Connect Digital Coalition,which focuses on hardest-to-connect communities.Supporting informed public policies for digitalization and sustainable development At Nokia,we collaborate with governments,regulators,international organizations,trade associations,industry peers and academia to inform effective policy making and support the development of the best policy framework for sustainable and inclusive digitalization.Nokia engages with policymakers and regulators transparently and constructively.We offer our expertise on trusted and reliable international connectivity,on the security of digital infrastructures,on a regulatory regime that facilitates network rollout and other digital policy endeavors,on best policy frameworks unlocking innovation,on improving the resilience of economies and their critical infrastructure(e.g.energy grids)and on the most effective regulations for sustainability(e.g.forced labor regulation or due diligence in supply chains).Nokias experts are detailing roadmaps toward 6G in several parts of the world.We advise on spectrum for broadband,including through our participation in the World Radiocommunication Conference 2023 inDubai.In 2023,we contributed our experience and expertise engaging and leading discussions in organizations developing best practices for the industry and advising policymakers across the regions.These included the European Round Table for Industry(ERT)and DIGITALEUROPE in Europe,the Samena Council in MEA,the Technology Council of Australia,the leading body representing the technology sector in Australia,CII(Confederation of Indian Industry)in India.We collaborated with think tanks such as the European Council on Foreign Relations(ECFR)and the German Marshall Fund to promote informed debates on policies beneficial to society.Our guidelines for dealing with government officials always apply,regardless of the employees role and the purpose or frequency of interaction.They also apply to interactions with employees of state-owned companies and other governmental customers.The basic guidance for interaction with a government official is laid down in our Code of Conduct.We do not participate in the political or electoral process through direct donations to political groups.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights16Nokia People&Planet Report 2023Industrial digitalizationEnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights17Nokia People&Planet Report 2023Industrial digitalizationOur stakeholdersStakeholder groupOur approachKey topics raised in 2023CustomersWe work with our customers to continue to improve the energy efficiency and sustainability of our products.We collaborate to resolve environmental,ethical and social issues,and look at ways in which technology can enable positive changes.GHG emission reduction,energy and materials efficiency,climate actions,circular products and services,recycled materials,life cycle assessment,value chain,responsible operations,inclusion and diversity and human rights.EmployeesOur people are our greatest asset and we aim to build a culture of trust,respect,diversity and opportunity for all,bringing to life our Nokia essentials of Open,Fearless and Empowered in a vision to create an unbeatable people experience.New people vision,Nokia essentials,well-being,health and safety,future ways of working and flexibility policies,inclusion and diversity,leadership development,technical career development and ethical business practices.InvestorsWe have regular discussions with our shareholders and the investor community on ESG topics including our approach and policies,and our opportunities and targets.Climate targets and actions,corporate governance,health and safety,ESG reporting standards,security and privacy and biodiversity.Suppliers and partnersWe work with suppliers to drive transparency,sustainability and good ethical business practices in our long and often complex supply chain.Read moreInclusion and diversity,modern slavery,ethical recruitment practices,responsible minerals sourcing,climate change,circular materials and health and safety.IndustriesWe contributed our experience and expertise engaging and leading in discussions with organizations developing best practices for the industry and advising policymakers across the regions.These included the European Round Table for Industry(ERT)and DIGITALEUROPE in Europe,the SAMENA Council in the Middle East and Africa,the Technology Council of Australia,TIA and US Chamber in the US and the Confederation of Indian Industry(CII)in India.We collaborated with think tanks such as the European Council on Foreign Relations(ECFR)and the German Marshall Fund to promote informed debates on policies beneficial for society.Measurement methodology standards for 5G radio and circularity standards for telecommunications products and networks in ETSI and ITU-T.Responsible use of AI standards in ISO,CEN/CENELEC and various national committees.Energy-saving features in 3GPP.AcademiaWe collaborate with leading academic institutions in Europe,the United States and Asia on research topics critical to our future business.We also participate in training programs and innovation events and recruit top talent from these institutions.6G,AI/ML,industrial IoT,quantum technologies,optics,photonics and cybersecurity.Civil societyWe engage with stakeholders such as community groups and NGOs.We work with NGOs to support programs which have a long-term impact and create a sustainable future platform in the target communities.Read moreDigital skills building,empowering diverse groups and ensuring equal access to opportunity such as education and the job market.Environmental protection and biodiversity.CitiesWe work with cities and communities to drive digitalization and smart sustainable development.Read moreConnectivity and digitalization,5G use cases,responsible AI,public safety and health,data security and privacy,green economy transition and environmental monitoring.GovernmentsWe contribute to policy debates fostering a connected society and the adoption of new technologies around the world.Digital and broadband policies,regulation of emerging technologies(AI),ESG topics,policies that encourage broadband rollout and adoption and the digital transformation of society and industry(incl.spectrum for broadband);policies for trusted and reliable international connectivity,for the security of digital infrastructures,for policy frameworks unlocking innovation(including 6G roadmaps),for the most effective regulations for sustainability(topics such as the regulation of forced labor,or due diligence in supply chains).Employee engagement We use a variety of mediums to engage with our own employees,including platforms for connecting,socializing,discussing,polling,blogging,training(live and online training modules),as well as toolkits on various topics,info hubs,and other similar approaches.We take employee feedback very seriously and incorporate input gathered directly from employees,surveys,polls,and training assessments into our strategic planning process for developing and enhancing compliance policies,procedures,communications,and training.Nokias annual survey,“Checking Nokias Heartbeat”was conducted for the second time in 2023,and the response rate of 76monstrated high participation amongst employees.The questions covered a wide spectrum of people and operational topics in order to gain the widest possible appreciation of the employee working experience at Nokia.The area of engagement performed the best with solid scores for Trust,and feeling Valued,both showing a Nokia wide favorability score of 90%.Combined with positive free-text comments regarding Co-workers and Culture,a picture emerged where,at a team level,Nokia employees feel engaged,directed,and purposeful.Nokias team culture appears to be a strength.For our external candidates,we also offer engagement with Nokia employees through the Nokia Insiders platform,where authenticity is paramount.Since 2019,with a repository of over 1000 questions posed by candidates and meticulously answered by our dedicated Nokia insiders,candidates gain invaluable insights into the genuine experience of working at Nokia.The UN Sustainable Development Goals and ourbusinessThe United Nations Sustainable Development Goals(SDGs)and their targets remain a key framework for our sustainability work and for many of our customers and partners.Climate change remains the most significant sustainability challenge for our business and for the planet.Through the technology we provide,we help customers,other industries,economies and individuals decarbonize through the digitalization of industrial processes and society,so they become more predictive and productive,with reduced emissions.To minimize our own footprint,we focus on both climate and circularity,where we aim for leadership in the energy efficiency of our products and circular practices.In early 2024,we again received a score of A-from CDP for our work and disclosures on carbon emissions.Goals 8,9 and 13 are the most relevant for our business but we believe that digitalization and enhanced connectivity will play an important role in achieving all 17 SDGs as discussed in this chapter and on our website.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights18Nokia People&Planet Report 2023Industrial digitalizationEnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights19Nokia People&Planet Report 2023Industrial digitalizationWe connect the unconnected through a broad product portfolio that enables greater digital inclusion across countries globally.We deliver broadband to urban and rural communities through fixed and wireless networks and to businesses and educational institutions through private wireless and campus networks.In 2023,Nokia deployed the Rural Connect solution in the Middle East and Africa to connect the unconnected in remote areas of sub-Saharan Africa.Service providers can use Rural Connect to bring mobile connectivity to remote areas with a cost-optimized radio site solution with high energy efficiency.Nokia is collaborating with UNICEF to bridge the digital divide by helping to improve digital education and training in schools in select parts of Senegal,West Africa,and launched its new UNICEF program inVietnam.Nokia products and solutions bring improved efficiencies,productivity and digitalization to industries,providing platforms for innovation and decarbonization.For example,in 2023 Nokia partnered with IT provider DXC Technology to launch a managed secure private wireless network and digitalization platform solution that helps industrial enterprises digitally transform their operations.We are also working with US energy provider Xcel Energy to help modernize grid operations.The project will include Nokia private wireless network technology,helping support secure,reliable data connectivity and new levels of automation as well as a growing mix of renewable power sources.Promote inclusive and sustainable economic growth,employment and decent workBuild resilient infrastructure,promote sustainable industrialization and foster innovationTake urgent action to combat climate change and its impacts We focus on constantly improving the energy and material efficiency of our products across our portfolio.This helps our customers both communication service providers and enterprises minimize their environmental footprints.We announced a new update to our Optical Networks portfolio with PSE-6s,the sixth-generation super-coherent photonic service engine,which is capable of reducing network power consumption by 60%.Generation-over-generation at the module level,the PSE-6s is up to 40%more power efficient per bit compared to the PSE-V.Nokia joined with Orange under the UNIDO-run(United Nations Industrial Development Organization)Switch to Circular Economy Value Chains(SWITCH2CE)initiative.The project aims to support corporates to accelerate their circularity efforts,including with their partners in developing countries.Nokia works closely with Orange to further develop circular approaches in network equipment,including setting up a new refurbishment and repair center in Egypt,which will extend the lifetime of Nokia products.We also delivered Habrok massive MIMO radios,which offer improved energy efficiency in wireless access networks compared to previous generations.EnvironmentWe address our own environmental footprint,focusing on both climate and circularity.We strive to minimize our footprint across scope 1,2 and 3 by actively and continually managing that footprint.As the volume of network traffic rises in a more connected,digitalized world,we must work to separate this growth in traffic from any equivalent growth in energy consumption.We also need to constantly strive to reduce GHG emissions across our operations and facilities,and work with our supply chain to help drive greater energy and resource efficiency through the whole chain.To minimize our environmental footprint,we aim to be the leader in energy efficiency in silicon,software and systems.We intend to accelerate our ambition in energy efficiency in 5G-Advanced and 6G through early engagement in standardization and ecosystem development.We are also improving product circularity with more recycled content in new products and expanded circular product offerings to customers.We believe our technology will play an ever-more significant role in helping other industries and society decarbonize(see the“Industrial digitalization”section of this report).EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights20Industrial digitalizationNokia People&Planet Report 2023ClimateClimate change remains a significant risk to society and the natural environment.It can negatively impact our supply chain and our customers business,as well as the global economy and political and social stability.We recognize that the products and services we provide globally may affect the environment and climate,as manufacturing,distributing and operating these products require energy and other natural resources.Our climate targets from 2024 onward202485%renewable electricity in our own facilities75%reduction of our facilities GHG emissions2025 100%renewable electricity in our own facilities65%reduction of scope 1 and 2 market-based emissions,including 85%reduction of our facilities GHG emissions203050%reduction of our total GHG emissions(Scope 1,2 and 3)Final assembly suppliers reach zero emissions50%reduction in suppliers GHG emissions73%reduction in logistics GHG emissions95%circularity rate for waste from our offices,labs,manufacturing,installations and product takeback Increase recycled content in mechanical part source materials2040Commitment to SBT to reach net zero emissions across our value chain1 Scope 1,2,3.2 This includes complete decarbonization of Nokias car fleet as well as its facilities,and marine fleet reductions as aligned with International Maritime Industry(IMO)decarbonization pathway3 covers:Scope 1:emissions from our facilities,car fleet and marine fleet,own vessels.Scope 2:market-based emissions from purchased energy.Scope 3:emissions from the customer use of sold products(covering almost 100%of our current portfolio)and emissions from logistics,final assembly factories in our supply chain,and marine fleet chartered vessels.This section presents our approach,actions and achievements in 2023,concerning our carbon footprint,circularity and biodiversity.Accelerating our climate ambitionOur accelerated net zero ambitionIn 2023,we collaborated with the Carbon Trust to investigate how to accelerate our net zero ambition and the related pathways and levers.In December 2023,the Nokia Group Leadership team approved the plan to fast-forward both our net zero target(Scope 1,2 and 3)and our interim 2030 scope 1 and 2 targets.Nokia commits to net zero GHG emissions across the value chain1 by 2040.Nokia also commits to accelerate its existing interim 2030 target to reduce GHG emissions across its own operations,2 reaching an 83%reduction by 2030.To ensure its targets are aligned with climate science,Nokia submitted its net-zero letter of commitment to the Science Based Targets initiative(SBTi)in February2024.Our key climate achievements in 2023 Our current SBT 3 is to reduce our total GHG emissions by 50tween 2019 and 2030 across our value chain(Scope 1,2 and 3).Overall,Nokias SBT carbon emissions in 2023 saw a reduction of 9%compared to2022.Our scope 1 GHG emissions in 2023 increased by 7%to 111 100 tons CO2e driven by our marine fleet.Our market-based scope 2 emissions reached 84 800 tons CO2e.This translates to a 37%reduction in our scope 2emissions by the end of 2023,compared to 2022.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights21Nokia People&Planet Report 2023Industrial digitalization1 Embodied emissions are used to refer to all the lifecycle emissions other than those from the use stage,these include emissions from e.g.raw material acquisition production and end-of-life treatment.In 2023,our scope 3 emissions included in SBT were 34 123 900 tons CO2e.This represents a reduction of 9%over the previous year.Despite this decrease,Nokias SBT-related emissions in 2023 are at the same level as the 2019 baseline year.The reported emissions for the baseline year were 34 960 700 tons CO2e.Nokias 2030 SBT is not on track with a linear reduction trajectory.While we continue to accelerate innovations in product energy efficiency and supplier collaboration,the availability and take-up of renewable energy by Nokias customers must rapidly increase to support the achievement of the interimtarget.More and more Nokia customers are accelerating their journey toward renewable energy.In 2023,we started to collect customer-specific emission factors from our customers as we believed this could provide a better indication of our total scope 3 category 11(use of sold products)GHG emissions than using a GHG Protocol-mandated global emission factor.Therefore in 2023,we also calculated a total scope 3 category 11 emissions number based on a blended emission factor.The blended emission factor is a combination of customer-specific factors confirmed by customers,country average factors and a global average emission factor.Our total scope 3 category 11 emissions based on the 2023 blended emission factor were 33 691 400 tons CO2e.In this first year,the blended emissions consist of 5lculated by customer-specific emission factors,92%by country-average emission factors and 3%by a global emission factor.In 2023,97%of our GHG emissions came from our products in use by our customers in their networks.We continue to minimize these emissions.Read more in“Our portfolio”section.We also continue to drive energy efficiency in our own operations and our value chain.GHG emissions from our own operations account for less than 1%of Nokias total carbon emissions and are less prone to the impact of natural catastrophes and severe weather.However,we continue to reduce our energy consumption across our facilities through targeted programs and actions(see the“Our own operations and climate”section).This is further supported by our target to purchase 100%renewable electricity by 2025 across our facilities based on RE100 criteria.We work with our suppliers to set clear targets,collaborating with them on climate issues and best practices.We collaborate with our customers on supply chain programs.We engage with our stakeholder ecosystem to drive improvements in the broader industry.Despite the potential positive impact of connectivity and digitalization,the ICT industry must continue to decarbonize its own operations and products,decoupling energy use from increasing capacity and data traffic demands.Our climate targetsOur current SBT is aligned with the goal of limiting global warming to 1.5C.We were the first telecoms equipment vendor to have an SBT accepted by the SBTi in 2017.In 2023,we have been working to set a net zero target with defined long-term actions and pathways for the decarbonization of our entire value chain.We also have other short-,medium-and long-term targets in specific areas of our operations and the value chain to drive concrete actions that support and accelerate the achievement of the main SBT.The current SBT covers the followingactivities:Scope 1:emissions from our facilities,car fleet and marine fleet,own vessels Scope 2:market-based emissions from purchased energy Scope 3:emissions from the customer use of sold products(covering almost 100%of our current portfolio)and emissions from logistics,final assembly factories in our supply chain,and marine fleet chartered vesselsOur target to purchase 100%renewable electricity by 2025 applies across our facilities globally based on the RE100 initiative.Our main final assembly suppliers have agreed to reduce GHG emissions by 100%by 2030 for the portion of their manufacturing attributed to Nokia.And we continue to advocate for greater uptake of decarbonized electricity.We encourage the use of more sustainable fuels by our logistics service providers,and work with energy utilities to help enable their transition.We do not just set targets for our suppliers,we support them by working together to lower our upstream indirect emissions and to promote circular practices and innovation.In 2023,we maintained and improved our supplier climate engagement and had 458 suppliers disclose their climate performance information to CDP,and 283 also set emission reduction targets.We also had 247 suppliers participate in the CDP water security questionnaire.Finally,we urged suppliers to align their climate targets with the SBTi and again rewarded climate-related innovations as part of our Supplier Diamond Awards program.We also focus on reducing the embodied1 emissions of our products,for example by offering circular products,adding recycled material content into new products and working with our suppliers on their journey to decarbonizing their energy sources.Read more from our key climate-related targets for 2023 and see a 2024 roadmap of all our ESG targets.Understanding and tracking our total emissionsAs shown in the following graph,Nokias total CO2e emissions from scope 1,2 and 3 were 35 409 500 tons CO2e.From this total amount,scope 1 emissions were 111 100 tons CO2e,scope 2 market-based emissions were 84 800 tons CO2e and scope 3 emissions totaled 35 213 600 tons CO2e.The scope of our SBT covers 34 319 800 tons CO2e,which is 97%of our total 2023 emissions.Read more about the SBTi and the criteria for SBTs here.Managing our environmental actionsOur global Environmental Management System provides the tools to analyze our most significant environmental EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights22Nokia People&Planet Report 2023Industrial digitalizationPercentages calculated out of reported,relevant GHG emissions.Our carbon footprint(Scope 1,2 and 3)Emission sourceMetric tons CO2e%of totalEnergy use in facilities and by fleet195 9000.6%Our scope 1 and 2 market-based emissionsUse of sold products34 427 80097%Our scope 3 emissionsPurchased goods and services560 0002%Upstream transportation and distribution140 9000.4%Employee commuting54 1000.2%Business air travel30 7000.1%Total scope 1,2 and 3 emissions35 409 500100%Use of sold products97%Reported data is rounded to hundreds.We ensure the total scope 1 and 2 rounds correctly.Percentages calculated out of accurate GHG emissions.Our carbon footprint(Scope 1 and 2)Emission sourceMetric tons CO2e%of totalFacilities,direct emissions 21 90011%Our scope 1 emissionsCar fleet 19 30010%Marine fleet69 90036cilities,indirect emissions from purchased energy,market-based84 80043%Our scope 2 emissionsTotal scope 1 and 2 emissions195 900100%The SBT covers the followingactivities:Scope 1:emissions from our facilities,car fleet and marine fleet,own vessels.Scope 2:market-based emissions from purchased energy.Scope 3:emissions from the customer use of sold products(covering almost 100%of our current portfolio)and emissions from logistics,final assembly factories in our supply chain,and marine fleet chartered vessels.2CDP is a global organization that runs a bespoke global disclosure system for investors,companies,cities,states and regions to manage their environmental impacts.impacts on an annual basis and to systematically track progress on selected focus areas.Our own operations are certified under the ISO 14001 Environmental Management System standard to verify compliance with regulations and with Nokias own environmental requirements.In 2023,we maintained our ISO 14001 certification and the coverage of employees within the scope of that certification was 90%.Climate-related risks and opportunitiesThe potential effects of climate change are wide-ranging,from natural disasters that could affect our supply chain,operations and customers,to the impact on the world economy,rising energy prices and increased regulation.We are committed to the UN Global Compacts Ten Principles,including Principle 7 on supporting a precautionary approach to environmental challenges.We follow the precautionary principle,especially in areas involving environmental risks.Our most material climate-related opportunities and risks are related to our ability to help other industries reduce their emissions and to constantly improve the energy efficiency of our products in use.We believe that the opportunities our technology provides to our customers,industry and society,as well as the environmental actions we take in our operations,can positively contribute to the fight against climate change.For examples of how we help other industries and cities increase efficiency,see the Industrial digitalization section.Our own operations are not very sensitive to changes in energy pricing.But climate change can impact our customers and supply chain,as well as the global economy and political and social stability.Our climate-related disclosures were aligned in our CDP2 report according to the guidance of the Task Force on Climate-Related Financial Disclosures(TCFD).Read more about the risk factors that could affect our business in our Nokia in 2023 annual report.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights23Nokia People&Planet Report 2023Industrial digitalizationDecarbonizing our value chainOur portfolioAccording to our Life Cycle Assessment,the GHG emissions from the customer use of sold products remain the largest part of our carbon footprint.As stated earlier,in 2023 the use phase based on GHG reporting accounted for 97%of our total GHG emissions.Our greatest efforts remain concentrated on reducing the power consumption of our products across Nokias portfolio to improve energy efficiency and have the greatest direct impact on our carbon footprint.In 2023,we delivered energy efficiency solutions in silicon,hardware,software and services.We worked with our customers to optimize the energy used across their networks,not just looking for energy gains of individual network elements.We assessed the opportunities to improve network performance and minimize energy use,thereby lowering emissions.We also looked at automatic configuration and AI/ML-based optimization of energy savings functionalities,intelligent software capabilities,technology innovations in our hardware evolution,and energy-efficient site solutions,all to minimize our carbon footprint.In 2023,the GHG emissions from the customer use of sold products decreased by 9%compared to 2022.Examples of energy efficiency improvements across our product and services portfolio that contributed to the reduction are detailed below by business group.Mobile Networks In 2023,we reached our target of halving the overall average energy consumption of 5G massive MIMO base stations while doubling the performance compared to the baseline of 2019.We must continually manage our industrys own footprint.We must ensure that the products and solutions we design and deliver to our customers are as energy-and material-efficient as possible.Our whole value chain must also show improvements in energy efficiency and minimize any potential negative impact from technology.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights24Industrial digitalizationNokia People&Planet Report 2023This was made possible with continuous improvements in our software features and hardware products based on ReefShark System-on-Chip(SoC)technology:AirScale Habrok massive MIMO radios have up to 30%lower energy consumption.AirScale Baseband products have up to 60%lower energy consumption compared to the previous product generation.In addition,our liquid-cooled AirScale Baseband subrack can reduce cooling system energy consumption by up to 90%.Our MantaRay Energy solution automates radio access network(RAN)energy-saving features with the help of AI.This can bring an additional 15%energysavings.With our innovative energy-saving radio site solutions,our customers can reduce cell site energy consumption by up to 30%.In our Wavence microwave transport portfolio,the new traffic-aware sleep mode and a simplified site solution can together enable up to 50%energy savings.Radio network energy efficiency is essential for helping the telecommunications industry and other industries reduce their carbon emissions.5G is designed to be 100 times more energy-efficient compared to earlier generations of radio technologies.While the mobile industry has continued to see double-digit growth in data traffic,our environmental impacts have grown at a much slower pace.Nokia embeds energy efficiency thinking into the entire product development process from design and manufacturing to circularity,as well as how we build a sustainable value chain.The new products and services we launched in 2023 will help our customers concretely reduce their scope 1,2 and 3 carbonemissions.Habrok,our latest generation of energy-efficient AirScale massive MIMO radios for operators and enterprises,was announced at Mobile World Congress 2023 in Barcelona,and the first Habroks were already delivered to customers in Q4 2023.The Habrok 64 weighs only 24 kg and has low power consumption,which reduces its footprint and improves energy efficiency significantly.At our Midsummer launch event,we introduced new additions to our AirScale Baseband portfolio.These new products help our customers meet their environmental goals by keeping RAN energy consumption at aminimum.We also launched MantaRay Energy a new solution which combines our capabilities to optimize RAN energy consumption with the help of AI.This solution has already been implemented in customer networks with concrete results in RAN energy savings.While in-built RAN software functions can tackle energy consumption during low traffic hours,our Digital Design service can in addition address peak hour energy consumption by adjusting the power settings at the cell level.With this service,Mobifone in Vietnam was able to reduce RAN energy consumption by close to 14%with no compromise on networkperformance.Our new energy-saving site solutions include pre-integrated all-in-one outdoor cabinet and a mast-or wall-mounted zero-footprint site solution.These solutions can significantly reduce radio site energy consumption by harnessing natural cooling,as well as reduce costs and materials.Our Wavence microwave transport solution now comes with traffic-aware sleep mode software and embedded power metering.With these features,it is possible to measure power consumption in the live network and further optimize the transport network energyefficiency.Cloud and Network ServicesNokia AVA Energy Efficiency helps customers meet their energy efficiency and carbon reduction goals.The solution uses AI to assess where active and passive power usage can be reduced without impacting the customer experience,resulting in up to 30%energy savings and therefore lower CO2e emissions for telco radio networks.It can be deployed on multi-vendor active RAN sites and other network domains like access,transport,core and data centers.It also monitors and controls auxiliary components in a network site including cooling systems,batteries,air ventilators and air-conditioning control,and shuts down unused hardware resources,which are critically important levers for energy reduction.AVA Energy Efficiency is offered as-a-Service,combining Nokias deep telcommunications knowledge and data science capabilities with the rapid deployment enabled by utilizing public cloud.Nokia,using its AVA Energy Efficiency software,has more than 50 completed or active energy-saving projects with communication service providers around the world.New customers in 2023 for AVA Energy Efficiency included Globe Telecom in the Philippines and Safaricom inKenya.Nokias Cloud Native Communication Suite(CNCS)gathers all IMS voice core components in a simplified cloud-native network function(CNF),reducing the carbon footprint of the solution by 15%and operating costs by up to 35%due to simplified life cyclemanagement.Nokias IMPACT IoT software platform allows customers to implement smart metering on energy,waste,gas,water,humidity and more to conserve scarce resources.IMPACT IoT remote management enables meter data and meter devices to generate instant visualization of energy consumption and daily operations as well as standardized data for daily readings and firmware upgrades.This allows for more effective billing,greater visibility into consumption,increased safety and proactive maintenance.With industrial digitalization,particularly through campus private wireless networks,Nokia Digital Automation Cloud(DAC)and industrial 5G devices,Cloud and Network Services provide connectivity and digital solutions that can transform physical and asset-intensive industries through decarbonization,improved safety and productivity.In campus edge,more than 90%of customers have reported energy reductions,and customers such as Dow Chemical and Chevron Phillips Chemical have leveraged Nokias solutions to automate operations and significantly reduce power consumption in industrial and hazardous operating environments.Nokia Digital Automation Cloud(DAC)Private Wireless Compact offers the most economical entry point into Industry 4.0 for small and mid-sized industrial facilities.The compact 5G private wireless solution offers all of the security,EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights25Nokia People&Planet Report 2023Industrial digitalizationradio performance and reliability of Nokia DAC in a smaller form factor with up to 60%reduction in energy consumption compared to Wi-Fi,contributing to increased sustainability of industries.Nokias Telecom Software-as-a-Service solutions enable communications service providers to gain better control over their communications expenses,optimize network usage and reduce energy consumption through better asset utilization.The on-demand nature of Software-as-a-Service delivers more efficient use of resources and customers only consume the energy they need,while cloud hosting reduces emissions from hardware shipments.Network InfrastructureIn 2023,our Network Infrastructure business introduced the Sustainability Excellence category to our internal annual quality awards.This initiative aims to recognize projects and teams that go above and beyond to incorporate sustainability principles into what we do here at Nokia.The projects include initiatives to directly reduce CO2e emissions through energy consumption reductions,as well as to improve circularity and accessibility.Within the Hardware Services group,initiatives such as direct ship and localization/light repair were implemented where possible to reduce our carbon footprint.Through this they were able to reduce over 7 500 tons CO2e in 2023.They also contribute to reducing our carbon emissions footprint through circularity initiatives such as refurbishments,component harvesting,using remanufactured stock,reusing common packaging materials,and localized recycling for unrepairable units.Building from Nokias global ESG program,Network Infrastructure expanded its ESG Principals capacity to include teams across its Regional Business Centers and Services organizations.These ESG Principals will help enable customer-facing teams to be ready to collaboratively support customers and internal teams on their sustainability journeys.Our IP silicon innovation and leadership continues with the announcement of our new in-house-developed FPcx routing silicon family.Like our FP5 IP routing silicon,FPcx delivers similar benchmark IP routing energy efficiency while delivering deterministic performance and services without compromise,even as it undertakes multiple network roles.You cannot remove the performance element from measuring power as they are directly linked.This allows our customers to do more with fewer routers,minimizing their overall network energy consumption.Our system design innovations deliver highly efficient cooling that helps lower the total energy consumption even further compared to competing designs.800GE routing,enabled by FP5-based systems,can increase capacity three times within the same space and energy envelope while reducing energy consumption by more than 75%over previous-generation silicon.Using the latest generation of 800G optics can offer an additional reduction in energy consumption of up to 40%when compared with the equivalent amount of 400G optics,helping our customers deliver highly sustainable traffic growth with better energy and space efficiencies.Customers also have the option of adopting the new generation of smaller and lower-cost optics applicable to 100G,200G and 400G interface speeds with energy savings of up to 30%against previous-generation optics.Importantly,with FP5 there is no performance trade-off to achieve energy savings even as the router performs multiple network roles with full features and capabilities enabled and running at line rate.Our IP software innovation can help drive additional energy savings and hence reduce related emissions.Service convergence having a single router support three or more network roles(e.g.core,peering,edge,mobile backhaul,and broadband network gateway)allows operators to consolidate separate networks into one backhaul and core network.This reduces energy consumption by having significantly fewer elements in the network.Our software licensing flexibility provides the capability to only enable the line cards and ports required to meet the traffic load,thus reducing system energy consumption.Our silicon,system design and software innovation,combined with network automation,are applied across our IP routing portfolio to meaningfully help our customers improve their IP network energy efficiency.In Optical Networks,the sixth-generation photonic service engine(PSE-6s)was announced in March 2023 with commercial deployments expected in early 2024.The PSE family of coherent digital signal processors(DSP)drives our high-performance,high-capacity optical transport platforms deployed in communication service provider,internet service provider and enterprise networks.The PSE-6s enables new dimensions in scale,performance and sustainability by delivering 1.2Tb/s per wavelength and 2.4Tb/s in a single line card,up to 2 000 km reach at 800G and up to 40%lower power consumption per bit versus the PSE-V.At our Midsummer launch event,we introduced new additions to our AirScale Baseband portfolio.These new products help our customers meet their ESG goals by keeping the Radio Access Network(RAN)energy consumption at a minimum.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights26Nokia People&Planet Report 2023Industrial digitalizationOur Fixed Networks unit helped operators move to more efficient PON(passive optical network)technologies:from GPON to XGS-PON and 25 G-PON.Nokia Lightspan,running 25G PON,consumes just 0.25 W/Gbps,making it the most efficient broadband technology in the world.We help customers move away from energy-inefficient point-to-point fiber and onto 25G PON.Lightspan nodes support GPON,XGS-PON and 25G PON.Upgrades on the same chassis increase their longevity and reduce waste.We further innovated in software and functionality.Lightspan energy-saving features include an evolution from a push to pull system for air cooling,programmable operating temperature control,modular power-down of unused ports,and a heat pipe equalizing effect in line cards.In choosing Lightspan,telco operators can lower their carbon emissions and their energy bills.Our own operations and climate Our target to reach 100%purchased electricity from renewable sources by 2025 across our facilities includes our offices,laboratories and factories.It is aligned with the RE100 initiative,the global corporate renewable energy initiative bringing together hundreds of large and ambitious businesses committed to 100%renewable electricity.In 2023,electricity consumption across our facilities was reduced by 3%compared to 2022,75%of total consumed electricity came from renewable sources and our scope 2 market-based3 emissions decreased by 37%from 2022 levels.The facilities scope 1 and 2 emissions were reduced by 33%compared to 2022 and 69%compared to the 2019 baseline.Nokia sites using renewable electricity in 2023 were in the following countries:Australia,Canada,China,Finland,France,Germany,Greece,India,New Zealand,Poland,Portugal,Spain,the UK and the US.Improving energy efficiency in our facility operations remains a key focus in all markets.Uninterrupted Power Supply(UPS)and Heating Ventilation and Air Conditioning(HVAC)equipment optimization in Finland,Romania and India;LED lighting installations in China;and lab space optimization in Japan and South Korea,as well as continual improvement of site operating procedures are just a few of the implemented initiatives contributing to the reduction in energy use.Sustainability in the selection of our facilities also continues to be considered with the recent announcement to relocate our Bell Labs Murray Hill campus in New Jersey to a new state-of-the-art research and development facility by 2028 that will meet a minimum requirement of LEED Gold certification.Other facilities achieving sustainability certifications(LEED,Green Mark)in 2023 include South Korea and Indonesia.At our Chennai factory in India,this year,an additional 1.2MWp-capacity was added to the existing 1.2MWp capacity rooftop solar plant.This addition,along with the installation of rooftop solar in our Alcatel Submarine Networks manufacturing site in Calais,Facilities scope 1&2 emissions and renewable electricity(scope 2)Facilities Scope 1 and 2 emissions (market-based)Nokia Scope 1 and 2 emissions (market-based)Renewable electricity500 000400 000300 000200 000100 00002020201920212022202320242025100806040200 Metric tons CO2e%3 A market-based method derives emission factors from contractual instruments,which include any type of contract between two parties for the sale and purchase of energy bundled with attributes about the energy generation,or for unbundled attribute claims.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights27Nokia People&Planet Report 2023Industrial digitalizationFrance,contributed to the overall increase in renewable electricity.In addition to improving energy efficiency at our own facilities,construction is underway at our West Gate Wroclaw site in Poland to transfer excess heat generated from lab equipment to the district heating network.This concept is also used at our Tampere site in Finland and reduces the need for other types of energy to be used to provide heat to the local communities.Our Oulu factory in Finland is the first Nokia facility to purchase renewable district heating in addition to renewable electricity,therefore operating on 100%renewable energy.Employee transportation-our car fleetWith our employee transportation,we aim to reach the target for our own operations emissions by introducing low-emission vehicles and alternate mobility options.In 2023,GHG emissions from our global car fleet decreased by 14%compared to the previous year and are now 35%less than in 2019.We have continued introducing electric vehicles as an alternative for combustion engine cars.Delivery times of new cars were still long in 2023,but the situation improved from 2022 when the automotive industry suffered from component shortages and a lack of capacity to meet the demand.In 2023,we reached an important milestone in green car policies we celebrated 15 years of our first green car policy implemented in Finland in 2008.That has led to great results.For example,all new company cars leased by Nokia in Finland in 2019,many of which returned to the used car market in 2023,represented 49.3 g/km less than the average CO2 emissions of new passenger car registrations in Finland in the same year.As the average scrapping age of cars in Finland is 22 years,each company car Nokia registered in 2019 is estimated to save 21.7 tons CO2 compared to the average car on the market,and they are now returning to the used car market.Marine fleetNokia also has a marine fleet related to our subsea cables business,Alcatel Submarine Networks(ASN).ASN contributes to Nokias main target to reduce GHG emissions by 50%by 2030.The ASN fleet represents around 63%of our scope 1 emissions.Although ASNs marine fleet CO2 emissions have increased globally,when broken down by vessel there is an average reduction of 4.5%per vessel compared to2022.ASN has a green charter in place and continues to look at five important strategic areas:the rejuvenation of its marine fleet,the use of shore power when at port,the optimization of transit routes using AI,the mobilization of regional-based chartered vessels to reduce transits,and next-generation cable ships with the latest technology in terms of propulsion and powergeneration.Between 2019 and 2023,ASN updated its fleet with three modern vessels,including two low-tonnage vessels to replace former-generation and higher-tonnage vessels for the same scope of work namely the maintenance of submarine telecom systems.Thanks to the lower tonnage and the more efficient propulsion,this is leading to a systemic CO2 emissionreduction.ASN has also brought a high-tonnage cable ship to its fleet,replacing a former-generation cable ship.This increases ASNs ability to carry higher submarine cable tonnage with reduced CO2 emissions per ton compared to 2022.As part of the continued search for improvements in CO2 emission reduction,ASN performed initial biofuel testing on one of its vessels.In 2023,the ASN Marine Fleet Manager obtained the Green Marine Europe label(covering the ASN Marine Fleet),which goes beyond European and international environmental regulations.Engaging our suppliers on climateWe work with our suppliers to reduce emissions,setting targets across our supply chain.Our target for our final assembly suppliers is part of our SBT climate target and requires that the final assembly suppliers achieve zero emissions by 2030 for the portion of their manufacturing allocated to Nokia.All final assembly suppliers have detailed roadmaps on a factory level,and we track their execution at business review meetings.We have also set a 50%reduction target by 2030 for other suppliers.In 2023,we extended our close collaboration on our 2030 roadmap with our Joint Design Manufacturing(JDM)suppliers as well as supplier categories with high emission intensity such as suppliers of integrated circuits,semi-discretes and printed wiring broads.We require our suppliers to have a documented Environmental Management System(EMS).We also require key suppliers to be ISO 14001 certified,which we track.We have worked with the CDP Supply Chain Climate program for more than 12 years and together create programs to drive continuous EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights28Nokia People&Planet Report 2023Industrial digitalizationimprovements in our upstream scope 3 emissions.We encourage our key suppliers to report their emissions,set reduction targets and roadmaps,get data verified and cascade emission reduction expectations and due diligence to the next tiers.By following up with suppliers on improvement areas,we also share our good practices and help them to reach their targets.In 2023,458 of our key suppliers,representing 65%of our total procurement spend,responded to CDPs request to disclose their climate performance information.Some of the key data is shown in the chart on this page.All suppliers whose CDP performance was below expectations were provided with improvement requirements and given recommendations for next priorities.In 2023,our scope 3 emissions from our supply chain(part of scope 3 category 1)were approximately 540 500 tons CO2e.These emissions are estimated by using our suppliers scope 1 and 2 emissions allocated to us based on the volume of products and services we purchase from them.We received the emissions data from 63%of our supplier spend through the CDP Climate Change program,and we scaled up the emissions allocated to Nokia to cover 100%of our suppliers.In 2023,we continued to address one of the challenges(accuracy)in emission allocations,namely data quality,by comparing the supplier-reported data with Life Cycle Assessment data tools and addressing quality issues with suppliers with strong deviations from sector average and Life Cycle Assessment values.Our Supplier Diamond Awards in 2023 again recognized suppliers across several categories.Expert juries judged supplier presentations,and the best were announced at our annual supplier event.The winning supplier in the sustainability category in 2023 was one of the leaders in sustainable semiconductor manufacturing examining the decarbonization of its own operations,establishing a net zero target for 2040 and collaborating with Nokia to reduce the emissions of our products.Read more about our work with suppliers under the Responsible sourcing sub-chapter and the Water in our supply chain section.Product transportation and distributionWe aim to save space,reduce packaging materials and maximize transport efficiency,thereby reducing inbound and outbound shipments.The continuous optimization of our manufacturing and supplier network across the regions will not only enable us to deliver a more rapid response to our customers needs,but also decrease transportation costs and reduce CO2e emissions.The reuse of packaging materials also contributes to reductions in the use of new packaging material.In 2023,we reduced the use of new packaging materials in terms of weight by 2 100 tons by reusing transportation packaging.In terms of our logistics,we look to explore and use the most efficient product transportation options.In 2023,our scope 3 GHG emissions related to upstream transportation and the distribution of our products stood at around 140 900 tons CO2e,a decrease of 57%compared to 2022.This significant drop in the above CO2e emissions is partly due to our continuous efforts to reduce air transportation while increasing sea,road and 458suppliers disclosed data,60%of Nokia spend290suppliers purchased renewable energy283suppliers had structured targets for emission reduction,and 96 of them in line andvalidated by the SBTi369suppliers reported their GHG emissions(Scope 1 and/or 2)84suppliers proposed reduction initiatives and collaboration opportunities with NokiaSupplier climate disclosure figurestons CO2e7 500annual reduction achieved by our final assembly suppliers(Nokia relevant)tons CO2e143 300annual reduction achieved by all suppliers activities(including final assembly)related to Nokia business298suppliers engaged their own suppliers on climate disclosureEnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights29Nokia People&Planet Report 2023Industrial digitalizationmultimodal modes(bining sea and air)and partly to the regionalization that moves activities closer to customers.As a result,in the last two years we have nearly halved our air transportation deliveries.However,a considerable part of the reduction in transported volumes related to a decrease in our deliveries.As one of the emission reduction methods in our transportation activities,we have explored carbon insetting,which is similar to carbon offsetting except the activities that lead to carbon footprint reduction take place within the context of the value chain.In 2023,we continued applying our sustainable aviation fuel(SAF)carbon insetting model,which aims at a direct carbon mitigation of the transport system.This is one of the most sustainable ways to reduce carbon emissions in air freight,as it saves any additional energy consumption arising from compensation measures.We further engaged with our logistics partners on our requirements related to the offering of SAF and have expanded the collaboration on SAF to four logistics partners.For 2024,our focus will be on continuing to improve the environmental efficiency of our transportation by collaborating with the biggest contributors(for example logistics providers,partners or customers)and concentrating on minimizing the most environmentally detrimental modes of transport.Remote meetings increased,business travel emissions decreased80 00060 00040 00020 0000Air travel CO2e emissionsNumber of remote meetings129630Air travel CO2e emissions(metric tons)Number of remote meetings (millions)2023 14% 76 21202220192020-58%-81% 372%-8%Reducing our travel footprintBusiness travel includes flights,hotels,rail,rental cars,taxis and public transport.Our reporting is based on air travel,which is the biggest contributor to our business travel emissions.We calculate the CO2e emissions based on the number of miles flown.In 2023,our CO2e emissions related to business air travel increased to approximately 30 700 tons,meaning a 15%increase compared to 2022.A significant portion of the increase was attributable to the lingering impact of pandemic-related travel restrictions in 2022.It is worth noting that compared to pre-pandemic levels in 2019,we were able to reduce travel emissions by 57%and increase remote meeting volumes by 103%.Our commuting emissions have increased by 8%compared to 2022,amounting to 54 100 tons CO2e due to increased commuting to offices.Most of our employees continued working from home at least partially in 2023 on average 51%of all employees.EnvironmentKey dataSecurity and privacyOur approachBusiness conductOur peopleSupply chainBridging the digital divideHuman rights30Nokia People&Planet Report 2023Industrial digitalizationCircularityEfficiency,the optimized use of resources and digitalization are key contributors to increase circularity.Traditional ownership of goods is changing to access to services and to the use of digital platforms for a sharing economy,both of which can improve circularity.Our strategy to increase operational circularity follows the classic waste hierarchy.The first principle of the hierarchy is always the avoidance of waste,which we do through digitalization,operational efficiency and product life extension.Good waste management practices are important.We have set targets to increase the use of circular materials in new products.We introduced a circular metric to guide our operational circularity journey and to close the material loop.Our target is to be 95%circular regarding waste in 2030.This target includes waste across our value chain:from our own top 20 sites based on waste production,including our own final assembly factories,supply chain final assembly factories,installation projects at customer sites,and product takeback.The purpose of the target is to improve waste management so that disposal to landfill is minimized and the waste produced will be either reused,recycled or recovered.To reach our target we aim to improve our waste-related data management and work with stakeholders to help ensure the best possible circular solutions for obsolete materials across geographies.In 2023,we achieved a circular waste level of 86sed on the attained data coverage.We have recognized areas where a high circularity rate has already been achieved,as well as areas requiring further action.There are still data gaps to be closed but data accuracy hasimproved.Circular practices and our products We continue to progress with the creation of ICT-specific circular economy standards in the ITU-T(International Telecommunication Union Telecommunication Standardization Sector)and ETSI(European Telecommunications Standards Institute),providing a common industry view on circularity and sharing best practices.In 2023,an assessment method for circularity performance scoring(ITU-T L.1023)was revised and published,making it applicable for a much wider product set including network infrastructure ICT goods,while the earlier standard was mostly tailored toward consumer electronics.New criteria and requirements related to robustness,material recycling compatibility,recycled metal content requirements At Nokia,we look at circularity from two perspectives.First,how we can increase the usage of non-virgin materials in the creation of new products and packaging.Second,how we can ensure maximum circularity of our operational value chain.This means that we embed circularity into everything we do.Scope of work definition and solution creation to maximize circularity potentialCircular consultationReuseCollectionMaterial collection,warehousing,disassembly and segregationUtilizing and reselling circular equipment and partsMaximizing material recycling and minimizing landfillingPreparing pre-owned parts into fully functioning or like-new equipmentRecyclingCustomer networkProducts and parts E-wasteCircular practices and productsEnvironmentKey dataSecurity and privacyOur approachBusiness conductOur
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The power ofbeauty.EXPANDING OUR ENVIRONMENTAL AND SOCIAL IMPACT 2023 ESG REPORTWe use the power of beauty to make a positive impact on our world.As the originator of All Things Beauty.All In One Place,Ulta Beauty is uniquely positioned to help drive the beauty industry to deliver more positive environmental and social impact for our guests,associates,stakeholders and the world.About this report Ulta Beautys 2023 environmental,social and governance(ESG)report captures our areas of progress and impact during fiscal year 2023 in our key focus areas of People,Product,Environment and Community.Please contact our General Counsel,Chief Risk&Compliance Officer,Jodi Caro,at InvestorR with any questions about this report.2023 ESG Report2ProductCommunityPeopleEnvironmentGovernanceSupplemental DataIntroductionAs we reflect on 2023,we have a lot to be proud of at Ulta Beauty:strong financial results,engaged guests and passionate associates.We are particularly proud of how we continue to use the power of beauty for good in a uniquely Ulta Beauty way.Expanding our environmental and social impact is an important part of the strategic framework that guides our company.Expectations of businesses continue to evolvemany of our guests,associates and stakeholders expect us to go beyond selling products or offering services and be part of the solution to environmental and social issues.As the largest U.S.specialty beauty retailer,we have the power to drive positive change,and we take this responsibility seriously.However,we cannot do this alone,and our strong partnerships and collaborative approach will allow us to influence our vendors and brand partners to join us in taking steps to improve the beauty industry as a whole.We focus our efforts on areas where we believe we can have the greatest impact and that make sense for our guests,our associates and our business.Im proud to share just a few highlights of the progress we made in 2023 across each of our ESG pillars.PeopleWe are proud to serve a broad,diverse population of guests who span all ages,ethnicities and walks of life,and remain focused on enhancing and evolving our assortment and service offerings to ensure all guests feel connected and reflected at Ulta Beauty.Representing beauty at its most diverse and inclusive helps our guests feel welcome and allows us to best meet their needs.Our engaged associates and winning culture are key drivers of our success.With an associate population that is 91male and 54%people of color,we are making great progress but know we have more work to do.In 2023,we remained focused on helping our associates achieve their full potential by offering a wide array of training and development opportunities contributing to our strong retention rateproof of the culture of belonging were creating.ProductMany of our guests are making lifestyle choices to reduce their environmental impact,including choosing products made with sustainable packaging.In 2023,over 300 brands were certified to one or more pillars of Conscious Beauty at Ulta Beauty.Were making progress toward our sustainable packaging goal and are further addressing the beauty industrys packaging footprint with the launch of The Beauty Dropoff nationwide in 2024.This initiative offers our guests a convenient,responsible means to dispose of hard-to-recycle beauty packaging at Ulta Beauty stores,which are then recycled or converted into energy by a specialty recycling partner.We also welcomed our second cohort of the MUSE program,designed to help BIPOC brands become retail ready.EnvironmentIn 2023,we announced emissions reduction goals approved by the Science Based Targets initiative.These targets include our commitment to reduce emissions from the products we sell and engage suppliers to set reduction targets of their own.Together,in partnership with our brands and suppliers,we are confident we can achieve our commitments.As an example of steps we are already taking,we recently announced that we will provide free guidance to all brand partners to support them on their climate journeys.This is good for them,good for us and good for the planet.We also made meaningful improvements on energy efficiency and will continue looking for ways to reduce the impact of our business on the environment.CommunityOur Ulta Beauty Charitable Foundation continues to play a key role in our ability to use the power of beauty to make a positive impact.In 2023,we raised$6.8 million dollars for our long-time partner,the Breast Cancer Research Foundation,advancing research and continuing our search for a cure.This is just one of the many non-profit partners we supported in 2023,making a real difference in the lives of women and their families across the country.We also provided much-needed support during natural disasters and expanded the impact of our Ulta Beauty associate relief program.We are grateful for the generosity of our guests,associates and the many partners who support our charitable efforts,and look forward to doing even more in 2024.Ulta Beauty believes in the power of beauty to do good and we look forward to showing the world just how much good we can do when we all work together.We hope you will continue to join us on this journey and encourage you to share your feedback along the way.Dave KimbellChief Executive Officer2023 ESG Report3ProductCommunityPeopleEnvironmentGovernanceSupplemental DataIntroductionESG at Ulta BeautyAs the largest U.S.specialty beauty retailer,our focus is to make beauty accessible and inclusive for all.To realize that potential,we have incorporated our intention to expand our environmental and social impact as part of the strategic framework that guides our business.As we continue our journey,we are excited about our potential to shape how the world experiences beauty.Ulta Beauty Strategic FrameworkDrive breakthrough and disruptive growth through an expanded definition of ALL THINGS BEAUTYEvolve the omnichannel experience through connected physical and digital ecosystems ALL IN YOUR WORLDExpand and deepen our presence across the beauty journey,solidifying UltaBeauty at the HEART OF THE BEAUTY COMMUNITYDrive OPERATIONAL EXCELLENCE AND OPTIMIZATIONProtect and cultivate our WORLD-CLASS CULTURE AND TALENTExpand our ENVIRONMENTAL AND SOCIAL IMPACTESG Strategic FrameworkWE USE THE POWER OF BEAUTY FOR GOODWE PURSUE ESG AS A VALUE DRIVERWE TAKE A TARGETED APPROACHWE BALANCE LEADING AND LEARNINGWE STAY TRUE TO WHO WE ARE2023 ESG Report4ProductCommunityPeopleEnvironmentGovernanceSupplemental DataIntroductionWhere positive impact meets business resultsExpanding our environmental and social impact is a part of our strategic framework for a reason.We cannot become the most loved beauty destination without being intentional about how we care for our guests and associates,minimize our impact on the environment and support the communities in which we live and work.Being intentional about how we operate our business every day drives results and is part of what makes us successful.How we make a positive impactPeopleWe champion inclusion and opportunity in beauty for all.ProductWe empower guests to make informed choices about the products that we offer.EnvironmentWe strive to maintain the beauty of our environment and minimize our impact on the world around us.CommunityWe support well-being in women and teens,so they can unleash their possibilities.Why it matters to our businessOur associates are key to helping guests find what theyre looking for,inspiring joy and driving loyalty.We keep our associates at the center of everything we do so they can stay focused on delivering great guest experiences.And we know that turnover is costly.Employees who feel valued are more productive,and more diverse companies tend to outperform their less diverse peers.1,2Turnover can cost up to 2X an employees salary3Beauty is an inherently personal category,and it knows no bounds.To deliver a great experience to every guest,we must have something for everyone,for every stage of their lifelong beauty journey.Guests also increasingly want to understand and feel good about the products they purchase.Our efforts to provide education and transparency about the products we carry can drive sales and brand loyalty.More than 85%of beauty shoppers are interested in clean beauty products4Working with others to reduce our collective impact builds strong partnerships,helps mitigate risks associated with climate change and enhances business resiliency.And efficient operations and facilities reduce costs associated with operating our stores and distribution centers.Energy efficiency can tie directly to operational expense savingsApproximately 91%of our associates and the majority of our guests are women and their well-being,as well as the well-being of our youth,is critical to their ability to succeed.Thats why we view philanthropic donations and volunteerism as investments that benefit our associates,guests and communities whose strength all contribute to our success.Charitable giving affects 73%of Americans spending decisions51 Forbes,Why Employee Recognition is More Crucial than Ever,2022 2 McKinsey,Diversity matters even more:The case for holistic impact,2023 3 Gallup,This Fixable Problem Costs U.S.Businesses$1 Trillion,20194 Ulta Beauty consumer insights,January 20235 MIT Sloan Management Review,Boosting Charitable Giving Can Also Boost Profits,20212023 ESG Report5ProductCommunityPeopleEnvironmentGovernanceSupplemental DataIntroductionOur inclusive value chainDiversity,equity and inclusion(DEI)are catalysts for all we do at Ulta Beauty.By embedding a DEI mindset into all aspects of our businessnot only our workplace practices,but also the suppliers we work with,products we offer and nonprofits we supportwe can think more innovatively,retain world-class talent and become the most loved beauty destination for guests.SuppliersWe believe sourcing from a diverse base of suppliers ensures we benefit from a wide variety of expertise and perspectives.We actively seek businesses with supplier diversity certifications and share information with qualified businesses about the benefits of certification.Learn moreStores and e-commerceWe meet the needs of our diverse guests wherever they shopin our stores and online.We train our beauty-loving associates to make all guests feel welcome and help them find the products and services they are looking for.Learn moreProductsWere proud to support beauty entrepreneurs with specific programs designed to ensure inclusivity through support of founders who identify as Black,Hispanic,Asian American/Pacific Islander and members of the LGBTQ community.Supporting up-and-coming businesses provides our guests with more choice and allows them to also support entrepreneurial spirit.Learn moreWorkplaceChampion diversity is a core valueone that all associates strive to infuse into their daily work.We ensure oversight and leadership of DEI at the highest levels of the company,including in our corporate offices,distribution centers and stores.Our aspiration is to create an inclusive,safe and equitable environment for allso that we can maintain high levels of associate engagement while focusing on our guests.Learn moreCommunityThe Ulta Beauty Charitable Foundations aspiration is for all women and teens to have access to the resources and support they need to support healthy minds,strong bodies and deep connections with others.Together with leading nonprofits,our foundation reaches women and teens across the U.S.Learn more2023 ESG Report6ProductCommunityPeopleEnvironmentGovernanceSupplemental DataIntroductionProgress against our commitmentsUlta Beauty uses the power of beauty to make a positive impact on our industry and the world.As we work to influence change in our industry,many of the outcomes of our efforts will be qualitative,far-reaching and long term.At the same time,we have made several quantitative and time-bound commitments across various areas of our business.These include our science-based emissions reduction target,which was approved by the Science Based Targets initiative(SBTi)in 2023.The information in the table below represents the progress we made toward our goals in 2023.New goals we set for 2024 can be found throughout this report.We will continue reporting progress towards our goals in future ESG Reports.PeopleGoalProgressConduct quarterly,in-store training to reinforce inclusivity and address unconscious bias for all DC and corporate associates,and conduct a third year of curriculum for salon and store associates in 2023CompleteInvest to further DEI efforts through brand amplification,assortment growth and equitable guest and associate experience in 2023CompleteAcknowledge and celebrate lived experiences with always on DEI internal programming in 2023CompleteProductGoalProgressDedicate 15%of total brand assortment to Black-owned,Black-founded and Black-led brands9%of brand assortment is from Black-owned,-founded or -led brandsEnsure that 50%of the consumer-level packaging,by weight,will be recyclable,refillable or made from recycled or bio-sourced materials for products sold by 202525%of packaging meets these requirementsDouble our spending with diverse suppliers(over 2022 levels,targeting 5.4%of total spend)by 20273.3%of spend is with diverse suppliersEnvironmentGoalProgressSet a near-term science-based emissions reductions target with the SBTi by 2023CompleteContinue improving operational efficiency of stores in 2023 via 100 LED lighting retrofits,30 HVAC retrofits and 50 Energy Management System(EMS)upgrades Effectively complete6CommunityGoalProgressFund one million hours of breast cancer research by 2024,equivalent to$50M in fundingComplete$55 million donated6 Completed 200 lighting retrofits;some EMS upgrades and HVAC retrofits pushed to early 2024.2023 ESG Report7ProductCommunityPeopleEnvironmentGovernanceSupplemental DataIntroductionPeopleWe champion inclusion and opportunity in beauty for all.1 in 3 Gen Z job seekers want to work for employers who prioritize diversity and inclusion77 Sensu Insight,What Do Gen Z Want from Employers?,20222023 ESG Report8PeopleIntroductionProductCommunityEnvironmentGovernanceSupplemental DataProtecting and enriching our cultureTo be at the heart of the beauty community we need talented people at the heart of our company.Were proud of the world-class culture weve built over the past 33 years and believe its one of the biggest drivers of our continued success.Insights from associates bear this out:during our annual culture survey,we continue to meet or exceed industry benchmarks for associate engagement.During our most recent survey,we learned that our people feel united by a sense of purpose and are comfortable being themselves at work.For the first time in 2023,we also conducted a survey specifically for job candidates who receive offers to work at Ulta Beauty.Survey findings,particularly from prospective associates just beginning to learn about our company,confirm that our caring culture is a magnet for talent.GOAL FOR 2024:Strive to maintain overall retentionWe are proud of our historically high levels of associate retention.In 2024,we set a goal to strive to maintain this level of performance(for all except seasonal and temporary associates).We will do this through continued focus on associate engagement,development,competitive pay and strong benefits offerings.MissionEvery day,we use the power of beauty to bring to life the possibilities that lie within each of usinspiring every guest and enabling each associate to build afulfilling career.VisionTo be the most loved beauty destination of our guestsand the most admired retailer by our UltaBeauty associates,communities,partners andinvestors.ValuesGive wow experiencesImprove alwaysWin togetherLove what you do,own what you doDo whats rightChampion diversity2023 ESG Report9PeopleIntroductionProductCommunityEnvironmentGovernanceSupplemental DataHow we manage and engage talentWe continue to invest in our People Success function to support all associates and to remain an employer of choice.This means helping individual associates grow their careers,with a refreshed competency model to drive consistency in our talent management processes and give us clear ways to measure success.It also means continuing to think about our workforce as one team,and identifying the talent today who will lead our business into the future.A major focus in 2023 was developing succession plans for key roles to improve our bench depth and readiness,as well as offering intentional development opportunities.Through inclusive recruiting strategies,equitable talent management processes and bespoke career development opportunities,were cultivating a workforce that is representative of our guests diverse lived experiences and the communities in which we operate.Our inclusive recruiting strategy focuses on talent acquisition,development,training and associate engagement and retention.Within our early-career recruiting workstream,we conduct outreach to students from under-resourced communitiesjust one example of our dynamic recruiting approach.Keeping associates safe amid organized retail crimeNothing is more important than associate and guest safety.Ulta Beauty is deeply committed to investing in ways we can address organized retail crime(ORC),theft and enhance overall safety in our stores.While this widespread problem is not unique to UltaBeauty and one we cannot solve alone,weve taken a range of actions to move the needle in the right direction and mitigate the impacts of these incidents.PartnershipsUlta Beauty is working with industry peers,as well as community leaders,landlords,retailers,district attorney offices,law enforcement,ORC alliances and government at all levels to push for legislative and law enforcement action to disrupt ORC efforts.StaffingWe strategically added resources and people to our Field Loss Prevention and ORC teams to provide more support to our stores.ORC managers conduct in-store visits to raise awareness about how to respond to and report ORC issues and conduct events with law enforcement.TrainingWe created an Introduction to ORC training course for all in-store associates and provide reference guides to reinforce learning.Protective MeasuresTo protect merchandise most frequently targeted by ORC and shoplifting,such as fragrances,we have installed secure fixtures to the majority of our stores,with added staffing to ensure an elevated guest experience.Strategic SupportEPICenter,our 24/7 strategic support center,operates as a single point of contact for associates to report safety incidents.It also performs remote monitoring and keeps stores informed about local safety incidents that could impact them and other business disruptions.2023 ESG Report10PeopleIntroductionProductCommunityEnvironmentGovernanceSupplemental DataCreating pathways for successOur industry is constantly changing,so our team is always learning.Opportunities for development begin early in careers,starting with a robust summer internship program.The program is designed for young professionals seeking their first post-graduate jobsas well as in-store associates looking to make the switch to a distribution center or corporate office-based career.In 2023,we hosted 43 interns,6 of whom had prior experience as Ulta Beauty store associates.Interns worked on projects including devising strategies for Ulta Beauty to gain market share among underrepresented customers and proposing innovative ways to engage guests.In early 2024,we implemented a new learning management system that is available to all associates.With this new system,associates will be able to find everything they need to upskill and reskill.This investment in our talented associates enables us to advance and refresh our approach to learning and development at Ulta Beauty,introducing features such as self-directed leadership learning opportunities within our wide catalogue of trainings.Inclusion in Action,our quarterly training on inclusivity and unconscious bias,is mandatory for all Ulta Beauty associates.8 What began exclusively as in-store training has been extended to our distribution centers and corporate workforce,with training topics customized for each group.Participating associates underwent three-and-a-half hours of training in 2023,with sessions focused on being an active bystander,authenticity in the workplace,collaborating across generations and providing equitable and unbiased environments for guests.We also added two new training programs in 2023 for established and aspiring leaders to deepen their skillsets.These included a leadership development series for store general managers,which covered optimizing teams,coaching for high performance and collaborating to achieve results.Recognizing that leadership is a skill,not a title,we introduced the Aspire Program to develop leadership skills for those without direct reports.The program focused on influencing others,managing up and making time for ones leadership development journey.We also held another cohort of our Diverse Leaders program,through which high-potential managers and directors can gain career support from Ulta officers,outside coaches and a peer mentoring circle.The Ulta Beauty workforceAssociates by gender91%Women9%MenAssociates by race54%People of color46%WhiteIn 2023:59%of new hires,enterprise-wide,were people of color19%of new hires,director level and above,were people ofcolor31%of people promoted at the director level and above were people of color,enterprise-wide65%women in leadership roles926%people of color in leadership roles9GOAL FOR 2024:Continue inclusivity trainingUlta Beauty offers training to reinforce inclusivity and address unconscious bias to all store,distribution center and corporate associates.We will continue to offer this training quarterly.8See more data in our EEO-1 summary.8 Where allowed by law9 Leadership roles are defined as director level and above2023 ESG Report11PeopleIntroductionProductCommunityEnvironmentGovernanceSupplemental DataHelping associates stay safe and wellAssociates safety in the workplaceas well as their physical and mental well-beingis our top priority.Ulta Beauty is proud to offer comprehensive and competitive benefits to our associates designed for whole-person support.We consider well-being across eight dimensions and strive to offer benefits to help associates meet their needs in each area.By offering a wide variety of benefits that are important to associates and their loved ones,we enhance our ability to recruit and retain top talent.Members of our benefits team are available at any time to answer associates questions about their benefits.Caring for associates healthAssociates who work more than 30 hours a week for Ulta Beauty,in any position,are eligible for health care coverage,including medical,dental and vision.Coverage extends to dependents,including spouses,same-sex partners and children under the age of 26.Our medical plans provide better levels of coverage,with less cost share placed on associates,compared to many other retailers.We offer comprehensive medical plans that empower associates to choose the coverage that best suits them,including a new health savings account option added in 2023.Associates can receive both virtual and in-person care,as well as urgent and scheduled care options.Health care benefits are designed to be inclusive and include coverage for some gender-affirming services and travel expense assistance for eligible reproductive health services where access to care is restricted.All full-time associates are eligible for paid sick time,regardless of their location.We follow state-level mandates regarding paid sick time for part-time associates.Benefits across every dimension of well-beingWe help associates plan for the future and for the unexpected with company-provided life insurance and options for disability coverage.Associates ages 21 and older are eligible to contribute to Ulta Beautys 401(k)plan with company match.We added a Roth 401(k)option to our offerings in 2023.We recently introduced Convenience Care,a service that helps associates locate resources for childcare,elder care and other services.Other benefits include financial wellness planning and guidance resources,annual memberships to a meditation tool(for corporate associates)and training on wellness,mindfulness and inclusion.In addition,all associates have access to an Associate Assistance Program that provides access to a range of well-being resources,Associate Relief Fund and an Ulta Beauty discount of 25%off retail products and 50%off salon services.Dimensions of well-beingEmotionalOccupationalPhysicalSocialSpiritualEnvironmentalIntellectualFinancial2023 ESG Report12PeopleIntroductionProductCommunityEnvironmentGovernanceSupplemental DataResources for parentsApproximately 91%of our associates are women,and our associates well-being is one of our highest priorities.We are proud of the holistic support and comprehensive benefits related to family planning and parenting.To support associates who wish to become parents,are parents-to-be or are already parents,Ulta Beauty offers benefits and resources for all stages of the process:Family planning Fertility benefits and resources that address the needs of all associates,including our single,LGBTQ ,adoptive and surrogacy associates Access to telemedicine/virtual care10 Health care plans that integrate the services of delivery professional services/midwives10 On-demand access to training,online tools and other resources for pregnancy and childbirth,including live informational sessions to help associates understand the benefits,resources and leave options available to them Pregnancy accommodations aligned with the Pregnant Workers Fairness ActParental leave At least 12 weeks of leave for childbirth and/or bonding with a new child through Ulta Beautys Maternity Leave Policy,which complies with the Family Medical Leave Act and also incorporates additional leaves provided by the company11 At least six weeks of leave for non-childbearing parents to bond,following birth or placement of a child A bereavement leave policy that covers leave for parents grieving losses caused by miscarriage or stillbirthReturning to work and family life Access to the Ulta Beauty Associate Assistance Program:a company-sponsored,confidential platform to support associates with well-being,mental health and life ingeneral(including resources for parents on topics like sleeproutines,postpartum depression,family financial planning,step-parenting,navigating teen years and work-life balance)A lactation policy that complies with federal and state regulations,including ensuring associates have the time and space required to collect and store breast milk Discounted childcare services with select partners Associate scheduling practices that comply with state and local regulations,including communicating work schedules at least two weeks in advance,and no“on-call”shifts,to allow associates to plan family life accordinglyMaking space for associates to connect Another way were strengthening culture is by operationalizing the work of our business resource groups(BRGs).Ulta Beauty has BRGs for associates who identify as a member or ally of a particular shared background or community,including:Asian American/Pacific Islander Black Hispanic LGBTQ Women VeteransThe mission of our BRGs is to cultivate an environment where all associates are valued,empowered and provided opportunities to develop and contribute to Ulta Beautys DEI journey and business.Each BRG has an executive sponsor providing guidance and ensuring they have the support needed to succeed.In 2023,we trained BRGs how to organize volunteer events,engage associates and interact with communities,improving their effectiveness.We also encourage store general managers to join educational events organized by BRGs,so they can use lessons learned to help build a more inclusive culture within their stores.Some of the events BRGs organized in 2023 included fireside chats for key moments like Black History Month,Asian Pacific American Heritage Month,Hispanic Heritage Month,Pride Month,Womens History Month and Veterans Day.We were also excited to host a panel of women founders of beauty brands,who gathered to discuss how they empower other women in the beauty industry.10 For associates enrolled in our medical plan11 Short-term disability coverage is available for all associates(at no cost for full-time associates and for purchase for part-time associates)2023 ESG Report13PeopleIntroductionProductCommunityEnvironmentGovernanceSupplemental DataProductWe empower guests to make informed choices about the products that we offer.86%of beauty shoppersand 90%of Gen Z/younger Millennialsare interested in purchasing clean beauty products1212 Ulta Beauty consumer insights,January 202314ProductPeople2023 ESG ReportIntroductionCommunityEnvironmentGovernanceSupplemental DataOperating at the heart of the beauty communityUlta Beauty was founded more than 30years ago with a clear vision:to be the most loved destination for guests to find all things beauty.Since our beginnings outside the city of Chicago,weve expanded through our leading omnichannel offering,with stores in all 50 states,a strong online presence and“shop-in-shop”stores through our partnership with Target.We are the nations largest specialty beauty retailer,putting us at the intersection of consumer trends,product innovations and industry evolution.With this position comes a great responsibility to help move our industry forward sustainably and responsibly.Offering products from approximately 600 brands in our stores and online,we help connect both established and emerging brands with our beauty-loving guests.Weve gathered insights that tell us what really matters to todays consumersso we know that they care more than ever about product ingredients,production practices and waste.Some of the greatest opportunities for impact in this area exist at the brand level.Ulta Beauty is driving progress by engaging with brand partners on important issues like carbon emissions,sustainable packaging and supply chain diversity.Guests come to Ulta Beauty stores looking to discover beauty on their own terms,explore the latest trends and to engage in self-care.Our guests are more diverse than ever in terms of ethnicity,gender identity and age.We strive to meet them where they are and offer products aligned with their needs and values,whether theyre looking for clean beauty products,diverse-owned brands,recyclable packaging or all of the above.Were finding opportunities to educate and shape behavior by providing clear information about the products we offer and enable guests to reduce their own environmental impact through in-store packaging recycling.Were also cementing our role as a leader in the beauty industry with key cross-category initiatives,including:Conscious Beauty at Ulta Beauty,which helps guests identify clean ingredients;cruelty-free,vegan and sustainably packaged brands and products;and brands that give back to communities and the planetThe Wellness Shop,which celebrates self-care by offering supplements,home spa goods and intimate wellness products SPARKED at Ulta Beauty,our launch platform,which offers guests the opportunity to discover the newest emerging brandsBeauty Without Limits,which uplifts underrepresented voices across retail and beautyThe Ulta Beauty portfolio25,000products600brands15ProductPeople2023 ESG ReportIntroductionCommunityEnvironmentGovernanceSupplemental DataMaking clean beauty accessible through assortment,transparency and educationThe data is clear:guests care about whats in the products they use.A recent study by McKinsey and NielsenIQ found that products positioned as good for people and the planet have experienced greater cumulative growth over the past five years than those that do not make such claims.13 While sustainability claims vary widely by categories,in the beauty space they generally relate to ingredients and packaging materials that are considered more sustainable than alternatives.For the past three years,Ulta Beauty has helped educate and inform our guests through Conscious Beauty at Ulta Beauty.We not only identify brands that are at the forefront of clean,vegan and cruelty-free beauty,sustainable packaging and giving back as we define itwe also share information with guests about why these areas of impact matter.As the demand for clean and sustainable beauty products grows,we remain focused on Ulta Beautys differentiated experience.As this space grows,here are a few factors that we believe set Conscious Beauty at Ulta Beauty apart from the rest:Educate,guide and simplify.“Clean.”“Sustainable.”We recognize that there is a lack of consensus around many words often used to describe beauty products.Conscious Beauty at Ulta Beauty is designed to provide transparency tohelp our guests make informed beauty and personal care product choices.Our approach has been to develop clear,guest-friendly pillar standards defining what Conscious Beauty means at Ulta Beauty.Choices for you and your world.Through Conscious Beauty at Ulta Beauty we give our guests access tomore choices,guide them along their journey and celebrate the brandsand products that are aligned with their values.Within Conscious Beauty at Ulta Beauty we certify products and brands to one or more offive pillars:Clean IngredientsCruelty FreeVeganSustainable PackagingGive BackIn 2023,we renamed the Positive Impact pillar to Give Back.The pillar continues to highlight brands that have charitable giving at their core.Give Back now certifies brands that provide ongoing financial support to environmental and/or social causes.Guest,associate and brand partner education.An important aspect of Conscious Beauty at Ulta Beauty is education.We work to inform guests on all that we offer,both in-store and online.In an effort to provide more transparency and educate through multiple touchpoints,guests can now scan QR codes in-store to see exactly whats on Ulta Beautys MadeWithout List.We also train associates so they can confidently engage guests and share information with brands so they can make changes to their products and packaging.Industry engagement and partnerships.To maximize our ability to move the industry forward,we partner with retail peers,brand partners and nongovernmental organizations like the Environmental Defense Fund.Ulta Beauty also plays an active role in industry groups tied to ingredients and packaging,including Change Chemistry,Personal Care Products Council,ChemFORWARD,Beyond the Bag(in partnership with Closed Loop Partners),Sustainable Packaging Coalition,Pact Collective,The Sustainability Consortium and Sustainable Brands.The Conscious Beauty at Ulta Beauty Advisory Council is made up of experts in product development,sustainability and brand leadership who act as our trusted advisors.300 brands certified to one or more pillars13 McKinsey,Consumers care about sustainabilityand back it up with their wallets,202316ProductPeople2023 ESG ReportIntroductionCommunityEnvironmentGovernanceSupplemental Data6How we use our influence to shape the industryWe have established ourselves as the retailer best known for clean beauty.14 Now,were bringing our brand partners along on the journey to maximize our positive impact.Conscious Beauty at Ulta Beauty is designed to reflect the needs of todays consumers and uplift the good work being done by our brands.A successful program depends on both guest understanding and brand partner participation.Our role is to act as the connector between these two groups,providing resources,encouragement and education along the way.Here are a few best practices weve learned in three years of Conscious Beauty atUltaBeauty:Share the business case.We communicate to brand partners the benefits of becoming certified for the pillars of Conscious Beauty at Ulta Beauty,given growing interest in clean and sustainable beauty products.15 There are clear incentives for brands to participate and continuously improve,and were committed to raising the profiles of products that achieve certification.Provide resources to drive progress.Brands dont have to go it alone.In fiscal 2023,we brought on Novi Connect as a third-party enrollment partner for Conscious Beauty at Ulta Beauty.Novi Connect will help brands engage suppliers on improved packaging and ingredients and make progress on their own sustainability journeys.Meet brands where they are.Many brands we offer are one-of-a-kind,so aspects of Conscious Beauty at Ulta Beauty must be too.When we launched our Give Back pillar,formerly known as Positive Impact,we set a requirement that brands make an ongoing financial donation to one or more environmental or social causes each year,but did not specify a donation amount.This approach allows businesses of all sizes to participate and be recognized.Be willing to evolve.We have continued to evolve by listening to and learning from sources such as industry experts,our Conscious Beauty at Ulta Beauty Advisory Council and our brand partners to understand what matters most to our guests.Over the past year,we refined how we think about sustainable packaging to be more transparent.We also began offering certifications at the SKU level for products made with clean and vegan ingredients to allow for greater choice and participation.Bring consumers along for the journey.Take a look at our website,social channels,advertising and store shelves,and youll see that communicating about Conscious Beauty at Ulta Beauty is a priority.We continue to learn more about what messages resonate with our guests through pilots to reduce single-use bags and encouraging recycling of empty product packaging.14 Ulta Beauty Proprietary Research,202315 McKinsey,Consumers care about sustainabilityand back it up with their wallets,202317ProductPeople2023 ESG ReportIntroductionCommunityEnvironmentGovernanceSupplemental DataProgress on sustainable packagingOf all the Conscious Beauty at Ulta Beauty pillars,we have put a special focus on Sustainable Packaging,as we believe that this is one of the areas where we can make a meaningful and measurable impact.The beauty industry generates 120 billion units of plastic packaging waste every year,90%of which is not recycled.16 Were attacking this problem across the product life-cyclethe use of recycled/recyclable content in packaging and the collection of packaging at the end of its use.Our goal is that by 2025,50%of the packaging we sell by weight in our total assortment,including Ulta Beauty Collection,will be recyclable,refillable,made from recycled or bio-sourced materials or a combination of these attributes.As of the end of fiscal 2023,were on our way to achieving our goal,with 25 of packaging meeting our definition of sustainable.Were making progress despite recycling infrastructure limitations,material shortages and an ongoing need to encourage more brands and consumers to embrace refills and reuse.In addition,the brands we carry include companies of all sizes,from many parts of the world and with different levels of capacity to gather the data we seek to verify their progress.Data will fluctuate as our brand and product assortment evolves.In addition,there is limited standardization in how brands track and share packaging information.We are using our strong partnerships and collaborative approach to educate and influence brands as we make progress on this complex journey together.In March 2024,we launched the Beauty Dropoff program at all stores.Through this program,guests can bring back their empty hard-to-recycle beauty packaging and deposit them in collection boxes provided by Ulta Beauty in partnership with Pact Collective.Pact will seek to find the best uses for collected items,including recycling and turning waste into energy.How do we think about sustainable packaging?Imagine the empty bottles,tubes,jars and vials that hold every product sold by Ulta Beauty over the course of a year.If you were to place all those containers on a scale,at least half of that total weight will come from containers that are at least one of the following:Recyclable(according to U.S.Federal Trade Commission guidelines)RefillableMade from recycled materialMade from bio-sourced material16 Forbes,Why Is Eliminating Plastics From Beauty Products So Critical?Superzero Founder Explains,202217 Data is rounded to the nearest whole number.The data used for calculated progress towards our targets includes numbers reported to Ulta Beauty by brand partners that has not been validated by third parties.Calculation for percentage of sustainable packaging weight is calculated by dividing the sum of total sustainable packaging weight of items purchased by total packaging weight(total product weight,minus net weight of usable product weight)of items purchased.The Beauty Dropoff18ProductPeople2023 ESG ReportIntroductionCommunityEnvironmentGovernanceSupplemental DataA closer look at whats in our productsThe beauty industry uses chemicals to give products their unique benefits,including moisturizing,sun protection,color,all-day wear and more.Transparency about the ingredients and formulations in the products we offer is a matter not only of consumer interest,but also safety and health.We maintain a Made Without List,which specifies ingredients that are not found in products badged for the Clean Ingredients pillar of Conscious Beauty at Ulta Beauty.And while indicating what ingredients not to use is a critical first move,were taking it a step further by working collectively with our retail peers and ingredient suppliers to identify safer alternatives to move the industry forward.In 2023,we joined ChemFORWARDs“Know Better,Do Better”collaboration,which brings leading beauty companies together to improve chemical hazard data for beauty products.Through this collaboration,Ulta Beauty and other industry leaders are sponsoring ChemFORWARD in conducting chemical hazard assessments of ingredients commonly found in cosmetics products.ChemFORWARD will then make this data available to brands and consumers,so they can make more informed choices.The Modernization of Cosmetics Regulation Act(MoCRA),passed in 2022,expands the Food and Drug Administrations authority to regulate cosmetics and ensure their safety.All facilities that manufacture products that are a part of Ulta Beauty Collection will register to comply with MoCRA.19ProductPeople2023 ESG ReportIntroductionCommunityEnvironmentGovernanceSupplemental DataFurthering beauty for allWe want every guest who shops at Ulta Beauty to find products that celebrate what makes them unique.Its why we work to curate a diverse product assortment,not only in terms of brands and categories but also for all ages,skin tones and hair types.In 2023,we worked to further increase the inclusivity of our assortment.Many Black and Hispanic beauty enthusiasts are looking for brands that truly understand their needs,which is one reason supporting Black,Indigenous and People of Color(BIPOC)-owned brands is a priority for Ulta Beauty.We have a support ecosystem across merchandising,supply chain,finance and other areas to assist our BIPOC brand partners achieve long-term success.This included two virtual summits in 2023 to give these brand partners the tools and resources needed to grow their businesses.We also welcomed the second cohort of our MUSE Accelerator program,a 10-week program designed to prepare early-stage BIPOC-owned and-founded brands for retail readiness.The program combines financial support with networking opportunitiesand is leading to real results for participants:Pound Cake Cosmetics,an award-winning lipstick brand and a participant in the first MUSE Accelerator cohort,launched in UltaBeauty stores and online in the fall of 2023.Ulta Beauty is also a proud signatory of the Fifteen Percent Pledge,through which we commit to devote 15%of our total brand assortment to Black-owned,Black-founded and Black-led brands.We have already achieved this goal within our hair care category.As of the end of fiscal 2023,Black-owned,-founded and-led brands made up 9%of our brand assortment store-wide.But supporting BIPOC-owned brands is about more than reaching diverse guests.Many consumers agree that its an important step toward equity.In a study by McKinsey18,45%of Americansacross genders,ethnic backgrounds and age groupssaid they believe that retailers should actively support Black-owned businesses and brands.We strive to place these brands in prime locations in our stores,advertising and email marketing.During Black History Month in 2023,we created a product discovery kitwhich was both sold online and distributed at conferencesto create awareness for 11 emerging Black-owned and-founded brands.The kits were targeted to all guests,and 100%of the purchase price was donated to Big Brothers Big Sisters of America,a nonprofit that supports youth in under-resourced communities.18 McKinsey,The rise of the inclusive consumer,202220ProductPeople2023 ESG ReportIntroductionCommunityEnvironmentGovernanceSupplemental DataAdvancing supplier diversityEmbracing DEI within our procurement practices helps make our supply chain strong and resilient.One of many aspects of our robust procurement process includes extending competitive bidding opportunities to certified businesses that fall within one or more of the following categories:Minority-owned Woman-owned Lesbian,gay,bisexual,transgender-owned Disability-owned Veteran-owned Service-disabled veteran-owned Small and disadvantaged-ownedWe are on track to achieve our goal of doubling our spend with certified diverse-owned businesses from 2.7%in fiscal 2022 to 5.4%in fiscal 2027.Our spending with certified diverse suppliers reached 3.3%of our total spend in 2023,marking a 22%increase from 2022.From 2022 to 2023,our retention rate with certified diverse vendors stood at 94%,showcasing not just engagement but sustained partnerships.We discovered many of our new vendors at conferences organized by advocacy agencies with whom we maintain corporate memberships.In 2023,we exhibited at conferences hosted by:National Gay&Lesbian Chamber of Commerce(NGLCC)National Minority Supplier Development Council(NMSDC)Womens Business Enterprise National Council(WBENC)Kitsch Certified Minority-Owned and Woman-OwnedJulissa Prado,Founder and CEO Rizos Curls Certified Minority-Owned BusinessCindy Pasky,President and CEOStrategic Staffing Solutions Certified Woman-Owned Business Sasha Gulish,Founder Be Rad,Inc.Certified Woman-Owned Small BusinessSpent$193Mwith certified minority-owned businessesSpent$92Mwith certified woman-owned businessesSpent$168Mwith small businesses21ProductPeople2023 ESG ReportIntroductionCommunityEnvironmentGovernanceSupplemental DataEnvironmentWe strive to maintain the beauty of our environment and minimize our impact on the world around us.78%of beauty consumers think its the responsibility of companies to protect the environment1919 Ulta Beauty consumer insights,January 202322ProductEnvironment2023 ESG ReportPeopleIntroductionCommunityGovernanceSupplemental DataOur climate commitmentsRoadmap to achieving our science-based targetBeing an industry leader means setting an example for others to follow.In 2023,we were proud to set our first science-based target(SBT)for carbon emissions,which was approved by the Science Based Targets initiative(SBTi).Our target has three main components,each of which we will address in distinct ways.It is designed to take responsibility for areas where we have control,and influence where we do not.Heres the roadmap we plan to follow between now and 2030:2019BaselineBaseline year for our emissions reduction goals2023Goal SetTarget approved by SBTi2027 Supplier Engagement Goal68%of the suppliers by emissions volume from whom we purchase goods and services will set their own SBTs.Background:The largest portion of our emissions come from the sourcing and manufacturing of products made by our brand partners and sold to Ulta Beauty.Plan:Support brand partners on their climate journeys and target setting with resources and tools to build their capacity to measure their emissions,set emissions reduction targets and publicly report their progress.Progress:40 of our brand partners by emissions volume have set a science-based target to reduce their emissions.2030Product Emissions GoalScope 3 greenhouse gas(GHG)emissions covering use of sold products reduced by 28ckground:Most products sold do not generate emissions during use,but aerosol sprays and electronic tools like hair dryers do.Plan:Collaborate with brand partners to develop and convert aerosols to the use of low global warming potential propellants and design energy-efficient tools and products to reduceemissions from electronic tool use.Progress:We have achieved an 18 decrease in Scope3,Category 11 emissions since 2019.Operational Emissions GoalScope 1&2 GHG emissions reduced by 90ckground:Electricity used to power our stores,distribution centers(DCs)and corporate offices account for 91%of our Scope 1 and 2 emissions,the other 9%are small amounts of natural and propane gas used for heating and refrigerants used for cooling.Plan:Invest in on-and off-site renewable energy and increase store and DC energy efficiency.Progress:We have achieved a 31 decrease in Scope 1 and 2 emissions since 2019.20 Data was supplied by EcoAct Inc.as of fiscal 2023 end.Data has not been verified by a third party and will fluctuate as our brand and product assortment evolves.23ProductEnvironment2023 ESG ReportPeopleIntroductionCommunityGovernanceSupplemental DataOur path forwardTransforming our operationsScope 1 and 2Continue implementing energy efficiency initiatives.Equip new facilities with the latest technology,while pursuing solutions to lower our energy demand like retrofitting lighting,HVAC systems and energy management systems in existing stores and distribution centers.Pursue more on-site renewable energy.Partner with landlords to support the installation of on-site solar photovoltaic systems.While we dont own the panels themselves,we purchase and use the renewable electricity generated on site(including the environmental attributes associated with that electricity).Scale up investment in renewable energy credits(RECs).Invest in unbundled RECs,which can be purchased and used anywhere in the U.S.,and purchase bundled RECs that support renewable energy projects in the same utility territories in which we operate.Adopt low-carbon refrigerants.Replace high-global warming potential(GWP)refrigerants with low-carbon alternatives inour cooling systems.Support efforts to make clean energy accessible for all through Community Solar and other projects.Seek opportunities to sign Community Solar Agreements.For these agreements,Ulta subscribes to a share of a local,off-site solar project,for which we pay a subscription fee in exchange for dollar credits on our electric utility bills.Improving the sustainability of our productsScope 3Reduce emissions from consumer use.Influence and engage with brand partners to develop more energy-efficient tools such as hair dryers,drive guest adoption of more efficient tools and educate guests about the impact of usage habits and products on emissions.Support the industry in adopting low-GWP propellants in aerosol sprays.Collaborate with aerosol value chain including brand partners and their ingredient and packaging suppliers to design and convert aerosols to the use of low-GWP propellants.Engage brand partners on climate topics.Partner with the Supplier Leadership on Climate Transition program and invite brand partners to participate in an online climate school to measure their emissions,set a science-based target,create a plan to reduce emissions and report their progress on their climate journeys.In early 2024,we released our first Sustainability Guide for brand partners with resources to help them make progress on their packaging and climate journeys.24ProductEnvironment2023 ESG ReportPeopleIntroductionCommunityGovernanceSupplemental DataOur carbon footprintOur business continued to grow in 2023,with 30 net new stores,new and updated distribution centers and expanded e-commerce offerings.In 2023,newly opened stores and a market fulfillment center(a type of distribution center)increased our physical footprint by 3.5%(by square feet).Our overall electricity consumption increased as a result of this growth,and overall natural gas consumption decreased due to warmer winter weather across the country.At the same time,our sales were strong in 2023,and we sold more products than in fiscal 2022.Expanded facilities and increased sales increased our overall emissions slightly.21 To begin reducing these emissions,we are implementing the emissions reduction roadmap outlined on the prior pages.Grid vs.Renewable Energy Consumption GridRenewableFY2234f%FY2116%FY2334fsolute Electricity Consumption22(Megawatt hours)FY21323,644FY22335,687 FY23336,8820.4solute Emissions(MTCO2e)23Scope 1Scope 2Scope 3FY222,009,22680,1538,940FY211,810,605100,1538,204FY238,34588,978 2,091,2794%Same-Store Emissions24(MTCO2e)23FY2277,5811,047FY238147,8717,06182,1346%Emissions Intensity25MTCO2e per 100 square feet (from stores only)FY210.64FY220.51 FY230.556.6%Scope 3 Emissions by Category26(%of total Scope 3)78%Purchased goods and services13%Use of sold products3%Employee commuting2%Fuel-and energy-related emissions not in Scopes 1 and 22%Upstream transportation and distribution1%End-of-life treatment of sold products1%Waste generated in operations An automated storage and retrieval system significantly increases the density of our distribution centers,allowing us to store 12 times the amount of product in the same amount of space.Other technologies,including automated receiving and a residual shuttle,limit the number of touches on each product.The Sure Sort system simplifies manual processes of scanning and sorting individual orders,thereby reducing the potential for errors and damage to products.Autonomous mobile robots work alongside associates in our South Carolina market fulfillment center to complete guest orders.The robots can communicate with associates in one of eight languages,automatically detecting each persons preferred language based on information on their badge.Ulta Beauty autonomous mobile robots26ProductEnvironment2023 ESG ReportPeopleIntroductionCommunityGovernanceSupplemental DataProtecting the beauty of the environmentWe strive to conserve precious resources like water,forests and the raw materials used to make our products and packaging.As part of our efforts to create a more efficient e-commerce supply chain,we are exploring ways to use more sustainable packaging materials and less packaging overall.Where possible,we are removing plastic bubble wrap and testing smaller box sizes to fit more orders into trucks.Guests will notice new Sustainable Forestry Initiative labels on cardboard boxes,indicating that boxes are made with paper from responsibly managed forests and How2Recycle labels encouraging them to recycle boxes in curbside bins.Reducing product wasteA retail industry-wide challenge is managing products with different expiration dates and varying specifications on whether they can be discounted or donated.Were addressing these dynamics and minimizing waste in a variety of ways.For example,we are improving our forecasting capabilities and working with partners to design packaging that minimizes the risk of product damage and determine more sustainable approaches for handling unsold products.For example,many products can be donated rather than being sent to a landfill.Improved sortation technologies at our distribution centers are also reducing the risk of accidental product damage.Using water with careWhile Ulta Beautys operations are not water-intensive,we work to conserve where we can.To manage our stores water footprint,we use instant water heaters and work to identify malfunctioning equipment as quickly as possible.Total Waste27(Tons)Water Consumption28(Gallons/square feet)FY2112.5FY2214.7 FY2312.027 Data correlates to Scope 3,Category 5 emissions accounting.Waste diverted from landfills includes all types of waste produced by Ulta Beauty that are recycled or combusted rather than being landfilled.28 Water intensity is defined as the total usage(in gallons)per square foot;represents same-store usage from 428 stores that were operational throughout the 2021,2022 and 2023 fiscal years.27ProductEnvironment2023 ESG ReportPeopleIntroductionCommunityGovernanceSupplemental DataCommunityWe support well-being in women and teens,so they can unleash their possibilities.67%of beauty consumers think brands should donate monthly or more often to charitable causes2929 Ulta Beauty consumer insights,January 202328CommunityEnvironment2023 ESG ReportProductPeopleIntroductionGovernanceSupplemental Data30 Dress for Success,202131 Development Dimensions International,201332 U.S.CDC,2023Helping women and teens unleash their possibilitiesThe Ulta Beauty Charitable Foundation expands our social impact by strategically and intentionally selecting giving opportunities and partners that align with our mission and values.As Ulta Beauty grows and evolves,our charitable foundation must also grow and evolve.We are intentional about where we are uniquely positioned to make a positive impact and change lives.And given the connections between beauty and well-being,we believe supporting well-being in women and teens allows us to empower those who need it most and have a positive impact on their lives along the way.75%of women lackprofessional development opportunities3063%of women have never had a mentor3160%of teen girls report feelings of persistent sadness or hopelessness32We know that having a positive sense of self affects many aspects of well-being.Our view of well-being is holistic,encompassing mind,body and community.GOALS FOR 2024:Support mental well-beingThe Ulta Beauty Charitable Foundation is developing long-term,outcome-driven goals to advance our well-being mission.We will make tangible progress by donating$1 million in 2024 to national nonprofit partners focused on supporting mental health and well-being.Invest in under-resourced communitiesThe Ulta Beauty Charitable Foundation will again donate$2 million in 2024 to nonprofit partners focused on BIPOC and LGBTQ communities.MindWe support individuals learning how to cope with lifes challenges and become more resilient and confident. BodyWe provide experiences and resources to build strong and healthy bodies. CommunityWe create opportunities to form positive relationships and develop a sense of connection.29CommunityEnvironment2023 ESG ReportProductPeopleIntroductionGovernanceSupplemental DataHealthy mindscreating connectionsTo maximize its impact,the Ulta Beauty Charitable Foundation focuses on a small number of partners whose work aligns with our mission.In 2024,we look forward to expanding our relationships with other partners,including Big Brothers Big Sisters,which creates mentoring connections between adult volunteers and youth;and The Jed Foundation,a national nonprofit that works to promote mental health and prevent suicide in teens and young adults.In line with our focus on well-being,we will introduce new opportunities for our associates who are passionate about giving back to their communities to engage with our partners to amplify our mission and expand our impact.Healthy bodiesOur largest partneris the Breast Cancer Research Foundation(BCRF),which funds cancer research worldwide.We support this signature partner with a combination of monetary and in-kind donations,an in-store fundraising program and volunteer service.In 2023,we were thrilled to achieve our goal of donating$50 million to BCRF between 2009 and 2023,raising more than$6.8 million in 2023 alone.During one of our giving programs,associates who had been touched by breast cancer shared their stories to raise awareness about the importance ofscreening and early detection.We will continue to support BCRF,and plan to target our investments toward continuing to search for a cure so all individuals impacted by breast cancer can have healthy outcomes.What does our research funding make possible?Ulta Beautys fundraising over the past year allowed us to support 15 annual research grants through BCRF,as well as its critical grants program focused on providing seed funding to researchers early in their careers.One recent grantee team included Dezheng Huo,PhD,and Olufunmilayo I.Olopade,MD,BS,FACP,both professors at the University of Chicago.Huo and Olopade are working to develop better options for prevention and treatment of breast cancer in under-resourced and understudied populations,particularly young women of African ancestry.Says Olopade,“None of my accomplishments to eliminate disparities in breast cancer outcomes would have been possible were it not for BCRF.With BCRFs support,we broke new scientific ground and came to realize how little we knew about breast cancer in non-white women.Through it all,I have been inspired by all in the breast cancer community who have come together to co-create a vision for a better future,where the translation of scientific advances and access to life-saving medicines reach all,including the most vulnerable among us.”Dezheng Huo,PhDOlufunmilayo I.Olopade,MD,BS,FACP30CommunityEnvironment2023 ESG ReportProductPeopleIntroductionGovernanceSupplemental DataDress for SuccessAnother partner is Dress for Success,a leading global nonprofit employment resource for unemployed and underemployed women.Dress for Success provides a network of support,development tools and professional attire,as needed,to help women thrive in work and in life,which is central to well-being.The Ulta Beauty Charitable Foundation is proud to support more Dress for Success affiliates nationwide than any other corporate partner.In 2023,we joined The Adecco Group US Foundation,Dress for Success and Wounded Warrior Project to help over 100 women veterans prepare for post-military careers during five“Suit and Salute”events across the country.These half-day workshops focused on personal branding and career readiness,equipping participants to market their skills to potential future employers.Clients worked with recruiters to update their resumes and chose new wardrobes with help from Dress for Success.After attending an event,17 women reported that they had been hired for new jobs.To help women prepare for job interviews,Ulta Beauty store leaders also gathered at their annual conference to pack 2,000 interview kits,which included office essentials like flash drives,portfolio folders,on-the-go beauty products and links to a downloadable cover letter template.Save the ChildrenSave the Children(STC)helps to ensure all children in rural America have a healthy,strong foundation to thrive as learners and in life.The Ulta Beauty Charitable Foundation raised more than$3 million for STC in 2023 through a point-of-sale donation program and associate fundraisers,which provided 1 million meals for hungry children and families across the U.S.Access to adequate nutrition is key to well-being for all.For Mothers Day,associates at our Jacksonville distribution center assembled self-care gift bags to bring joy to caregivers of children in STCs programs.Face masks were also distributed to STCs programs at the southern U.S.border to promote health and safety in these communities.Since 2019,we have raised over$10 million for STC.In 2024,the Ulta Beauty Charitable Foundation will support STCs disaster relief efforts.Assistance when associates need it mostBeyond giving back to the communities we serve,our foundation manages our Associate Relief Fund,which provides monetary grants to Ulta Beauty associates facing a range of personal hardships,including illness,intimate partner violence,military deployment of a family member and natural disasters.In 2023,we gave grants to 237 associates coping with challenges including domestic violence,serious illness or injury or damage to their home.Our Ulta Beauty Charitable Foundation enables associates to help fellow associates in need.“As a child of an Army Veteran,I am forever grateful for the opportunity to have been in the presence of such a powerhouse of women empowering one another at our Suit and Salute event.This event allowed us to show our appreciation for all the women that have served and continue to serve this country.”-Brenda Gonzalez,Operations Manager345 Dress for Success volunteers1,200 volunteer hours65eventsJacksonville DC associates packing Mothers Day gift bags for caregivers of kids in Save the Childrens programs.31CommunityEnvironment2023 ESG ReportProductPeopleIntroductionGovernanceSupplemental DataGiving back in our backyardsUlta Beautys community impact spans the locations where we operate.While we have a special focus on the Chicago area,where our corporate headquarters is located,as we have grown,we have expanded our impact across the U.S.and beyond,amplifying our positive impact.We continue to partner with youth-serving organizations,including After School Matters,Step Up and Youth Guidance.Following the success of our“Pretty Empowered”program,in partnership with YWCA Metropolitan Chicago,we expanded the event to four cities in 2023.During this day-long event,340 girls ages 9 to 14 learned about the scientific aspects of making cosmetics,as well as leadership,wellness and self-confidence,from 75UltaBeauty volunteers.Empowering young girls contributes to their well-being.Ulta Beauty associates are passionate about giving back.In 2023,our associates self-reported nearly 4,000 hours of volunteer work with nonprofit organizations.We provided in-person and virtual volunteer opportunities throughout the year and organized school supply drives and mentoring events for our annual Martin Luther King Jr.Day Week of Service.In addition,our digital innovation team has members who reside in Uruguay,and we recently launched partnerships with two nonprofits there.Ceprodih supports vulnerable families,particularly mothers experiencing unemployment,domestic violence and other hardships.TECHO helps build housing and community infrastructure throughout Latin America,including providing emergency housing after natural disasters.Ulta Beauty has provided grants and volunteer time to these two nonprofit partners,making a positive impact far from home.Our people also joined forces in a major way in 2023 by relaunching Associates Coming Together to Support(ACTS),an associate-led philanthropic group.ACTS is open to all associates and is overseen by an executive sponsor.During its first year,ACTS grew to more than 200 members and raised nearly$800,000 for charities.“What a company stands for and how it gives back to the community have become more important to me as Ive progressed in my career.Getting involved with the philanthropic side of the business and meeting coworkers I dont typically interact with helps me feel more fulfilled and engaged.”-Michelle LaBounty,ACTS Member32CommunityEnvironment2023 ESG ReportProductPeopleIntroductionGovernanceSupplemental DataGovernanceA foundation of good corporate governanceand commitment to our mission,vision and valuessets the tone and guides ESG at Ulta Beauty.Lorna E.NaglerChair of the Board of DirectorsMichelle L.Collins DirectorKelly E.Garcia DirectorCatherine A.Halligan DirectorDave KimbellChief Executive OfficerPatricia A.Little DirectorMichael R.MacDonald DirectorGeorge R.Mrkonic DirectorHeidi G.Petz DirectorGisel Ruiz DirectorMike C.Smith Director80%of consumers support companies that are transparent about their environmental and social data3333 JUST Capital,SURVEY ANALYSIS:Americans Want to See Greater Transparency on ESG Issues and View Federal Requirements as a Key Lever for Increasing Disclosure,2022 2023 ESG Report33CommunityGovernanceEnvironmentProductPeopleIntroductionSupplemental DataExecuting on our missionUlta Beautys Board of Directors brings a wide variety of expertise and leadership to help guide our CEO and our management team.In 2023,we proactively declassified our Board,meaning that all Board members stand for reelection annually.This structure keeps all members accountable to shareholders each year and supports Board refreshment.Our Board of Directors and Executive Team have overall oversight and accountability for environmental,social and governance issues.Each of the Boards three committees touches these topics in a different way:Nominating&Corporate Governance CommitteeResponsible for developing a diverse Board and periodically reviewing company policies related to ESG Compensation CommitteeOversees human capital risks and periodically reviews the companys diversity,equity and inclusion policies and practices Audit CommitteeMonitors technology and cyber risks,enterprise risk management and overall risk managementOur full Board discusses and provides guidance on our strategy to expand our environmental and social impact topics multiple times throughout the year,and we regularly update Board members on emerging topics.For example,the Board has oversight of Ulta Beautys use of artificial intelligence(AI)and provides input on its responsible use.Board members have ongoing access to an ESG Resource Center,which includes valuable data and information on emerging trends.We share our ESG Scorecard with our Board quarterly,which includes:Progress toward goals within our four ESG pillars (People,Product,Environment,Community)Updates on investor engagement Updates on ratings and rankingsAt least once a year and up to quarterly,Board members also receive updates on the regulatory environment;shareholder advisories,policies and communications of note;risk assessment and risk policies;and cybersecurity matters.Risk managementTo assess risks,we proactively seek input from associates at all levels of the company,with special emphasis on the in-store and distribution center associates who know our guests and operations best.Our risk management insights team conducts research,surveys,workshops and ongoing discussions with cross-functional groups across the company to gain insights on enterprise level risks and risk mitigation efforts.Our Board provides guidance and oversight on enterprise risk management(ERM)activities and processes across the company.To ensure understanding of the risks we face as an enterprise,the Board receives regular management updates on our business operations,financial results and strategy.Our leadership team also keeps the Board informed about emerging or evolving risks as they arise.Ulta Beauty Ethics&Compliance policiesBelow is a list of our Ethics&Compliance and IT policies.You can find an overview of our Ethics&Compliance policies in our Code of Business Conduct.Acceptable Use Policy Americans with Disabilities Act Policy Confidentiality Policy Employment Policy Harassment and Discrimination Prevention Policy Identity and Access Management Policy Information Security Management Policy Insider Trading Policy IT Risk Management Policy Network Security Policy Open Door Policy Privacy Notice and Policy(CA)Records and Information Management Policy Relationships in the Workplace Policy Gratis&Gift Policy Vendor Risk Management PolicyUlta Beauty Board composition11directors55%women55%joined within the last five years36%people of color45%men60average age2023 ESG Report34CommunityGovernanceEnvironmentProductPeopleIntroductionSupplemental DataProtecting business and guest dataWe continued executing our digital transformation building on our strong foundation and improving how we run our business,gather insights and deliver guest experiences.At all times,and particularly during this time of transformation,safeguarding data and complying with privacy and consumer protection laws remain top priorities.While we do not sell guest data,we do share aggregated and anonymized data with our brand partners and third-party vendors,and we inform our guests of our practices.Our Security and Network Operations Center constantly and proactively monitors our network and application landscape for threats and anomalies,and we have established processes for performing third-party risk assessments and ensuring secure sharing of data.We manage data security and privacy at the highest levels.Our CEO keeps the Board informed on cybersecurity and privacy matters including regular reports to the Audit Committee and full Board discussions throughout the year.Our Chief Technology and Information Officer oversees core elements of our IT functions,including IT infrastructure,systems and security,as well as our technology strategy.Ulta Beautys General Counsel,Chief Risk&Compliance Officer also serves as our Chief Privacy Officer and works closely with our internal data governance team,including our Vice President of IT Risk Management,our Data Enterprise Officer and our IT Risk Management team,to ensure we take a holistic approach to caring for guest,associate,financial and other proprietary data.Keeping our organization secure requires everyones help,and we regularly train associates on how to keep data safe and recognize potential phishing,scams and threats.In October 2023,we observed National Cybersecurity Awareness Month with multiple events and training programs designed to reinforce associates skills for preventing cybercrime.Ulta Beauty is also prepared for the SECs new cybersecurity disclosure rules and other emerging state privacy and data protection laws.In the last three fiscal years,Ulta Beauty has not experienced any material cybersecurity incidents and expenses incurred from cybersecurity incidents were immaterial.Operating with integrityThe Ulta Beauty Code of Business Conduct represents our commitment to conducting business ethically.It provides an overview of the laws,policies and regulations that apply to our work.It is included in new-hire materials for all associates,who must read and acknowledge this policy each year.In addition,all store managers and above in the field,distribution center managers and corporate associates take an annual course on the Code of Business Conduct and are expected to act in accordance with the Code at all times.Our Board of Directors completes training on our Code of Business Conduct bi-annually and oversees material changes to the Code.We continually strive to improve our approach to compliance through the Ulta Compliance Network,a cross-functional group of associates who regularly focus on compliance and share best practices to report on compliance.In 2023,the Ulta Compliance Network introduced a quarterly scorecard on trends that is shared with our Board and Executive Leadership Team,which keeps our leaders informed about key compliance metrics and issues.Ulta Beauty Vendor Standards outline our expectations of company vendors.These cover the ethical conduct and social and environmental compliance standards required of a responsible workplace.Sharing concernsWe encourage associates to report any violations of the Code of Business Conduct.There are several ways to report a concern,all of which are proactively communicated to associates in many ways,including training,postings and the UltaNet.Speaking with ones own manager or another manager Speaking to a People Success Business Partner Using the We Care!Lets Talk line to reach the Associate Care and Support Team Email:AssociateCareandSupportU Phone:855-HR-ULTA-1(855-478-5821)Contacting our third-party Ethics Hotline anonymously by phone or online Website: Phone:1-888-673-9271 Contacting our General Counsel,Chief Risk Compliance Officer2023 ESG Report35CommunityGovernanceEnvironmentProductPeopleIntroductionSupplemental DataESG program structureOur ESG priorities are aligned with and are part of our overall business strategy.This work is focused on four key pillars,which contribute to our positive impact through the people we employ and guests we serve,the products we offer and the impact we have on the environment and on communities.From our Board of Directors to associates at every level of the company,we work to drive progress against these pillars in ways that make sense for our business.DIRECTIONINFORMATIONBoard of DirectorsCEOExecutive TeamESG Executive SponsorResponsible for overall ESG strategy and vision,alignment with enterprise priorities;provides guidance and support on decision making and prioritizationESG Program Steering LeadProactively engages and supports pillar owners and related cross-functional projects;builds function and disclosure foundation;provides ESG program recommendations to the Executive Team to ensure alignment with enterprise strategy/prioritiesCross-Functional Owners/SMEsDrive and support ESG strategy within their pillars;provide cross-functional view;serve on Steering Committee and engage with external consultants;help allocate resources and funds,and determine scope of projectsESG PillarsPeopleProductEnvironmentCommunity2023 ESG Report36CommunityGovernanceEnvironmentProductPeopleIntroductionSupplemental DataSupplemental DataLearn more through our latest environmental,social and governance data,framework disclosures and additional information on our programs and policies.Note:Except as otherwise noted,all data reflects the fiscal year ended February 3,2024.2023 ESG Report37GovernanceSupplemental DataCommunityEnvironmentProductPeopleIntroductionSustainability Accounting Standards Board(SASB)IndexAccounting MetricsTopicAccounting MetricCategoryUnit of MeasureCodeResponse/CommentEnergy Managementin Retail&Distribution(1)Total energy consumed,(2)percentage grid electricity,(3)percentage renewableQuantitativekWh and therms,Percentage(%)CG-MR-130a.1(1)Electricity:336,882,087 kWh,Natural Gas:1,391,267 therms2023 ESG Report Environment Our carbon footprintData SecurityDescription of approach to identifying and addressing data security risksDiscussion and analysisn/aCG-MR-230a.12023 ESG Report Governance Protecting business and guest data(1)Number of data breaches,(2)percentage involving personally identifiable information(PII),(3)number of customers affectedQuantitativeNumber,Percentage(%)CG-MR-230a.2In the last three fiscal years,Ulta Beauty has not experienced any material cybersecurity incidents and expenses incurred from cybersecurity incidents were immaterial.Labor Practices(1)Average hourly wage and(2)percentage of in-store employees earning minimum wage,by regionQuantitativeReporting currency,Percentage(%)CG-MR-310a.1(1)The median hourly wage of in-store,full-time regular employees(excluding seasonal,temporary and commissioned employees as determined by employment class)was$24.00(2)Percentage of in-store employees earning minimum wage,by region:RegionTotal AssociatesAssociates Above Minimum WageTotalove Minimum Wage within RegionTotal at Minimum Wage within RegionTotal%at Minimum Wage within RegionCentral4,6504,649100.0.0%Mid Atlantic4,014 3,93398.02.0%Mid East3,667 3,51295.854.2%Mountain West Plains 3,650 3,57898.0r2.0%No Cal PNW4,064 3,54887.3Q612.7%Northeast4,397 4,32998.5h1.5%So Cal Arizona4,529 4,18992.5407.5%South4,936 4,935100.0.0%South Central4,300 4,300100.0.0%Southwest4,449 4,447 100.0 .0 23 ESG Report38GovernanceSupplemental DataCommunityEnvironmentProductPeopleIntroductionAccounting MetricsTopicAccounting MetricCategoryUnit of MeasureCodeResponse/CommentLabor Practices(continued)(1)Voluntary and(2)involuntary turnover rate for in-store employeesQuantitativeRateCG-MR-310a.2Full-time regular employees(excluding seasonal,temporary and commissioned employees as determined by employment class)Annualized TurnoverAll Types:35.5%Annualized TurnoverVoluntary:30.1%Total amount of monetary losses as a result of legal proceedings associated with labor law violationsQuantitativeReporting currencyCG-MR-310a.3No material monetary losses resulted from legal proceedings associated with labor law violations during 2023.Workforce Diversity&InclusionPercentage of gender and racial/ethnic group representation for(1)management and(2)all other employeesQuantitativePercentage(%)CG-MR-330a.1(1)ManagementExecutive Team:10%people of color 70%women 30%menUlta Beauty Leadership(director-level associates and above):26%people of color 65%women 35%menManagement Director-Level Associates:25%people of color 68%women 32%men(2)All other employeesUlta Associates(below director level):55%people of color 91%women 9%menSee Supplemental Data Standard EEO-1 racial and ethnic group categories(U.S.Operations only)for regular managerial and non-managerial employees in operations.Total amount of monetary losses as a result of legal proceedings associated with employment discriminationQuantitativeReporting currencyCG-MR-330a.2No material monetary losses resulted from legal proceedings associated with employment discrimination in 2023.SASB Index(continued)2023 ESG Report39GovernanceSupplemental DataCommunityEnvironmentProductPeopleIntroductionAccounting MetricsTopicAccounting MetricCategoryUnit of MeasureCodeResponse/CommentProduct Sourcing,Packaging&MarketingRevenue from products third-party certified to environmental and/or social sustainability standardsQuantitativeReporting currencyCG-MR-410a.1Data unavailable for 2023.We are evaluating potential disclosure on this topic in the future.Discussion of processes to assess and manage risks and/or hazards associated with chemicals in productsDiscussion and analysisn/aCG-MR-410a.2We train associates who handle hazardous materials so they can do so safely and in compliance with applicable laws,rules and regulations.Additionally,we maintain safe indoor air for all guests including during the use of hairsprays,dyes and other products in our salons.Learn more about the Clean Ingredients pillar of our Conscious Beauty at UltaBeauty program in the Product section of this report.Discussion of strategies to reduce the environmental impact of packagingDiscussion and analysisn/aCG-MR-410a.3We have set a sustainable packaging target that by 2025,50%of packaging sold at Ulta Beauty will be recyclable,refillable or made from recycled or bio-sourced materials.2023 ESG Report Introduction Progress against our commitments2023 ESG Report Product Progress on sustainable packaging Activity Metric Number of:(1)retail locations and (2)distribution centersQuantitativeNumberCG-MR-000.A(1)1,385 stores(2)7 distribution centersTotal area of:(1)retail space and (2)distribution centersQuantitativeSquare feetCG-MR-000.B(1)14.5M total store square feet(2)3.3M square feet in distribution centersSASB Index(continued)2023 ESG Report40GovernanceSupplemental DataCommunityEnvironmentProductPeopleIntroductionTask Force on Climate-related Financial Disclosures(TCFD)Disclosure Focus AreaRecommended DisclosureResponse/ReferenceGovernanceDisclose the organizations governance around climate-related risks and opportunities.a)Describe the boards oversight of climate-related risks and opportunities.2023 ESG Report Governance Executing on our mission2023 ESG Report Governance ESG program structure2023 Proxy Statement Corporate Governance Board Role in Risk Oversightb)Describe managements role in assessing and managing climate-related risks and opportunities.Our General Counsel,Chief Risk&Compliance Officer,who reports to the Chief Executive Officer,is the executive sponsor of our ESG program and works with a cross-functional team of experts,including representatives from Growth and Development/Energy Management,Supply Chain and Procurement,Finance,Corporate Strategy,People Success/Human Resources and Legal Risk&Governance.2023 ESG Report Governance ESG program structureStrategyDisclose the actual and potential impacts of climate-related risks and opportunities on the organizations businesses,strategy and financial planning.a)Describe the climate-related risks and opportunities the organization has identified over the short,medium,and long term.b)Describe the impact of climate-related risks and opportunities on the organizations businesses,strategy,and financial planning.2023 CDP Climate Change,C2.2,C2.2a,C2.3a,C2.4aLearn More:2023 ESG Report Product Making clean beauty accessible through assortment,transparency and education2023 ESG Report Environment Our path forward2023 ESG Report Environment Protecting the beauty of our environmentc)Describe the potential impact of different scenarios,including a 2C scenario,on the organizations businesses,strategy,and financial planning.2023 ESG Report Environment Our path forward2023 ESG Report41GovernanceSupplemental DataCommunityEnvironmentProductPeopleIntroductionDisclosure Focus AreaRecommended DisclosureResponse/ReferenceRisk ManagementDisclose how the organization identifies,assesses and manages climate-related risks.a)Describe the organizations processes for identifying and assessing climate-related risks.b)Describe the organizations processes for managing climate-related risks.c)Describe how processes for identifying,assessing,and managing climate-related risks are integrated into the organizations overall risk management.2023 ESG Report Environment2023 Proxy Statement Corporate Governance Board Role in Risk OversightMetrics and TargetsDisclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities.a)Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.Comparable store annual energy consumption Grid vs.renewable energy consumption Scope 1,2 and 3 emissions Percentage of packaging sold that is recyclable,refillable or made from recycled or bio-based sourcesb)Disclose Scope 1,Scope 2,and,if appropriate,Scope 3 greenhouse gas(GHG)emissions,and the related risks.2023 ESG Report Environment Our carbon footprintc)Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.2023 ESG Report Environment Our path forward;Our climate commitmentsTCFD(continued)2023 ESG Report42GovernanceSupplemental DataCommunityEnvironmentProductPeopleIntroductionUlta Beauty ESG fact sheet2021 Reported2022 ReportedFiscal 2023OUR FOOTPRINTStores 1,300 1,355 1,385Distribution centers(including fast fulfillment and market fulfillment centers)6 6 7States operated in 50 50 50Associates 40,000 53,000 56,000CORPORATE GOVERNANCE:BOARD DIVERSITYPeople of color 3166%Women 54UU%Men 46EE%Identify as lesbian,gay,bisexual,transgender,queer and/or questioning(LGBTQ )10%9%9%DIVERSITY%of people of color hired at the director level and above 50Q%Ulta Beauty AssociatesPeople of color 49ST%Women 90%Men 10%9%9%Executive TeamPeople of color Did not report20%Women 67pp%Men 3300%Ulta Beauty Leadership(director level and above)People of color 25&%Women 65fe%Men 3545 23 ESG Report43GovernanceSupplemental DataCommunityEnvironmentProductPeopleIntroductionUlta Beauty ESG fact sheet(continued)2021 Reported2022 ReportedFiscal 2023PRODUCTSProducts 25,00025,000 25,000Brands 600600 600Brands certified to one or more of the Conscious Beauty at Ulta Beauty pillars 270300 300 COMMUNITYDollars raised for Save the Children$2.4 million$2.3 million$3 million Dollars raised for Breast Cancer Research Foundation(cumulative since 2009)$42 million$47 million$55 million Dollars raised for Dress for Success(cumulative since 2017)$1 million$1.3 million$1.7 million ENVIRONMENTEMISSIONS34Total Scope 1(MTCO2e)8,204 8,349 8,345Total Scope 2(MTCO2e)100,153 80,153 88,978Scopes 1&2(percent of total emissions)5%4%4%Total Scope 3(MTCO2e)1,810,605 2,009,226 2,091,279Scope 3(percent of total scope emissions)95%WASTETons of waste diverted for recycling 20,288 21,477 26,295Tons of hazardous waste diverted from landfills35 21,288 22,532 27,604Tons of waste sent to landfill 26,247 29,770 33,35834 Organizational Boundary:The GHG Inventory organizational boundary follows the operational control approach.As defined by The GHG Protocol Corporate Accounting and Reporting Standard,“a company has operational control over an operation if the former or one of its subsidiaries has the full authority to introduce and implement its operating policies at the operation.”Scope 1 and 2 emissions are calculated for all leased or subleased sites within Ultas operational control.Emissions not within Ultas operational control are accounted for in Scope 3 emissions.Operational Boundary:During the reporting period,the organizational boundary includes Stores,Offices,distribution centers(DCs)(including fast fulfillment centers and market fulfillment centers)that are fully or partially in operation during the reporting period.All sites operated by Ulta are leased or subleased.Financial reporting(10-K)reports operational boundary in terms of Stores,Offices and DCs as of end of the reporting period,i.e.,sites in operation by end of the reporting period.GHG Inventory differs from financial reporting quantifying Scope 1 and 2 emissions of additional sites(e.g.,sites that were closed or relocated throughout the reporting period).35 Waste diverted from landfills includes all types of waste produced by Ulta Beauty that are recycled or combusted rather than being landfilled.2023 ESG Report44GovernanceSupplemental DataCommunityEnvironmentProductPeopleIntroductionStandard EEO-1 racial and ethnic group categories(U.S.Operations only)Regular Managerial Employees by Ethnicity&Gender(less seasonal and temporary employees)TopicFemaleMaleUnknownTotal36CountPercentageCountPercentageCountPercentageCountPercentageAmerican Indian/Alaskan Native410.7 .0.0C0.7%Asian1262.10.2.092.3%Black or African American4908.3X1.0.0T89.3%Hispanic or Latino1,27121.522.2.0%1,40323.7%Native Hawaiian or Other Pacific Island210.40.1.0$0.4%Two or More Races2033.4&0.4.093.9%White3,25955.124.6.0%3,53159.7%Unknown00.0.0.0.0%I do not wish to provide00.0.0.0.0%Grand Total365,41191.5P68.6.0%5,917100.0%Regular Non-Managerial Employees by Ethnicity&Gender(less seasonal and temporary employees)TopicFemaleMaleUnknownTotal36CountPercentageCountPercentageCountPercentageCountPercentageAmerican Indian/Alaskan Native3790.9(0.1.070.9%Asian1,5403.50.2.0%1,6243.7%Black or African American5,52612.5070.7.0%5,83313.2%Hispanic or Latino13,20029.992.0.0,06931.9%Native Hawaiian or Other Pacific Island1890.40.0.0 40.5%Two or More Races2,0684.720.3.0%2,1905.0%White18,70042.4%1,0402.4.0,74044.8%Unknown60.0.0.0p.0%I do not wish to provide10.0.0.0.0%Grand Total3641,60994.4%2,4655.6.0D,075100.0%Total Regular Employees(less seasonal and temporary employees)TopicFemaleMaleUnknownGrand Total36 Grand Total36Count 47,020Percentage 94%Count 2,971Percentage 6%Count 1Percentage 0%Count 49,992Percentage 100%Ulta Beauty reports all EEO-1 data about our associates to the federal government as required by law;our 2023 report can be found here.36 Totals may vary from summation due to rounding2023 ESG Report45GovernanceSupplemental DataCommunityEnvironmentProductPeopleIntroduction2023 Ulta Beauty Awards&RecognitionBeacon Awards Brand Booster Industry IconBloomberg 2023 Gender-Equality IndexEPA Green Power Partner Top 30 RetailForbes Americas Best-in-State Employers Americas Best Large Employers Best Brands for Social Impact Best Employers for Diversity Global 2000Worlds Largest Public CompaniesFortune Americas Most Innovative CompaniesNewsweek Americas Best Loyalty Programs Americas Best Retailers Americas Greatest Workplaces for Diversity Americas Greatest Workplaces for Job Starters Americas Greatest Workplaces for LGBTQ Americas Greatest Workplaces for Parents&Families Americas Greatest Workplaces for Remote Work Americas Greatest Workplaces for Women Most Trustworthy Companies in AmericaGreen Lease Leaders Gold TenantLatino Corporate Directors Association Corporate Visionary AwardOnConferences Icon Awards Top 10 Information Security Team Rankings&RatingsWe understand and support enhanced ESG disclosures and have worked over the past several years to expand our efforts.Below are our scores as of fiscal 2023 end(unless otherwise noted).Rating AgencyScoreMorgan Stanley Capital International(MSCI)ESG IndexesAAS&P Global Corporate Sustainability Assessment/Dow Jones Sustainability Indices3789th percentileBloomberg Gender-Equality IndexIncluded on 2023 Index Sustainalytics15.9(Rating is“low risk”;range is 0-40 ;in Retail,Ulta Beauty is in top 25%)ISS QualityScoreE=2;S=4;G=4(1=Best/Low Risk;10=Worst/High Risk)ISS ESG Corporate Rating C-CDPC(indicates awareness-level on environmental factors)Glass LewisFOR Recommendation on all proposalsInstitutional Shareholder Services(ISS)FOR Recommendation on all proposals37 As of October 27,2023 score date2023 ESG Report46GovernanceSupplemental DataCommunityEnvironmentProductPeopleIntroductionThank you for your interest in Ulta Beauty.If you have any questions about this report,please contact our GeneralCounsel,Chief Risk&Compliance Officer,JodiCaro,at InvestorR.Forward-Looking StatementsThis report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934,as amended,and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995,which reflect our current views with respect to,among other things,future events and performance.You can identify these forward-looking statements by the use of forward-looking words such as“outlook,”“believes,”“expects,”“plans,”“estimates,”“targets,”“strategies”or other comparable words.Any forward-looking statements contained in this report are based upon our historical performance and on current plans,estimates and expectations.The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans,estimates,targets,strategies or expectations contemplated by us will be achieved.There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements.For a list of factors that could cause actual results to differ materially from those discussed or implied,please see our public filings with the Securities and Exchange Commission,including risk factors contained in Item 1A,“Risk Factors”of our Annual Report on Form 10-K for the year ended February 3,2024,as such may be amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q.Except to the extent required by the federal securities laws,we undertake no obligation to publicly update or revise any forward-looking statements,whether as a result of new information,future events or otherwise.
2024-10-21
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Environmental,Social and Governance Report 20231Letter from the ManagementAbout TMEExecutive Highlig.
2024-10-21
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Dell Technologies FY24 ESG Report Environmental,Social and Governance Report At Dell Technologies,our purpose is to create technologies that drive human progress.Our commitment to advance sustainability,cultivate inclusion,transform lives and uphold trust is core to who we are and how we deliver technology that propels business and society forward.Our environmental,social and governance(ESG)strategy and this report are how we turn this commitment into action,holding ourselves accountable to drive greater impact for business,people and the planet.Table of contents INTRODUCTION 4 A message from our Chairman and CEO 5 A message from our VP,Corporate Sustainability and ESG 6 Our business 7 Goals dashboard 8 11 13 14 Awards and recognition ENVIRONMENTAL CLIMATE ACTION 15 16 Strategy 18 Greenhouse gas inventory Product carbon footprint 21 Innovation 23 Supply chain environmental management 24 INCLUSIVE WORKFORCE 47 Workplace 48 Workforce 51 Accountability 53 Marketplace 54 SOCIAL GOVERNANCE TRUST 67 ESG materiality Stakeholder engagement Reporting frameworks CIRCULAR ECONOMY 28 Product lifecycle 30 Circular design 31 Product materials Sustainable packaging Recovery and recycling 33 35 37 DIGITAL INCLUSION 39 Community engagement 41 Global partnerships 43 Technology innovation 45 Future-ready skills 46 HUMAN RIGHTS 55 Salient risks 56 Supply chain responsibility 58 Continuous improvement model 59 Responsible labor practices 62 Health,safety and worker rights 63 Responsible minerals sourcing Supplier diversity 65 66 APPENDIX About this report 100 ESG goals and key drivers methodology 102 106 Reporting frameworks index Glossary 111 Endnotes 115 Security 68 Privacy 71 Ethics 72 Corporate governance Board and ESG governance Risk assessment 75 77 Public policy 79 75 BY THE NUMBERS 80 Performance metrics Supply chain audit results 81 96 99 This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.A message from our Chairman and CEO A lot has changed in the 40 years since I first launched Dell from a University of Texas dorm room,but what hasnt changed is our commitment to creating technology that drives human progress.In fact,our mission is more powerful and important than ever.From the PC to the internet to the cloud,weve helped customers put their data to work to drive incredible outcomes.Now,with generative AI it feels like the last few decades have just been the pregame show.AI will revolutionize how we live and work,and it will drive unprecedented advances across every domain of human endeavor.From education to healthcare to physics,AI will help deliver radical progress and productivity.We need to work together to ensure AI lives up to its potential by encouraging responsible use and ensuring its application is as beneficial to people and our planet as possible.The evolving regulatory environment is on the minds of our customers,partners,suppliers and investors.Michael Dell Chairman and CEO Dell Technologies Sustainability and ESG commitments are now widely recognized as business imperatives that impact everything from supplier decisions to business strategy.At Dell,we are both meeting our goals and helping customers meet theirs.In the following report,we hold ourselves accountable and share progress against our commitment to create positive business,social and environmental impact.Dell Technologies is rooted in innovation and progress,and this brings exciting opportunities for collaboration across our ecosystem of customers,partners and team members.Together,we can realize our greatest ambitions and do it responsibly.Were here to support you and are grateful for the opportunity to partner with you.“”We need to work together to ensure AI lives up to its potential by encouraging responsible use and ensuring its application is as beneficial to people and our planet as possible.4Dell Technologies FY24 ESG Report INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCEHUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Messages from our leadership Our business Awards Goals dashboard ESG materialityStakeholder engagement Reporting frameworks This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.A message from our VP,Corporate Sustainability and ESG We actively support our customers and partners in achieving their goals while making a lasting impact for business,people and the planet.Our approach includes embedding Sustainability and Environmental,Social and Governance(ESG)throughout our value chain and technology stack.We engage our supply chain to drive emissions reductions,use innovative materials and takeback programs to advance the circular economy and collaborate with nonprofits with the aim to bring everyone access to the benefits of technology.Our FY24 ESG Report is one way were holding ourselves accountable against our ambitious goals for 2030 and beyond,and we continue to invest in initiatives that apply our technology,scale and talented workforce to address complex challenges like climate change,accelerating the circular economy,creating inclusive workplaces and addressing the digital divide.Cassandra Garber Vice President,Corporate Sustainability and ESG Our FY24 highlights include:Closing in on our packaging goal,with 96.4%of packaging across our entire product portfolio made with recycled or renewable materials.949,000 hours of volunteer work logged by our team members,spanning community projects such as park cleanups to skill-based work through the Pro Bono program.Over 396 million people benefiting from our digital inclusion programs,partnerships and innovation since FY20.These efforts provide access to technology,connectivity,digital skills and support for under-resourced communities around the world.Receipt of a platinum EcoVadis 2023 medal for scoring in the top 1%of companies assessed across four major themes:environment,labor and human rights,ethics and sustainable procurement.Launched more products featuring recycled,renewable and reduced carbon emissions materials.In FY24,we used over 43 million kg(95 million lbs)of sustainable materials in our products and were the first in the industry to ship certified 50%recycled content steel in our displays.Underpinning all these highlights are our continued partnerships and collaboration inside and outside our organization.And as we explore the opportunities and address the environmental and social impacts that come with AI,we will continue to work alongside and support our customers,partners and communities.The next phase of how we use technology to create meaningful impact,build trust and create a more sustainable and inclusive world for everyone is a phase unlike any before,and one were excited to embark on together.5Dell Technologies FY24 ESG Report INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCEHUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Messages from our leadership Our business Awards Goals dashboard ESG materiality Stakeholder engagement Reporting frameworks This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Our business 170 approximate number of countries Dell operates in globally No.34 on Fortune 500 2,000 patents issued to Dell Technologies in 2023 No.1 in client business,high-end gaming,purpose-built backup appliance,workstations,server,storage software,PC monitors,external storage,hyperconverged and converged systems*Client PC&upsell revenue statistic calculated by Dell Technologies primarily by utilizing other PC OEMs financial public filings,as of Q4 FY24;Workstations(Units)-IDC WW Quarterly Workstation Tracker CY23Q4;PC Monitors(Units)IDC WW Quarterly Monitor Tracker CY23Q4;High-end Gaming(Units)-IDC Quarterly Gaming Tracker,CY23Q4,$1,500 price band;Server(Units)-IDC WW Quarterly Server Tracker CY23Q4;External Storage(Revenue)-IDC WW Quarterly Enterprise Storage Systems Tracker CY23Q4;Storage Software IDC WW Storage Software and Cloud Services Tracker CY23Q4 and includes archiving software,data replication and protection software,software-defined storage controller software,and storage infrastructure and device management software;PBBA IDC WW Purpose-Built Backup Appliance(PBBA)(Revenue)CY23Q4;Hyperconverged Systems(HCI)(Revenue)IDC WW Quarterly Converged Systems Tracker CY23Q4.$2.8B invested in R&D in FY24 99%of Fortune 500 served as of FY24 120,000 approximate Dell Technologies team members as of FY24$88.4B in FY24 revenue Dell Technologies integrated solutions help customers modernize their IT infrastructure,manage and operate in a multicloud world,address workforce transformation,and provide critical solutions that keep people and organizations connected.6Dell Technologies FY24 ESG ReportINTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Messages from our leadership Our business Awards Goals dashboard ESG materiality Stakeholder engagement Reporting frameworks Awards and recognition Dell Technologies is investing in initiatives across our ESG impact areas and receiving recognition across the globe.The following FY24 awards highlight areas of excellence and represent our commitment to drive impact.Explore more of our awards and recognition.FORTUNE AMERICAS MOST INNOVATIVE COMPANIES 10th out of 200 companies Recognized in the top 10 of Americas Most Innovative Companies,transforming industries from the inside out.WORLD BENCHMARKING ALLIANCES DIGITAL INCLUSION BENCHMARK 8th out of 200 companies Recognized in the top 10 of the worlds 200 most influential digital technology companies,helping to advance a more inclusive digital society.GARTNERS POWER OF THE PROFESSION SUPPLY CHAIN&PEOPLE BREAKTHROUGH OF THE YEAR Ranked among the 2024 winners The Gartner Power of the Profession Supply Chain Awards are an annual community-driven recognition program that inspires supply chain transformation around the globe.*FAST COMPANYS WORLD CHANGING IDEAS AWARDS Score:2023 Company of the Year Selected as Fast Companys World Changing Company of the Year and winner of Corporate Social Responsibility category in recognition of Dells efforts to address the digital divide and climate change.HUMAN RIGHTS CAMPAIGN CORPORATE EQUALITY INDEX Top score of 100 points Recognized as a leader in LGBTQ inclusion by meeting all criteria to earn a score of 100.This index is the national benchmark for LGBTQ related corporate policies,benefits and practices.BEST PLACE TO WORK Score:100%The Disability Equality Index(DEI)serves as a benchmark that helps companies build a road map of measurable,tangible actions to achieve disability inclusion and equality.INSTITUTIONAL SHAREHOLDER SERVICES ESG Score:Prime status Achieved prime status by fulfilling ISS ESG requirements regarding sustainability performance in our sector.WORLDS MOST ETHICAL COMPANIES Score:12-time honoree Recognized in 2024 as one of the Worlds Most Ethical Companies by Ethisphere for the 12th time,affirming Dells robust programs and commitment to integrity.ECOVADIS Platinum medal Awarded a platinum EcoVadis medal in 2023 for scoring in the top 1%of companies assessed across four major themes:environment,labor and human rights,ethics and sustainable procurement.*Gartner does not endorse any vendor,product or service depicted in its research publications.Gartner research publications consist of the opinions of Gartners Research and Advisory organization and should not be construed as statements of fact.Gartner disclaims all warranties,expressed or implied,with respect to this research,including any warranties of merchantability or fitness for a particular purpose.Gartner,Gartner Power of the Profession Supply Chain Awards,2024,https:/ is a registered trademark and service mark of Gartner,Inc.and/or its affiliates in the U.S.and internationally and is used herein with permission.All rights reserved.INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX 7 Dell Technologies FY24 ESG Report Messages from our leadership Our business Awards Goals dashboard ESG materiality Stakeholder engagement Reporting frameworks This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Goals dashboard Our ESG plan lays out ambitious goals for the decade*and beyond.We believe how we track our progress is critical.We organize our goals across four pillars:Advancing Sustainability,Cultivating Inclusion,Transforming Lives and Upholding Trust.Our pillars help us organize our ESG work and track progress against our goals.Read about our progress in By the Numbers.Learn more about the methodologies that we use to calculate progress toward each of our goals and key drivers in the Appendix.*The year presented within each goal statement refers to the calendar year that coincides with the majority of Dells fiscal year.Our fiscal year is the 52-or 53-week period ending on the Friday nearest January 31.Our ESG activities,including goal progress,are primarily collected and reported by fiscal year,unless otherwise noted.The expected end date of each goal is the end of the associated fiscal year(e.g.,By 2030 refers to the end of Dells Fiscal Year 2031).*Due to the one-year lag in supplier emissions data,progress against the current year is not available.Material topic Environmental Goal Our status SDGs1 Advancing sustainability Climate action By 2050,we will achieve net zero greenhouse gas(GHG)emissions across scopes 1,2 and 3 7,12,13 Key Driver:By 2030,we will reduce scopes 1 and 2 GHG emissions by 50%7,13 Key Driver:By 2030,we will source 75%of electricity from renewable sources across all Dell Technologies facilities and 100%by 2040 7,13 Key Driver:By 2030,we will reduce absolute scope 3 GHG emissions from purchased goods and services by 45%FY23:18,238,800 MT CO2e.*We are in the process of restating our emissions for this category to make each year comparable and to provide a cumulative comparison to our FY20 baseline.12,13 Key Driver:By 2030,we will reduce absolute scope 3 GHG emissions associated with the use of sold products by 30,13 Circular economy By 2030,more than half of our product content will be made from recycled,renewable or reduced carbon emissions material 12 By 2030,100%of our packaging will be made from recycled or renewable material,or will utilize reused packaging 12 By 2030,for every metric ton of our products a customer buys,one metric ton will be reused or recycled 12,13 Percentage reduction in GHG emissions 40.6%FY24 50%Percentage of electricity generated from renewable sources 61.5%FY24 75%Percentage reduction in GHG emissions 22.2%FY24 30.1%Percentage of product content made from recycled,renewable or reduced carbon emissions material FY24 500%Percentage of recycled or renewable material content in packaging FY24 96.4%Percentage of products collected 100%FY24 30.1%INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX 8 Dell Technologies FY24 ESG Report Messages from our leadership Our business Awards Goals dashboard ESG materiality Stakeholder engagement Reporting frameworks This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Material topic Social Goal Our status SDGs Transforming lives Digital inclusion By 2030,we will improve 1 billion lives through digital inclusion 4,9 Key Driver:Each year through 2030,50%of the total people directly reached will be those who identify as girls and women,or underrepresented groups 5,10 Key Driver:Each year through 2030,we will deliver future-ready skills development for workers in our supply chain FY24:Dell recorded 131,478 hours of future ready skills training at supplier sites and in-house manufacturing locations.8 By 2030,75%of our team members will participate in giving or volunteerism in their communities 17 Key Driver:By 2030,we will use our expertise and technology to support the digital transformation of 1,000 nonprofit partners 9,17 Cultivating inclusion Inclusive workforce By 2030,50%of our global workforce and 40%of our global people leaders will be those who identify as women 5 By 2030,25%of our U.S.workforce and 15%of our U.S.people leaders will be those who identify as Black/African American or Hispanic/Latino 10 Goals dashboard Our ESG plan lays out ambitious goals for the decade*and beyond.We believe how we track our progress is critical.We organize our goals across four pillars:Advancing Sustainability,Cultivating Inclusion,Transforming Lives and Upholding Trust.Our pillars help us organize our ESG work and track progress against our goals.Read about our progress in By the Numbers.Learn more about the methodologies that we use to calculate progress toward each of our goals and key drivers in the Appendix.*The year presented within each goal statement refers to the calendar year that coincides with the majority of Dells fiscal year.Our fiscal year is the 52-or 53-week period ending on the Friday nearest January 31.Our ESG activities,including goal progress,are primarily collected and reported by fiscal year,unless otherwise noted.The expected end date of each goal is the end of the associated fiscal year(e.g.,By 2030 refers to the end of Dells Fiscal Year 2031).Total number of people reached(cumulative,FY20 to current reporting year)FY24 1B Percentage of people reached directly who identify as girls and women,or underrepresented groups(direct reach only)FY24 51.5Pu%Percentage of team members participating in giving or volunteering FY24 48%1,000 Total number of nonprofit partners supported in their digital transformation journey FY24 535 396M 35.0%Percentage of our global workforce who identify as women FY24 50).1%Percentage of our global people leaders who identify as women FY24 40.1%Percentage of U.S.workforce who identify as Black/African American or Hispanic/Latino FY24 25.6%Percentage of people leaders in the U.S.workforce who identify as Black/African American or Hispanic/Latino FY24 15%INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX 9 Dell Technologies FY24 ESG Report Messages from our leadership Our business Awards Goals dashboard ESG materiality Stakeholder engagement Reporting frameworks This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Goals dashboard Our ESG plan lays out ambitious goals for the decade*and beyond.We believe how we track our progress is critical.We organize our goals across four pillars:Advancing Sustainability,Cultivating Inclusion,Transforming Lives and Upholding Trust.Our pillars help us organize our ESG work and track progress against our goals.Read about our progress in By the Numbers.Learn more about the methodologies that we use to calculate progress toward each of our goals and key drivers in the Appendix.*The year presented within each goal statement refers to the calendar year that coincides with the majority of Dells fiscal year.Our fiscal year is the 52-or 53-week period ending on the Friday nearest January 31.Our ESG activities,including goal progress,are primarily collected and reported by fiscal year,unless otherwise noted.The expected end date of each goal is the end of the associated fiscal year(e.g.,By 2030 refers to the end of Dells Fiscal Year 2031).Material topic Governance Goal Our status SDGs Upholding trust Trust By 2030,our customers and partners will rate Dell Technologies as their most trusted technology partner We announced this goal in FY23 and worked in FY24 to identify best practices for measuring trust among customers and partners.We aim to make progress against our key drivers for Trust and will continue to evolve how to best measure and communicate progress against this goal.9 Key Driver:By 2024,Dell will make available the first validated Zero Trust solution,accredited by the U.S.government and commercially available to targeted global public and private sector organizations Dells Zero Trust solution,Project Fort Zero,is awaiting a testing date for validation from the U.S.Government.We anticipate publishing a general availability date shortly following the successful completion of the U.S.Government validation test.16 Key Driver:By 2025,100%of actively sold Dell-designed and branded products and offerings will publish a software bill of materials(SBOM),providing transparency on third-party and open-source components We are working to determine the full scope of actively sold Dell-designed and branded products and offerings and to establish our metric pipeline.At the close of FY24,we had generated SBOMs for 70 Dell-designed and branded products and are on track to meet this key driver by 2025.9 Key Driver:By 2030,all new Dell products and offerings that use authentication will offer a password-less authentication mechanism We are working to ensure our product architectures enable passwordless authentication,including certificate-based management,and incorporation of hardware-bound authentication methods are being established and adopted into roadmaps.9 Key Driver:Each year through 2030,we will make it easier and faster for customers to exercise choice and control over their personal data In FY24,Dell made customer choice and control over personal data easier and faster through the expansion of our enhanced Privacy Center,which is now available in 74 locations globally.16 INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX 10 Dell Technologies FY24 ESG Report Messages from our leadership Our business Awards Goals dashboard ESG materiality Stakeholder engagement Reporting frameworks This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.ESG materiality We have conducted an ESG materiality2 assessment to identify the ESG topics that are most important to our stakeholders,as well as those where Dell Technologies can play the most meaningful role.For this assessment,we consulted with a broad range of stakeholders,including Dell employees,investors,suppliers and customers.We have used this analysis to guide our approach and focus resources on areas where we have the greatest opportunities for growth,leadership and risk mitigation.The ESG topics identified are as follows:Business ethics:Promoting high standards of ethics and helping to prevent corruption,extortion and bribery throughout our business practices.Ensuring that employees are empowered to voice concerns without fear of retaliation and with confidence that those concerns will be taken seriously.Ensuring that marketing and communication of products and services are honest,transparent and fair.Read about business ethics in the report:Ethics Business performance:Value created by Dell,measured using indicators such as net revenue,operating income and cash flows from operations.Read about business performance in our SEC filing.Community investment:Dell invests in communities with a focus in the two following areas:Access to technology:Ensuring affordable,equitable access to information and communication technology(ICT)globally,which is a prerequisite for leveraging digital information and services.Science,technology,engineering and mathematics(STEM)education:Preparing citizens of the future with the necessary skills in science and technology in order to adapt to and thrive in an increasingly digital world.Read about community investment in the report:Digital Inclusion Data privacy and security:Guarding against threats to data,such as protecting data from loss,corruption or unauthorized access and governing how data,specifically personal data,is legitimately used and disclosed.Read about data privacy and security in the report:Privacy,Security Diversity and inclusion:Striving to cultivate an inclusive culture that reflects the diverse perspectives,backgrounds and cultures of the communities in which we live and conduct business,while ensuring everyone has access to the same opportunities within our organization.Read about diversity and inclusion in the report:Inclusive Workforce,Supplier Diversity Energy and climate change:Helping ensure efficient use of energy and transitioning to renewable and low-carbon emissions energy sources.Includes transportation energy and product energy efficiency.Ensuring resilience of the business and communities across the value chain to the effects of climate change.Read about energy and climate change in the report:Climate Action,Circular Economy Environmental and social regulatory compliance:Striving to ensure Dell complies with environmental and social laws and regulations that are pertinent to business practices in each location we operate in.Read about environmental and social regulatory compliance in the report:Human Rights,Supply Chain Responsibility,Trust,Climate Action,Circular Economy Governance:Maintaining the standards,structures and processes to ensure the effective governance of Dell Technologies,including the matters that impact all strategy,goals and programs.Read about governance in the report:Corporate Governance Human rights:Fundamental rights of all people to live and be treated with dignity and respect.They are inherent and every human being is entitled to these rights without discrimination.Read about human rights in the report:Human Rights Innovation:Continuing to improve upon and develop new solutions in the technology sector and passing on the benefits of our discoveries to each of our stakeholders.Includes information on technology for societal and environmental benefit.Read about innovation in the report:Digital Inclusion,Climate Action Labor engagement and development:Maintaining positive interactions between management and staff,fostering a sense of purpose and commitment to Dells strategy and goals.Providing flexible work options and a positive culture around work-life balance and labor well-being.Ensuring longer-term sustainable employment across the companys value chain and addressing changing labor dynamics.Read about labor engagement and development in the report:Inclusive Workforce Occupational health and safety:Establishing practices to promote the safety,health and well-being of people when they are at work.Read about occupational health and safety in the report:Workplace,Health,Safety and Worker Rights Product quality and safety:Delivering superior quality products that are safe throughout the life cycle and continuously considering new opportunities to enhance and increase product quality to meet the needs of an informed public.This includes protection of any intellectual property.Read about product quality and safety in the report:Trust,Circular Economy,Innovation,Product Carbon Footprint Product stewardship:Managing product life cycles to help increase energy efficiency,recovery,reuse,recycling and recycled content and enable closed material loops.Promoting responsible waste management,in particular e-waste management.Read about product stewardship in the report:Circular Economy,Zero Waste INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMYDIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUSTBY THE NUMBERS APPENDIX 11 Dell Technologies FY24 ESG Report Messages from our leadership Our business Awards Goals dashboard ESG materiality Stakeholder engagement Reporting frameworks This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Importance to Stakeholders Degree of Opportunity or Impact Business Ethics Community Investment Governance Business Performance Innovation Labor Engagement&Development Occupational Health&Safety Product Quality&Safety Product Stewardship Supply Chain Resilience Environmental&Social Regulatory Compliance Substances of Concern Water&Effluents Data Privacy&Security Diversity,Equity&Inclusion Energy&Climate Human Rights Sustainable Consumption HighModerate HighModerate Double materiality assessment In FY24,we began work on our first double materiality assessment.We target to complete and publish our assessment in upcoming ESG Reports,which will help us further refine our ESG performance and reporting and prepare for future regulations.Once completed,we expect to incorporate the results of that assessment into our ESG performance and reporting methodologies,standards and frameworks.Substances of concern:Reducing and eliminating the potential health and environmental impacts of substances used in products across their life cycles.Read about substances of concern in the report:Health,Safety and Worker Rights,Zero Waste Supply chain resilience:Reducing Dells risk exposure to potential disruptions in the value chain,such as severe weather events,conflict and pandemics.Read about supply chain resilience in the report:Supply Chain Responsibility,Risk Assessment Sustainable consumption:Shifting the business model to decouple growth from negative societal and environmental impacts;engaging customers to positively shift purchasing and use behavior to enable a circular economy;promoting usage as a service;and dematerializing processes and activities through digitization.Read about sustainable consumption in the report:Circular Economy,Supply Chain Environmental Management,Product Carbon Footprint Water and effluents:Minimizing or optimizing the overall water consumption and quality impacts across operations,including within headquarters and data centers,as well as water used(or avoided)by the use of Dells products and services.Additionally,the quality of Dells water discharges can impact the functioning of the ecosystem in numerous ways.Direct impacts on a catchment can have wider impacts on the quality of life in an area,including social and economic consequences for local communities and indigenous peoples.Read about water and effluents in the report:Supplier Water Stewardship INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX 12 Dell Technologies FY24 ESG Report Messages from our leadership Our business Awards Goals dashboard ESG materiality Stakeholder engagement Reporting frameworks This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Dell Technologies works to engage all our stakeholders as we accelerate toward our ESG goals and build technologies that drive human progress.Stakeholder engagement Customers and channel partners As we work to advance sustainability within our business,we enable customers and partners to join us in creating meaningful impact for business,people and the planet.Our partner ecosystem helps customers prepare for the journey to come,from hybrid work and hybrid cloud to the edge and sustainability initiatives.We support and collaborate with our partners in ESG initiatives.We launched an ESG Partner Spotlight in 2023,which celebrates partners in every region who make ESG real for their customers and communities.We communicate our ESG performance and priorities through various communications,including our annual ESG Report and responses to customer inquiries.We partner with customers to support our signature programs that advance Dells Transforming Lives goals.Read more in the Digital Inclusion section of this report.Industry analysts We collaborate with industry analysts through both inbound and outbound engagements.Together,we participate in analyst benchmarking studies and research projects.We also engage in advisory sessions to enhance our initiatives and advance industry standards through thought leadership.Examples of analyst firms include Enterprise Strategy Group,Gartner and IDC.Investors We maintain robust and regular dialogue with our stockholders.We work to ensure understanding of our business and company strategy,and we continue to deepen understanding of investor priorities.We engage via investor events,including quarterly earnings calls,securities analyst meetings and conference presentations,as well as perception studies and ongoing communications.These communication efforts include ESG-focused engagement to ensure our stockholders have sufficient information to understand our approach toward key issues.Read more in the Corporate Governance section of this report.Nongovernmental organizations(NGOs),community partners and multi-stakeholder initiatives We work with NGOs and community partners to advance and collaborate on societal and environmental efforts both locally and globally.We support and participate in coalitions and other multi-stakeholder initiatives that align with our areas of focus.Read more in the Digital Inclusion and Supply Chain Responsibility sections of this report.Policymakers We engage with the public and private sectors to promote solutions for a variety of environmental,social,economic and technological challenges and opportunities.We work with a variety of internal and external stakeholders,including trade associations,to determine where and how we engage on relevant issues and policies that impact our customers,business and team members.Read more about the government actions and policies Dell supports in the Public Policy section of this report.Supply chain We engage with suppliers through our Social and Environmental Responsibility(SER)assurance program.Our SER audit takes a four-element approach,including a critical feedback loop that helps us assess risk,audit progress,develop action plans and build the capabilities of our suppliers.Through this process,we help our suppliers build skills in preventing forced labor,ensuring health and safety and improving energy efficiency.As a founding member of the Responsible Business Alliance(RBA),Dell enforces high standards across its supply chain.This memberships auditing framework is an essential element of our robust environmental and human rights due diligence program.Read more in the Human Rights section of this report.Team members We use several feedback mechanisms to gather team member feedback on our ESG initiatives.For example,we gather feedback and build community through our Employee Resource Groups,and our materiality assessment includes a feedback option for team member inputs.Read about our continuous listening strategy in the Inclusive Workforce section of this report.INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX 13 Dell Technologies FY24 ESG Report Messages from our leadership Our business Awards Goals dashboard ESG materiality Stakeholder engagement Reporting frameworks This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.We believe transparent ESG reporting is a business imperative,which is why we focus on the metrics that matter most to our stakeholders.We welcome the standardization,simplification and harmonization of international reporting standards,and we are committed to driving meaningful impact and transparently disclosing our progress.Our approach to disclosure is informed by global standards and frameworks including those outlined below,and we continue monitoring and preparing for the evolving reporting landscape.Reporting frameworks SASB We map our disclosures to the standards for software and IT services and hardware established by SASB.These standards help to guide the reporting of ESG issues most pertinent to stakeholders.We are disclosing on the topics that we consider material to our operations,using SASBs standards for the hardware and software and IT industries.Global Reporting Initiative(GRI)We publish disclosures referencing the GRI standards,emphasizing the issues and indicators that are most relevant to our business and our stakeholders.GRI standards enhance the comparability and quality of information on economic,environmental and social impacts(positive and negative)organizations have.They also create a common language to communicate that information to stakeholders.CDP Water Security and Climate Change Responses Since 2017,we have provided CDP Water Security and Climate Change responses,which help us to measure,manage and report our environmental impact.Our GRI,SASB,and WEF SCM indexes can be found in our Reporting Frameworks Index.View current and archived copies of all our ESG reports.Preparing for an evolving reporting landscape ESG reporting is rapidly evolving with the growing adoption of the International Sustainability Standards Boards(ISSB)reporting standards globally,transposition of the Corporate Sustainability Reporting Directive(CSRD)in European Union member countries and development of other regional and national requirements around the world.Dell currently reports on ESG in its financial statements;however,these new or evolving regulations require expanded reporting.We are actively preparing for these comprehensive and granular disclosures covering a broad range of sustainability topics.World Economic Forum(WEF)Stakeholder Capitalism Metrics(SCM)Dell,alongside 25 other companies,was one of the initial signatories of the initiative by the WEF to align and focus corporate ESG disclosures.To meet this commitment,Dell reports on the WEF frameworks core Stakeholder Capitalism Metrics.U.N.Sustainable Development Goals(SDGs)In the Goals Dashboard,we map alignment of our goals with the U.N.Sustainable Development Goals(SDGs).INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX 14 Dell Technologies FY24 ESG Report Messages from our leadership Our business Awards Goals dashboard ESG materiality Stakeholder engagement Reporting frameworks This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Taking action on climate change As a leading technology provider with operations,supply chain and customers that span the globe,we are committed to understanding the impact our business has on the environment.We are taking action to mitigate climate change,and we offer innovative products and solutions to customers to help them reduce their emissions,reach their reduction targets and operate more efficiently.2050 GOAL KEY DRIVERS By 2050,we will achieve net zero greenhouse gas(GHG)emissions across scopes 1,2 and 3 Our approach to climate action The need to mitigate the negative impacts of climate change is clear,compelling and required to meet key aspects of the Paris Agreement.We are committed to using scientific guidelines and standards like Science Based Targets initiative(SBTi)to set greenhouse gas(GHG)emissions reduction targets and to deliver on our net zero ambition.In FY23,we strengthened our targets and enhanced our ambition by shifting from intensity targets to absolute targets for scope 3 categories 1 and 11.This has been a transition from relative reduction measures to absolute reduction measures.3 In this section,we highlight our FY24 efforts:Our emissions:We inventoried our greenhouse gas(GHG)emissions to understand our footprint and explored opportunities to reduce energy consumption and increase our use of renewables.Product energy efficiency:We focused on lowering the footprint of our products,including emissions from our upstream and downstream impacts,and providing solutions to increase efficiency.We aim to do this all without compromising the performance of our technology.Innovating to decarbonize:We explored solutions for the complex environmental challenges that come with digital transformations for our customers and society.Supply chain environmental impact:Our engagement program explored more specialized support to suppliers as they navigate challenges to deliver on their own reduction target roadmaps.Climate ActionIN THIS SECTION Strategy 16 Greenhouse gas inventory 18 Product carbon footprint 21 Innovation 23 Supply chain environmental management 24 By 2030,we will reduce absolute scope 3 GHG emissions from purchased goods and services by 45%FY23:18,238,800 MT CO2e.*We are in the process of restating our emissions for this category to make each year comparable and to provide a cumulative comparison to our FY20 baseline.*Due to the one-year lag in supplier emissions data,progress against the current year is not available.By 2030,we will reduce scopes 1 and 2 GHG emissions by 50%Percentage reduction in GHG emissions 40.6%FY24 50%By 2030,we will source 75%of electricity from renewable sources across all Dell Technologies facilities and 100%by 2040 Percentage of electricity generated from renewable sources 61.5%FY24 75%By 2030,we will reduce absolute scope 3 GHG emissions associated with the use of sold products by 30%Percentage reduction in GHG emissions 22.2%FY24 30 Dell Technologies FY24 ESG Report INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Decarbonize our operations,customers and society Our climate action strategy is comprehensive because we understand that no single solution will help us meet our climate goals.We incorporate carbon mitigation actions within our own operations,for our customers,partners and society:Decarbonize Dell:We internally reduce emissions,implement operational resilience strategies and manage the carbon footprint of our operations and products.We also engage with our suppliers to drive down emissions upstream of our operations.Decarbonize customers and partners:As part of a global technology chain,we support our customers and partners climate-related goals through breakthrough innovations.Decarbonize society:Our support for global climate goals drives engagement and advocacy on climate-related issues beyond our immediate community.We ensure that our emissions data is tracked,managed and reported over time.We calculate emissions in accordance with the methodology set out in the Greenhouse Gas Protocol and follow industry best practices in terms of GHG accounting methodologies.We also align our emissions reduction key drivers to Science Based Targets initiative(SBTi)criteria.The ESG Goals and Key Drivers Methodology section contains additional details on how we measure progress to our key drivers.SCOPE 2 Indirect emissions related to consumption of purchased electricity,steam,heating and cooling.SCOPE 1 Direct emissions from Dell Technologies-owned and-controlled resources.SCOPE 3 Indirect emissions associated with our supply chain,the use of our products by customers,activities like business travel and the transportation of goods and services.SBTi has validated our updated set of 2030 emissions targets and classified our scopes 1 and 2 ambition as in line with a 1.5 degrees Celsius trajectory for climate change,which is the most ambitious target companies can set for scopes 1 and 2 emissions.We continue to participate in the CDP Climate Change annual disclosure reporting our scopes 1,2 and 3 footprint.We also ask and expect our suppliers to participate in CDP Supply Chain disclosure and to report their GHG emissions,reduction targets and mitigation plans.Public advocacy We continued to hold paramount our commitments to advancing sustainability in FY24,with a focus on climate action and circular economy.We realize partnerships and collaboration are key to making a sizeable impact in both areas.For instance,we joined our peers in engagements to educate key stakeholders,including policymakers,on the importance of urgent climate action.In FY24,we also:Continued partnership with like-minded multinational companies as a member of the World Economic Forums(WEF)Alliance of CEO Climate Leaders and participation in the WEF Climate Adaptation Community.Michael Dell signed the WEF business coalition letter in support of global climate action.Took part in CDPs 2023-2024 Science-Based Targets(SBT)Campaign.Campaign participants,which included financial institutions and other companies,were added to the CDP website and to a letter sent in October to over 2,100 CDP-targeted multinational businesses,a group that includes certain Dell suppliers,encouraging them to adopt SBTs.Continued our membership in the Digital Climate Alliance and the GridWise Alliance.Supported a letter through our membership with the Responsible Business Alliance(RBA),urging the European Unions co-legislators to set a common European standard for responsible business conduct.This would pave the way for a cross-sectoral and EU-wide level playing field for sustainability due diligence:the Corporate Sustainability Due Diligence Directive(CS3D).Greenhouse gas emissions by scope Strategy 16 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.MAKING OUR PRODUCTS USING OUR PRODUCTS OPERATING OUR COMPANY SCOPE 3 CATEGORY 6 BUSINESS TRAVEL SCOPE 3 CATEGORY 3 FUEL&ENERGY SCOPE 3 CATEGORY 4 LOGISTICS 2030 TARGETS ONGOING ACTIONS TO NET ZEROSCOPE 3 CATEGORY 11 USE OF SOLD PRODUCTS SCOPE 3 CATEGORY 1 PURCHASED GOODS&SERVICES SCOPE 1 DIRECT EMISSIONS SCOPE 2 INDIRECT EMISSIONS in operational emissions50%REDUCTION in absolute emissions from purchased goods and services 45%REDUCTION in absolute emissions associated with the use of sold products 30%REDUCTION Reduce emissions from air and rail travel by using technology to replace in-person travel Use lower-carbon transport options like electric vehicles,where possible Reduce our dependence on fossil fuels and increase use of renewables Optimize our transportation network Partner with key carriers for transportation efficiencies Advocate for industry-wide transition to lower carbon footprint transportation fuels Reduce the energy intensity of our products Advocate for global renewable electricity policies Support our customers transition to renewable electricity Focus on eliminating GHG-emitting fuels in our buildings and vehicles Transition to low-or no-emissions cooling systems for our buildings and equipment Focus on sourcing 75%of electricity from renewable sources by 2030 Drive scope 2 emissions to nearly zero by sourcing 100%of electricity from renewable sources by 2040 Partner with suppliers to improve reporting and reduce their operational and upstream emissions footprint Include product carbon footprint in our design decisions Achieving net zero emissions Getting to net zero greenhouse gas(GHG)emissions takes a deep understanding of our carbon footprint and setting ambitious near-term,science-based targets to achieve by 2030.Our 2030 reduction targets align with the categories where we have the greatest opportunity for impact.17 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.The Dell Technologies strategy to minimize greenhouse gas(GHG)emissions resembles the carbon mitigation hierarchy:avoid,reduce,replace and where these mitigating actions are not feasible offset.Avoid emissions from the start.Reduce the energy intensity and extent of impacts that cannot be avoided.Replace high-carbon emissions energy sources with renewable or low-carbon emissions alternatives.Offset by investing in projects that remove or reduce emissions elsewhere.We annually inventory our GHG emissions to understand where we have opportunities to reduce our environmental impact.In alignment with our four 2030 key drivers toward our 2050 net zero goal,we focus on reducing emissions from our own operations and energy usage,those associated with goods and services we purchase and the use of our sold products.This inventory practice allows us to disclose our GHG emissions performance,management and progress toward our net zero goal.Greenhouse gas inventory*Our GHG Inventory includes FY23 Category 1 figures as explained in text Greenhouse gas emissions scopes and categories%Total Scope 1&2 GHG emissions(market-based)0.6%Scope 3 Category 1 Purchased good and services*59.0%Scope 3 Category 3 Fuel-and energy-related activities 0.4%Scope 3 Category 4 Upstream transportation 2.5%Scope 3 Category 6 Business travel 0.3%Scope 3 Category 11 Use of sold products 37.2%Total Scope 1&2 GHG emissions(market-based)Scope 3 Category 1*Purchased good and services Scope 3 Category 3 Fuel-and energy-related activities Scope 3 Category 4 Upstream transportation Scope 3 Category 6 Business travel Scope 3 Category 11 Use of sold products Dell GHG Inventory 18 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Energy use and renewables We use energy to operate office and data center equipment,heat and cool our buildings and operate a small fleet of on-site security and maintenance vehicles.In addition to facility operations,our total energy consumption includes the estimated fuel used in vehicles leased by Dell.We maintain our ISO 50001 certification in Dell-owned manufacturing facilities through our commitment to efficient energy systems management.Global energy demand and costs continue to increase.Both contribute directly to our electricity consumption and renewable energy purchase strategy.Energy from renewable sources helps us transition away from carbon-intensive sources and reduce our emissions.We used renewable energy in the form of on-site solar generation,green power sources and unbundled and bundled renewable energy certificates(RECs)for our U.S.locations.As members of the RE100 initiative,we adhere to the groups technical guidance on renewable energy procurement.In FY24,we sourced 61.5%of electricity from renewable sources across all Dell facilities.KEY DRIVER By 2030,we will source 75%of electricity from renewable sources across all Dell Technologies facilities and 100%by 2040 Scope 1 and scope 2 emissions Scope 1 and 2 emissions account for a small share of our total footprint and represent the emissions in our direct control.Here we focus on emissions reductions in operations,including purchased energy.In FY24,scope 1 and scope 2(market-based)emissions accounted for 172,400 MT CO2e.We have reported using the market-based methodology since establishing a baseline in FY20.4 Scope 1 includes direct emissions from Dell-owned and-controlled resources.Our main sources of scope 1 emissions include transportation(company vehicles and aircraft),fuel use,back-up generators,natural gas use,refrigerant leakage from Dell facilities,mobile sources and offices.5 Scope 2 includes indirect emissions related to the consumption of purchased electricity,steam,heating and cooling.Our main sources of scope 2 emissions are from electricity purchased for our facilities.KEY DRIVER By 2030,we will reduce scopes 1 and 2 GHG emissions by 50%MT CO 2e of scopes 1 and 2(market-based)GHG emissions FY23FY22 199,100203,700 172,400 FY24 100K 200K 40.6%reduction from our FY20 baseline.Percentage of electricity generated from renewable sources FY22 55%FY23 59%FY24 61.5u Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Scope 3 emissions Scope 3 includes indirect emissions from upstream and downstream sources in our value chain.We identify scope 3 emissions sources in accordance with the GHG Protocol Scope 3 Standard and perform extensive data collection for reporting requirements.We report emissions from our most significant scope 3 categories:purchased goods and services,upstream transportation,market-based energy activities and from the use of sold products.We also report emissions from business travel.Scope 3 emissions make up the largest portion of our Dell GHG inventory.Within scope 3,emissions that are associated with the goods and services we purchased(category 1)and those associated with the use of our sold products(category 11)are the largest contributors.6 We have the largest opportunity for emissions reduction in these categories and each are directly associated with a climate action key driver.Category 1 includes emissions from purchased goods and services.As done in our previous ESG reports,we provide scope 3 category 1 emissions with a one-year lag given the timeline of suppliers reporting their emissions data.For FY23,we reported our scope 3 category 1 emissions as 18,238,800 MT CO2e.This is a part of the dataset used to calculate the Dell GHG inventory.We continually refine our scope 3 category 1 emissions calculations by updating Dells quality controls and working with suppliers to receive more accurate data.Overall,these improve our calculations but can make year-over-year dataset comparisons challenging.We are initializing the process of re-baselining as part of our efforts to accurately measure our progress.Category 11 includes emissions from the use of sold products and accounted for 11,473,600 MT CO2e in FY24.This category contains commercial and consumer products including desktops,notebooks,displays,docking stations,servers,storage and networking systems.Customer use of our data center server products had the largest impact on our scope 3 category 11 emissions and many of our innovations involved product energy efficiencies for data center hardware and software solutions.The amount of product that we ship is a large factor on our category 11 emissions.Also,emissions from the use of sold products contain several levers we have varying influence over,which can make year-over-year trends non-linear.7 Examples of levers in category 11 we have lower influence over are projected power consumption changes or the public grid energy mix.We continue to develop and implement initiatives where we have influence to reduce lever-type impacts on our category 11 emissions.Examples of levers we have higher influence on are product efficiency designs and telemetry sourced from customer usage profiles.KEY DRIVER By 2030,we will reduce absolute scope 3 GHG emissions from purchased goods and services by 45%FY23:18,238,800 MT CO2e.*We are in the process of restating our emissions for this category to make each year comparable and to provide a cumulative comparison to our FY20 baseline.The By the Numbers section of this report contains additional figures and information on GHG emissions.KEY DRIVER By 2030,we will reduce absolute scope 3 GHG emissions associated with the use of sold products by 30%MT CO 2e of scope 3 category 11 GHG emissions FY23FY22 14,410,000 13,590,000 11,473,600 FY24 5M 10M 22.2%reduction from our FY20 baseline*Due to the one-year lag in supplier emissions data,progress against the current year is not available.15M 20 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Product carbon footprint Product carbon footprint(PCF)is the aggregate of manufacturing,transport and usage emissions plus those related to end-of-life management.PCFs provide customers with insights for more informed purchasing decisions.We employ two methodologies to capture end-to-end PCF impact across our product portfolio:Product Attribute to Impact Algorithm(PAIA)and the Dell PCF Calculator.8 PAIA is commonly used throughout the consumer products industry.At Dell,we use PAIA for servers,storage,networking and legacy client products built prior to CY24.We will continue to use PAIA for infrastructure solutions group(ISG)servers,storage and networking client products.The next step in our PCF calculation journey has been our development of the Dell PCF Calculator,which we have first applied to commercial client products.Several scope 3 emissions categories align with PCF data,including purchased goods and services,transportation and distribution and use of sold products.Through our assessments and insights,we aim to reduce the carbon footprint of our products and solutions without compromising performance.We focus on reducing PCFs in four stages of the product lifecycle:Manufacturing:We actively reduce emissions from the start by using recycled,renewable and low-emissions materials.Transportation:By optimizing logistics and giving preference to regional ground shipping,we reduce delivery emissions.Energy use:We enhance efficiency in client solutions,servers and storage products to minimize energy consumption.End-of-life management:We responsibly recover,recycle and reuse retired assets to contribute to the circular economy.More details on our work to reduce the impacts of our products throughout their lifecycles are in the Circular Economy section of this report.Product energy efficiency Eco label standards We adhere to international eco label standards that guide our industry in areas of climate,circularity,transportation and energy efficiency.Eco labels help us build trust through third-party validations and make it easier for customers and partners to identify our most sustainable products.Some of our products have earned ENERGY STAR certifications and adhere to U.S.EPA energy-efficiency specifications.Over 500 of our computers,displays,enterprise servers,data center storage and networking equipment are ENERGY STAR-qualified.We also work in support of 80 Plus,TCO and the China Environmental Label Program standards.We participate in the Global Electronics Council EPEAT eco-labeling program where over 330 of our products are EPEAT-registered and more than half of thoseare EPEAT gold.EPEAT has a range of criteria for products to earn its label.EPEAT also launched a Climate designation specifically for products that meet stringent climate-related criteria.The EPEAT Climate designation assures customers their purchases have limited impact on climate change.In FY24,we were recognized as an EPEAT Climate Champion and an early adopter of the climate change criteria with over 200 registered Climate products.A list of product names and gold,silver,or bronze and Climate designations are on the EPEAT registry.21 Dell Technologies FY24 ESG Report INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Sustainable data centers We work to improve our products energy efficiency through hardware,software and tailored efficiency solutions.Our technology and services allow us to partner with customers on their journey to build modern,sustainable data centers.We optimize our data center technology for efficient energy performance in two main areas:Our hardware is designed to deliver maximum performance per watt of energy used.Breakthrough software solutions like OpenManage Enterprise(OME)Power Manager and CloudIQ provide energy management insights.The inefficient use of IT assets is a large source of excessive energy consumption in data centers.We have reshaped our understanding of thermals and cooling best practices over the years to help customers minimize energy waste.For example,by implementing variable speed fans and infrastructure purpose-built for higher temperatures,our customers can avoid over-cooling and waste less energy.To improve data center efficiency and performance and deliver value to customers,we combine several elements:Audit infrastructure:We examine components for opportunities to minimize power demands.For example,we improve asset density to reduce floor space and the corresponding cooling required.Our OpenManage Enterprise(OME)power manager delivers telemetry to help lower the carbon footprint.Right-sized footprint:By installing only necessary assets,our customers can reduce wasteful over-provisioning.Right-sized IT assets either reduce the power draw for equipment,make the power draw efficient,or both.Dells PowerEdge power supply units(PSU)portfolio incorporates strategies to enable right-sizing of PSU capacity based on platform configuration and target workloads.Additionally,our APEX as-a-service(aaS)offerings provide customers with these right-sized IT resources and the ability to scale when needed.Optimized HVAC functionality:We engineer new ways to reduce heat generated by our powerful machines through cooling systems and thermal advancements.For example,our EPEAT Climate PowerEdge servers with direct liquid cooling systems minimize energy needed to cool the data center and reduce reliance on HVAC systems.Intelligent platform management:Our servers have built-in Basic Input or Output System(BIOS)and Integrated Dell Remote Access Controller(iDRAC)settings to manage off-peak power consumption.These intelligent platforms can also identify potential issues.Optimized workload:Our data center solutions help manage workloads on premises and in the cloud.Customers that transition to high-density and energy efficient flash storage experience substantial enterprise data storage reductions.Learn more about how our Energy Efficient Data Center solutions are designed to increase efficiency while reducing energy costs and emissions.22 Dell Technologies FY24 ESG Report INTRODUCTION CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Innovation is core to our leadership in the evolving digital transformation landscape.We continuously investigate sustainable solutions for the complex challenges that come with digital transformations including optimizing energy efficiency and resilience.We highlighted two decarbonizing efforts in FY24.One involved customer data center efficiency and another related to the broader energy sector to expand our insights on grid resilience.Innovation Data center optimization Data centers are essential to business operations but require significant power consumption and energy budgets.We offer a Get Efficient Assessment to help customers understand the gains they could realize by transitioning to optimized data centers.In FY24,we performed over 700 assessments for customers of all sizes and from all segment types in the Asia Pacific-Japan(APJ)region.This region has substantial decarbonization opportunities due to its high energy intensities.Insights:Data centers are more efficient when assets require less power.Get Efficient helps assess if customers are right-sizing data center equipment to their needs,and using it effectively.Get Efficient Assessments contain details of optimized data center assets across core storage,servers,hyper-converged infrastructure(HCI),data protection services(DPS)and unstructured data solutions(UDS).Because of the complexity of these assessments,we developed an internal sustainability reporting dashboard that tracks and manages sustainable data center transformation details.Solutions for our customers vary based on their specific climate-related goals and challenges.With insights from our dashboard,we can provide accurate and tailored support to our customers as they decarbonize their IT.Grid resilience The American Council for an Energy Efficient Economy(ACEEE)is exploring how optimized technology can reduce our collective energy intensity.We partnered with Intel to investigate two ACEEE emissions savings opportunities one centered around grid resilience and the other around optimized electric vehicle charging.Emissions savings is the difference between baseline emissions and the predicted impact of an applied solution.Calculating the broader impact of products or services across scope 1,2 and 3 emissions is challenging.This is especially true for the complex upstream and downstream supply chain activities within scope 3.The solutions that we built following our work with ACEEE expanded our understanding of where we can integrate our technology within the grid and the magnitude of related emissions savings.9 Through our partnership,we found that the positive impact of both solutions can accelerate large-scale decarbonization.Intelligent grid management Approach:Grid management solution(GMS)for the utilities sector to optimize substation distribution.We investigated voltage and capacity management for industrial electricity user loads in a front-of-meter application.10 Insights:We built a GMS for more precise data monitoring,sharing and intelligent controls that helped reduce emissions on both the energy supply and demand sides.GMS solutions can support utility substation reductions in transmission and distribution line losses which improve efficiency and help match grid supply to specific load needs to avoid excess voltages.Maximizing asset utilization,incorporating distributed energy resources and increasing renewables can deepen these savings.Optimized EV charging Approach:Electric vehicle(EV)fleet charging solution for the transportation sector to optimize depot charging.We investigated energy demand factors and schedule controls for EV depot charging used in commercial fleets in behind-the-meter applications.11 Insights:Our solution enabled emissions savings from optimized charging,but its application is limited by data availability.Reduced emissions were dependent on EV charging schedules because of the time-dependent differences in prices and emissions.Improved controls for schedules and capacity management are essential to manage costs,reduce emissions and ensure that electricity providers can meet demand.Programs for vehicle electrification and utility programming in support of EV buildouts are increasing.As they do,emissions savings calculations for fleet depot charging are valuable to decarbonize the transportation sector.23 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.As exhibited in the GHG Inventory section of this report,scope 3 category 1 emissions account for a large share of our carbon footprint.Emissions reductions in our supply chain have the potential to make a large impact.In FY24,we continued to prioritize our supply chain environmental programs and took steps to reduce GHG emissions,promote water stewardship and expand waste management systems through partnerships with our suppliers.Supply chain environmental management We actively engaged with experts and leveraged technology platforms to improve data accuracy with a centralized way to collect,analyze and report on supplier-specific emissions data.We are committed to decreasing our carbon footprint and understand that supplier collaboration both direct and indirect is essential.We encourage our suppliers to:Report scopes 1,2 and 3(category 1)emissions to CDP and join the CDP Supply Chain to engage respective upstream suppliers with the aim to reduce emissions.Submit a letter of commitment to establish near-term targets with the Science Based Targets initiative(SBTi)net zero standard.Publicly declare a target year for meeting or exceeding RE100 initiative expectations.Reduce overall scopes 1,2 and 3(category 1)emissions from CY2020 Reporting.We encourage suppliers to periodically assess their challenges and partner with us to identify solutions.24 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Emissions and supplier engagement In FY23,we set a revised 45solute reduction target for scope 3 category 1.Our goal meets the Science Based Targets Initiatives(SBTi)criteria for emissions reduction goals.We partner with our highest emitting suppliers to drive emissions reduction through our Emissions Supplier Engagement Program(ESEP).In the first phase of ESEP,the Procurement and Social and Environmental Responsibility(SER)teams engaged with suppliers and logistics carriers to understand their current emissions reduction initiatives and assess the best way to approach our program.We narrowed ESEPs scope to focus on a subset of suppliers to prioritize the highest impact potential.Through our engagement,we gathered a better understanding of the following:Data accuracy and availability:One of the challenges suppliers face in achieving requested emissions reduction commitments is data limitations that cause inaccurate reporting and benchmarking.Commit status and gaps:Supplier maturity depends upon their emissions reduction targets and initiatives,which might reveal gaps against Dells commitment requests.Partnership:Supplier feedback on the largest areas of opportunity is key to partnering with Dell on emissions reduction initiatives.The next ESEP phase includes more in-depth engagement and prioritization with our key suppliers,investing in new technologies and capabilities to improve automation and integrating solutions to streamline supply chain emissions data collection.Supplier emissions forecasting and enhanced hotspot analysis will drive tailored action plans and engagement strategies.Positive supply chain impact recognition In FY24,we received recognition for our efforts in sustainable supply chain environmental practices.The Institute of Public and Environmental Affairs(IPE)ranked 742 companies and Dell was one of only two companies to receive IPEs Green Supply Chain Corporate Information Transparency Index(CITI)Master ranking.12 To achieve this,a company must rank as a top performance brand in the annual CITI ranking;maintain high performance standards in their supply chain environmental management13;and show that all key suppliers track their environmental performance through data systems.The IPE also recognized Dell as one of the top three scoring Climate Action Transparency Index(CATI).This score was based on responsive engagement in:supply chain transparency,compliance performance,green supply chain practices,energy conservation and emissions reduction efforts and levels of public disclosures.CDP annually evaluates corporate supply chain engagement on climate issues through its Supplier Engagement Ratings.In FY24,we maintained our recognition as a CDP Supplier Engagement Leader based on our efforts in the transition toward a net zero sustainable economy.Recognition criteria included assessing the level of climate performance within our business strategy;science-based target reporting;scope 3 emissions accounting;supplier engagement levels;and the overall CDP Climate Change performance.Capstone research on public policy and supplier emissions In FY24,we partnered with the Columbia University School of International and Public Affairs for a capstone project to research policy analysis and regulations designed to incentivize corporate carbon emissions reductions in Southeast Asian countries.This research identified policies that offer cost-effective emissions reduction opportunities and government support for corporate decarbonization.The results also generated long-term practical insights on how suppliers can effectively leverage external policies to reduce their carbon footprint.Supplier emissions energy challenges The largest source of emissions often comes from suppliers own scope 3 category 1 emissions,but these often take the longest time to reduce.Corporate decarbonization must make economic sense,with priority given to the most straightforward solutions that provide large emissions reduction across all scopes.Reducing scope 2 emissions is often the most straightforward and cost-effective option through renewable energy procurement and energy efficiency projects.However,a primary decarbonization challenge expressed by suppliers is lack of access to renewable energy due to cost and location barriers.The capstone project identified five types of policies that incentivize decarbonization for suppliers,depending on the markets or jurisdictions where they operate:1.Subsidies and Loans:Favorable interest rates and financing for certain projects that reduce carbon emissions.2.Grants:Funding awarded for renewable energy projects or for receiving verification of substantial progress toward achieving carbon neutrality.3.Power Purchase Agreements:Long-term contract between a customer and electricity generator to purchase renewable electricity at pre-negotiated prices(multiple schemes available depending on location).4.Carbon Tax Incentive:Government tax credits or special depreciation for purchase of assets that improve manufacturing efficiency or reduce carbon emissions.5.Foreign Ownership:Foreign investment and ownership permitted for renewable energy projects within specific countries.Capstone recommendations The capstone project recommendations support ESEPs goal to educate and train suppliers on opportunities to decarbonize while ensuring alignment with economic benefits.Suppliers need customized planning support to identify decarbonization projects that leverage region-specific policy incentives and emissions data platforms to explore reductions in their own supply chain.We will continue to monitor policy updates as a key driver for engagement with suppliers in our progress toward scope 3 category 1 emissions reduction key driver for 2030.25 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Energy efficiency capability and improvements We partnered with our suppliers on science-based emissions reduction strategies and building energy efficiency capabilities.In FY24,our supply chain energy efficiency program supported 67 suppliers with on-site technical advising that included:Review of energy data and completion of gap analysis.Analysis of direct feedback from internal surveys and prior on-site visits.Review of energy management systems.Proposal for energy-saving actions and energy efficiency best practices.We also helped suppliers investigate high energy consumption facilities and systems,like energy-intensive machinery.As part of this investigation,suppliers analyzed ways to reduce consumption levels through activities like implementing green modeling programs;introducing constant temperature-controlling engineering;recycling water;thermal insulation;and investing in robotic electricity-saving programs.As a result of the program,suppliers achieved the following outcomes:Generated an energy management system that aligned with ISO 50001 and obtained third-party certification.Set dated reduction targets with review cadences to monitor upstream and downstream progress.Implemented energy-saving actions to reduce energy consumption and emissions.Developed diverse energy-saving plans for continuous improvement.We will continue to collaborate with our suppliers to find more energy efficiency opportunities to advance sustainability and reduce suppliers operational impacts.Supplier water stewardship High-quality fresh water is required to produce some of the components in our products.Water stewardship,the responsible planning and management of water resources,is vital to manufacturing our products in a sustainable way.We understand that some of our suppliers operate in water-stressed areas where they may experience insufficient surface and groundwater to meet their regions needs.Since FY21,we have worked with our peers in the Information Communications and Technology(ICT)sector to support suppliers to achieve continuous improvement.The Alliance for Water Stewardship(AWS)and the Responsible Business Alliance(RBA)develop shared assessment criteria aligned to the International Water Stewardship Standard to help suppliers understand their current performance level and build capability going forward.For our business,stakeholders include municipal water providers,local community members and the wastewater treatment plants within their respective factory water risk mitigation plans.For suppliers that have water-intensive processes or operate factories located in water-stressed areas,we partnered on the following:Encouraged suppliers to use the ICT Water Stewardship Assessment to identify gaps and improvement opportunities within factories.Provided consultancy and technical support to suppliers to develop and implement water management action plans.Offered on-site training and coaching to water-responsible members on topics of stakeholder engagement,supply chain water management and information disclosure.Offered online training sessions on continued water management criteria from the ICT Water Stewardship Assessment.We submit annual responses to the CDP Water Security Report on our corporate efforts toward a water-secure future.CDP responses for FY24 are not available at the time of this ESG report publication but will reflect the following water stewardship figures:227 of our supplier factories implemented water management plans.Our suppliers saved 86.1 million cubic meters of fresh water and reduced the amount of wastewater they discharged by 82.3 million cubic meters.For additional details on our water commitments and actions,please refer to Dells Water Policy Principles.26 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Zero waste in our supply chain Waste is a byproduct of our manufacturing process.We seek to reduce waste through our Zero Waste Program under our Social and Environmental Responsibility(SER)business unit that measures waste generation and reports significant waste-related impacts.Our waste reduction reporting standards align with the Global Reporting Initiative(GRI 306).SER specialists help suppliers ensure safe disposal practices and reduce waste.We work with suppliers to identify alternatives to reduce or reuse waste that would otherwise be sent to landfills.We also conduct supplier trainings on industry disposal standards for solid and hazardous waste.Additionally,we expect our suppliers to align with our expectations for transparency about their environmental impacts by publishing sustainability reports in accordance with GRI.Through the Zero Waste Program,we help suppliers implement solutions that include composting,anaerobic digestion,incineration and other end-of-life recovery opportunities like reuse and recycling.Highlights from our Zero Waste Program in FY24 include:Dell helped 21suppliers reduce the amount of waste disposed of in landfills.Supplier sites were chosen to support this program because they are key strategic partners of Dell.9 additional suppliers participating in our Zero Waste Program facilities received a UL2799 or TRUE certificate for their waste management system and 100%diverted solid waste from landfills.89.9%of our direct material suppliers(by spend)reported sustainability initiatives in accordance with GRI standards.Based on this information,54.8%of Dells direct material suppliers(by spend)reported progress in reducing waste from their operations.Hazardous waste Dell operates in a manner that protects the environment and prevents pollution,in accordance with our Global Environmental Policy.We comply with global and regional waste management regulations and are committed to minimizing the generation of both non-hazardous and hazardous waste throughout our value chain.The on-site recycling initiatives at Dell-owned facilities effectively reduce the volume of non-hazardous waste.The portion that cannot be recycled is responsibly disposed of by incineration or landfill.Waste is designated as hazardous based on applicable U.S.,state,regional and local laws.At Dell,hazardous waste may include electronic waste,waste oil,damaged batteries,small amounts of solvents like paints,thinner,and cleaners and waste from facility lighting.These waste items are properly disposed of or recycled by qualified recyclers.For waste that cannot be recycled,disposal is in accordance with local environmental regulations.Globally,Dell generates minimal hazardous waste.In the U.S.,we are designated as a very small quantity generator(VSQG)according to the U.S.Environmental Protection Agency regulations on hazardous waste.All our Dell-owned global manufacturing locations are ISO 14001 Environmental Management System certified.Part of ISO 14001 certification includes efforts to address and monitor hazardous waste.Dell adheres to local regulations on waste management in all regions where it operates.We also have Global Environmental Health and Safety(GEHS)Standards that all our locations must follow.There are GEHS Standards that specifically reference hazardous waste and the response to a hazardous substance emergency,for example,the GEHS-S1002:Chemical and Hazardous Materials Management or the GEHS-S1005:Waste Management and Waste Reduction Standards.Our EHS teams collaborate closely with our Facilities organization to oversee the management of hazardous waste across all Dell locations worldwide.By leveraging risk assessments and adhering to stipulations of our ISO 45001,and ISO 14001 certifications and the Responsible Business Alliance(RBA)standards,we have minimized the amount of hazardous substances in our manufacturing processes.Dell follows the Clean Electronics Production Network(CEPN)process where hazardous chemicals are identified and systematically removed from production through elimination or substitution with a less hazardous chemical.More information on RBA,CEPN and our Chemical Use Policy is available in the Supply Chain Responsibility section of this report.27 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Strategy GHG inventory Product carbon footprint Innovation Supply chain environmental management INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Advancing sustainability through circularity Our commitments to the circular economy power the creation of sustainable technology and solutions that drive business and society forward.Circularity as an economic system and product development process is integrated throughout our value chain.We embed it across the business and in deep collaboration with suppliers,customers and other stakeholders.Through our efforts and partnerships,we have recovered over 1.3 billion kg(2.8 billion lbs)of used electronics since 2007.Building on over 25 years of experience in offering global recovery and recycling services,we are rethinking,redesigning,reusing and recycling our way to an even more sustainable future.Our approach to circular economy The progress we have made in our circularity practices helps us comply with evolving regulatory requirements.In adherence to the sustainable materials indicators in the Reporting Frameworks Index,we refined the scope of our circular economy goals in FY23.That refinement included expanding our product content goal to include materials produced using reduced carbon emissions energy sources.We also expanded our packaging goal to include where we utilize reused packaging original packaging that has been recollected and reused.However,measurement and reporting capabilities for reused packaging are still in development and we now expect to reflect the expanded scope of this goal in future reports.Additionally,we updated the unit of measurement for our reuse or recycle goal,also known as our takeback goal.We now calculate the goal based on weight instead of unit count.These refinements increase the accuracy of our goal progress and are more aligned with broader industry approaches to these metrics.We aim to reduce e-waste and associated emissions to lower our environmental impact.To do so,we begin with low-emissions materials and then we reuse,recover and recycle as many products and components as feasible.In FY24,we made progress toward each of our refined circularity goals.Circular EconomyIN THIS SECTION Product lifecycle 30 Circular design 31 Product materials 33 Sustainable packaging 35 Recovery and recycling 37 2030 GOAL By 2030,more than half of our product content will be made from recycled,renewable or reduced carbon emissions material 14.1%Percentage of product content made from recycled,renewable or reduced carbon emissions material FY24 50 30 GOAL By 2030,for every metric ton of our products a customer buys,one metric ton will be reused or recycled Percentage of products collected 100%FY24 30.1 30 GOAL By 2030,100%of our packaging will be made from recycled or renewable material,or will utilize reused packaging 100%Percentage of recycled or renewable material content in packaging FY24 96.4( Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMYDIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Dells circularity advancements Sustainability is a constant work in progress.We have been an industry leader in sustainable practices for over 30 years from the launch of our recycling services to the use of recycled,renewable and low-emissions materials in our products and packaging.Our circularity advancements help us drive innovation for our industry and beyond.1990s 2000s 2010s 2020s 2004 2006 2007 2009 2009 Dell Reconnect partnership launched with Goodwill(U.S.-only)for reuse and recycling First Dell products registered with EPEAT First use of recycled plastic in our products(OptiPlex)First in the industry to use bamboo packaging First in the industry to ban the export of e-waste to developing regions 2020 Used waterproof material from windshield glass layers to protect Ecoloop backpacks 2021 Introduced Concept Luna as an innovative exploration of sustainable PC design 2021 First use of renewable bioplastics in Latitude 5000 and Precision 3000 series 2021 First use of Multi-vector 2.0 with intelligence features and Dell Liquid Cooling in PowerEdge 2021 Exceeded UNSD 2025 goal to increase annual use of recycled ocean-bound plastics 10 x four years early 2022 First use of hydropower-produced aluminum 2022 Introduced bio-based material made from captured methane in keyboard components 2022 Introduced bioplastics made from castor oil-based materials in select products 2022 Expanded use of ocean-bound plastic from packaging into our products for the first time 2023 Introduced recycled copper and recycled aluminum in our products 2023 First to ship certified 50%recycled content steel in displays 2023 Claimed a baseline amount of recycled glass content 2011 First Dell fresh air and fan-less servers to reduce data centers energy use 2013 First company to achieve Titanium Power efficiency in our servers/storage 2014 First use of closed-loop materials in our products(OptiPlex)2015 Began sourcing reclaimed carbon fiber from the aerospace industry 2017 First packaging made with ocean-bound plastic 2017 Co-founded NextWave to keep ocean-bound plastic out of oceans and within the circular economy 2017 Reduced data center energy usage with multi-vector cooling and advanced air cooling 2018 Committed to using 100%recycled or renewable material in all our packaging by 2030 2018 First in industry to recycle gold from used motherboards and reuse in new motherboards14 2019 Released a sustainable low-carbon edition of the Latitude 7300 First Asset Recovery Services for commercial customers 1996 First global,free recycling program for consumers 1997 First Dell ENERGY STAR certified product1993 29 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIXProduct lifecycle Circular design Product materials Sustainable packaging Recovery and recycling INTRODUCTION With our 2030 goals set,we focus on actions that drive progress in each area of our product lifecycle.We are designing end-to-end products that are cutting-edge and easier to repair,recycle or upcycle in deep collaboration with suppliers,customers and other stakeholders to close the loop and reduce waste.The following details how goals align,by lifecycle stage,from product materials to end-of-life recovery and recycling.Product lifecycle Sustainable materials from the start We select sustainable materials that are across the spectrum of recycled,renewable or reduced carbon and ensure they are also recyclable at the end of their life.In FY24,we expanded our use of recycled,renewable and low-carbon materials like 50%recycled copper,recycled aluminum,steel and plastics.Sustainable packaging and transport When it comes to getting our products to customers,we increased the amount of recycled or renewable materials in packaging,offer multipack services to reduce packing material and offer lower-emissions shipping options.We continue to align to the Global Logistics Emissions Council(GLEC)framework to reduce freight operations,optimize shipment options and overall transportation requirements by shipping directly from manufacturing facilities where possible.Innovative research,circular design and manufacturing Our designs aim to reduce waste and make service and repair easy.Our engineers work to refine modular designs for simple servicing,disassembly and repair.Many of these breakthrough designs are attributed to the work inspired by Concept Lunas sustainable PC design,which was introduced in FY22 and has influenced future product designs.Increased repairability during use Once our products are in our customers hands,they need to be as energy efficient as possible,durable and easy to repair with readily available tools.Reducing the energy intensity of our products is critical to supporting our customers business and sustainability goals.Designing for more durability and easy repairability helps keep products in circulation for longer.With this in mind,we launched the Dell Self-Repair site to simplify upgrading or repairing Dell devices with an expanded number of parts available.End-of-life reuse,recycle and recovery What happens to our products when they reach the end of their life is important.Our recovery and recycling services offer customers seamless,secure ways to retire and recycle their products.This minimizes e-waste and reduces the demand for new raw materials.Through our takeback services,we recover retired IT equipment and prioritize reuse of products and components before recycling what remains.The lifecycle of a Dell product 30 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Product lifecycle Circular design Product materials Sustainable packaging Recovery and recycling INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Product design plays a significant role in reducing waste and emissions.Our aim is to keep products and materials in use for as long as possible,so we implement designs that allow our products to be more easily disassembled.This makes them easier to repair,refurbish,reuse and recycle.Circular design The strategy and evolution of design at Dell Since its introduction in FY22,Concept Luna has evolved into an inspiration and guidepost for Dells circular design approach.Our design teams gathered a wealth of knowledge and strategies during product prototyping that pushed the boundaries of what Dells sustainable technology could look like now and in the future.We continue to implement these findings in our products and further build our portfolio of innovative designs.However,we understand that creating a positive impact on the world is not something one company can achieve alone.We engage with others including our competitors to drive circularity at scale and maximize impact.Our memberships in influential cross-industry partnerships like the Circular Electronics Partnership(CEP)and NextWave Plastics are examples of this collaboration in action.Hosted by the World Business Council for Sustainable Development(WBCSD),CEP brings together leaders from industry,international organizations and civil society.CEP facilitates global collaboration on an industry road map to overcome the barriers to a circular electronics industry.This includes improving product and supply chain circularity,and increasing awareness of the importance of circular electronics.In addition to our leadership and memberships,we increased our public advocacy efforts.We participated in stakeholder education on the importance of a more circular economy in the technology sector,including a May 2023 Consumer Technology Association Circular Economy panel and a similar panel at the 2024 Consumer Electronics Show.We continue to join efforts across industries towards building a more circular economy,which aims to eliminate waste while keeping resources and materials in use longer.31 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Product lifecycle Circular design Product materials Sustainable packaging Recovery and recycling INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.Circular design principles To accelerate the circular economy,we work towards design principles that consider sustainability throughout our process.Sourcing sustainable materials draws on recycled,renewable or reduced carbon materials for our product designs.We work diligently to ensure the materials we source minimize our impact on the environment.Examples at Dell include low-emissions aluminum in XPS laptops,recycled aluminum with low-emissions aluminum in Latitude and Precision products and recycled copper in the cables of some power adapters.Designing for parts harvesting or recycling is important to make it easy to recover parts and recycle materials from products that reach the end of their lives.Recycling materials uses less energy than processing virgin raw materials.Examples at Dell include clear labeling,easy separation of parts and material types,unified material grades and recyclable materials and working with recycling partners.Designing for durability creates longer-lasting products,which helps avoid or delay the environmental impact created by building new devices.Examples at Dell include improved water spill resistance,greater tolerance for shock and vibrations,wider range of temperature and humidity tolerances,better battery endurance and greater fault tolerance.Dematerializing and optimizing reduces needed materials or the impact of processes required to create products.Using fewer resources upfront preserves natural resources and reduces the carbon footprint of mining and manufacturing.Examples at Dell include designing for fewer internal components,lean manufacturing,passive cooling,paints,on-demand production and customer tools like virtualization.Designing for reuse and repair makes it easier to access and replace damaged or failed parts to extend product life.Reuse uses less energy than recycling,which further reduces carbon footprints.Examples at Dell include modular designs such as single-access service doors,eliminating the use of glues and creating upgradable or interchangeable parts.Evolving business practices by offering services and adjusting business models helps keep resources in the economy and out of landfills.Examples include as-a-Service(aaS)offerings,cascaded ownership(opportunities to remanufacture and reuse materials repeatedly),takeback programs,on-demand services and technologies to drive system change such as artificial intelligence(AI),machine learning and data analytics.32 Dell Technologies FY24 ESG Report CLIMATE ACTION CIRCULAR ECONOMY DIGITAL INCLUSION INCLUSIVE WORKFORCE HUMAN RIGHTS TRUST BY THE NUMBERS APPENDIX Product lifecycle Circular design Product materials Sustainable packaging Recovery and recycling INTRODUCTION This is the beginning of the navigation for the page.To exit the navigation,press the“H”key on your keyboard.From our first use of recycled plastic and products in 2007 to our pioneering use of hydropower-produced aluminum today,we continue to invest in materials innovation.To support advancements in the circular economy,we have increased our use of recycled,renewable and reduced carbon emissions materials across our product portfolio.In FY24,we used over 43 million kg(95 million lbs)of recycled and renewable materials in products,or 14.1%total of our product materials goal.Product materials Closed-loop vs open-loop systems In an open-loop system,materials cross industries or functionality,like plastic recycled from water bottles for use in computers.In a closed-loop system,materials are recycled back into an item similar to the original,like parts from old hard drives used as stock for creating new parts for hard drives.Closed-loop systems are the backbone of a circular economy because they keep materials in use through recycling and reuse.We have closed-loop practices in our supply chain and products that contain closed-loop materials recovered from used technology.Post-consumer recycled plastic Bio-based plastics Reclaimed carbon
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ContentTime RangeCycle of IssuanceFormulation StandardFormulation PrincipleThis report is the 7th Report on Sustainable Development issued by FAW-Volkswagen Automotive Co.,Ltd.The last report was issued in August,2022.For convenience of expression and reading,FAW-Volkswagen Automotive Co.,Ltd will hereby be expressed as“FAW-VW”,“the company”and“we”in this report.This report introduces the sustainable development report performance in China of FAW-VW and its affiliated institutions(see in chapter Organization Distribution)within the period of 2022 January 1st to 2023 December 31st.No significant change to the scope of report.The cycle of issuance of this report is 2 years.This report is formulated according to the actual status of FAW-VW and referring to the GRI Standard.The report is divided into four core chapters,namely:Strategy,Economy,Society and Environment.The status of parameters introduced in this report can be seen in the indexes at the end of the report.With full consideration to the companys activities and influence,and the actual expectation and interests of stakeholders,this report provides a faithful reflection of the companys conduct as it actively fulfills its economic,social and environmental responsibilities,and comprehensively implements the strategy of sustainable development.This report shows information and data from the companys official documents and statistics reports,and collects information of practicing sustainable development by all departments and affiliated institutions,providing reference for stakeholders to make reliable and reasonable performance evaluation.Attaching great importance to its own sustainable development,the top management of FAW-VW tasked the secretary of the board and colleagues of the Company Office to formulate the Sustainable Development Report and seek attestation.After finishing the report,will entrust TUV Rheinland(Shanghai)Co.,Ltd.for external inspection.See independent inspection announcement in page 98 of the report.About this reportAttestationAll the paper used for this report is recycled paper.Sustainability Report /01Sustainability Report /0302 The BOM of FAW-VW is the highest ranking organization for the daily decision making of the company.It includes 5 members appointed by both shareholders and are responsible of different systems.The BOM adopts a collective decision-making system,and the topic of sustainable development is also included.The BOM is also responsible for monitoring core company indicators,and reporting to both shareholders about the fulfillment on a regular basis every year.Organization StructureDecember 10th,2022,Nie Qiang took over Guo Yongfeng as Commercial Vice President of FAW-VW August 1st,2023,Ulrich Feuereis took over Dr.Andre.Stoffels as First Vice President(Finance)of FAW-VW September 1st,2023,Dr.Oliver Gruenberg took over Andreas Dick as Vice President(Technology)of FAW-VWFAW Audi Sales CO.,LTD.Jetta Brand&Chengdu BranchSales Company-VW Brand Finance AdministrationControllingInternal AuditingCompany OfficeManagement ServicesSupplyQuality AssuranceVehicle ConnectivityLegal Risk and ComplianceHuman ResourcesSafety AssuranceTalent Empowerment and Development CenterGlobal Employee CenterTechnical DevelopmentProduct ManagementPlanningLogisticsChangchun PlantFoshan BranchQingdao BranchTianjin BranchPowertrain DivisionVSCNie QiangUlrich FeuereisPan ZhanfuJin XianzhenDr.Oliver GruenbergVice President(Commercial)First Vice President(Finance)Member of BOD,Secretary of Party Committee,PresidentVice President(Human Resources)Vice President(Technology)BOMSustainability Report /05Organization DistributionProduction BasesChangchunChangchun PlantChangchun Engine and Transmission PlantChangchun New EnergyWorkshopQingdaoQingdao PlantQingdao New Energ WorkshopChengduChengdu PlantChengdu Engine PlantTianjinTianjin PlantFoshanFoshan PlantFoshan New Energy WorkshopRSDAudi BrandJetta brandShenyang/Northeastern RegionBeijing/Northern RegionShanghai/Eastern RegionNortheastern RegionHenan RegionNorth China RegionHangzhou/Southeastern RegionGuangzhou/Southern RegionChengdu/Western RegionEast China RegionSouth China RegionCentral China RegionShandong RegionNorthwestern RegionSouthwestern RegionVW BrandRSD1/ChangchunRSD2/BeijingRSD5/WuhanRSD6/GuangzhouRSD3/JinanRSD4/ShanghaiRSD7/ChengduRSD8/XianChangchun BaseSouthwest BaseSouth China BaseEast China BaseNorth China BaseFAW-Volkswagen Automotive Co.,Ltd(will be referred to as FAW-VW)was established on February 6th,1991,a large passenger vehicle manufacturing company under the joint operation of CHINA FAW GROUP CO.,LTD.(60%share),VOLKSWAGEN AG(25%share),Audi AG(5%share)and VOLKSWAGEN CHINA Investment Company(10%share),and Chinas first modern passenger vehicle manufacturing company established according to the scale of Chinas economy.The company currently has three brands of VW,Audi and Jetta,with products covering the volume market and premium market.FAW-VW continuously improves its technological and R&D capacity during its rapid development.Today,the company owns cutting-edge R&D and testing facilities including auto testing field,new technology development center,New Energy Center,engine and acoustic laboratory,etc.Those facilities grants FAW-VW the whole process testing capacity from parts to engine,and further consolidate the future advantage of FAW-VW in technological innovation.Currently,FAW-VW carries out win-win cooperation with over 2400 Tier 1 suppliers,together building an outstanding supply chain system.It also joins hands with over 1700 dealers to provide more efficient auto service of higher quality to the vast consumer group.Through over 30 years of development,FAW-VW has established whole vehicle production bases in Changchun,Chengdu,Foshan,Qingdao and Tianjin.Company IntroductionFAW-VW has carried out win-win cooperation with overTier 1 suppliers,together building an outstanding supplier systemFAW-VW has joined hands with overdealers to provide better and more convenient automotive services to the vast consumer group2,4001,70004 Sustainability Report /0706 Speech of the PresidentMember of BOD,Secretary of the Party Committee,President of FAW-Volkswagen Automotive Co.,LtdFor FAW-VW,the year 2022 was a year of United and 2023 a year of Go Forward with Determination.Reflecting upon the past two years,FAW-VW has charted a remarkable path.Under the multiple challenges of resurging pandemic,supply chain shortage,power supply limit due to high temperature,and sudden natural disasters,FAW-VW has actively demonstrated a sense of responsibility commensurate with its position as a leader in the auto industry,and realized rapid production and operation recovery and stable development relying on its strong systematic capacity.Adhering to the customer-oriented approach,we continued to pursue innovation together with our upstream and downstream partners including dealers and suppliers to realize win-win cooperation and progress while maintaining stability.Embracing opportunities of transformation,we further accelerated the digitalization transformation of the whole system,significantly improving efficiency,reducing management cost,and realizing innovation-led development.With the common efforts of all colleagues,the whole brand has faced difficulties with relentless spirit,and realized an accumulated new car sales of 1,823,577 units(including Audi FBU),thereof VW brand 1,041,077 units,Audi brand 635,588 units(including FBU),and Jetta brand 146,912 units,demonstrating the strong resilience and capacity of the brand.In 2023,with concerted and concrete efforts,FAW-VW achieved its milestone of 27 Mio.accumulated production with only 32 years and 10 months.Adhering to green and low carbon development,we promoted the use of clean energy including photovoltaic power,hydro power and wind power in our five bases,enhanced green development and green management of the whole industrial chain,and realized coordinated carbon reduction of 251,700 tons.We also worked with China Automotive Technology&Research Center Co.Ltd(CATARC)to issue the first whole product life cycle carbon footprint report,ushering in the beginning of the carbon accounting of FAW-VW.In 2023,we strived to make breakthrough in NEV,independently completed the intelligence upgrade of the car engine,and adopted it first in the ID.7 VIZZION model.We also continued to enrich our products,took the initiative to develop brand new electric models,and obtained the export authorization for Jetta brand.Relentlessly deepening digitalization transformation,we successfully rolled out 58 projects including production and sales integration,dark factory,and intelligent storage and logistics.As a result,we improved production flexibility,shortened order delivery cycle,reduced corporation management cost,and satisfied users diversified demand with better efficiency.In 2023 whole year,we delivered over 1.91 Mio.units(including Audi FBU)to terminal users,VW brand accumulated terminal sales 1,050,017 units,Audi brand 698,188 units(including FBU),Jetta brand 162,000 units.All three brands realized year-on-year sales volume increase.Our achievement came from the strong leadership of both shareholders,the persistent effort of all FAW-VW colleagues,the close cooperation of our partners,the longstanding trust and confidence of our customers,and the strong support of all sectors of the society.Those are the sources of strength for FAW-VW to succeed,but also heavy responsibility on our shoulders.As a leader in the auto industry,FAW-VW acknowledges,undertakes and strives to fulfill its responsibility.Upholding the green development philosophy for the whole life cycle,and under the strategic guidance of the Chinese and German shareholders,FAW-VW accelerated the low-carbon,digitalized and smart transformation.With efficient and stable corporation management,scientific and healthy talent training,green and smart production and manufacturing,and low carbon products with high quality,we answered the concerns of all sides,and realized our own growth in line with the development of the nation and the transformation of the auto industry.Uniting our efforts and moving forward with determination,we aim at even greater success.From 2022 and 2023,the auto industry experienced accelerated transformation and intertwined changes.In 2022,FAW-VW united all efforts to face the difficulties head on,and established a comprehensive basis for high quality development in the new era.In 2023,FAW-VW kept its momentum and moved forward with determination,leading the development of the auto industry,and making significant contribution to the strong development of the country and its economy.The change from“United”to“Go forward with determination”represents a lift of status,the transformation of our pragmatic spirit,and that FAW-VW now embarks on a new path of high quality development in the new era of joint venture cooperation.In the future,FAW-VW will continue to engage in close cooperation with all stakeholders,uphold the development path of Rising up to Challenge and Gearing up to Innovation in a down-to-earth manner,continue to focus on key sectors including operation results,future layout and systematic capacity building,accelerate high quality and sustainable development,and inject strong impetus to the high quality development of Chinas auto industry!Sustainability Report /0908 Organization StructureOrganization DistributionCompany IntroductionSpeech of the PresidentGRI Content IndexContinuous Value CreationDealer RelationshipSupplier Relationship Domestication and LocalizationRisk ManagementEmployee StatusEmployee Career Development PlanOccupational Health and SafetyEmployee CaringCustomer Health and SafetyCustomer SatisfactionPublic Welfare and CharityCompany Strategy and Social ResponsibilitySustainable Development ManagementStrategy0102040507942232424546505258626668731216CATALOGUEEconomy02Society03Environment ManagementMeasures Against Climate ChangeProduct Development and Power SystemRaw MaterialsGreen Factory BuildingGreen LogisticsGreen ITInformation SecurityGreen OfficeEfficient Energy UtilizationWater ResourcesExhaust Gas,Waste Water and Solid WasteMajor Environmental Protection Data76787980828487888990919192Environment04Sustainability Report /0908 10 Strategy01Company Strategy and Social ResponsibilitySustainable Development Management1216Facing the CASE trend(connected,autonomous,shared,electric),FAW-VW actively embraces the opportunity for change,comprehensively accelerates the digitalization intelligence transformation of the company,and realizes the digitalization of the whole process of products,production,marketing and other business.Facing the future,FAW-VW has established a new development path of Rising up to challenge and Gearing up to innovation,maintained stability while pursuing rapid growth in new energy transformation and digital governance,made comprehensive efforts to inject strong momentum into the high-quality development of Chinas auto industry,and led the new direction of the development of the auto industry.STRATEGYSustainability Report /11Sustainability Report /1312 In terms of stable performance,FAW-VW focused on its targets and continued to lead.In the past two years,with the accelerated transformation of the industry,chip shortage,price war and other challenges continuously impacting production and operation,FAW-VW safeguarded its leading position among joint ventures through various measures including fully guaranteeing production and supply,comprehensive marketing innovation,and in-depth lean management.In terms of system capacity development,on the one hand,FAW-VW consolidated and gave play to its traditional advantages.For production,it aimed at large-scale customization and lean and agile logistics to promote accurate and rapid customer orders delivery and constantly improved logistics efficiency;for manufacturing,with the goal of building highly automated and interconnected plants,a new smart factory roadmap was released;for quality,it continued to deepen the user-centered preventive quality management system and continuously improved user experience.On the other hand,FAW-VW stepped up to address its systematic shortcomings in the Chinese market,promoted self-developed product projects in an orderly manner,and accelerated the reserve of forward-looking technologies for Chinese users.In terms of management system construction,FAW-VW continued to strengthen the team building for cadres and talents,optimized the incentive and constraint mechanism,and innovated and promoted management models including OKR and garage,and continued to unleash the creativity and vitality of employees.We comprehensively promoted the companys digital transformation,opened up 17 process domains,promoted the implementation of more than 100 transformation projects,accelerated data management and application,and promoted the transformation of digital intelligence from business digitalization to a new stage of digital business.In terms of environmental management system,FAW-VW actively practiced its corporate social responsibility,used green and clean energy,and vigorously promoted the utilization of clean energy such as wind power and photovoltaic.We stuck to emission standards much stricter than the national standard,and promoted the application of emission reduction technologies including coating process optimization,gray-water system,and waste heat recovery.FAW-VW addressed the full link of source control,streamline process,end control,and monitoring and early warning,and made every effort to achieve the full-life cycle carbon emission target in 2030.The auto industry is undergoing major changes unseen in a century,and the differences between the Chinese market and global market in terms of user demand,technology iteration,industrial chain resources,and competition pattern are becoming increasingly distinct.In the future,FAW-VW will accelerate the launching of electric and hybrid products to provide users with a richer selection of high-quality products,constantly improving user satisfaction.We will continue to write new chapters on the path of Rising up to challenges and Gearing up to innovation,and strive to create a new example for the transformation and upgrading of Chinas auto joint ventures,leading the new direction for development of the auto industry.01Target-oriented and innovation-led02Play to our advantages and address our weaknesses03Digitalization intelligence transformation with focus on talent cultivation04Save energy,reduce carbon emission,and pursue green developmentCompany Strategy and Social ResponsibilityAs the first modern passenger car enterprise established according to the scale of Chinas economy,FAW-VW always adheres to their customer-oriented aspiration and quality-first principle,continues to make innovation breakthroughs,and seeks to create win-win results for enterprises,users,employees,industrial chain and the society.With is efforts,it realizes the transformation from pioneer to leader,drives the rapid development of Chinas auto industry and promotes regional economic prosperity.At the same time,FAW-VW acknowledges its corporate social responsibility and takes firm actions,and always follows the path of green and low-carbon development.With energy-saving and environmentally friendly materials and the world-leading technologies,it effectively controls the waste water,exhaust gas and carbon emissions,accelerates the layout of a series of carbon reduction projects including photovoltaic and wind power,and contributes to the sustainable development of all mankind.In recent years,Chinas auto industry experienced a boom in NEV development,making the competition pattern even more complex.Facing challenges ahead,FAW-VW actively plans and transforms,delivering satisfactory results in terms of business performance and system capacity building.2022-2023 Company Strategy14 2022-2023 Overall Situation of the Companys Basic Responsibility and Social Responsibility PracticeFAW-VW actively practices corporate social responsibility,and continues to focus on green environmental protection,children care,disaster relief and other fields.Taking the needs of the people as our guidance and social responsibility as our own responsibility,we continue to practice social responsibility and corporate accountability with the spirit of great love while leading the development of the auto industry with our own sound development.Sticking to the direction of high quality development,FAW-VW accelerated transformation and upgrade,and created 58 digital projects including production and sales integration,dark factory,and intelligent warehousing and logistics.As a result,we achieved flexible production upgrades,improved market response speed,shortened the order delivery cycle,further enriched customization options,and improved the capacity of meeting the more diversified needs of end users more efficiently.These improvements won us the trust and favorable comments from our customers,and also laid a solid foundation for the sustainable development of the company.In 2023,FAW-VW applied for 23 independent manufacturing technology patents and owned numerous domestically pioneered automation processes,achieving the first multifunctional PVC robot work island in China,and E-lane as the industrys first intelligent warehouse project.Factories in all bases have fully realized the digital intelligence transformation,and factories in Changchun,Qingdao,and Tianjin bases have been awarded the title of Chinas benchmark intelligent factory in the auto industry.The numerical control rate and network connection rate of key equipment have reached 100%,and a group of national level digitalization talents have also been cultivated.Adhering to the go TO zero environmental declaration and the clear target of achieving carbon neutrality by 2060,FAW-VW uses energy-saving and environmental-friendly materials and global leading processes to effectively control waste water,exhaust gas and carbon emissions,and builds green and environmental benchmarking factories.Each production base has won a number of national and regional green and sustainable development awards and certifications.FAW-VW accelerated the layout of a series of carbon reduction projects including photovoltaic,wind power,etc.,and the use of clean electricity reached 450 million KWH.Through the Green Partner project,FAW-VW collaborated with suppliers and dealer partners to reduce carbon emissions by 26,000 tons,and worked with China Auto Technology&Research Center Co.Ltd(CATARC)to issue the first whole product life cycle carbon footprint report,ushering in the beginning of the carbon accounting of FAW-VW.FAW-VW bears its responsibility in heart and takes firm actions to practice its corporate social responsibility.FAW-VW,together with China Environmental Protection Foundation and Tsinghua University,launched the Auto Environmental Innovation Leading Program.It was an innovative corporate social responsibility project,which aims to influence all sectors of society and guide them to make continuous investment and research in auto environmental protection technology by setting up core frontier topics in the field of auto environmental protection technology,and selecting and funding potential projects in this field,so as to build an environmentally friendly auto society that is beneficial to public health and can contribute to ecological civilization construction.The Auto Environmental Innovation Leading Program plan has been held for three sessions from 2020 to 2023,supporting 42 projects of well-known universities and scientific research institutions in China,with a funding amount exceeding 13 million yuan.FAW Audi actively launched public activities for children,including the“Spring Bud Dream Camp”,“Spring Bud Dream Chorus”and“Hear your dreamcampus radio station”.By the end of 2023,the“FAW Audi Public Welfare Foundation”raised 14 million RMB,with its projects covering 20 provinces and cities and benefiting over 100 thousand children.In the past five years,FAW-VW has donated more than 100 million yuan.In March 2022,donated 20 million yuan in cash to Changchun City and Jilin City in Jilin Province for epidemic prevention and control.In September 2022,5 million yuan was donated to the Luding earthquake disaster area in Sichuan Province to support local earthquake relief.In August 2023,FAW-VW,together with its three brands VW,Audi and Jetta,donated 20 million yuan(7 million yuan in cash and 13 million yuan in special funds)to the Beijing,Tianjin,Hebei,Heilongjiang and Jilin area for flood relief and post-disaster reconstruction.In December 2023,FAW-VW donated 4 million yuan to Gansu region to support local earthquake relief and post-disaster reconstruction.Throughout the years,while focusing on its own development,FAW-VW has also made continuous contribution to the society and fulfilled its obligation as a major taxpayer.It paid 79.82 billion RMB of tax from 2022 to 2023,and its accumulated tax payment reached 685.1 billion RMB by the end of 2023.FAW-VW actively carries out poverty relief through consumption,and constantly expands the channels of assistance,purchasing over 20 Mio.worth of poverty alleviation products from poverty alleviation areas every year.At the same time,FAW-VW also promotes the prosperity and development of the upstream and downstream industrial chain and the regional economy,creating nearly 500,000 positions in upstream and downstream.Extensively recruiting fresh graduates,FAW-VW recruited more than 600 people in 2022,and nearly 500 in 2023,with over 75%graduates from domestic 985 universities and overseas top universities,continuously cultivating outstanding talents for Chinas auto industry.Sustainability Report /15Creating nearlypositions in upstream and downstream chainPurchasing overof poverty-alleviating products from poverty-stricken areas every yearFrom 2022 to 2023,recruitedfresh graduates20500,0001,100million yuanSustainability Report /1716 Shareholders equity Strategic planningCompany governanceEconomic performanceAnti-corruptionCompliance with laws and regulations Promote economic development Provide employment opportunities Environmentally friendly processes and productsEfficient use of energyExhaust gas,wastewater,solid wasteWater resourcesBiodiversityGreen factoriesAnti-corruptionDomestication and localizationGreen logisticsGreen partnersEconomic performanceSupplier relationsRaw materialsGreen partnerEconomic performanceDealer relationsCustomer health and safetyCustomer satisfactionEnvironmental processes and productsRaw materialsFunding for public welfare initiativesAdvocate public welfare idealsVolunteer servicesPublic welfare and charityTraining and educationCollaborative researchEmploymentSalary and welfareOccupational health and safetyCareer development and planningTraining and educationDiversity and equal opportunitySecurity assuranceEconomic performancePromote industry developmentSupport industry activity organizationEnvironmentally friendly processes and productsStakeholderInterest DemandShareholderGovernment authoritySupplier partnersDealer partnersCustomerEmployeeIndustry organizationPublic welfare and charity organizationEducational and academic institutionsShareholderGovernment authoritySupplier partnersDealer partnersCustomerEmployeeIndustry organizationPublic welfare and charity organizationEducational and academic institutionsStakeholderMajor ActivitiesDaily communicationSite visit and researchInformation disclosureSupervision and inspectionConvene general meetings of shareholders and boards of directors;regular communication with shareholders Supplier conferenceSupplier trainingSupplier visitSupplier approval managementGreen partnership action planDealer conferenceDealer trainingDealer visitGreen partnership action planDealer satisfaction surveySales serviceAftersales serviceFinancing serviceCustomer satisfaction surveyCustomer care activityBuild a public welfare platformParticipate in public welfare innovation researchJointly carry out public welfare projectsDaily communicationJoint training of talentsConduct research and practiceConduct joint research projects in the fields of scientific research and corporate social responsibilityRegularly issue performance reports and conduct performance communications Employee training and cultivationSalary and benefitsEmployee care programEmployee satisfaction surveyOccupational health managementLogistic services and security assuranceIndustry seminarDaily interface and communicationAssist in the development of industry standardsSocial responsibility-Public Charity OrganizationsChina Foundation for Poverty AlleviationChina Environmental Protection FoundationChina Children and Youth Foundation-Educational and Academic InstitutionsTsinghua UniversityPeking UniversityZhejiang UniversityTongji UniversityShanghai Jiao Tong UniversityHarbin Institute of TechnologyJilin UniversityDalian University of TechnologyNortheastern UniversityBeijing Institute of TechnologyUniversity of Electronic Science and Technology of ChinaChangchun Auto industry UniversityJilin Technology College of Electronic InformationNeijiang Vocational and Technical CollegeGuangdong Lingnan industry and commerce first technician collegeShandong Vocational College of CommunicationsJinzhong Vocational and technical CollegeFAW-VW 2025 Strategy-shareholderCHINA FAW GROUP CO.,LTD.VOLKSWAGEN AG Audi AGVOLKSWAGEN GROUP CHINASustainable development managementEmployee responsibilities-EmployeeProduct responsibilities-Customer-Government AgenciesMinistry of CommerceSAMRMinistry of industry and Information TechnologyState-owned Assets and Administration Commission of The State CouncilNational development and reform commissionMinistry of ecological environment-GuildChina Consumer AssociationSupplier relationship-Supplier partnerDealer relationship-Dealer partnerGreen productionGreen product-Industry organization partnerChina Association of Auto Manufacturers(CAAM)CPCAChina Society of Auto Engineering(SAE-China)Chinese auto technology researchCenter(CATARC)Green partnersSustainable developmentJointdevelopmentEconomic developmentGreen developmentSustainable Development ManagementStakeholder Relations in Enterprise DevelopmentInterests of Stakeholders in the Course of Corporate DevelopmentMajor Activities of Stakeholders in the Course of Corporate DevelopmentThe substantive topics reflect the most significant impacts an organization has on the economy,environment and people.FAW-VW adheres to the principle of stakeholder engagement,and regularly identifies and analyzes substantive topics.In 2023,through stakeholder surveys and interviews,and combined with changes in the internal and external environment,FAW-VW reviewed its substantive topics,and elevated the priority of customer satisfaction and environmentally friendly processes and products so as to better address stakeholder concerns.Based on a comprehensive consideration of importance to stakeholders and importance to the company commercial success,a matrix of substantive topic significance was formed.Selected as a benchmark unit among the National Intelligent Manufacturing Demonstration Factories of 2022Honored as Best Joint Venture Automotive Enterprise in China for 2022Achieved 10 championships in the 2022 China Automobile Industry Customer Satisfaction Survey by China Quality AssociationHonored with the Xinhua Credit Golden Orchid Cup Pioneer Enterprise in Carbon Peak&Carbon Neutrality Technology Innovation awardID.6 CROZZ secured the industrys first Five-Star Driving and Riding Quality Star CertificationID.4 CROZZ won the champion of the Large and Midsize Category Obstacle Race at the 2022 China New Energy Vehicle Endurance Competition and triumphed as the SUV category champion in the 12-hour Endurance Race Talangon claimed 7 titles at the 2022 CCPC China Production Car Championship Professional Station Audi Q4 e-tron was crowned the Luxury Performance Pure Electric SUV of the Year 2022;named China Car of the Year and China Green Car of the Year 2023;and honored as the 21st Century Business Heralds Elite New Energy Ride of the Year 2022Jetta VA3 won the Customer Satisfaction Championship in the Compact Sedan segment below 100,000 RMB in 2022 China Automobile Customer Satisfaction Index(CACSI)by China Quality AssociationJetta VS5 secured the Customer Satisfaction Championship in the Compact SUV segment below 100,000 RMB in 2022 China Automobile Customer Satisfaction Index(CACSI)by China Quality AssociationJetta VS7 secured the Customer Satisfaction Championship in the Midsize SUV segment below 200,000 RMB in the 2022 China Automobile Customer Satisfaction Index(CACSI)by China Quality Association and earned the title of Five-Star Healthy Car by China Automotive Engineering Research InstituteHonored with the Xinhua Credit Golden Orchid Cup-Excellent Case of Green and Low-carbon Technology Innovation awardAchieved 14 championships in the 2022 China Automobile Industry Customer Satisfaction Survey by China Quality AssociationHonored with the China Quality Association Quality Technology Award 2023”Awarded the Best Collaborative Employer at the CGMA Global Management Accounting Awards 2023 in ChinaAwarded with the First Prize for Innovation Achievements in State-owned Enterprise Management 2023The Chengdu Branch of FAW-VW was titled 5A-Level Model Enterprise of Harmonious Labor Relations in Chengdu CityThe Foshan Branch of FAW-VW was honored with the Digital Excellence Award in the automotive industryThe Qingdao Branch of FAW-VW was selected as a National-level Intelligent Manufacturing Demonstration Factory by the Ministry of Industry and Information Technology;also rated as the first Zero-waste Factory in Qingdao CityBoth the Qingdao and Tianjin Branches of FAW-VW were honored with the title of Second China Auto Industry Benchmark Smart FactoryFAW-VWs Volkswagen and Audi brands were honored with the China Auto Golden Service Award 2023FAW Audi Audi brand won the Auto After-sales Service Benchmark Brand Award for two consecutive yearsTavendor was honored with the Top Comfortable Car at the Third China Auto Grandeur CeremonyAudi Q4 e-tron was honored with the Top Low-carbon Car at the Third China Auto Grandeur CeremonyNew Jetta VS5 ranked first among compact SUVs below 100,000 RMB in the 2023 China Automotive Industry Customer Satisfaction Evaluation(CACSI)by China Quality AssociationImportance to company commercial successImportance to stakeholdersGreen logisticsEconomic performanceDiversity and equal opportunityPublic welfare and charityAnti-corruptionTraining and educationRaw materialsCompensation and benefitsWater resourcesDomestication and localizationSecurity assuranceGreen ITSupplier and dealer relationsEnvironmentally friendly processes and productsGreen partnersOccupational health and safetyEmploymentBiodiversityEfficient use of energyCustomer satisfactionCustomer health and safetyGreen factoriesExhaust gas,waste water,solid wasteFAW-VWs Awards and Honors in 2022FAW-VWs Awards and Recognition in 2023”Importance Matrix”of the Sustainable Development of StakeholdersSustainability Report /1918 Sustainability Report /2120 Economy02Continuous Value CreationDealer RelationshipSupplier Relationship Domestication and LocalizationRisk Management2232424546As the national stimulus policies are gradually implemented,the auto market has shown a long-term trend of growth.As the transition towards NEV has spurred new market drivers,new products and new technologies are on the rise,which further intensifies the competition.In the face of such a complex market environment,FAW-VW seizes every opportunity that come its way,commits itself to the direction of“Rising up to the challenge,Embracing innovation and transformation”and delves deep into Chinas market,to strive for green,healthy and sustainable development.ECONOMYSustainability Report /21Sustainability Report /2322 Continuous Value CreationFrom 2022 to 2023,against the backdrop of Covid recurrence,chip shortage,and a volatile market,FAW-VW united to tide over the difficulties and moved forward with determination.It pulled the strength from the VW,Audi and Jetta brands,marched ahead despite adversity,and as an industry leader,made contributions to the acceleration of the industrial innovation and transformation.In 2022,the companys revenue reached 352.06 billion RMB and,in 2023,the revenue totaled 368.75 billion RMB.In 2022 and 2023,FAW donations amounted to 35.43 million RMB and 36.87 million RMB,respectively.Its tax payment in 2022 was 41.61 billion RMB and in 2023,38.20 billion RMB.In 2022 and 2023,as the auto industry has become all the more competitive.In the face of a complicated and fluid market,the VW brand keeps a close contact with its dealers,and together they have formed and followed through on a cooperation philosophy:mutual negotiation,mutual pursuit and mutual creation lead to win-win results.In addition to this,the VW brand adheres to the strategy of“ICE and NEV Together”,and gradually puts into practice the business operation guidelines of“keep up the work rhythm,assume responsibilities and manage the business well”.In 2022,VW sales reached 1,041,077,and in 2023,the number was 1,050,017,with a year-on-year increase of 0.9%.VW brand realized sales growth for two consecutive years.Its ICE market share is registered at 6.9%,making the VW brand the only Joint Venture volume brand with growth.A Sagitar saw a cumulative sale of 285,051,defending its leader position in the A segment market.The cumulative sales of SUVs,Talagon and Tavendor,exceeded the mark of 60,000 cars,with a year-on-year increase of 111.2%,a top scorer on their segment market.In 2022 and 2023,as brand-led and customer-oriented,the Audi brand,at the key juncture when the luxury car market was transforming itself,managed to cement its foothold in the first-tier group.It sold 635,588 cars(including imported cars)from the dealer side in 2022.In 2023,it realized a sale of 698,188 cars(including imported cars)from the dealer side,with a year-on-year growth of 9.8%.Such sales achievement has pushed up the cumulative sales to over 8.5 million cars.In 2022,Jetta reached a sales figure of 146,912 cars,with 1.0%of the ICE market share.In 2023,Jetta sold 162,000 cars,with 1.2%of the ICE market share,a record-high number.The cheerful sales result would be impossible without the strong production capabilities.In 2022 and 2023,FAW-VW overcame a series of difficulties arising out of the complex and worsened business environment,made consistently solid steps on the high-quality development path,and promoted independent innovation,business transformation and upgrading.As a result,in 2022,FAW-VW managed to produce 1.82 million cars,and in 2023,the production exceeded the mark of 1.87 million cars,which lay a solid foundation for the achievement of the sales and profit targets.Moreover,FAW-VW responded efficiently to the market demands.Through flexible adjustment of model variants and production arrangement of vehicles with missing parts,the company realized a precise match between production and sales demand.The company prioritized key models to ensure their production.Focusing on the key model Audi A6L,FAW-VW front-loaded its production at maximum,improved its production capacity,and finally achieved a year-on-year 37%increase in the production volume in 2023.As to the key models of Magotan and Sagitar,the company fully tapped into the potentials of the construction and debugging schedule to produce more vehicles,resulting in a year-on-year increase of 26%in the production output in 2023.On the front of intensive digital-intelligent-transformation,thanks to the introduction of the APS advanced scheduling system,the PPA scheduling time went down from 2 hours to just 30 minutes,which raised significantly the efficiency and quality of the production scheduling.Sales PerformanceProduction and ManufacturingProduction reachedunits in 2022For the key model Audi A6L,production increased byyear-on-year in 2023For key models Magotan/Sagitar,production increased byyear-on-year in 2023Production reachedunits in 20231.81937&%million yuan1.87Sustainability Report /2524 FAW-VW has identified five key development areas:customer-centered transformation;sustainable intelligent electric transformation;the building of irreplaceable key capabilities;excellent enterprise operation and management,and significant Party education.13 important measures have been carried out on the front of customer insight,product innovation,digital transformation,etc.On digital transformation,FAW-VW adopts a“Business IT dual-wheel driving approach and defines the digital transformation strategy as“1521”.The transformation will be promoted through the Point(transformation project),Line(enterprise architecture sorting),and Area(data governance and application).To achieve the designated key goals,the roadmap is planned in three stages:basic stage,revenues increase stage,and revenues target achievement stage.Until now,the goals set in the first and the second stage have been accomplished.FAW-VW has established a Digitalization Committee and organized a series of promotion meetings,to make decisions on key digital transformation topics,and supervise the implementation and revenues of key projects.FAW-VW has established 17 Process Domain Enterprise Architecture CPC mechanisms(senior managers are the major responsible persons for company-level processes),with CPC at the leading position,assisted by Process Assistant Managers PA(L2 managers).The business transformation is carried out relying on various major business lines,and for this,a team is established with responsible persons appointed for the business architecture,application architecture,and data architecture.FAW-VW adopts the TOGAF method to conduct the diagnosis of the company situation,clarification of enterprise architecture and architecture planning,roadmap planning,and transformation project reviewing,with a view to clearly defining a three-year process domain transformation roadmap plan,and systematically advancing the implementation of transformation projects as planned.FAW-VW has built a Business IT team,which includes personnel responsible for the business architecture,data architecture,application architecture,infrastructure,information security,etc.Business Digitalization:By putting online core businesses of the 17 process domains,the company has achieved 3.5 billion RMB of cost reduction and profit increase,and improved the efficiency of business management in business operation,new business,personnel business transformation.For example,the on-time delivery rate of orders is increased from 79%to 85%,the number of staff involved in digital transformation is increased from 825 to 1382,and the key customer experience indicators performance is also enhanced drastically.The order delivery time of ID models is reduced from 24 days to 16 days.The Audis sales NPS score was 83.1 in 2022 and 93.5 in 2023,with a year-on-year increase of 12.5%.Data-Based Business:The Data-based business is the second most important part in digital transformation.FAW-VW drives continuous business innovation through data-driven projects.Data-related products and services have brought over 25 million RMB of profits and cost savings to the company.Over 100 optimization measures are well in place with an aim of the enhancement of the management efficiency,user experience,system capabilities.01Strategy Planning02Taking Multiple Measures03Transformation AchievementsIn terms of technological and innovative planning,combining the companys strategy,industry trends and customer demands,FAW-VW has built up 10 platforms for technology planning,defining the technological development direction clearly.Meanwhile,the company has created an innovative management process V2.0 for technology development,which defines a main-value chain linked by technology planning,innovative development and ingenious application.This has further enhanced the whole-process monitoring on the innovation project initiation,implementation and the final acceptance.In addition,from 2022 to 2023,the company applied for 393 patents,256 items of which were invention patents.More than 70 innovative achievements were obtained,which fully demonstrates the companys strong and fruitful technology innovation.On technology development strategy,FAW-VW focuses on 5 fields,namely ensuring project success,seizing profit,enhancing capability,building teams and strengthening Party education.FAW-VW attaches great importance to tackling the key technological tasks,and commits itself to the spirit of“Be Independent,Be the Leader”.It follows through on the brand route of“Collective Wisdom New Journey”,which defines clearly the innovative development direction in four fields and ten technological platforms.Based on this,it has sorted out 49 main technology directions with 809 items and created a technological roadmap.In the aspect of technology talents,FAW-VW has recruited 546 new employees from 2022 and 2023 into the technology pool.For the first time in the company,the TE department initiated the building of an all-staff learning route,finished two iterations of the technology position models and the learning route,leading employees effectively to enhance their professional skills.Moreover,TE has developed and carried out the new-staff training plan,conducted targeted trainings for new hires and special courses for manager candidates,organized company-level visits and experience events in TE testing rooms or testing sites.By sharing the best practice cases and choosing the best instructors and topics for each one,TE ensured 342 new graduates finished their technology projects.Meanwhile,TE has built up a digital platform for manager candidates,which could monitor the knowledge status of the manager candidates group,and develop coaching plans.It has carried out 22 special coaching courses.As a result,the percentage of new employees obtaining an award for their projects increased and the percentage of manager candidates passing the AC test also improved.Under the trend of the new four modernizations in the automotive industry,FAW-VW has started a new business layout and built an independent development team of nearly 400 members.Starting from the innovation of the vehicle connectivity scenarios and driven by the customer values,FAW-VW delves deep into the lean development and masters the know-how to develop intelligent cockpits in terms of application,OS,and domain controller software.FAW-VW is dedicated to delivering excellent products of intelligent connectivity,driving the business by employing big data,and exploring the innovative business models.In the field of product,FAW-VW has comprehensively upgraded the product experience of the three major brands.It has developed a first-class new generation of intelligent infotainment system,a leapfrog progress in the voice-command function,navigation,and a human-computer interaction.In the field of data,FAW-VW explores the value of the vehicle data deeply,accelerates the digitalization development,and spares no efforts in vehicle development,sales market expansion,after-sales profit increase,and the enhancement of vehicle lifecycle management.In the field of security and compliance,FAW-VW participates actively in the national automotive data security pilot program,takes the lead in completing the data security compliance of all products in production and research,and fulfills fully the social responsibilities.At the same time,the company synchronously promotes the compliance systems like software update management system and builds up the vehicle network security operation centers.By participating in the drafting of standards in the field of vehicle connectivity,such as the Specification for Intelligent Connected Vehicle Data Security Management System by the Automobile Standards Committee and the Requirements for Automotive Enterprise Data Security Management System by the China Association of Automobile Manufacturers,the company shares with the society its experience in data security management,contributing to the healthy growth of the industry.Technology Innovation and DevelopmentNew Energy Vehicle and Intelligent ConnectivityDigital Transformation26 By integrating Strategy,Insights,Product,Equipment,and IoT Data Sources,FAW-VW establishes a full lifecycle management and operational process encompassing User Insights,Product Operation,Product Planning and Product Development Control,effectively supporting top-level decision-making from planning to operation.Firstly,the company builds up the EPIC project(Product Lifecycle Management),realizing cross-field,cross-system business and data integration.It provides data services for over ten core IT systems in the company,making possible the digitalized management of the product decision-making meetings.Secondly,through the Car-line project,the company actualizes digital configuration and adjustments for the products,and drives data iteration in the product/equipment center.Via the construction of product/equipment data centers and business centers,FAW-VW has achieved digital product operation,increasing the business efficiency by 40%,reducing the MIX deviation rate by 30.8%,increasing the sales volume by over 12,000,and increasing the profits by 340 million RMB.FAW-VW reshapes the end-to-end processes to meet customer needs,builds irreplaceable production and sales capabilities and has realized user-centered sales and production model transformation.Firstly,an individualized OTD(order to delivery)e-commerce platform has been built,which opens up the direct linkage channel between C-end customers and manufacturing centers,providing the customers with a more diverse range of personalized product portfolio and a more transparent online ordering experience.In 2023,496,000 vehicles were delivered with customer ratings reaching 4.8 high and revenues reaching ca.60 million RMB.Secondly,the production organization adopts the collaborative production and sales model focusing on customer orders.In order to take on customer orders efficiently,it reshapes the end-to-end processes for sales order forecast and vehicle production,builds a forecast system to achieve an intelligent collaboration between production planning and sales orders,and develops an integrated dashboard of planning to secure a quick response in the entire sales and production process for multiple products offered.The refitting options are increased by 50%,with the average promised delivery period reduced to 27 days and costs saved of 160 million RMB.Thirdly,the vehicle delivery process has been updated and digitalized.The systematic barriers between dealers and the OEM have been broken down,and hence the logistics and transportation arrangements for vehicles could be completed during the manufacturing process.Thanks to the cancellation of short-distance storage and transportation as well as the secondary distribution transportation,delivery efficiency has been improved.In addition,FAW-VW has conducted intelligent upgrading of the transportation network planning,efficiently combined highway,railway and waterway transportation,and pursued the shortest possible delivery time and the least possible cost,saving 330 million RMB while keeping the delivery date.FAW-VW reshapes the fields of production and supply,and builds a lean model of supply chain management.Firstly,an end-to-end smart procurement ecosystem is created with the value chain of parts in their lifecycle at its center.This improves the procurement contract signing efficiency by 62%,and the comprehensive work efficiency by 20%,while reducing the cost by 8%and producing zero illegal procurement.Secondly,FAW-VW has initiated a completely new lean supply chain model of E-Lane(balanced chain).With the launch of this model,the trucks full load rate is increased to 68%,accumulative vehicle sequence fluctuation falls to 10,time window accordance rate hits 90%,the productivity of related logistic workers rises by 22%and the logistic cost is saved by 600RMB/car,representing a reduction of 75%with an annual saving of 100 million RMB.FAW-VW has built an intelligent benchmark factory,increased the level of digitalization,networking and intelligence of the factory and slashed operating costs.By formulating a project strategy for development,pilot program and promotion,the introduction of the industrys cutting-edge technologies is perfectly integrated with the promotion of mature technologies.Firstly,in terms of smart production,Changchun-Production Base places across the board the digitalization into core businesses focusing on efficiency,quality and cost,and solves the problem of bridging the“last mile”of digitalization,making FAW-VW one of the first joint-venture automotive enterprises selected into the 14th Five Year Plan in China.Secondly,regarding connectivity,the Qingdao-Production Base has all its production equipment in Body Shop,Painting Shop,Press Shop and Assembly Shop 100%connected with the Internet.The defect detection of painted surfaces in the Painting Shop is conducted through automated equipment,which improves the detection rate,efficiency and the car body quality.Thirdly,in terms of supplier promotion,the Tianjin-Production Base has upgraded and extended digitalization to the supplier end,and realized a quality control of over 80%of the purchased parts.Fourthly,on energy conservation and environmental protection,the Foshan-Production Base aims at building an environment-friendly enterprise by applying a number of advanced production equipment,and has achieved a balance between efficient production and sustainable development.Guided by the concept of“Green Factory,Perfect Factory”,the Chengdu-Production Base upholds the rigorous German craftsmanship standards and the high-quality product control standards,achieves independent system and technology innovation and fosters a Jetta Brand with local characteristics.In 2023,FAW-VW completed the SOP of 43 projects with an annual revenue of 72.49 million RMB,including 18.02 million RMB of energy cost reduction,15.99 million RMB of labor hour cost optimization,6.56 million RMB of spare parts savings,4.97 million RMB of scrap cost reduction,7.44 million RMB material savings and 19.51 million RMB of logistics and maintenance savings.04Key Cases and AchievementsSustainability Report /27Sustainability Report /2928 The All New Sagitar and All New Bora have been comprehensively refreshed in aspects such as exterior and interior styling,powertrain,intelligent technology,and comfort and safety.Meanwhile,both models have introduced VWs latest IQ.TECH,and integrated VWs forward-looking technological intelligence and humanistic aesthetics.From driving assistance,parking,smart interconnectivity,to lighting technology,these enhancements have comprehensively elevated user experience,setting new benchmarks for A class sedans.Upon its debut,All New T-Roc was born to lead the trend with its cutting-edge styling,upgraded powertrain,refreshed interior design,and intuitive and smart IQ-technology.With its trendsetting genes,All New T-Roc not only deciphers the code to resonate with todays youth but also sets a new benchmark in the compact SUV segment.In response to consumption upgrading,the boom in the SUV market and the new trend of intelligence development,All New Tayron family has undergone a comprehensive evolution.With cutting-edge design,fully integrated intelligent elements,and a diversified lineup of powertrain configurations,All New Tayron family provides leading driving experience and accompanies a growing number of forward-thinking users to embrace changes and keep pace with the time.ID.7 VIZZION is positioned as safe,intelligent,comfortable new flagship B BEV sedan.It is VWs world first medium-sized BEV car.ID.7 VIZZION not only continues ID.familys persistent pursuit for safety and quality,but also realizes leap-forward development in intelligent technology.The launch of medium-to-large 5-seat SUV,Tavendor,fully met customers diversified and personalized demands.It particularly caters to new-generation customers who are keen on outdoor exploration,refined social engagement and life of quality,offering them an all-new,hardcore mode of mobility.JuneAprilAugustDecemberNovemberAll New Sagitar and All New BoraAll New T-RocAll New Tayron FamilyID.7 VIZZIONTavendor202220222023Audi Q4 e-tron is an NEV product developed by Audi based on the brand-new MEB platform.The exterior adopts sports design elements,dynamic body lines and digital lighting,demonstrating its aura as a BEV premium SUV.Ever since its launching,it has achieved good market feedback.JulyAudi Q4 e-tronThe brand new Audi SQ5 Sportback is a high-performance premium coupe SUV with sharp elegance and excellent driving experience.With standard 3.0TFSI 8-speed Tiptronic full-time quattro four-wheel drive system,it inherits the sporty and premium DNA of Audi Sport models,and gives users unparalleled driving pleasure with its strong power and excellent control.SeptemberAll New Audi SQ5 SportbackThe new Audi A6L has achieved comprehensive upgrades on both design and premium experience.With its more attractive sense of product value and consistent high quality,it brings premium driving experience beyond expectations to the value creators of the era.AugustNew Audi A6LIn December 2022,FAW Audi introduced the flagship EV product RS e-tron GT of the same platform as Porsche,successfully expanding its layout in the high-end EV market.DecemberAudi RS e-tron GTThe brand new Audi A8L interprets the aesthetic inspiration and intelligent connotation of the top flagship product with its perceptual aesthetics and friendly technology,creating a new product image of premium D-class intelligent flagship car.At the same time,Audis first D A8L Horch model was introduced with a 130mm wheelbase extension and exclusive fictitious graticule grill.It will continue Audis century-old legend as a stellar example of administrative model.AugustNew Audi A8LNew Product Launch-Audi BrandNew Product Launch-VW brandSustainability Report /3130 2023Boasting its unique product concept,Audi S4 Avant possesses both daily practicality and functionality,continuously satisfying users pursuit for a better life.While bringing users perfect driving experience,Audi S4 Avant will continue to consolidate the brand image of Audi.JuneAudi S4 AvantNew Audi A6 Avant and new Audi A6 allroad have made further upgrades in exterior,interior and equipment to meet the high-level demands of travel enthusiasts.As a paragon of premium C-class wagon,new Audi A6 fully combines SUVs off-road nature with sedans comfort.It is favored by many successful,individualistic and high-end people who enjoy a tasteful life.NovemberNew Audi A6 Avant,New Audi A6 allroadAs a flagship EV product developed on the same platform as Porsche,Audi e-tron GT meets users expectation for an NEV car with its graceful design and strong power.JulyNew Audi e-tron GTPositioned as the most beautiful coupe,the new Audi A7 Sportback has upgraded the extraordinary taste of users with its“aesthetic without compromise product style and excellent performance,and has been adored by many social elites with refined and unique fashion taste and love for sports.NovemberNew Audi A7 SportbackStylish and dynamic exterior design,distinctive interior color,and fashionable elements such as punching and stitching,these are the features that create a unique urban SUV image.Leading functional equipment such as three-zone automatic air conditioning,ACC adaptive cruise,digital key and flexible rear space combination make the new Audi Q3 a very practical SUV.AugustNew Audi Q32022The intelligence and convenience of the new car has been significantly improved with the introduction of vehicle connectivity and other functions.An online and offline coordinated launch event was held together with Tik Tok where both cars were well-received and loved by users.New Jetta VS5/VS7 have made great design changes,using soft material for interior cover.Cooperating with well-known influencers,singers and comedy stars,the launch information was spread innovatively through online shows and gained 7.3 billion exposure.The new car was created together with ABT,a well-known refitting factory.As the first official modified product ABT,its sporty and cool modification features were shown in the cooperation with the Universiade and Gem,the singer.The younger and more dynamic glossy edition continues to penetrate into the younger customer group.Combining with the interesting concept of camping lifestyle,Jetta held its first offline product launch activity,forming online and offline multi-touchpoint interaction,and enhancing the user experience.The glossy edition received positive comments from users,gradually improving product capacity.MayMayAugustAugust2023 New Jetta VS5/VS7New Jetta VS5/VS7New Jetta ABT Limited EditionNew Jetta VS5/VS7 Glossy Edition2023New Product Launch-Audi BrandNew Product Launch-Jetta BrandSustainability Report /3332 In 2023,based on the market changes,VW brand has actively sorted out the channels and firmly carried out the“network slimming project”through developing downsize and downgrade business process for dealers who are in operation difficulties and optimizing dealer termination business focusing on“network clearance and exit persuasion”.Through perfecting process and active communication,VW brand has provided various proposals for dealers with operational difficulties including downsizing,downgrading and dealers termination.In the whole year,11 dealers were downsized,33 dealers downgraded,and 89 dealers terminated from the network,further resolving potential channel risks in advance and improving channel health.Through downsizing and downgrading,VW Brand reduced dealers operating cost,helped stores in extreme difficulty to timely cut loss,and decreased the cost of brand management.These efforts contributed to an estimated dealer cost reduction of 56 million yuan per year,and also helped the brand reduce costs by 64 million yuan per year.In order to provide users with safe and reliable spare parts and accessories,FAW-VW has optimized the packaging standard of spare parts in strict accordance with the Product Quality Law of Peoples Republic of China(PRC),and required the suppliers of the whole network to uniformly implement the standard.The standard requires that certificates should be provided for all spare parts products,including but not limited to the name of the manufacturing unit,unit address,spare part number,spare part name,part model,factory date,serial number of certificate,inspectors signature,etc.The labeling of chemical spare parts is required to be strictly in accordance with GB 15258-2009 Chemical Safety Labeling Regulations;The technical description of chemical safety shall be implemented strictly following GB 16483-2008 Technical Description of Chemical Safety _ Contents and Project Sequence.02Network Slimming03AftersalesFacing the ever-changing market structure and competition,VW brand keeps emphasizing on the dealers following status and operation quality,keeping the overall dealers following rate above 92%.It continues to develop a lean supply and demand management system to promote a demand-oriented resource allocation strategy and gradually increase the proportion of dealers active demand to over 95%.It also creates a product-centered marketing system which helps dealers greatly improve their profitability,and jointly build a high-quality sales system with dealers.01High Quality SalesDealer RelationshipIn 2022-2023,VW brand seized the development opportunities of beneficial policies and market demand etc.,kept stressing on user-oriented principle,and continued to deepen brand operation focusing on transformation in three dimensions:electric innovation and transformation,high-end upward breakthrough and digital intelligence transformation.VW BrandSustainability Report /35To enhance awareness of Audi New Energy,a special new energy showroom was established in the central city area and New Energy commercial areas.A total of 6 showrooms were established from 2022 to 2023,and an NEV network model was developed using big data analysis to accurately define spots with commercial value.Existing 4S dealers were upgraded with three styles of new energy exhibition areas and supporting high-power charging stations.By the end of 2023,49 HPC charging stations were put into use.For the main model Q4 e-tron,experiences from previous E tron and Q2L e tron were summarized to formulate differentiated authorization strategies that stimulated dealer enthusiasm for investment and sales.A new energy sales team was vigorously cultivated with a focus on developing sales talk regarding selling points exploitation,competitors benchmarking,objections handling,must-introduce selling points,and test drive key points.Two centralized trainings for Q4 e-tron were organized,covering more than 2,000 sales staff and increasing average test score by 24%.NEV sales advisors certification has been implemented with a total of 589 people passing certification from 2022 to 2023.These measures supported the Q4 e-tron sales target fulfillment.To reduce dealer operating expenses and improve operational efficiency,Audi brand has established a cross-departmental team with the goal of enhancing efficiency through measures related to assets,personnel,operations,and processes.In 2023,it formulated important measures of two sharing and two optimization,namely:sharing idle or underutilized assets,sharing 4S dealers and diversified staff within the same city and group,optimizing dealer operations by reducing the number of test drive cars and increasing the basic commission payment ratio,and optimizing process from offline operation to full-link digitalization.In 2023,two sharing and two optimization resulted in a reduction of approximately 630 million in dealer operating expenses.Audi brand also innovated the 112 communication mechanism by conducting monthly sales-led strategy livestreaming,quarterly dealer expert committee conferences and biannual core investor exchange meetings were established to facilitate direct communication with investors and dealers.These initiatives successfully aligned manufacturers with dealers while strengthening information transmission efficiency and transparency,building a closer and more efficient cooperation between OEM and dealers.01High-Quality Sales02Reduces Costs and Increases Efficiency for Dealers03Upgrading Cooperation with OEM34 From 2022 to 2023,Audis channel management adopted an overall strategy focusing on improving dealer terminal management,assisting brand promotion,and enhancing customer experience in order to achieve current and long-term business targets with high quality,and innovated management to ensure the health,vitality,and sustainable development of the network.Audi BrandSustainability Report /3736 In response to the current downward market environment,Jetta brand works closely with its dealers to overcome challenges by establishing a closer communication mechanism between manufacturers and dealers.It also normalizes communication between core investors,and launches monthly high-frequency communication on specific topics.Those communications aim at discussing challenges and opportunities in the current volatile market,formulating future-oriented tactics,and unifying operation strategies.From 2022 to 2023,a total of 13 meetings were held,including three offline core investor communication meetings,six special business improvement meetings,and four online communication meetings,covering 214 dealer investors,establishing closed-loop management for 275 terminal issues,and significantly promoting targeted improvement and business optimization.Close Communication between OEM and Dealers,Continuous Business OptimizationVW brand is dedicated to establishing an industry-leading empowerment system that provides systematic and standardized high-quality empowerment for dealers.In pursuit of this goal,VW brand unwaveringly promotes the online and offline complementary empowerment model.By 2023,there were over 2,166 course modules available on the online learning platform,with online empowerment courses and livestreaming reaching 84,000 person-days.VW brand Training Centers also operated smoothly and completed the contract renewal of the on-demand service model by the end of 2023,further reducing service prices and improving cost-efficiency.Based on the actual needs of dealer staff,VW brand continues to optimize its curriculum system by establishing a flexible empowerment plan and providing standardized content for dealers.The brand develops the series courses of Dealer Management Core Competitiveness,launches targeted empowerment,organizes dealer general managers tour to strengthen dealer confidence and convey brand care,and promotes hierarchical management for new sales advisors to identify shortcomings and ensure targeted empowerment,with certification rate reaching 90%in 2023.To address personalized dealer needs,VW brand has established a dealer problem diagnosis,improvement,and in-store follow-up guidance system.From 2022 to the end of 2023,174 dealers completed in-store empowerment(70 dealers in 2022,104 dealers in 2023),covering a total of 2,780 people(700 people in 2022,2080 people in 2023),and realizing dealer demand fulfillment rate of 100%.The capacity for dealer internal trainers to conduct transfer training and the quality of their courses are equally important.VW brand has been continuously optimizing its hierarchical management system of dealer internal trainers.By the end of 2023,dealer internal trainer certification rate reached 2023.An expert internal trainer team was also established,with a total 120 members and SKU coverage rate of 88%.In order to create an environment where all employees can effectively introduce cars and improve terminal sales capabilities,VW brand organized Talagon and Tavendor Sales Skills Competition in order to promote training through competition and efficiently extract outstanding experience for extensive sharing.VW brand sorted out and improved the entire life cycle management mechanism for sales talk,developed on the co-creation platform scenario-based sales talk that is easy to understand,communicate,and impress customers using selling points and attraction points,and made timely updates according to changes of our own products and of competitors.01Mutual Empowerment to Support Terminal Sales02Focus on Demand and Optimize Curriculum System03In-Store Counseling to Meet Front-Line Needs04Enhancing Internal Training and Strengthening Sales Foundation05Promoting Training through Competition and Enhancing Sales Capacities06Iteration of Sales Talk and Sales ToolsJetta BrandDealer TrainingVW Brand38 In 2023,a diagnosis-driven special empowerment in-store counseling process was launched.After multiple rounds of business changes,103 in-store counseling sessions were successfully conducted covering 79 dealers,whose year-on-year level of performance in sales volume and gross profit successfully exceeding market average.Additionally,communication meetings with core investors led to the execution of 11 cocoon-breaking plans throughout the year covering key business segments such as showroom,level two network,new media,gross profit,and DCC etc.Starting from the perspective of investors,these initiatives increased their focus on businesses,and drove the replication and promotion of benchmarking experience.Taking Panda as the prototype,the core selling points of the brand are transformed into graphics,texts,and animations to facilitate better understanding of products for front-line sales and customers in a more accessible manner,and also improved the sales advisors knowledge and utilization of these materials.Additionally,the first Jetta brand sales and service skills competition was held,along with the launch of 945 strong foundation empowerment,and establishment of Jetta _ Training new media account and optimization of sales assistance tools,enhanced personnel capabilities across multiple dimensions.Starting from 2023,Jetta brand has established a dealer store-side improvement tracking system.This includes monthly monitoring of the implementation of the store-side performance improvement plan,identifying execution pain points,and ensuring successful implementation.Based on performance diagnosis reports,Jetta brand evaluated the effect of improvement and adjusted improvement plan.Furthermore,a behavioral working mechanism is formed by summarizing and refining successful improvement actions,solidifying the achieved results.02Carry out Empowerment with Multiple Parallel Measures03Improvement Tracking,Continuous OptimizationSustainability Report /39In order to bolster dealers confidence in Audi brand and enhance their understanding of its history,value,and concept,Audi launched the Mentality Strengthening Action.Three training materials including Brand History Manual,Brand Strategy Manual and Technical Manual were developed,additionally,and the offline training sessions Way of Audi for boosting dealer confidence have been relaunched.Through a combination of online and offline methods,a total of 11,000 individuals participated in trainings,achieving an average score of 95 points after completion.Furthermore,over 60 brand sales talks were created and more than 20 experience improvement proposals were generated.To retain high-end staff within dealers,Audi implements a talent training and retention plan with focus on general manager positions.The plan involves implementing a transformation plan that begins with teaching general managers necessary basic knowledge followed by targeted training based on their specific business scenarios.Advanced management practices are then introduced using a project-based approach to improve management capabilities.To ensure effectiveness,a closed-loop verification process is designed within the business reporting link.Finally,a star rating project based on performance and fulfillment is developed to guide general managers in promoting and enhancing brand loyalty in alignment with the strategic direction of the brand.Empowering Training for Improvement,Cultivating Talent for DevelopmentAudi BrandTo address existing diagnostic needs,the systematization and automation of dealer financial data and performance data have been completed,guaranteeing smooth data acquisition channels.In 2023,an additional 114 indicators were incorporated into the system,ultimately forming a stable and clear financial and business integrated diagnostic logic system consisting of 387 indicators.The financial diagnosis report includes rebate payment,profit research,etc.,issued every N 2 month;while the business diagnosis report cycle is fully synchronized with month-on-month data presentation,issued every N 1 month.01Integrate Diagnostic Analysis for Both Finance and BusinessIn order to effectively empower and cultivate outstanding management and frontline personnel for Jetta brand,and to enhance the overall business performance and profitability of dealers,starting from 2022,Jetta brand shifted from traditional training to empowerment,and implemented a closed-loop management system aimed at enhancing personnel capabilities through diagnostic analysis,empowerment implementation,and improvement tracking.Jetta BrandSustainability Report /4140 Innovative Automobile Financial ServiceVW BrandAudi BrandFrom 2022 to 2023,VW brands auto loan business focused on customer needs while actively leveraging partner resources and cooperating with banks to capitalize on opportunities within the auto finance market,and creating innovative long-term high-profit loan product.The product was launched across 8 regions in 2023 which increased dealer profits by 25 million.Auto finance continued tapping partner resources,developed cross-industry cooperation,expanded customer acquisition channels,drove brand exposure,and enhanced traffic,realizing sales of 16,392 units in 2023.Focusing on key models,VW brand worked with financial partners to invite high quality customers in the system.In 2023,10 special marketing activities of loyal customers and test drive events for Talagon and Tavendor were successfully carried out.Starting from customer needs,VW brand launched products such as Yibao service and ID.three main electric parts lifetime warranty service in 2022,with over 200,000 cumulative sales,improving both customer satisfaction and dealer profitability.From 2022 to 2023,the cumulative insurance renewal business reached 3.42 million orders,and the self-operated extended warranty business reached 1.09 million orders.From car purchase to use,VW brand provided customers high-quality auto finance services in an all-round way,and strived to establish top auto finance ecology in the industry.VW brand has benchmarked against the experience of mature overseas markets and explored the layout of a leasing system to lead users leasing demand and develop sales incremental channels.The brand has developed and designed six leasing scenarios including Talagon and Tavendor in-depth test drive car leasing at dealers,ID.genius leasing,521 family carnival leasing for group employees,and official car leasing for VW brand regional managers.This effort contributed a sales increase of over 3,800 units while laying a solid foundation for future leasing platform upgrades and in-depth development of the 2C-end leasing market.From 2022 to 2023,Audi brand focused on customers and offered a range of financial products tailored to various scenarios,including car purchase,car usage,and car rental.In response to users car purchasing needs,Audi provided diverse financial products with periods ranging from 12 to 60 months,and 0%interest rate.In last two years,these options were made available to 245,000 customers.To address customers car usage requirements,Audi offered seven exclusive products including extended warranty,insurance benefit package,and accident car compensation service,providing high-quality experience for the 602,000 Audi users.For the long-term leasing needs of the customers,Audi innovatively introduced operational leasing product that delivered an industry-leading luxury car leasing experience.Additionally,this effort contributed to the sales growth of new energy vehicles of Audi brand.From 2022 to 2023,in order to improve dealer capacity and efficiency,Audi brand has provided more efficient digital tools for insurance marketing for over 300 dealers,realizing the initial digitalization of financial business on the dealer side.It providedAudi customers with a high-quality mobility experienceThe Volkswagen brand has explored new channels to increase sales and has accumulated a sales increment of over2023 dealer profit increased by3,80025vehicles million yuan602,000FAW-VW aims to build a healthy,stable and sustainable supply chain system,and facilitate green development,transformation and upgrade of the supply chain by promoting supplier localization,full-scope performance management and green development at the supplier side.By cooperating with suppliers and third-party partners,SU has helped suppliers achieve management and technology optimization in terms of energy saving,emission reduction and carbon reduction.For example,Qingdao Huaxiang Automotive Metal Parts Co.,Ltd.has reduced carbon by 85.19 tons per year through automated station start-stop control.ZF FAWER Chassis Technology(Changchun)has reduced carbon by 93.54 tons per year through intelligent lighting control.Changchun Faway Adient Automotive Systems Co.,Ltd.Tianjin Branch has achieved carbon reduction by 108.93 tons per year through the comprehensive cost optimization of transformer.Volkswagen Automatic Transmission(Dalian)Co.,Ltd.has reduced carbon by 3,106.02 tons per year through washer substitution project.BASF Shanghai Coatings Co.,Ltd.has reduced carbon by 4,500 tons/year through the recycling of aqueous cleaners.And Cosma Automotive Shanghai Co.,Ltd.has reduced carbon by 540.55 tons/year through the energy-saving renovation project of boiler gas.FAW-VW Supply(hereinafter referred to as SU)has constructed a green development strategy and developed key initiatives in five dimensions to support the companys carbon reduction goals,enhance supply chain green management,build a leading green supply chain,and promote the sustainable development of the supply chain.System construction was carried out in sectors including clean energy conversion of the supply chain,material recycling and low-carbon processes.Until now,SU has signed green energy commitments with 100 key suppliers,covering more than 60%of key components.Furthermore,SU has realized recycling of aluminum scrap materials from factories,with annual recycling volume 13,593 tons and annual carbon reduction 182,282 tons.A multi-party agreement was signed with CGNPC to form a nuclear power alliance to help 12 suppliers achieve their clean energy transformation.The promotion of the green development concept and the establishment of a green supply chain are key initiatives of FAW-VWs 2025 strategy to deepen the supplier management system.Based on promoting sustainable development and green transformation of the supply chain,SU has made supplier green development an important part of supplier capability building,and promoted the sustainable development of the whole industrial chain and life cycle of suppliers through measures including the Green Partner Program and the Material Recycling Program.SU has supported the development of component zones through the production base strategy,regularly organized exchanges between zone supplier associations to share resources and policy support,and helped local suppliers realizing healthy development.For instance,Jetta brand of FAW-VW Chengdu Branch is committed to promoting the localization development of the whole value chain.While encouraging suppliers to come up with localized low-cost solutions,it also formulated sourcing business strategies with priority given to localized suppliers.85 Chengdu suppliers have been targeted for support,of which 21 have achieved complete localized development and 64 have achieved more than 50%of localized development.In 2022-2023,SU has developed nine training courses for suppliers in collaboration with multiple departments including Planning(PL),Controlling(CT),and Quality Assurance(QA).33 training events were successfully held,including three online live sessions,six practical exercises and 24 face-to-face coaching sessions.With 1,700 people trained,70%of suppliers were effectively involved and their overall capabilities were comprehensively improved.In 2023,SU fully implemented digital evaluation of supplier performance,enabling online evaluation of 1,360 production material suppliers and their factories,ensuring real-time summary and feedback of supplier performance.Through the Green Partner Program,SU joined forces with a third party to conduct on-site environmental energy and sustainability reviews of suppliers,which has now covered 200 suppliers,identified and eliminated 687 environmental risks and discovered 498 energy-saving opportunities,reducing carbon emissions by 34,422 tons per year and creating energy-saving benefits of 81.9 million RMB.In 2023,SU achieved production guarantee of 1.85 million vehicles,exceeding the cost optimization target,and took multiple measures to promote supplier cost optimization,capacity enhancement,and digital transformation.For example,through digitalization construction of PRIME system and integration of suppliers business end,the business online coverage has reached 100%and the online contract-signing rate over 95%,and the contract-signing period has been significantly shortened to one day.We have also established the export business of parts to help suppliers expand user group,revitalize surplus production capacity,and increase revenues and profits.01Strategic Sourcing System05Supplier Management Regarding Social Responsibility02Sustainable Management System of the Supply Chain06Green Development of Suppliers03Promoting Supplier Localization07Supplier Training04Supplier Performance Management08Cost Optimization Results from SuppliersSupplier RelationshipSustainability Report /4342 Sustainability Report /4544 Domestication and LocalizationTo promote the development of Chinas automotive industry and build a stable and sustainable industrial chain,FAW-VW focuses on and provides comprehensive support to local suppliers in terms of policies,funding,training,and procurement etc.,gradually promoting the transition from imported parts to domestic production,improving the localization rate of models,achieving technological autonomy and controllability of key parts,and promoting the development of the domestic automotive parts industry.FAW-VW currently has stable partnerships with over 2000 suppliers,with sole proprietorships or joint ventures accounting for 50%and private enterprises accounting for 42%.There are 171 local suppliers in Changchun,accounting for 58%of the purchase amount of the Changchun base;85 local suppliers in Chengdu,accounting for 48%of the purchase amount;54 local suppliers in Foshan,accounting for 37%of the purchase amount of the Foshan factory;35 local suppliers in Qingdao,accounting for 46%of the purchase amount of the Qingdao factory;51 local suppliers in Tianjin,accounting for 68%of the purchase amount of vehicle models produced in the Tianjin factory.The increase of localized suppliers has not only driven local economic development to a certain extent,but also created numerous job opportunities for the local area.Among them,suppliers in Changchun have provided 180,000 jobs,suppliers in Chengdu 90,000 jobs,suppliers in Foshan 70,000 jobs,and suppliers in Qingdao and Tianjin each 50,000 jobs.FAW-VW currently has stable partnerships with overWith sole proprietorships or joint ventures accounting forPrivate enterprises accounting for2,000suppliers50B%Sustainability Report /4746 FAW-VW strives to build an efficient and professional collaborative risk management system,effectively improving the quality of risk management.Firstly,update and optimize the risk system process,release 2 company level regulations and 4 business processes and update corresponding tools and forms,providing a mechanism guarantee for preventing and resolving risks in business processes.Secondly,strengthen the construction of risk management organizations,designate contact persons for risk control in various business departments of the company,and assign dedicated responsible personnel for tasks including the departments business management process clarification,internal control defect rectification,and major risk handling.Thirdly,in the context of transformation and changes,the company actively implemented business changes,optimized risk management mechanisms,and established a risk assessment mechanism that combines quarterly,special,and annual assessments.Fourthly,further strengthen the collaboration between risk management and the companys internal supervision system to form a concerted force for enterprise internal supervision.With the dual driving forces of external environment and internal demand,FAW-VW has innovated its risk prevention and control work mode,strengthened the control of major risks and important business areas,and shifted its management from the“defense”to the more active“attack”mode.Firstly,organize the collection,analysis,and reporting of risk information on a quarterly basis around major risks and key business areas of the company,and timely track and understand the situation of new risks and the trend of major risks of the year.Secondly,focus on major risks,carry out exclusive projects of risk control support,establish internal and external risk collection channels for risk collection,optimize risk assessment tools,improve risk monitoring indicators,promote businesses including indicator digitization and empowerment support,and enhance the level of major risk control.According to relevant data,90%of business risks in daily work can be effectively controlled through business processes.Therefore,the foundation of risk management is the processes of business departments.In order to better reduce risks from the perspective of process design,FAW-VW has optimized the business process audit tool based on business practice,refined the process review elements,and reviewed 1656 new standard process documents of the company,effectively improving the effectiveness of process internal control design.At the same time,in order to improve the operational efficiency and application effectiveness of business process audit tools,the company has applied digital means to realize one-stop closed-loop management.In the past two years,business operation data shows that the review and application of risk control tools have achieved significant results,effectively improving the design maturity of the companys business processes,reducing the possibility of major process risks,and providing reasonable guarantees for the efficient and stable operation of the company!FAW-VW focuses on embedding integrity risk management into the entire business process,focusing on key positions and critical procedures,effectively identifying integrity risks,developing targeted prevention and control measures,and promoting the implementation of measures.From 2022 to 2023,after evaluation and clarification,all departments of the company identified 577 key positions with integrity risks,accounting for 55%of the total positions.By identifying the integrity risks of key positions,regulatory measures were formulated based on the characteristics of the position.Focus were also give to positions on the same level and category to strengthen warning and deterrence.Continuously deepening the dual protection education for FAW-VWs business and employees careers.From 2022 to 2023,76 new managers have received training on integrity in their work,208 integrity reminders were given through collective talks,and 694 candidates for reserve managers received training on integrity in their work.We conducted level by level integrity reminder talks for key personnel,covering over 800 managers and more than 11000 other key personnel.The Party Conduct and Clean Governance Construction Responsibility Area has conducted 8 quarterly special learning sessions,covering more than 86000 party members and key personnel.In addition,172 sessions of disciplinary instructors were conducted.We organized specialized training and online exams on party discipline and national laws,covering 23426 people.To strengthen the cultivation at the source and facilitate the transition from the campus to the workplace,528 new employees received education on integrity in their work,guiding them to establish a sense of self-discipline and integrity in their work to make a good start and take good steps in the new phase of their lives.FAW-VW has always been dedicated to building a high-quality and high-standard compliance system,establishing a compliance organization,and forming a compliance management structure under the leadership of the Compliance Committee,with regular members of the compliance working group working together,specialized members watching over key areas,and cooperation between various departments.We optimized operational mechanism,and improved multiple work mechanisms including compliance system evaluation,compliance risk warning,compliance review of rules and regulations,and special evaluation of key compliance risks.We also established a compliance culture education system,developed a compliance culture construction process,formed a curriculum system for rule of law,risk control,and compliance education,and carried out 3 joint construction activities in key areas,achieving 100%coverage of compliance culture publicity,and 93%recognition of compliance integrity culture.We have established a comprehensive compliance risk prevention and control mechanism,and improved the close-loop management mechanism for risk identification,evaluation,planning and handling,risk control,special evaluation,and continuous improvement.From 2022 to 2023,we had 124 compliance risk assessments,11 hotspot tracking warnings,and 283 handling measures.We carried out special evaluations in key compliance areas,collaborated with the three sales brands to conduct anti-monopoly compliance evaluations,and updated relevant standards and processes including the Anti-Monopoly Compliance Boundary List,Anti-Monopoly Compliance Guidelines for Typical Business Scenarios,and Law Enforcement Investigation Cooperation Manual.We established a data compliance evaluation and review mechanism,and developed 3 sets of compliance guidelines,3 sets of compliance checklists,and 2 sets of detection tools through connecting business scenarios and identifying risk points and management prompts,guaranteeing effective control of the companys compliance risks.Legal actions against improper competition behaviors,anti-trust and anti-monopoly practices are of crucial importance to the normal operation of the company as they involve disputes arising from fair market competition and the effective operation of the market economy.The company continuously learns relevant laws,regulations and regulatory requirements such as the Anti-Unfair Competition Law of the Peoples Republic of China and the Anti-Monopoly Law of the Peoples Republic of China.Up to now,the company has not receive any legal actions against improper competition behaviors,anti-trust or anti-monopoly practices.Improve the risk management system and mechanismInnovate the work mode of risk prevention and controlOptimize business process audit tools and promote their digital applicationIntegrity risk management and controlCompliance managementLegal actions against improper competition behaviors,anti-trust and anti-monopoly practicesRisk ManagementFAW-VW has conscientiously implemented the deployment requirements of the State owned Assets Supervision and Administration Commission of the State Council on strengthening the internal control system construction of central enterprises.Focusing on the overall goal of strengthening internal control,preventing risks,and promoting development,it has gradually built a scientifically standardized,effective,and efficient risk management system,providing reasonable guarantees for the companys sound and orderly operation,and helping to achieve the companys business targets.Sustainability Report /4948 Society03Employee StatusEmployee Career Development PlanOccupational Health and SafetyEmployee CaringCustomer Health and SafetyCustomer SatisfactionPublic Welfare and Charity50525862666873With the vision of being the most outstanding automotive enterprise in China and the most dynamic company in the hearts of employees and partners,FAW-VW adheres to the corporate mission of“making classic cars with high value,creating excellent mobility services,and promoting harmony among people,vehicles,and society”.Committed to customer-oriented approach,FAW-VW has been providing high-quality automotive products and services to customers,and helping the steady development of Chinas automotive industry.On the other hand,we have been actively fulfilling social responsibilities,creating a high-quality development platform for employees,paying attention to and supporting public welfare undertakings,winning widespread recognition from society.SOCIETYSustainability Report /49Sustainability Report /5150 In 2022,the number of managers totaled 452,of which 388 were males,accounting for 86%;64 were female,accounting for 14%.365 of them aged 30-50,accounting for 81%;87 of them aged 50 and above,accounting for 19%.In 2023,the number of managers totaled 468,of which 392 were males,accounting for 86%;76 were female,accounting for 16%.397 of them aged 30-50,accounting for 85%;71 of them aged 50 and above,accounting for 15%.At the end of 2022,FAW-VW had a total of 43 senior managers,accounting for 10%of the total manager headcount at the end of the year;77 of them were L1.5 level managers,accounting for 21%of the total number of employees at the end of the year.There were 16 female senior management staff(senior managers and L1.5 managers),accounting for 13%.At the end of 2023,there were 37 senior managers,accounting for 8%of the total number of employees at the end of the year.81 of them are L1.5 level managers,accounting for 17%of the headcount at the end of the year;There are 17 female senior management staff(senior managers and L1.5 managers),accounting for 14%.38,856 Regular Chinese Employees in 202237,945 Regular Chinese Employees in 2023Employment statistics for 2022Employment statistics for 20232022 Resignation StatisticsResignation Statistics in 2023Total number and proportion of new and resigned employees by age,gender,and region in 2022AgeBaseBaseBaseBaseGender3079270.5%Number of new employeesPercentageNumber of new employeesPercentageNumber of resigned employeesNumber of employeesPercentageNumber of resigned employeesNumber of employeesPercentageChangchun97186.5%Changchun68478.5%Changchun62022,9762.7%Changchun83322,5323.7%Male71563.6%Tianjin242.1%Tianjin70.8%Tianjin1902,6567.2%Tianjin1212,6354.61-5033129.5%Chengdu443.9%Chengdu13215.2%Chengdu1256,3192.0%Chengdu866,5341.3male40836.4%Qingdao191.7%Qingdao172.0%Qingdao1752,5726.8%Qingdao1462,6475.5Q00Foshan655.8%Foshan313.6%Foshan2764,3336.4%Foshan1123,5973.1%AgeGender3062772.0%Male57465.91-5024428.0male29734.1Q00AgeGender3049610,3984.8%Male1,27336,1713.51-5088226,9983.3male1132,6854.2Q81,4600.5%AgeGender303878,2774.7%Male1,20035,1213.41-5090928,0043.2male982,8243.5Q21,6640.1ced with the severe challenges brought by industrial transformation,FAW-VW has been putting“talents”at the center and recruiting widely,openly,and equally through multiple channels such as domestic university recruitment,overseas recruitment,and social recruitment.Refraining from hiring child labor,forced or compulsory labor,we have been providing employees with unbiased and non-discriminatory career opportunities and development space,respecting their personal development wishes,and providing reasonable,legal,and compliant channels to express their opinions.We have also been offering employees channels for growth and development opportunities,maintaining the continuous improvement of their abilities and values,and advocating for reasonable work and healthy living to comprehensively enhance the happiness and quality of their lives.On compensation system,FAW-VW has established a compensation strategy of“payment based on positions and competences”in 2022,reshaping the compensation system for operational personnel.Firstly,we benchmarked the labor market around each base and designed differentiated compensation standards.Secondly,we increased the proportion of monthly compensation,enhanced monthly guarantee and incentive timeliness.Thirdly,we strengthened the application of performance results in annual bonus distribution,allowing value creators to receive more returns.In terms of social security,FAW-VW has timely and fully paid social insurance and housing provident fund for all employees in accordance with relevant national laws and regulations,established a monthly compensation guarantee mechanism,balanced monthly income of employees,and ensured their daily lives.Top EmployerExpatriate employees of FAW-VW come from 23 countries including Germany,Mexico,Czech Republic,Portugal,Brazil,as well as 25 parent companies,including Volkswagen Germany,Audi,Volkswagen Mexico,Skoda,Volkswagen Brazil,and Porsche.As of December 2023,FAW-VW has 268 expatriate employees in total,of which 201 are managers,and 67 are employees.Managers account for 75%and employees 25%.Global Employee OverviewEmploymentSustainability Report /5352 20222023Employee satisfaction with empowerment according to employee categoriesPosition TypePosition TypePosition TypePerson-TimePerson-Time2023Learning hours(hours)Learning hours(hours)2022Management TeamOperational TalentsProfessional TalentsManagement TeamOperational TalentsProfessional TalentsWhite Collar EmployeeBlue Collar Workers32,768404,357207,67568,4951,095,548393,95883%8,656210,42490,67214,733511,874244,72784%Manager candidate channel:FAW-VW,guided by“value creation”,has created a talent development channel that covers the entire career of all types of employees,where“everyone can succeed,everyone strives to succeed,and everyone fully displays their talents”.A systematic and reasonable training and selection system has been established for manager candidates,providing FAW-VW with approximately 1,900 candidates(accounting for 1/4 of the total number of white-collar workers).Professional talent channel:since the reform of the white-collar system,FAW-VW has strengthened the positive cycle of value management,with an annual promotion rate of about 10%for P/T sequence employees.Meanwhile,the job qualification criteria are iterated on a yearly basis.We are committed to building a learning organization that empowers,certifies,and develops employees,thereby achieving the integration and development of employees and organizational capabilities,helping the company achieve strategic goals.Operation talent channel:we connected posts,levels,positions and compensation,reshaped the human resources system,and integrated the original posts into four sequences to create a development channel where everyone can enjoy development and only those with achi
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Kapitelname01Foreword02General Disclosures03Commitment to Initiatives 04Raw Materials05Outlook for 202406AnnexResponsible Raw Materials Report 2023Volkswagen Group Responsible Raw Materials Report 2023201Foreword02General Disclosures03Commitment to Initiatives 04Raw Materials05Outlook for 202406AnnexContents4 Foreword 6 General Disclosures 7 Responsible Supply Chain(ReSC)System 9 Raw Materials Due Diligence Management System(RMDDMS)12 Social,Human Rights and Environmental Risks in Scope 13 Priority Raw Materials 14 Regulatory Frameworks and Guidelines 17 Main Tools of the RMDDMS 18 Supply Chain Grievance Mechanism19 Limitations 20 Commitment to Initiatives 21 DRIVE Sustainability 21 German sector dialogues on the implementation of the National Action Plan for Business and Human Rights(NAP)22 Initiative for Responsible Mining Assurance(IRMA)22 Responsible Minerals Initiative(RMI)23 2023 Highlights 24 Raw Materials 25 Battery Raw Materials 25 Lithium 29 Cobalt 32 Nickel 34 Graphite 36 Conflict Minerals 36 Tin,Tantalum,Tungsten and Gold(3TG)39 Other Raw Materials 39 Aluminum 42 Copper 44 Leather 46 Mica 49 Platinum Group Metals(PGM)52 Natural Rubber 55 Rare Earth Elements(REE)58 Steel 60 Magnesium 61 Cotton 62 Outlook for 2024 64 Annex 65 List of Abbreviations 66 List of Initiatives and Associations 67 List of 3TG Smelters 74 List of 3TG Countries and territories of origin ContentsVolkswagen Group Responsible Raw Materials Report 2023301Foreword02General Disclosures03Commitment to Initiatives 04Raw Materials05Outlook for 202406AnnexDisclaimerThis report is prepared by the Volkswagen Group companies and the respective brands(“legal entities”)of the Working Group for the Responsible Raw Materials Due Diligence Management System(RMDDMS).These legal entities are Volkswagen AG,AUDI AG,Dr.Ing.h.c.F.Porsche AG,MAN Truck&Bus SE and Scania CV AB.Within this Management System we have assigned the 18 priority raw materials to the aforementioned legal entities.Through this systematic approach,the Volkswagen Group companies are able to cover a broad range of raw materials andcoordinate actions across the Volkswagen Group companies accordingly.Although this report has been prepared in collaboration with and by the aforementioned legal entities,each single legalentity is only responsible for the content and described activities of the raw material for which it is in the lead(please seeoverview of the 18 priority raw materials on page 12 of this report).Volkswagen Group Responsible Raw Materials Report 20234Kapitelname01 Foreword02General Disclosures03Commitment to Initiatives 04Raw Materials05Outlook for 202406AnnexForeword01 Volkswagen Group Responsible Raw Materials Report 2023501 Foreword02General Disclosures03Commitment to Initiatives 04Raw Materials05Outlook for 202406AnnexForewordDear readers,The Volkswagen Group pursues the vision of enabling sus-tainable mobility for future generations.As one of the worlds largest automotive groups,we recognize our duty to make a difference to generate meaningful value for both society andthe environment.Our legal,social and environmental responsibilities extend well beyond our Group across all our supply chains.These include more than 63,000 supplier locations in 96 countries around the world.The holistic approach of our regenerate sustain-ability strategy provides the basis for advancing sustainability together with our partners and stakeholders.Focuses include environmental protection and human rights due diligence.We take our responsibility for sustainable procurement of raw materials very seriously and are continuously working with indirect suppliers in upstream supply chains where the challenge is greatest.We identify,assess and address risks through our Responsible Supply Chain System,currently covering 18 priority raw materials and their respective supplychains.We share information across our brands and regions through our Sustainability Procurement Network of more than 110 experts,which serves as a component in managing sustain-ability in our supply chains.To increase traceability,we work with our business partners and their respective suppliers,based on the requirements of our Code of Conduct.We also collaborate with like-minded stakeholders and companies via cross-industry initiatives to develop common standards and approaches to sustainability due diligence.In this report,you will find information on our approach and methodology,the raw materials we have identified as our priority focus and our activities in 2023.It highlights not only our progress in terms of transparency and risk mitigation for raw materials procurement,but also outlines challenges we continue to face in our global,complex and fragmented supply chains.In 2023,the first year in which the Supply Chain Due Diligence Act came into force,the Volkswagen Groups focus was on full and best possible compliance with the obligations imposed by the law.We have updated our procurement processes and keep monitoring new developments to include new regulations such as the EU Battery Regulation and the EU Deforestation Regulation,but also use our global impact to improve supply chain due diligence.We hope you find this report informative and invite you to share your feedback through Dirk Groe-Loheide Member of the Extended Executive Committee,Group ProcurementMember of the Board,Volkswagen BrandVolkswagen Group Responsible Raw Materials Report 20236Kapitelname Rohstoffbezeichnung01Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance Mechanism General Disclosures02 Volkswagen Group Responsible Raw Materials Report 2023701Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismGeneral Disclosures Responsible Supply Chain(ReSC)System The Volkswagen Group is one of the largest automotive manu facturers globally.In this position we recognize our impact on people and the planet.In order to align our own activities and the activities of the suppliers in our supply chains with leading practice in respecting human rights and the environment,we continue to take proactive steps.Our efforts are part of our broader commitment to fulfilling our legal,social and environmental responsibilities,not only in the Volkswagen Group but also in our supply chains.Our policy on sustainable materials reflected in our Raw Materials Due Diligence Management System(RMDDMS)is based on global normative guidelines including the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas(OECD Minerals Guidance).This Guidance provides a five-step framework with detailed recommendations to ensure that the minerals we use are responsibly mined or sourced,respecting human rights and avoiding contributing to conflict.In accordance with the fifth step of the framework,we there-fore publicly report on our supply chain due diligence policies,processes and practices in this Responsible Raw Materials Report 2023.The report details our approach and covers the raw material-specific human rights and environmental supply chain due diligence activities that were implemented in 2023.It pro-vides an overview of the progress we made with our RMDDMS and lists our activities for 18 high-risk raw materials that we have prioritized for more in-depth risk management.In addition to the 16 raw materials covered in previous years,we have expanded our scope to include cotton and magnesium.While we continue to face challenges in sourcing raw mate-rials responsibly,such as complex and sometimes opaque raw materials supply chains and varying legal requirements around the world for sustainability standards,we are also taking further steps to improve the effectiveness of our risk management.We know that we need to continue to engage with our suppliers,turn our focus increasingly to risk mitiga-tion,and more effectively assess whether the actions we have taken are driving positive impacts for the people and environ-ments affected by our raw material supply chains.We are proud of our progress and the fact that this is our fourth time reporting publicly,although we recognize that,for some issues and raw materials,we are in the early stages.The Responsible Raw Materials Report 2023 is structured as follows:We first present the Volkswagen Groups due diligence approach to supply chains in general and our raw material-specific management system in particular,including governance,scope and main tools used.We then describe the key activities and achievements for our 18 priority raw materi-als in 2023 and conclude with an outlook to 2024.Further information on Environmental,Social and Governance(ESG)topics is available on the Groups corporate website and in the 2023 Sustainability Report.Responsible Supply Chain(ReSC)SystemIn 2022,in preparation for the German Supply Chain Due Dil-igence Act(LkSG),we adapted our management approach in procurement and introduced extensive measures to facilitate compliance.We developed the Volkswagen Group Respon-sible Supply Chain(ReSC)System as an overarching due diligence approach for our supply chains and integrated the existing Raw Materials Due Diligence Management System into the ReSC System as a deep-dive measure for risks in ourupstream supply chain.The aim of the new holistic approach is to further enhance our management of risks occurring along the Volkswagen Groups supply chains.We aim to respect human rights and avoid and minimize social and environmental risks based on a systematic risk analysis and in close collaboration with our suppliers and business partners.The approach also intends to help end breaches and continu-ously improve suppliers sustainability performance.It includes controls and a disclosure system to ensure transparency.A grievance mechanism at Group level to provide an early-warning risk-awareness system is also in place.Implementation of the management approach is mandatory and is enshrined in corresponding policies for the Groups brands and controlled companies.The various procedures and measures that the ReSC System entails are described in detail in our 2023 Sustainability Report(pages 121127).The Responsible Raw Materials Report 2023 focuses on the Raw Materials Due Diligence Management System.Kapitelname Rohstoffbezeichnung01Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismGeneral Disclosures Responsible Supply Chain(ReSC)System Responsible Supply Chain(ReSC)SystemHuman Rights Focus SystemRisk assessment based on the nature of the suppliers business activitiesIndividual supplier riskStandard measuresDeep diveMeasureslowmediumhighall suppliersmedium-/high-risk suppliershigh-risk suppliersAnalysisAssessmentMitigationImpact evaluationDeep DiveMeasuresProbability and severity of human rights and environmental risksRaw Materials Due Diligence SystemCountry Risk FilterAcross all tiers n tierlowlowhighhigh Code of Conduct for Business Partners Supply Chain Grievance Mechanism Sustainability Rating Supplier TrainingRisk Analysis Media ScreeningVolkswagen Group Responsible Raw Materials Report 20238Volkswagen Group Responsible Raw Materials Report 20238Volkswagen Group Responsible Raw Materials Report 2023901Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismGeneral Disclosures Raw Materials Due Diligence Management System(RMDDMS)Raw Materials Due Diligence Management System(RMDDMS)One deep-dive measure of the ReSC System,specifically used to manage risks along raw material supply chains,is the Volkswagen Groups Raw Materials Due Diligence Manage-ment System(RMDDMS).The RMDDMS covers the 18 raw materials identified as priority raw materials and their respec-tive supply chains.The Volkswagen Groups supply chain is extremely com-plex,globally distributed and subject to constant change.It includes more than 63,000 direct supplier sites in more than 96 countries involving thousands of parts made from a wide range of raw materials.One product supply chain can include as many as nine levels and one single car component can have more than 1,000 suppliers.It is therefore essential that we take a risk-based approach and prioritize areas of focus in our due diligence efforts.The risk-based due diligence provides the steps we should take to identify,prevent and mitigate actual and potential adverse effects in the supply chain.It also ensures that we do not contribute to conflict in our purchasing activities through indirect support to non-state armed groups in the extraction,transport,trade,handling and export of raw materials.Different supply chains tend to have different levels of risk.Raw material supply chains require special focus,as our abstract risk analysis as part of the ReSC System showed a high exposure to human and environmental risks which are often more systematic and prevalent with indirect suppliers.For prioritized raw materials,the RMDDMS includes further assessments which facilitate the deduction of mitigating and preventive measures for systematic risks as well as a review of the effectiveness of these measures.Seeking alignment with the five-step framework of the OECD Minerals Guidance,we developed and implemented the RMDDMS in 2020.It is based on the Volkswagen Group Policy on Sustainable Raw Materials which sets out our com-mitment to responsible and transparent business practices throughout our raw materials supply chains.The policy out-lines our responsibility to respect human rights,the obliga-tion to implement a human rights due diligence process and measures to remediate negative human rights impact.The Volkswagen Group Policy on Sustainable Raw Materials is being reviewed and will be updated in 2024.Through the RMDDMS,we aim to improve transparency in our upstream supply chain,assess and identify risks,and engage with suppliers and stakeholders to prevent and mitigate po-tential negative impact on people and planet.The graphic below provides a visual depiction of our step-by-step approach to raw material due diligence:Volkswagen Group Responsible Raw Materials Report 20231001Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismGeneral Disclosures Raw Materials Due Diligence Management System(RMDDMS)AssessmentMitigationImpact EvaluationIdentification of 18 priority materialsInternal assessment of how the RMDDMS is performingApproach:direct engagement with our direct suppliersEngage in cross-industry initiatives or in-country projectsAssignment of sustainability lead brands for raw materialsAnnual reporting on due diligence efforts in public disclosureSupplier engagement to raise awareness and better understand the risksCollaboration on high-risk supply chains through joint projects and initiativesIdentification of affected vehicle parts and main suppliers to the Volkswagen GroupRisk mitigation measuresStep-by-step approach to raw material due diligence0107AB020804060305RMDDMS GovernanceIn line with the OECD Minerals Guidance,the RMDDMS is overseen by a senior-level Steering Committee comprised of senior management of the Sustainability function from Procurement across all relevant brands and regions of the Volkswagen Group,including the Head of Global Supplier Risk and Sustainability Management of Volkswagen Group Procurement.The Steering Committee meets quarterly.The due diligence activities are coordinated through a Working Group comprising representatives from Sustainability Manage-ment in Procurement departments across the Volkswagen Groups brands.Each of the identified priority materials is assigned to a“Brand Lead”to ensure in-depth knowledge and ongoing engagement with relevant suppliers and stakeholders for each of the raw materials.This Brand Lead is a representa-tive from one of the Volkswagen Groups brands and responsi-ble for coordinating and implementing the RMDDMS activities.In the reporting period,the internal capacities for Sustainability functions in Procurement were strengthened,both in the Volkswagen Group as well as in the respective brands,and thefrequency of Working Group meetings was increased.Volkswagen Group Responsible Raw Materials Report 20231101Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismGeneral Disclosures Raw Materials Due Diligence Management System(RMDDMS)RMDDMS GovernanceSenior-Level Steering CommitteeSenior Management of Sustainability from Procurement RMDDMSMeets quarterly as the “Group Staff Meeting Sustainability.”Represents all relevant brands and regions of the Volkswagen GroupWorking GroupRepresentatives or“brand leads”assigned to each priority raw materialMeets bi-weekly to coordinate RMDDMSactivities across the materialsAccountable for all steps according to the RMDDMS and alignment with global best practice.Oversees risk analysis and mitigation measures and their implementation for all relevant high-risk raw materials.For more information on the steering bodies see the detailed version in the 2022 Responsible Raw Materials Report(page6)Risk mitigation (i.e.contractual requirements,audits,on-the-ground projects,training)Risk Analysis (i.e.gather data from suppliers,engage with stakeholders)OverseeFeeds intoVolkswagen Group Responsible Raw Materials Report 20231201Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismGeneral Disclosures Social,Human Rights and Environmental Risks in Scope Social,Human Rights and Environmental Risks in ScopeEnvironmental Water,including water pollution,water consumption,amount of water(flood or drought)and access to water and sanitation Handling,storage and disposal of waste Production and use of pollutants and hazardous chemicals Air,including air pollution and greenhouse gas emissions Noise and vibrations Destruction of forests and soils Biodiversity,including damage to natural habitats,wildlife,plants and ecosystems,including ecosystem servicesBiodiversityPollutionWasteWaterCommunities Causing harmful soil change,water and air pollution,noise emissions and excessive water consumption,which affect natural resources and health Forced evictions and/or expropriations of land,forests,bodies of water Protection of the rights of indigenous peoplesCommunities rightsSocial&Human Rights Child labor Forced or compulsory labor Discrimination,incl.sexual harassment Direct or indirect support to non-state armed groups and/or public or private security forces Torture Health and safety at work Trade union freedoms and freedom of association Payment of adequate wages/salaries Safety of installationsHuman rightsWorking conditionsThe risk categories are listed in abbreviated form in Section 04 of this report for every raw material.The risks categories used in our RMDDMS are reviewed regularly to reflect legal requirements and best practices.For this Responsible Raw Materials Report,we summarized the risks in scope in seven sub-categories aligned with the European Sustainability Reporting Standards(ESRS):Environmental risks are summarized in the sub-clusters pollution,waste,water and biodiversity.Social risks are covered by the sub-clusters human rights and working conditions.The impact of supply chain activities on local communities is comprised in the sub-cluster communities rights.01Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismGeneral Disclosures Priority Raw Materials 13Volkswagen Group Responsible Raw Materials Report 2023Raw Material Lead Brands in RMDDMS are Volkswagen|Audi|Porsche|MAN|Scania1 PGM Platinum Group Metals 2 REE Rare Earth Elements Battery Raw MaterialsOther Raw MaterialsConflict Minerals(3TG)AluminumNickelLeather Mica Natural Rubber Steel Tungsten CobaltCopperTantalum NEW CottonGold 20Raw material experts across our groupPriority Raw MaterialsTo address our due diligence obligations in light of the complexities and scale of our raw materials supply chains,we followed the OECD-compliant risk-based approach and developed a methodology to select priority raw materials based on the severity of potential human rights and environmental impacts.For the first risk assessment,we used databases such as Maplecrofts global risk data,raw material-specific risk analyses and other reports that outline ESG risks in supply chains.In addition,we reviewed cases from our grievance mechanism and gathered relevant data through outreach to stakeholders such as NGOs and n-tier suppliers.We also considered our leverage in raw materials supply chains,and at times prioritized raw materials where we considered the risk less severe but where we had high leverage.In these cases,we saw aclear opportunity to make a positive impact.In the reporting period,we reassessed our raw material prioritization.We extended the scope of the RMDDMS and included two additional raw materials with particularly high levels of sustainability risks cotton and magnesium resulting ina total of 18priority raw materials.Tin LithiumNatural GraphitePGM1 NEW MagnesiumREE2 Volkswagen Group Responsible Raw Materials Report 20231401Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismGeneral Disclosures Regulatory Frameworks and Guidelines Regulatory Frameworks and Guidelines The Volkswagen Group is committed to adhering to all appli-cable national and international legislation.Beyond this,we confirm our commitment to major international agreements and declarations,which determine important cornerstones for our actions.These include in particular:The UN Universal Declaration of Human Rights,which is codified in the International Covenant on Civil and Political Rights and in the International Covenant on Economic,Social and Cultural Rights The Core Labour Standards of the International Labour Organization(ILO)The UN Guiding Principles on Business and Human Rights The OECD Guidelines for Multinational Enterprises The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas The principles of the UN Global CompactThe Volkswagen Group continuously monitors and adapts its risk management approach in procurement to meet the re-quirements of new laws such as the German Supply Chain Due Diligence Act(LkSG)which came into force on January 1,2023 and prepare for upcoming regulations at both na-tional and international level.Relevant upcoming sustainabil-ity regulations on a European level include for example the EU Battery Regulation(EUBR)and the EU Deforestation Regula-tion(EUDR).Another focus topic is the Corporate Sustainabil-ity Reporting Directive(CSRD),and the associated European Sustainability Reporting Standards(ESRS)will be applied for 2024 reportingof the Volkswagen Group.Preparation for upcoming EU sustainability regulationsIn 2023,we closely monitored proposals for new regulations.However,before final legislative texts are endorsed,the drafts are altered,amended and fine-tuned.Therefore,preparation for the new legislation is a process which will be ongoing until the implementation guidelines and specifications have been defined,open questions resolved and new processes established.In the reporting period,we undertook preparatory measures such as:Identify relevant aspects for the team working on responsible sourcing practices(based on the final versionof the respective regulation).Establish Group-wide working group to coordinate all activities on new sustainability regulations,specifically EUBR and EUDR,across brands and regions.Create shared understanding on the scope of the due diligence requirements and specific legal terms;align with internal departments such as Legal,Customs,etc.Identify parts and suppliers in scope of the due diligencerequirements.Conduct gap analysis to identify potential need for changes in internal processes and systems,agree on working packages and assign responsibilities.Identify necessary updates to contractual requirements such as the battery raw materials specification sheet.Determine suitable tools to support due diligence.In addition,the Volkswagen Group also initiated discussions with suppliers to achieve a common understanding of the regu-lations.Alignment on expectations and tools is required in order to standardize audits and questionnaires and reduce the efforts for suppliers.Here,we also engaged with industry initiatives such as Drive Sustainability and the Responsible Minerals Initia-tive(RMI),with the aim of driving industry-wide good practice.EU Battery Regulation(EUBR)The EU Regulation concerning batteries and waste batteries(EU Battery Regulation)was published on July 12,2023,and will replace the existing Batteries Directive dating from 2006.The EUBR aims to improve current regulations by making batteries used in the EU more environmentally friendly and increasing the lifespan of electronic devices used by consumers.The due diligence chapter of the regulation(chapter VII)will apply from August 18,2025.In view of the expected growth in battery demand,the EU puts battery due diligence obligations on economic operators that place batteries on the Union market or put them into service,going beyond the voluntary efforts from actors in the battery supply chain that are already in place.Annex X of the EUBR provides a list of raw materials and risk categories to focus on when designing and implementing battery due diligence policies.The list of social and environmental risk categories is far more extensive than existing due diligence legislation and will require a thorough review of our RMDDMS.While the Volkswagen Group prepared for the new regulation in the reporting period,sustainability was already a significant fo-cus area in our battery supply chains and our responsible sourc-ing practices before that and a large part of our internal processes are already aligned with the EUBR due diligence requirements.EU Deforestation Regulation(EUDR)The EU Regulation on deforestation-free products(EU De-forestation Regulation)came into force on June 29,2023.It impacts seven specific commodities,including leather and natural rubber as well as derived products.The new EUDR reg-ulation will require any company importing or exporting these commodities and products into or out of the EU as well as plac-ing them on the EU market to prove that the products are not linked to deforestation and have been produced in accordance with the relevant legislation of the country of production.The provisions will enter into application from December30,2024.The Volkswagen Group has started analyzing theEUDR and is taking steps to align its due diligence approach,particularly for leather and natural rubber,with the legisla-tive requirements.Volkswagen Group Responsible Raw Materials Report 20231501Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismGeneral Disclosures Main Tools of the RMDDMS Main Tools of the RMDDMSWhile the challenges and solution approaches can vary greatly depending on the high-risk raw material in focus,there are a number of tools that are considered particularly useful in the context of the RMDDMS.These are presented below.Raw Material Specification SheetsThe Volkswagen Group uses a Code of Conduct for Business Partners(CoC BP)as a mandatory component of all contracts with direct suppliers.It sets out our expectations of business partners with respect to key human rights,environmental,social and compliance standards,based on international standards,as well as objectives,rules and policies of the Volkswagen Group.We also call on our tier-1 suppliers to pass these requirements down along the supply chain.As a key component of our raw materials due diligence,we work on developing and implementing contractually binding specification sheets for our high-risk raw materials.The use of the specification sheets defines our raw material-specific human rights and environmental expectations towards our suppliers and ensures that they are fulfilled.For example,specification sheets can include requirements on supply chain transparency and the implementation of certain industry-specific sustainability standards at important pinch points in the supply chain.To date,we have developed specification sheets for the following priority raw materials:Battery raw materials lithium,cobalt,nickel and nat-ural graphite:rolled out across the Volkswagen Group in 2020.Preparing for compliance with the new EU Battery Regulation,the specification sheet for our battery raw materials was updated in 2023 Aluminum:piloted by AUDI AG and Volkswagen in 2022,rolled out across the Volkswagen Group in 2023 Mica:piloted by Porsche,AUDI AG and Scania in 2022,rolled out across the Volkswagen Group in 2023 Leather:rolled out across the Volkswagen Group in 2023 Natural rubber:specification sheet developed in 2023Direct business partners who supply a product that contains any of the raw materials in scope are requested to comply with the specification sheets for all new contracts.However,when rolling out the sustainability specification sheets across the Volkswagen Group for the materials in scope,we strongly encouraged our suppliers with existing contracts to also comply with the specified requirements.We expect our direct suppliers to pass on these requirements to their respective suppliers and into the upstream supply chain alongside theCoC BP.AuditsAudits are one of the key tools for assessing risks in our upstream supply chains and consequently identifying mit-igation measures.They tie in with other tools used for our raw material due diligence and help promote transparency,compliance and a culture of continuous improvement and dialogue throughout the supply chain.Due to the complexity and the large number of suppliers,particularly in our battery supply chain,the Volkswagen Group has established a tiered assessment system with different types of audits to systematically review the sustainability performance of our suppliers.Second-party audits are used to verify,at regular intervals or on a case-by-case basis,that our suppliers are complying with our requirements.They are carried out by qualified audi-tors(internal or contracted consultants).The Volkswagen Group also carries out audits of selected direct suppliers as part of the Sustainability Rating(S-Rating)1.Other audits are performed ad hoc,for example in response to a grievance case,and focus on human rights risks and social standards.The on-site audits can identify gaps in supplier performance,but also risks at indirect suppliers sites that need to be mitigated through the direct supplier.All audits of direct suppliers carried out on behalf of the Volkswagen Group are accompanied by a Corrective Action Plan(CAP),and the effectiveness of the implemented measures is verified by the auditor in re-audits(as part of a desktop review or a further on-site audit).1 Find more information on audits related to the Sustainability Rating in the 2023 Sustainability Report,page 129.Volkswagen Group Responsible Raw Materials Report 20231601Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance Mechanism General Disclosures Main Tools of the RMDDMSInitially,the Volkswagen Groups battery audit program fo-cused on cobalt due to the severity of the human rights risks associated with this mineral.From there,we covered other battery raw materials and have worked our way up the supply chain,moving from our battery suppliers to precursors,refin-ers,treatment units and mine sites.As human rights-related risks are often greatest at the beginning of the supply chain and can be most effectively addressed there,third-party audits and certifications are another part of our strategy.These independent audits are AuditsTin|Tantalum|Tungsten|GoldCobaltLeatherAluminumMicaAudit standardResponsible Minerals Assurance Process(RMAP)(Responsible Minerals Initiative)Customized standard developed by the Volkswagen Group with an external audit company.Draws on the OECD Minerals GuidanceStandard developed by the Leather Working Group(LWG)ASI Performance and ASI Chain of Custody(CoC)Standard developed by the Aluminium Stewardship Initiative(ASI)Global Workplace Standard for Mica ProcessorsScope of risks assessed in the auditAnnex II risks as defined by the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk AreasAnnex II risks(see column to the left),as well as occupational health and safety,and child laborBusiness and operations management,environmental and social impact,occupational health and safety,complianceASI Performance Standard:62 environmental,social and governance principles such as business integrity and transparency,water and biodiversity and human and labor rightsASI CoC standard:requirements for a CoC material,including supply chain due diligence and material accountingEnvironmental management system,occupational health and safety,fair labor practicesTier(s)that have been auditedSmelters and refinersFrom battery cell supplier to treatment unit levelTanneriesAll stages of the aluminum supply chainMica processorsconducted by certification bodies according to a standard set of requirements and verify that the suppliers meet all the requirements of the chosen standard.The Volkswagen Group also uses databases with audits conducted by global initiatives.One example is RMIs“list of RMI-conformant smelters.”Several global initiatives offer voluntary audit-based certifications for suppliers,among them IRMA,ASI and LWG.We also work directly with mine operators to certify mines through international associations.By employing a combination of these approaches,the Volkswagen Group can more effectively oversee its supply chains,ensuring that they live up to rigorous environmental and human rights standards.This table provides an overview of how we use audits across various raw materials in our supply chains:Volkswagen Group Responsible Raw Materials Report 20231701Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismGeneral Disclosures Main Tools of the RMDDMS Supplier DialoguesTo help us establish and strengthen alignment around expec-tations with respect to our raw materials supply chains,we continue to engage directly with key suppliers.Sustainability training and workshopsOne key component is systematic training of suppliers as well as our own employees.Sustainability is an integral part of the skills profile for all procurement employees.Sustainability training delivered in web-based,online or face-to-face for-mats covers topics such as:(i)corporate responsibility;(ii)legal frameworks and requirements;(iii)our internal process-es,such as the Volkswagen Groups sustainability rating and(iv)our management systems,such as the RMDDMS.Part of this training was dedicated to the topic of sustainability in raw materials.The training course on sustainability for procure-ment was held more than 3,700 times worldwide in 2023.In order to support the continuous development of our suppliers,the Volkswagen Group Procurement Sustainabil-ity Management also offered sustainability training courses and workshops with our suppliers at selected locations or online.We also offered web-based on-demand training.7,791 suppliers received such training in 2023.We continued to offer our voluntary human rights training for suppliers,which has been available since 2020.In addition to the training,we created an e-learning module on sustainabili-ty which is available to current suppliers in eight languages.Collaboration with external partners and international initiativesThe Volkswagen Group also aims to address human rights risks in the upstream supply chain beyond its contractual re-lationships.To this end,we engage with various stakeholders as an exercise to increase our leverage while at the same time benefit from the learning and knowledge sharing.We take part in conferences and workshops and meet with NGOs,associations,local partners and media representa-tives.We see value in engaging with NGOs and community representatives,both on a national and international level.In 2023,our Working Group members met with nearly 20 different stakeholders to exchange views on human rights,social and environmental issues.These meetings took place both virtually and in person,included follow-up meetings,and some evolved into recurring working groups.In 2023,we attended over 15 events of relevance to our responsible sourcing of raw materials and spoke at seven events,including conferences related to the automotive industry and its impact on human rights and the environment.During the OECD Forum on Responsible Mineral Supply Chains in April 2023,the Volkswagen Group took part in the DRIVE and the RMI Partner Session and spoke about the EUBR,challenges of implementation and opportunities for an industry-wide alignment.The Volkswagen Group and its brands are also active members in a number of global initiatives both cross-industry and raw material-specific.Together with our partners,we pursue the following objectives:knowledge transfer,development of standardized risk assessment tools and the introduction of standards for responsible raw material supply chains with respect to human rights,the environment and compliance.We believe that these activities are helping us make progress on our path to transparent and sustainable supply chains and advance more responsible business practices worldwide.For a description of selected initiatives of which the VolkswagenGroup is a member,see the section on participation in international initiatives on pages 2021.Volkswagen Group Responsible Raw Materials Report 202318Kapitelname Rohstoffbezeichnung01Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismVolkswagen Group Responsible Raw Materials Report 202318General Disclosures Supply Chain Grievance Mechanism Supply Chain Grievance Mechanism The supply chain grievance mechanism is used to process information on breaches of the Code of Conduct for Business Partners by the Volkswagen Groups direct or indirect suppliers.We believe that grievance mechanisms are important for managing human rights and environmental risks in our supplychains.Through this mechanism,we process concerns others have raised regarding negative human rights and environmental impacts.Hints can be placed anonymously.When a hint is brought to our attention,we investigate incidents relating to breaches or suspected violations by business partners of the Code of Conduct for Business Partners of the Volkswagen Group,including abuses of human rights and environmentalimpacts.More information about our grievance mechanism and KPIs for 2023 can be found in our 2023 Sustainability Report(pages123 and 128).Who can reportWhat is the outcomeHow can reports be madeIn personVia the Compliance contact personOmbudspersons (external lawyers)www.ombudsmen-of-Respective suppliers might be temporarily blocked from being awarded new contractsCan lead to termination of supplier relationship with the Volkswagen GroupRepresentatives of communities in the immediate vicinity of our production locationsCivil society organizationsAll suppliers staff membersBreaches identified and categorized by their severitySerious breachesOnline Reporting Channelwww.bkms- sustainability Mail Central Investigation Office,Mail Box 1717,38436 Wolfsburg/Germany24/7 hotline 49 5361 9 46300 800 444 46300Civil society organizationsVolkswagen Group Responsible Raw Materials Report 20231901Foreword Responsible Supply Chain(ReSC)System Raw Materials Due Diligence Management System Social,Human Rights and Environmental Risks in Scope Priority Raw Materials Regulatory Frameworks and Guidelines Main Tools of the RMDDMS Limitations02 General Disclosures04Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Supply Chain Grievance MechanismGeneral Disclosures LimitationsLimitations2023 marks the fourth year since introducing the RMDDMS at the Volkswagen Group.Over the course of the reporting period,we made improvements across the individual raw materials and undertook steps to strengthen the management system itself.While we are pleased with our progress,we also encountered obstacles along the way.Challenges of multi-tier global supply chainsIn the reporting year,we continued our efforts to work towards greater transparency in our supply chains.It is a particular challenge to identify upstream actors in our supply chains that impede the flow of sustainability and compliance information,as well as risk assessment and mitigation activities in the more remote tiers of the supply chain where the Volkswagen Group does not have a direct contractual relationship with the suppli-er.For example,we found that,in some cases,suppliers were unwilling to disclose the identities of their suppliers because of antitrust and competitionconcerns.Limited responsible sourcing maturity among supplier groupsThrough our battery materials mapping and auditing program we continued to conduct supplier audits against the five-step framework of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals.While many of our suppliers and sub-suppliers are open to adopting the OECD framework,some are reluctant to conduct external audits or are struggling to identify and mitigate risks in their supply chains.Midstream companies in particular are often unable to identifythe existing human rights and environmental risks associated with the mineral commodities they process and are not familiar with international standards.Lack of a level international playing fieldWhile due diligence expectations at the EU and European na-tional level have increased,legal requirements for businesses in many other geographies are not developing at the same speed.This creates a challenge for downstream companies which are unable to address risks much further up their global and fragmented supply chains by themselves.This regulatory imbalance can only be addressed through close collaboration between businesses in various jurisdictions,as well as measures aimed at creating an international level playing field.Another example is that in some cases,national legislation is not in line with,or even contradicts,international best practice(for example,the stakeholder consultation process-es required at mine sites).Upstream companies then face the challenge that while they implement national legisla-tion,it may not be perceived as sufficient by downstream industry actors who expect them to implement international best-practice requirements.Limits of corporate influence and the role of governmentsSome of the issues we face are beyond our sole control.As set out in the UN Guiding Principles on Business and Human Rights,states have a duty to protect human rights,while business enterprises have a responsibility to respect human rights.To create an enabling environment for responsible business conduct,governments play a key role in issues such as ensuring good governance(for example,combating bribery and corruption),enacting and enforcing relevant legal frameworks,and ensuring that human rights are not violated through the deployment of state security forces.However,we recognize the complexities for governments in ensuring human rights and environmental protection.One example of such complexities relevant to the downstream sector is the protection and respect of human rights in regions with artisanal and small-scale mining(ASM).While ASM is associated with poor health and safety standards and child labor and may operate outside the formal economy with little or no regulation,it is an important source of income for a large number of people in the countries concerned.It is therefore a balancing act to exclude poor working and environmental conditions from global supply chains,while at the same time not excluding the most vulnerable groups in society from improving theirlivelihoods.Evolving legislation and management systemsDue diligence management systems require significant resource investment and learning for all businesses,includ-ing ours.This is particularly the case with systems trying to address risks across multiple tiers of long and complex supplychains.In the reporting period,we were able to increase the internal capacities working on the RMDDMS.This required internal capacity development and training.Due to the LkSG and other upcoming legislations,documentation and internal proce-dures became a higher priority in our work.In addition,supply chain compliance obligations continue to grow in complexity.Evolving laws and regulations in different jurisdictions add to the challenge and need to be communicated and implemented in our due diligence processes and tools,as well as rolled out to our supply chains.This is especially challenging when leg-islation is not harmonized,differs from international guidelines or uses undefined legal terms.We are constantly learning along the way and are achiev-ing milestones and measurable positive results for human rights and the environment through longer-term initiatives and engagement.Volkswagen Group Responsible Raw Materials Report 202320Schaubild01Foreword02General Disclosures03 Commitment to Initiatives DRIVE Sustainability German sector dialogues on the implementation of the National Action Plan for Business and Human Rights Responsible Minerals Initiative Initiative for Responsible Mining Assurance 2023 Highlights04Raw Materials05Outlook for 202406Annex Commitment to Initiatives 03 Volkswagen Group Responsible Raw Materials Report 20232101Foreword02General Disclosures03 Commitment to Initiatives DRIVE Sustainability German sector dialogues on the implementation of the National Action Plan for Business and Human Rights Responsible Minerals Initiative Initiative for Responsible Mining Assurance 2023 Highlights04Raw Materials05Outlook for 202406AnnexCommitment to Initiatives DRIVE Sustainability|German sector dialogues on the implementation of the National Action Plan for Business and Human Rights(NAP)The Volkswagen Group is involved in various initiatives with a focus on sustainability along the supply chain,some of which are cross-industry initiatives and relevant across a range of raw materials while others are raw material-specific.By participating in these initiatives,we are able to collaborate with other industry actors and increase our leverage across all tiers ofthe supply chain and within the broader industrysector.In 2023,we continued to be involved in several broader ini-tiatives and took part in several of their activities:DRIVE Sustainability The Volkswagen Group is a founding member of the industry-led initiative DRIVE Sustainability under the umbrella of CSR Europe.DRIVE Sustainability is a partnership of 16 leading automotive companies that are leading the transformation to a circular and sustainable automotive value chain by using a common voice in their engagement with suppliers,stakehold-ers and related sectors.As active members,we participate in the Raw Materials Working Group,through which we contributed to further developing the Raw Material Outlook.The platform is a keyini-tiative within DRIVE Sustainability and provides a tool for automotive companies to analyze critical raw materials value chains by mapping stages and actors and identifying salient ESG risks along the supply chain.In 2023,we worked on updating the ten initial raw material profiles of the platform and added five newrisk profiles.Another tool developed by the working group is the Sustain-ability Assessment Questionnaire(SAQ)which is also used by the Volkswagen Group as a basis for our Sustainability Rating(S-Rating)assessment.The common questionnaire standard for auditing sustainability aspects of suppliers is currently used by 13 of the member companies and intends to improve efficiency through a standardized approach.In SAQ version 5.0,revised in 2022,relevant topics were added to prepare for the German Supply Chain Due Diligence Act(LkSG).Drive is the sustainable supply chain platform for automo-tive tier-1 suppliers and supplier associations.Members can engage in a systematic dialogue with Drive Sustainability partners about common sustainability challenges and find joint solutions.In 2023,we took part in two workshops with Drive members on ESG risks of Rare Earth Elements(REE)and Nickel value chains.Together with DRIVE Sustainability,we also participated in several external events in the reporting period 2023 EU-LATAM Convention on Raw Materials,2023 OECD Minerals Forum,the final RE-SOURCING conference and engaged with 50 stakeholders across NGOs,trade unions,industry associations and suppliers.Drive Sustainability and CSR Europe also work locally with a focus on setting up sustainability networks to strengthen responsible sourcing and due diligence practices in the bat-tery value chain.The project“Extractives for Sustainability,”carried out with the support of the Deutsche Gesellschaft fr Internationale Zusammenarbeit(GIZ),addresses ESG issues related to the production of copper and cobalt in the DR Congo and manganese and iron ore in South Africa.The proj-ect,finalized in 2023,helped build local business networks among local mines for collaborative action and dialogue with the downstream part of their supply chains.In 2023,we con-tinued to participate in the project through online meetings and webinars.Other on-the-ground activities in the reporting period included engagement sessions on rare earth elements in Myanmar with NGO Global Witness and on aluminum with Human Rights Watch and Inclusive Development International.We also kicked off a project with global union IndustriALL on human rights due diligence in the Indonesian battery supplychain.DRIVE Sustainability is an associate member of several material-specific initiatives to join forces for more sus-tainable material-specific supply chains,among them the Global Platform for Sustainable Natural Rubber(GPSNR)and ResponsibleSteel.German sector dialogues on the implementation of the National Action Plan for Business and Human Rights(NAP)Since 2020,the Federal Ministry of Labour and Social Affairs(BMAS)has organized Sector Dialogues to help implement Germanys National Action Plan for Business and Human Rights(NAP).These dialogues offer guidance to enterpris-es and support their efforts to implement the NAPs human rights due diligence requirements.One of the sectors is the automotive sector.The Sector Dialogue is a forum compris-ing representatives of the automotive industry and business associations,trade unions,NGOs and several other initiatives.The members have developed a series of guidelines for inte-grating due diligence requirements into business processes,covering both the NAP requirements and the obligations set out in the German Supply Chain Due Diligence Act(LkSG).Fo-cus materials are copper and lithium.In the reporting period,we actively participated in the Lithium Working Group,mainly through Porsches representation.Find more information on the Lithium Working Group in section 04 of this report.Volkswagen Group Responsible Raw Materials Report 20232201Foreword02General Disclosures03 Commitment to Initiatives DRIVE Sustainability German sector dialogues on the implementation of the National Action Plan for Business and Human Rights Responsible Minerals Initiative Initiative for Responsible Mining Assurance 2023 Highlights04Raw Materials05Outlook for 202406AnnexCommitment to Initiatives Initiative for Responsible Mining Assurance(IRMA)|Responsible Minerals Initiative(RMI)Initiative for Responsible Mining Assurance(IRMA)The Volkswagen Group continues to be an active and com-mitted member of the Initiative for Responsible Mining Assurance(IRMA)and is also a member of the IRMA Buyers Group and the Mining Engagement Team.IRMA is a multi-stakeholder alliance that advocates for more socially and environmentally responsible mining.IRMA offers an independent assessment of mines against comprehensive standards.The IRMA stan-dards encompass the protection of human rights including the rights of local communities,the exclusion of corruption,health protection measures,occupational safety and environmental protection.In 2023,public consultation began on two draft updated standards:the Standard for Responsible Mining and Mineral Processing 2.0 and the Chain of Custody Standard for Responsible Mined Minerals.The Volkswagen Group has committed to gradually applying the IRMA Standard for Responsible Mining in its battery sup-ply chains,ensuring that,in high-risk regions,sourcing battery raw materials is restricted to material originating from mines that are audited against the IRMA Standard.The continued scaling of IRMA across the mining industry and raw material supply chains remains critical to unlocking the ability of the Volkswagen Group and other downstream brands to achieve their responsible sourcing goals.We fully support IRMAs efforts to engage with mining-affected communities,civil society and trade unions on how the IRMA system can serve as a tool for meaningful engagement to improve mining practices worldwide.Responsible Minerals Initiative(RMI)The Responsible Minerals Initiative(RMI)of the Responsible Business Alliance(RBA)is a global multi-stakeholder effort to promote responsible sourcing of minerals from conflict-affected and high-risk areas.RMIs Responsible Minerals Assurance Process(RMAP)en-ables companies and their suppliers to determine which smelt-ers and refiners have systems in place to responsibly source minerals in accordance with current global standards.The evaluation is done through an independent third-party audit.Through the RMI,the Volkswagen Group joins forces with oth-er partners,either along the supply chain or from other indus-tries,to promote dialogue and build a common understanding of sustainability expectations and harmonized upstream and downstream due diligence tools.We help drive industry-wide solutions and collaborative efforts to collectively leverage and standardize tools and adopt standardized data points for data exchange that enable downstream and upstream companies to map their supply chains while maintaining business confidentiality.In the reporting period,the Volkswagen Group used Material Insights as a risk radar tool to start the risk identification and due diligence process and continued to encourage suppliers to be assessed against RMI standards.We also played a key role in reviewing the RBA and RMIs Practical Guide to EU Battery Regulation and Battery Ma-terials Due Diligence and supporting documents,working with suppliers to ensure the accurate completion of the information.In addition,we participate in the RMIs Emerging Minerals Working Group,which brings together more than 40companies to map global value chains for sustainable transition,encourage suppliers to be assessed against a standard and use collective leverage where necessary to drive responsible business practices upstream.For more details on our participation in raw material-specific initiatives please see the respective Raw Material Snapshots in section 04 of this report.A full list of our membership and participation in industry groups and initiatives can be found in Annex II at the end ofthis report.Volkswagen Group Responsible Raw Materials Report 20232301Foreword02General Disclosures03 Commitment to Initiatives DRIVE Sustainability German sector dialogues on the implementation of the National Action Plan for Business and Human Rights Responsible Minerals Initiative Initiative for Responsible Mining Assurance 2023 Highlights04Raw Materials05Outlook for 202406AnnexCommitment to Initiatives 2023 Highlights DRIVE SustainabilityMicaPorsche joined the Responsible MicaInitiative pilot project to establish responsible supply chains in Madagascar on behalf of the Volkswagen Group and took part into a field trip toMica Mines inAnsy,Madagascar.See also Raw Material Snapshot on mica,page 46Global Platform for Sustainable Natural Rubber(GPSNR)Capacity-building projects in Indonesia coached 380 smallholders on disease fighting and trained 7,000 smallholders on Good Agricultural Practices.Projects in Thailand educated 100 smallholders on agroforestry and 85 small-holders took part in training workshops on agro-forestry in Cote DIvoire and Indonesia.See also Raw Material Snapshot on natural rubber,page 52Aluminium Stewardship Initiative(ASI)Aluminum specification sheets with ASI requirements rolled out across the VolkswagenGroup.See also Raw Material Snapshot on aluminum,page 39new risk profiles have been ad-ded to the Raw Material Outlook platformworkshops with Drive members on ESG risks in REE and nickel value chains5 2Technical workshops by the”Responsible Lithium Partnership”on water-related challenges in Chile See also Raw Material Snapshot on lithium,page 25112021LithiumPGMScania started supporting the Marikana Youth Centre,a multi-stakeholder project working to provide brighter futures for children in the platinum mining town of Marikana.See also Raw Material Snapshot on PGM,page 49The Leather Working Group(LWG)All of the Volkswagen Groups brands joined the Leather Working Group,following Bentley which became the first automotive member of the LWG in2023 HighlightsSee also Raw Material Snapshot on leather,page 44 Battery Raw Materials Conflict Minerals05Outlook for 202406Annex Other Raw Materials01Foreword02General Disclosure03Commitment to Initiatives 04 Raw Materials 04 Raw Materials Volkswagen Group Responsible Raw Materials Report 20232501Foreword02General Disclosure04 Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Lithium Cobalt Nickel Graphite Conflict Minerals Other Raw MaterialsBattery Raw Materials Lithium LithiumLithium is a soft and light,silvery-white alkali metal found in mineral and brine deposits.The metal is best known for its high energy storage density and its use in rechargeable batteries.Further industrial applications are metallurgy,glass and ceramics,lubricants and drugs.EnvironmentalSocial&Human RightsCommunities Forced or compulsory labor Protection of the rights of indigenous peoples Pollution,water consumption Loss of biodiversity Destruction of forests and soilsKey material-specific risks241H%6%Countries of origin(Share of global mining/processing)AustraliaArgentinaChinaChile Top 3 mining countries Top 3 smelting and refining/processing countries Both 58%Source:USGS,2023 estimates.Volkswagen Group Responsible Raw Materials Report 20232601Foreword02General Disclosure04 Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Lithium Cobalt Nickel Graphite Conflict Minerals Other Raw MaterialsBattery Raw Materials LithiumKEY APPLICATION EV batteries Lithium in our supply chainLithium hydroxide and lithium carbonate are the most import-ant lithium products,also for the Volkswagen Group.They are used as raw material for cathodes for battery manufacturing.Owing to the expansion of e-mobility,our demand for lithium as a key material for batteries is expected to grow in the coming years.In 2023,the Volkswagen Group did not directly source any battery raw materials,including lithium.Instead,we buy bat-tery cells from suppliers which are themselves up to several supply chain steps away from the raw material origin.We collaborated with our main battery suppliers,for which we use a mandatory EV battery raw materials specification sheet.The main lithium producing countries are Australia,Chile,China,Argentina and Brazil.In the reporting period,PowerCo entered into purchasing agreements with suppliers of battery raw materials that will begin supplying PowerCo in 2025.PowerCo,founded in 2022,vertically integrates the develop-ment and production of battery cells within the Volkswagen Group and is expected to start manufacturing in 2025.More information is available in the 2023 Sustainability Report(pages54-55).Risk Assessment The systemic and salient risk area identified for lithium is related to water.The water consumption for mining and processing,which is particularly relevant in high water stress areas,can be related to adverse environmental impacts on soil and biodiversity as well as adverse impacts on neigh-boring communities.However,the water-related challenges are manifold and vary depending on the lithium deposit(hard rock or brine)and the extraction process and the technologies used.Another important risk in the context of lithium extraction relates to the protection of indigenous peoples rights.Many lithium deposits are located on or near indigenous territories and operations affect indigenous livelihoods in different ways.Forced labor was added as a newly identified risk area in 2023 as a result of a grievance case(see below).For all battery raw materials,we engage closely with our bat-tery suppliers in order to collect supply chain data and con-duct thorough risk assessments.During the reporting period,we continued to collect data through our lithium supply chain mapping questionnaire,which we analyzed and assessed to identify any responsible sourcing risks.In addition,publicly available information such as news articles or ESG reports provided useful insights.In 2023,two lithium mine sites in Chile successfully under-went assessments according to IRMA standards and achieved IRMA50 and IRMA75 respectively.Both reports were thor-oughly reviewed to confirm our previous risk assessments.Risk MitigationOur strategy for risk mitigation in the lithium supply chain is multi-faceted.Through cross-industry initiatives such as the Initiative for Responsible Mining Assurance(IRMA)and the activities of the Responsible Lithium Partnership in Chile,we continue to advocate for more responsible mining,positive impact in mining affected regions and an increased share of IRMA-certified material.Contractual requirements for transparency and due diligence set out in our battery raw materials specification sheets are one key element of risk mitigation.The first requirement established in the specification sheet is providing trans-parency on the supply chain which allows us to conduct a comprehensive social and environmental risk analysis,con-duct mapping audits and define and implement risk mitiga-tion measures,if necessary.We use the IRMA reports for our risk assessment,and the IRMA standard is a prerequisite for direct lithium procure-ment.In the reporting period,we continued to promote the IRMA standard among tier-n suppliers and conducted meetings with two lithium mining companies and two mid-stream companies to follow up regarding their progress with IRMA assessment.We also seek a contractual commitment to continuous improvement to increase the IRMA performance level over time.In preparation for the start of the battery production,the Volkswagen Groups procurement team is supporting PowerCo in social and environmental risk assessments of potential direct suppliers of battery raw materials.These so-called“ESG pre-checks”are conducted during the initial dialogue with po-tential suppliers,with a particular focus on mine sites located in high-risk countries.In the reporting period,we conducted one pre-check for lithium.During contract negotiations,we also performed comprehensive on-site human rights due diligence facilitated by industry expert consultants.Stakeholder Engagement Collaboration with local stakeholders participating in the Responsible Lithium Partnership in Chile Participation in lithium working groups of the German Sector Dialogue and the RMI Continued dialogue with direct and indirect suppliersVolkswagen Group Responsible Raw Materials Report 20232701Foreword02General Disclosure04 Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Lithium Cobalt Nickel Graphite Conflict Minerals Other Raw MaterialsBattery Raw Materials Lithium Initiatives and dialogueThe Volkswagen Group is a founding member of the Respon-sible Lithium Partnership in Chile which is coordinated by the German Agency for International Cooperation(GIZ).The partnership focuses on the responsible use of resources and sustainable lithium production in Chiles Salar de Atacama region through local multi-stakeholder partnerships.The plat-form seeks to promote collaboration among stakeholders in the Salar de Atacama watershed to improve long-term natural resource management.In 2023,we contributed to several activities,among them a hydrological study which also covered the potential impacts on biodiversity.We also continued to support the“Respon-sible Lithium Partnership,”a multi-stakeholder partnership(seehighlight boxon page 28).In 2023,we continued to participate in the Lithium Working Group of the German Automotive Sector Dialogue,mainly through our representative from Porsche.The working group has developed recommendations for the lithium industry on how to effectively manage the lithium supply chain risks.These were finalized in alignment with national experts and local organizations and mining companies and published in July 2023.The project also aims to support the cascading of sus-tainability requirements in the supply chain.Through the German Automotive Sector Dialogue,we are also engaged with the International Lithium Association in a dialogue with mining companies(hard rock and brine).The Volkswagen Group also participates in the RMI Work-ing Group on Lithium to foster the uptake of due diligence activities and responsible sourcing across the supply chain.In the reporting period,as a result of collective supply chain mapping and industry engagement efforts,41 lithium facilities were mapped,one facility was successfully assessed against the RMAP standard and three facilities are preparing for assessment in 2024.Research and direct stakeholder engagementIn the reporting period,the Volkswagen Group funded re-search on social risks associated with lithium in the so-called“lithium triangle”in South America(Argentina,Bolivia,Chile);a potential second phase of the project with academia in Australia and Chile is currently being discussed.We also continued to engage with NGOs in order to deepen our understanding of the situation of local stakeholders in Chile.During the German-Chilean Raw Materials Forum 2023,we met representatives of the Atacamea Women Alliance to learn about their actions to strengthen the role of the Lickanantay women in the Salar de Atacama and understand their priorities while facing increasing lithium extraction in Northern Chile.Grievance case on forced laborForced labor was identified as a new salient risk area for lithium in 2023.A grievance case was opened to address the alleged relationship to the allegations through one of the Volkswagen Groups suppliers.As a consequence,we commissioned a series of audits in the lithium supply chain.Following the audits,the grievance case was closed since the auditors did not confirm the alleged supply chain connections.For more information,see the Volkswagen Group website on ESG controversies.Outlook 2024We plan to:Further promote the IRMA standard for responsible lithium mining and gather feedback from stakeholders around IRMA-certified lithium mines Engage with our suppliers to develop and roll out tools to sup-port compliance with the EUBR Continue supporting local stakeholders in Chile through the Responsible Lithium Partnership Continue expanding our lithium supply chain mapping in close collaboration with our major batterysuppliers Engage in dialogue with relevant internal and external stake holders on newly identified risks in the lithium supply chain and emerging lithium producing countries For more information on the EU Battery Regulation(EUBR)see page 14 of thisreport.Volkswagen Group Responsible Raw Materials Report 20232801Foreword02General Disclosure04 Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Lithium Cobalt Nickel Graphite Conflict Minerals Other Raw MaterialsBattery Raw Materials Lithium HIGHLIGHTThe Responsible Lithium Partnership on the ground in ChileIn the reporting period,we continued to support the Responsible Lithium Partnership,a multi-stakeholder partnership in Chile,facilitated by GIZ in the context of the Responsible LithiumPartnership.Participation is very broad and the format is unique in the region since it brings together representatives from local tourism and agriculture associations,lithium mining companies,indigenous communities and local authority representatives.Several activities have been implemented by the roundtable on two major focus areas:Technical data:A project to source technical data on lithium production as well as water use and demand in the region,in order to reduce potential scientific uncertainties.Furthermore,11 technical workshops on water-related challenges and potential solutions were held throughout 2023.Water resources:One of the first focus areas of the roundtable,resulting in a series of measures,including a cadastre of water rights on the river basin;geological and hydrological mapping of the Vilama River;awareness campaigns and capacity-building program;providing access to data and resources through website and social media;irrigation pilot;monitoring of streams;grey water use;plan for sustainable tourism;support to stakeholders for public funding for water-related projects;and investment in upgrading a freshwater plant.The Responsible Lithium Partnership enables dialogue between organizations,indigenous com-munities and institutions that carry out productive,social and/or cultural activities in the Salar de Atacama basin.The members seek to collabora-tively resolve information gaps on the basin and reach agreement on priority issues related to the sustainability of the region,mainly focused on water-related issues.11on water-related challenges in 2023.technical workshopsVolkswagen Group Responsible Raw Materials Report 20232901Foreword02General Disclosure04 Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Lithium Cobalt Nickel Graphite Conflict Minerals Other Raw MaterialsBattery Raw Materials Cobalt CobaltCobalt is a hard,lustrous,silvery metal,found in rocks only in a chemically combined form.The vast majority of cobalt is extracted as a by-product of existing nickel and copper mining.Cobalt is primarily used in lithium-ion batteries and in the manufacture of magnetic high-strength alloys.Social&Human RightsCommunities Forced or compulsory labor Child labor Discrimination Health and safety Trade union freedoms Payment of adequate wages Causing harmful change Protection of the rights of indigenous people Production and use of pollutants Pollution,water consumption Handling and disposal of waste Loss of biodiversity Destruction of forests and soilsKey material-specific risks74%DR CongoRussia4%7%Indonesia8%Finland4nadaChina72%Countries of origin(Share of global mining/processing)Top 3 mining countries Top 3 smelting and refining/processing countriesSource:USGS,Cobalt Institute,2023 estimates.Volkswagen Group Responsible Raw Materials Report 20233001Foreword02General Disclosure04 Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Lithium Cobalt Nickel Graphite Conflict Minerals Other Raw MaterialsBattery Raw Materials CobaltKEY APPLICATION EV batteries Cobalt in our supply chainCobalt hydroxide,cobalt sulphate and cobalt metal are the main inputs for EV battery cell production.Cobalt plays an essential role in batteries,improving vehicle range and safety by providing thermal stability in cathode chemistry.In 2023,the Volkswagen Group did not directly source any battery raw materials,including cobalt.Instead,the Volkswagen Group buys its battery cells from suppliers which are themselves up to nine supply chain steps away from the raw material origin.Our main sourcing countries for cobalt are DRCongo,Turkey,Indonesia and New Caledonia(France).In the reporting period,PowerCo entered into purchasing agree-ments with suppliers of battery raw materials that will begin supplying PowerCo in 2025.PowerCo,founded in 2022,vertically integrates the develop-ment and production of battery cells within the Volkswagen Group and is expected to start manufacturing in 2025.More information is available in the 2023 Sustainability Report(pages54-55).Risk Assessment The Volkswagen Group has identified human rights and ad-verse environmental impacts as the systemic and salient risks for cobalt.This is due to the majority of the worlds cobalt being mined in the southern area of the DR Congo.While mining is a primary source of income for the region,cobalt is partially mined in labor-intensive artisanal and small-scale mining(ASM)with low wages,poor working conditions and little to no safety.The lack of law enforcement is also related to adverse environmental impact on the neighboring communities.Supply chain traceability is low due to the many actorsinvolved.In 2023,the Volkswagen Group continued to engage with battery cell producers and collected data through our cobalt supply chain mapping questionnaire,which we analyzed and assessed to identify any responsible sourcing risks.Working closely with our battery suppliers through our cobalt supply chain mapping and audit program,we have identified and prioritized certain suppliers.Risk MitigationWhile cobalt supply chains are complex,we continued to focus on working with our battery suppliers on securing sus-tainability in the supply chain.The Volkswagen Group strictly avoids sourcing cobalt from artisanal mining operations,a strategic decision aimed at mitigating the inherent risks associated with such activities in the DR Congo.Through our battery raw materials specification sheets,we request our suppliers to adhere to internationally recognized responsible sourcing practices such as the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Af-fected and High-Risk Areas.We seek contractual commitment to international standards such as those developed by IRMA or RMI(RMAP).By incor-porating the IRMA standard into its supplier requirements,the Volkswagen Group/PowerCo reaffirms its commitment to responsible sourcing practices and underscores the impor-tance of maintaining ethical standards in the cobalt supply chain.Following a suppliers commitment,we continuously monitor the suppliers progress towards its IRMA certification.While it remains the responsibility of the supplier to achieve IRMA certification,we remain closely involved.As part of this ongoing supplier engagement,one priority topic has been the safe management of hazardous substances,including miningtailings.However,compared to lithium,the cobalt supply chain contains additional challenges regarding standards:Cobalt is often mined as a by-product of large-scale copper(mainly in DR Congo)or nickel mines(e.g.Indonesia).The respective copper-cobalt mining companies are new to the IRMA stan-dard and sometimes favor alternative standards.In the reporting period,the Volkswagen Group also remained on the advisory board of a responsible mining standard,known as CERA 4in1 Performance standard,which was piloted in 2021.The CERA 4in1 pilot project was completed in2023 but is now on hold due to the roll out of IRMA.Stakeholder Engagement Ongoing engagement with on-the-ground projects such as Cobalt for Development(C4D)Dialogue with direct suppliers of cobalt through PowerCo Participation in RMI Working Groups on cobalt and emerging minerals OECD Forum on Responsible Mineral Supply ChainsVolkswagen Group Responsible Raw Materials Report 20233101Foreword02General Disclosure04 Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Lithium Cobalt Nickel Graphite Conflict Minerals Other Raw MaterialsBattery Raw Materials Cobalt In preparation for the start of the battery production,the Volkswagen Groups procurement team is supporting PowerCo in social and environmental risk assessments of potential direct suppliers of battery raw materials,including cobalt.These so-called“ESG pre-checks”are conducted during the initial dialogue with potential suppliers to assess the situation on the ground.In the reporting period,we con-ducted one pre-check for cobalt.In high-risk contexts,the checks are complemented by on-site due diligence facilitated by industry expert consultants,to ensure that suppliers comply with recognized standards on a range of human rights and environmental topics.We also leverage media screening and supply chain moni-toring solutions to actively monitor media hints of any issues occurring at our cobalt suppliers.For any issues,we seek responses and remediation plans when relevant,which are then monitored by the company.Initiatives and dialogueIn 2023,we continued to engage with Cobalt for Development(C4D),a cross-industry initiative implemented by GIZ that works to support communities dependent on artisanal cobalt mining in the DR Congos Lualaba Province.In C4D,we work together with partners for improved working and living condi-tions for small-scale cobalt miners and their communities.The pilot project aims to strengthen compliance with laws and improve health and safety conditions and social well-being for people locally.Outlook 2024We plan to:Further promote the IRMA standard for responsible cobalt mining Continue expanding our cobalt supply chain mapping in close collaboration with our major batterysuppliers,implementing new digital tools to improve the management of the collected supply chain information Engage with our suppliers to develop and roll out tools to sup-port compliance with the EUBR For more information on the EU Battery Regulation(EUBR)see page 14 of thisreport.Volkswagen Group Responsible Raw Materials Report 20233201Foreword02General Disclosure04 Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Lithium Cobalt Nickel Graphite Conflict Minerals Other Raw MaterialsBattery Raw Materials Nickel NickelNickel is a metallic element with a silvery appearance which occurs naturally in soil and water.Primary nickel is produced and used as ferro-nickel,nickel oxides and other chemicals.Stainless steel is by far the most important use of nickel,but it is also used in other alloys,plating and batteries.EnvironmentalSocial&Human RightsCommunities Forced or compulsory labor Child labor Direct or indirect sup-porttoarmed groups Discrimination Health and safety Payment of adequate wages Trade union freedoms Causing harmful change Forced evictions and/or expropriations Protection of rights of indigenous people Production and use of pollutants Pollution,water consumption Handling and disposal of waste Destruction of forests and soilsKey material-specific risks6%Countries of originNew CaledoniaPhilippinesIndonesia33P%Japan7%RussiaChina6%Countries of origin(Share of global mining/processing)Top 3 mining countries Top 3 smelting and refining/processing countries Both Source:USGS,EU RMIS,2023 estimates.Volkswagen Group Responsible Raw Materials Report 20233301Foreword02General Disclosure04 Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Lithium Cobalt Nickel Graphite Conflict Minerals Other Raw MaterialsBattery Raw Materials NickelKEY APPLICATION EV batteries Nickel in our supply chainNickel sulfate provides a source of nickel ions for the cathode material of lithium-ion batteries,such as Nickel-Cobalt-Aluminum(NCA)and Nickel-Cobalt-Manganese(NCM)batteries,contributing to the batterys overall performance,energy density and stability.In EV batteries,nickel-rich cathodes improve energy density and stability while reducing costs.Thus,nickel is a strategically important raw material in the electrification of transportation,in addition to its other uses in stainless steel,alloys and plating.For the Volkswagen Group,EV batteries are by far the largest field where nickel is required,and we did not directly source any nickel for this use in 2023.Our main sourcing countries for nickel are Australia,China,Papua New Guinea,Indonesia and New Caledonia(France).In the reporting period,PowerCo entered purchasing agreements with suppliers of battery raw materials that will begin supplying PowerCo in2025.PowerCo,founded in 2022,vertically integrates the develop-ment and production of battery cells within the Volkswagen Group and is expected to start manufacturing in 2025.More information is available in the 2023 Sustainability Report(pages 54-55).Risk Assessment The most serious risk areas associated with nickel are environmental impacts of open pit mining such as destruc-tion of forests and soils,water pollution and waste handling,particularly in seismically active areas such as Indonesia.Additionally,nickel production is a greenhouse-gas and energy-intensive process.For locations of a number of nickel mines as well as smelting and refining companies,human rights risks have been identified,including working condi-tions,health and safety,and forced labor.Risk MitigationContractual requirements for transparency and due diligence set out in our battery specification sheets are one key ele-ment of risk mitigation.Furthermore,the VolkswagenGroup has undertaken a broad sectoral analysis of the nickel supply chain and is continuing its supply chain mapping and auditing program.The Volkswagen Group joined IRMA in 2022 and has since rolled out the IRMA standard across the battery supply chains through contractual obligations.However,regarding standards,the nickel supply chain con-tains additional challenges compared to lithium,as nickel mining companies are new to the IRMA standard and some-times favor alternative standards.In preparation for the start of the battery production,the Volkswagen Groups procurement team is supporting PowerCo in social and environmental risk assessments of potential di-rect suppliers of battery raw materials.These so-called“ESG pre-checks”are conducted during the initial dialogue with po-tential suppliers,with a particular focus on mine sites located in high-risk countries.In the reporting period,we conducted six pre-checks for nickel.In high-risk contexts,during contract negotiations,we also perform comprehensive on-site human rights and environmen-tal due diligence facilitated by industry expert consultants.Stakeholder Engagement Participation in the nickel working group of RMI Ongoing dialogue with industry peers and direct and indirect suppliers Dialogue with affected stakeholders and NGOs Dialogue with direct suppliers of nickel through PowerCo Outlook 2024We plan to:Continue expanding our nickel supply chain mapping and audit program in close collaboration withour major battery suppliers Progressively apply the IRMA standard for responsible nickel mining and promote IRMA audits in the nickel supply chain Plan and engage in an on-the-ground partnership project in Indonesia to mitigate environmental and social risks and raise industry standards on sustainable manage-ment of nickel mining and refining Engage with our suppliers to develop and roll out tools to sup-port compliance with the EUBR For more information on the EU Battery Regulation(EUBR)see page 14 of thisreport.Volkswagen Group Responsible Raw Materials Report 20233401Foreword02General Disclosure04 Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Lithium Cobalt Nickel Graphite Conflict Minerals Other Raw MaterialsBattery Raw Materials Graphite GraphiteGraphite is a soft,crystalline form of carbon with a metallic luster and a dark grey color.With its thermal and electrical conductivity,it is suitable for many industrial applications.Synthetic and natural graphite are used on a large scale in pencils,lubricants and electrodes.EnvironmentalSocial&Human RightsCommunities Forced or compulsory labor Child labor Direct or indirect sup-porttoarmed groups Discrimination Health and safety Payment of adequate wages Trade union freedoms Causing harmful change Forced evictions and/or expropriations Protection of rights of indigenous people Production and use of pollutants Pollution,water consumption Handling and disposal of waste Destruction of forests and soilsKey material-specific risks6%6%MadagascarMozambiqueChina77%Countries of origin(Share of global mining)Top 3 mining countries Source:USGS,2023 estimates.Volkswagen Group Responsible Raw Materials Report 20233501Foreword02General Disclosure04 Raw Materials03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Lithium Cobalt Nickel Graphite Conflict Minerals Other Raw MaterialsBattery Raw Materials GraphiteKEY APPLICATION EV batteries Graphite in our supply chainNatural graphite is contained in a vast number of vehicle parts,most importantly in the anodes of EV batteries,but also in brake discs and precision parts,graphite powders,etc.EVbatteries are by far the largest field where graphite is required,and the Volkswagen Group did not source any graphitefor this use in 2023.With more electric vehicles being produced,we expect the demand for graphite to keep rising.China is the worlds lead-ing supplier of natural graphite.Given its strategic importance for the energy transition and its high supply risk,natural graphite is listed by the EU as a critical raw material.Risk Assessment The Volkswagen Group has identified human rights and ad-verse environmental impacts as the main systemic and salient risks,particularly occupational health and safety,air pollution and negative impacts to local communities.Risk MitigationWe take a multi-layered approach to risk mitigation,focusing on our six battery suppliers as well as the future direct suppli-ers of natural graphite to PowerCo.Contractual requirements for transparency and due diligence set out in our battery specification sheets are one key element of riskmitigation.In the reporting period,the Volkswagen Group has undertaken a broad sectoral analysis of the graphite supply chain and has continued its supply chain mapping and auditing program.The Volkswagen Group joined IRMA in 2022 and is com-mitted to rolling out the IRMA standard across the battery supply chains through contractual obligations.This applies to both our current battery suppliers and the new suppliers for PowerCo.Outlook 2024We plan to:Continue expanding our graphite supply chain mapping and audit program with our battery suppliers Engage with our suppliers to develop and roll out tools to sup-port compliance with the EUBR For more information on the EU Battery Regulation(EUBR)see page 14 of thisreport.Stakeholder Engagement Ongoing engagement in industry initiatives Dialogue with direct suppliers of graphite through PowerCo05Outlook for 202406Annex Battery Raw Materials 3TG Other Raw Materials Conflict Minerals04 Raw Materials01Foreword02General Disclosure03Commitment to Initiatives Conflict Minerals 3TG36 3TGTin,tantalum,tungsten and gold(3TG)are referred to as“conflict minerals”due to their role in violent conflicts in the Democratic Republic of the Congo(DRC)and neighboring countries,where their extraction and trade are used to fund armed groups while fueling human rights abuses,corruption and money laundering.3TG metals are used in a wide range of everyday electronic products.Child labor Direct or indirect sup-port to armed groups Discrimination Forced or compulsory labor Forced evictions and/or expropriations Protection of the rights of indigenous peoples Production and use of pollutants Air pollution Safety of installations Handling and disposal of waste Pollution,water consumption TIN,TANTALUM,TUNGSTEN AND GOLDSocial&Human RightsCommunitiesEnvironmentalKey material-specific risks Destruction of forests and soils Loss of biodiversity Noise and vibrations Health and safety Payment of ade-quate wages Because 3TG are four different raw materials with a large total number of countries of origin,we decided against visualizing them on a world map.Instead,the 3TG smelters and the countries and territories of origin we identified are listed in Annexes III and IV ofthisreport.Volkswagen Group Responsible Raw Materials Report 20233701Foreword02General Disclosure03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials 3TG Other Raw Materials Conflict Minerals04 Raw MaterialsConflict Minerals 3TGKEY APPLICATIONS Various automotive parts Electronics 3TG in our supply chain 3TG metals(tin,tantalum,tungsten and gold,collectively called 3TG or also conflict minerals)are used in tiny quantities in a wide array of automotive parts and components.This lack of focal parts to concentrate on creates a key challenge for 3TG due diligence in automotive supply chains.Tracing the upstream supply chains becomes even more challenging considering that the raw materials are typically added to our supply chains several levels upstream where we have no direct contractual relations.The Volkswagen Group does not directly purchase 3TG metals.However,we request our suppliers to ensure that only responsibly sourced conflict minerals are part of their supply chains.As stated in our contractually binding Code of Con-duct for Business Partners(CoC BP),business partners may only use 3TG from smelters or refiners that meet the require-ments of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas,as assessed by the Responsible Minerals Initiative(RMI)or similar organizations.These assessments are carried out according to the RMIs Responsible Minerals Assurance Process(RMAP).We expect our suppliers to avoid all minerals from conflict affected smelters.Nevertheless,in line with OECD Guidance,the aim is not to ban the procurement of conflict minerals that originate in conflict-affected and high-risk areas,but to pro-mote sourcing from responsible sources within those regions.Risk Assessment As part of the annual general risk assessment,the Volkswagen Group identified human rights risks including child labor and support to non-state armed groups and/or public or private security forces as outstanding systemic social risks.Salient environmental risks are pollutants and hazardous chemicals.However,almost all risk categories according to our RMDDMS apply to these conflict minerals.As with most other minerals,the highest risks occur at the mining level.For 3TG due diligence,the“choke-point approach”in alignment with the OECD Minerals Guidance is best practice.The approach aims to first identify smelters and refiners(choke points)and then ensure that those smelters and refiners source responsibly.In 2023,we continued working towards transparency along our 3TG supply chain by collecting relevant supplier data.We used the RMIs Conflict Minerals Reporting Template(CMRT).The CMRT is a standardized reporting template that facilitates the transfer of information through the supply chain regard-ing mineral country of origin and the smelters and refiners used.The template also supports identifying which smelters and refiners should undergo an audit according to RMIs RMAPstandard.In addition,we continued partnering with Assent,a supply chain management solution which includes a third-party database,to manage and improve the quality of the transpar-ency data we receive from suppliers delivering nearly 200,000 different parts.The response rate increased to above 70%,a significant improvement compared to last years campaign.We expanded our supplier outreach in line with our ongoing due diligence process.Through collective industry out-reach,including our partner Assent and using the CMRT,we identified and engaged with a greater number of relevant tier-1 suppliers compared with previous years around 4,000 suppliers delivering nearly 200,000 different parts.The response rate increased to above 70%,a significant improve-ment compared to last years campaign.We have determined country of origin data for the majority ofthe smelters in our supply chain.Lists identifying our smelt-ers and countries of origin can be found in Annexes III and IV of this report.Stakeholder Engagement Member of RMIs smelter engagement and gold team Ongoing dialogue with NGOs Enhanced due-diligence outreach to tier-1 suppliers Encouraging smelters to undergo RMAP auditsVolkswagen Group Responsible Raw Materials Report 20233801Foreword02General Disclosure03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials 3TG Other Raw Materials Conflict Minerals04 Raw MaterialsConflict Minerals 3TG Outlook 2024We plan to:Continue to work on increasing transparency along our 3TG supply chain by collecting data and en-gaging with our most critical tier-1 suppliers(based on the smelter risk profile and/or the quantity of 3TG materials used in their products)Increase the percentage of RMAP-conformant 3TG smelters inour supply chain Risk Mitigation Besides our work on increasing transparency in our 3TG supply chains,we are focusing on increasing the number of RMAP-compliant smelters through our participation in theRMI.In the reporting period,the Volkswagen Group continued to participate in the smelter engagement team and the gold team of the Responsible Minerals Initiative(RMI).Together with other RMI members,we worked with a number of our smelters to encourage them to undergo the RMIs Responsible Minerals Assurance Process(RMAP).Smelters and refiners who face challenges meeting requirements of the RMAP standard can participate in the Extended Corrective Action Plan(CAP)Process of the RMI.This process helps smelters and refiners pursue risk mitigation and continuous improvement.Together with our partner Assent,we launched an enhanced due diligence program for 3TG in 2023 to ensure that the requirement from our CoC BP is enforced.To determine if the suppliers comply with our requirements,we assess whether the smelters are RMAP-conformant and also check for any negative media coverage of the smelter.Through this addi-tional outreach activity 1,500 direct suppliers were requested to ensure that only RMAP-conformant smelters contribute to their supply chains.Of the smelters identified in our supply chain,nearly 63%were RMAP-conformant as of the end of 2023.The slight decrease in RMAP conformance compared to the previous reporting year is due to a reduced number of globally available confor-mant smelters.We continue to look for red flags in accordance with the OECD Guidance that may help identify suppliers from conflict-affected and high-risk areas prone to issues of human rightsviolations.Raw Materials Rohstoffbezeichnung05Outlook for 202406Annex Battery Raw Materials Other Raw Materials Conflict Minerals Aluminum PGM Copper Natural Rubber Leather REE Magnesium Mica Steel Cotton04 Raw Materials01Foreword02General Disclosure03Commitment to Initiatives Other Raw Materials Aluminum Volkswagen Group Responsible Raw Materials Report 2023397%BrazilCountries of origin(Share of global mining/processing)Top 3 mining countries Top 3 smelting and refining/processing countries Both Source:USGS,2023 estimates.Aluminum Aluminum is extremely versatile and is therefore used in a variety of applications,often replacing steel due to its light weight.It is strong,nonmagnetic,and conducts heat and electricity.Aluminum is an abundant element in the earths crust but does not occur in its pure form.It has to be extract-ed from bauxite in a resource-intensive process.EnvironmentalSocial&Human RightsCommunities Forced or compulsory labor Protection of the rights of indigenous peoples Production and use of pollutants Air pollution Handling and disposal of waste Key material-specific risks Pollution,water consumption Loss of biodiversity Destruction of forests and soils ChinaAustralia59#%$%GuineaVolkswagen Group Responsible Raw Materials Report 20234001Foreword02General Disclosure03Commitment to Initiatives 05Outlook for 202406Annex Battery Raw Materials Other Raw Materials Conflict Minerals Aluminum PGM Copper Natural Rubber Leather REE Magnesium Mica Steel Cotton04 Raw MaterialsOther Raw Materials AluminumKEY APPLICATIONS Body sheets Die casting&extrusion parts Aluminum in our supply chain Aluminum is used in several key parts of our brands vehicles from engines,chassis,frames and body sheets to wheels.Aluminum is also used in battery compartments,cooling plates and many other smaller
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1Annual Green Bond Impact Report|Fiscal Year 2023 UpdateAnnual Green Bond Impact ReportFiscal Year 2023 UpdateHolmen Iggesund joined Apples Supplier Clean Energy Program in 2023.Holmens Blbergsliden wind farm features 26 turbines and is located just outside of Skellefte,Sweden.2Annual Green Bond Impact Report|Fiscal Year 2023 UpdateContentsApples green bonds 2Process for selecting projects and quantifying benefits 3Cumulative allocation and benefits 4Featured projects 5Appendix 11 Sustainalytics Review 12 Ernst&Young LLP Use of Proceeds Examination 182Annual Green Bond Impact Report|Fiscal Year 2023 UpdateApples green bondsApple is committed to leaving the world better than we found it,and that commitment is considered in everything we do from how we design our products to the processes we use to make and recycle them.We have long sought to model how businesses can lead in driving the reduction of global carbon emissions,and our green bonds have helped Apple to demonstrate that leadership.We issued our first$1.5 billion green bond in February 2016 and our second$1 billion green bond in June 2017 to help advance projects to mitigate our impact on climate change and inspire others to do the same.Both of these green bonds are fully allocated.In November 2019,we proceeded with our third green bond issuance,and our first in Europe raising 2 billion(approximately$2.2 billion)across two tranches(the“2019 Green Bond”).The 2019 Green Bond supports environmental efforts across the company,as well as our ambitious goal to reach carbon neutrality across Apples entire carbon footprint,including the full product life cycle,by 2030.1 We first aim to leverage low-carbon product design,energy efficiency,clean electricity,and direct emissions abatement to reduce emissions by 75 percent by 2030,compared with our fiscal year 2015 carbon footprint.We then plan to address residual emissions by investing in high-quality carbon removal solutions.This years annual impact report covers the cumulative allocation of Apples 2019 Green Bond proceeds to environmental projects that incurred spend between September 29,2019,and September 30,2023 Apples 2023,2022,2021,and 2020 fiscal years.$4.7 billionSince February 2016,Apple has issued a total of$4.7 billion in green bonds,with approximately$3.4 billion allocated to date.3Annual Green Bond Impact Report|Fiscal Year 2023 UpdateProcess for selecting projects and quantifying benefitsThe 2019 Green Bond proceeds are intended to prioritize projects that mitigate our carbon emissions,including supporting the execution of Apples 2030 carbon neutrality roadmap.Our Environment,Policy and Social Initiatives team leads an annual evaluation and project selection process to identify projects eligible for green bond proceeds.The final allocation of net proceeds to eligible projects is determined by our vice president of Environment,Policy and Social Initiatives,based on each projects alignment with the 2019 Green Bond eligibility criteria:low carbon design and engineering,energy efficiency,renewable energy,carbon mitigation,and carbon sequestration.2Apple allocated proceeds to a variety of project types across the eligible categories,including operational projects with immediate direct carbon benefits,capacity-building projects that enable suppliers to achieve carbon emissions reductions,and research and development that will unlock future carbon reductions once scaled.For many projects,were able to quantify a direct carbon benefit.When this is possible,we calculate the carbon impact over the projects lifetime by estimating the annual carbon emissions reductions or removals of each project3 and multiplying it by the projects expected lifetime based on the underlying contracts.Were also quantifying the new renewable energy capacity were adding to the grid through the renewable energy projects to which weve allocated green bond proceeds based on the terms of our agreements with project developers.4Annual Green Bond Impact Report|Fiscal Year 2023 Update*A number of projects to which green bond proceeds were allocated since issuance are dedicated to research anddevelopment,capacity building,and policy advocacy.These types of projects have an indirect carbon benefit andtherefore are not reflected in the Projected Environmental Benefits quantified above.*This number represents power purchase agreements(PPAs)and virtual power purchase agreements(vPPAs)where Apple is the sole investor,and obtains environmental attributes that are applied to our corporate carbon footprint.Apples investments also support capacity from which we do not directly obtain environmental attributes.We also co-invest with other partners.The capacity from both of these kinds of investments are not included in the number above.Apples combined investments,including those made with partners,have resulted in over 2,000 MW installed renewable energy capacity from the 2019 Green Bond issuance through fiscal year 2023.2019 Green Bond Cumulative AllocationFiscal year 2023 updateProjects$864.2 million(39%allocated)By Eligibility Category(in millions)4Low-carbon design$87.9Energy efficiency$5.5Renewable energy5$683.4Carbon mitigation$8.9Carbon sequestration$78.5Projected Environmental Benefits6 The 70 projects to which Apple allocated 2019 Green Bond funds since issuance are estimated to result in the following direct environmental benefits.*13,800,000 metric tons CO2eLifetime greenhouse gas emissions to be mitigated or offset7 707 MW*Installed renewable energy capacity705Annual Green Bond Impact Report|Fiscal Year 2023 UpdateFeatured projectsIn fiscal year 2023,we continued to expand the projects that support our 2030 carbon neutrality goal,with investments in R&D,renewable energy,and other environmental initiatives.What follows are select examples of the projects to which Apple allocated green bond funds in fiscal year 2023.While we introduced 11 new projects in fiscal year 2023,the majority of our spend was allocated to continuing long-term environmental initiatives necessary to reach our carbon neutrality goal.The full list of projects with detailed descriptions and key performance indicators was provided to Sustainalytics for their second-party review(see the Appendix for the Sustainalytics Review Statement).Clean energy for product useThe electricity that our customers use to charge or power their Apple devices represents 24 percent of Apples gross carbon footprint.8 Increasing the energy efficiency of our products helps drive down emissions from product use,and were taking steps to address the emissions that remain.In fiscal year 2023,weve allocated green bond proceeds to our investment in the 320-megawatt,2300-acre IP Radian Solar project in Brown County,Texas,which is now fully funded.And in fiscal year 2023,we began to fund several new solar projects in Michigan.Over the next several years,we aim to help generate enough clean energy so that we can match the electricity consumption of our products globally on an annual basis,while continuing to power corporate offices,retail stores,and data centers with 100 percent renewable electricity.Apple is investing in renewable energy worldwide including this large-scale solar project in Brown County,Texas to help address the electricity customers use to charge or power their Apple devices.6Annual Green Bond Impact Report|Fiscal Year 2023 UpdateRecycled materialsThe use of recycled materials is central to our goal of making carbon neutral products by 2030.Incorporating recovered materials into our design process has already helped us lower the carbon footprint of the products we create.But to maximize the use of recycled content,additional research and development is needed.In fiscal year 2023,we continued to allocate green bond funds to further investigate ways to address challenges in improving the purity of recovered materials so they can be reused in Apple products instead of being downcycled.Reducing emissions in Apples supply chainEmissions from our manufacturing supply chain represent approximately 65 percent of Apples comprehensive carbon footprint,9 of which electricity use is the single largest contributor.Weve worked to address these electricity emissions in our supply chain through targeted supplier programs,like the Supplier Clean Energy Program and the Supplier Energy Efficiency Program.In fiscal year 2023,we continued to allocate green bond proceeds to both of these programs.Supplier Energy Efficiency ProgramThe Supplier Energy Efficiency Program,launched in 2015,aims to help our suppliers optimize energy use in their facilities by focusing on approaches to reduce energy use and avoid energy waste.We provide technical and planning support to suppliers as they build more energy-efficient systems by helping them to recognize optimization opportunities and identify solutions through assessments and audits.To assist with implementation,we connect suppliers to extensive education and training opportunities,including technical assistance resources,and to external funding and green financing for energy efficiency projects.Typical energy efficiency projects may include replacing outdated or inefficient heating,cooling,and lighting systems;repairing compressed air leaks;and recovering waste heat.As suppliers become more knowledgeable in this space,they become more able to tackle deeper decarbonization challenges.7Annual Green Bond Impact Report|Fiscal Year 2023 UpdateSupplier Clean Energy ProgramOur Supplier Clean Energy Program helps enable suppliers transition to clean,renewable electricity through levers such as policy advocacy,information about renewable energy procurement options,data insights,and engagement opportunities with renewable energy experts.As of September 2023,more than 300 manufacturers are committed to using 100 percent clean energy for their Apple production by 2030,which represents over 90 percent of the companys direct manufacturing spend.10 Capacity building.We share the knowledge weve gained throughour own transition to 100 percent renewable energy with our suppliers,supplementing their efforts to identify and pursue opportunities to decarbonize as their businesses evolve.For this reason,we invest heavily in providing education and training across our supply chain through platforms such as our Clean Energy Academy,which includes advanced and customized trainings and workshops with leading experts.Additionally,the Clean Energy Academy supplements our Clean Energy Portal,which is available to all suppliers and provides training materials,resources,and country-specific information to guide them in their transition to renewable energy.Advocating for strong policy.Government policies and rules can present some of the most significant opportunities to collaborate on transitioning to renewables.We lend our voice and stand with other companies and stakeholders to break down local,regional,and national policy barriers to achieve thriving clean energy markets.In fiscal year 2023,we allocated green bond proceeds to policy efforts in Japan,Vietnam,India,and South Korea.Expanding renewable energy opportunities.To support our suppliers transition to renewable electricity,we help them find high-quality solutions so they can decide how best to address their specific needs.When we face barriers to accessing cost-effective clean electricity,we innovate.One such innovation,the China Clean Energy Fund,enables Apple and our suppliers to invest in clean energy,and in fiscal year 2023,we allocated additional green bond proceeds to the fund.8Annual Green Bond Impact Report|Fiscal Year 2023 UpdateNature-based solutionsTo reach our goal of carbon neutrality for our products by 2030,we allocated green bond proceeds to invest in high-quality carbon removal projects through Apples Restore Fund for the small portion of emissions were not yet able to avoid through other methods.In partnership with Conservation International and Goldman Sachs,weve invested with three high-quality forestry managers in Brazil and Paraguay to restore sustainably certified working forests and protect native forests,grasslands,and wetlands.Together,these initial forestry projects are forecast to remove 1 million metric tons of carbon dioxide from the atmosphere starting in 2025.We aim for these projects to become certified under the Verified Carbon Standard(VCS)and the Climate,Community&Biodiversity Standards(CCBS).Based on our learnings with these projects and the growing global need for more nature-based solutions,Apple announced an expansion of the Restore Fund in fiscal year 2023.As part of the expansion,Apple will invest up to an additional$200 million in the new fund,which Climate Asset Management a joint venture of HSBC Asset Management and Pollination will manage.The new portfolio aims to remove 1 million metric tons of carbon dioxide per year at its peak while generating a financial return for investors.For Apple suppliers that become partners in the fund,it will also offer a new way for them to incorporate high-impact carbon removal projects as they decarbonize.Apple and partners are working with forestry managers to create responsibly managed forests that optimize for both carbon and wood production,creating revenue from timber and generating high-quality carbon credits.Photo by Arbaro Advisors.9Annual Green Bond Impact Report|Fiscal Year 2023 UpdateCarbon footprint modeling improvementsAs our low-carbon manufacturing processes evolve,so do our techniques for measuring Apples footprint.In fiscal year 2023,we again allocated green bond funds to several projects intended to improve the fidelity,scalability,speed,and breadth of Apples carbon models,and to improve the carbon modeling of Apples use of new recycled content in products.The 2019 Green Bond also continued to support our work with the sustainable semiconductor technologies and systems research program of imec,a world-leading research and innovation hub in nanoelectronics and digital technologies.Our collaboration is focused on improving the data associated with integrated circuit production,from end to end,and using improved data and shared expertise to identify carbon reduction opportunities for the entire integrated circuits industry.10Annual Green Bond Impact Report|Fiscal Year 2023 UpdateReport Notes1.We plan to reach carbon neutrality beginning with our fiscal year 2030 carbon footprint.2.Across our other environmental reporting,we also use the term“emissions abatement”for“carbon mitigation”and“carbon removal”for“carbon sequestration.”3.Notes on Projected Environmental Benefits:We estimated future environmental benefits of projects that are not yet fully operational,including carbon emissions avoided or removed,energy capacity,and annual renewable energy generation.To estimate carbon emissions avoided for renewable energy projects and renewable energy certificates(RECs),we use regional grid emissions factors as well as projections for annual electricity generation or the MWh associated with RECs.For the Restore Fund,we estimated the total carbon removal potential over the lifetime of the projects.There is inherent uncertainty in all of these projections.There is currently no generally accepted accounting principle to measure or account for many of these metrics,and our measurement methodologies may change.Projects dedicated to research and development or capacity building are not quantified,as their carbon benefit while we believe is often sizable is indirect and may take place across Apples global supply chain.Proceeds from Apples 2019 Green Bond were allocated to new and ongoing projects.For ongoing,multiyear projects,we included the spend that occurred during the fiscal year allocation period and the estimated environmental benefits of the entire completed project.We changed our methodology for quantifying the benefits of eligible projects to a project lifetime calculation in fiscal year 2022.We believe a lifetime calculation to be a better method of quantifying the impact of these projects compared to the prior calculation methodology that entailed estimating annual emissions reductions,as our projects range from 1 to 25 years well beyond the maturity of the 2019 Green Bond and related impact reporting.4.The green bond allocations above do not capture financial returns from project investments.As a result,the information provided does not capture a full view of the net abatement costs to Apple.5.Renewable energy spend includes equity investments,long-term contracts like power purchase agreements(PPAs)and virtual power purchase agreements(vPPAs),as well as some renewable energy credits,equity investments,and long-term environmental attribute purchase agreements.For PPAs/vPPAs,the allocated amount is calculated as the net present value of future cash flows based on estimated annual production in megawatts and power price over the contract term.Because of this allocation methodology,the financial allocations to the 2019 Green Bond use of proceeds may not proportionally match the carbon contributions that we expect from each category of Apples 2030 carbon neutrality roadmap.6.See note 2.7.Starting with fiscal year 2022,were calculating greenhouse gas emissions mitigated or offset using the projected lifetime benefits of eligible projects from cumulative allocations for the period from fiscal year 2020 to fiscal year 2023.Project lifetimes range from 1 to 25 years.8.Based on our fiscal year 2022 carbon footprint.9.Based on our fiscal year 2022 carbon footprint.10.Direct manufacturing spend calculated based on fiscal year 2022 financial information.This Green Bond Report(the“Report”)contains forward-looking statements,within the meaning of the Private Securities Litigation Reform Act of 1995,that involve risks and uncertainties.Such forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact.For example,statements in this Report regarding the potential future impact of allocated projects are forward-looking statements.Forward-looking statements can also be identified by words such as“future,”“goal,”“anticipates,”“believes,”“estimates,”“expects,”“intends,”aims,”“plans,”“predicts,”“projected,”“will,”“would,”“could,”“can,”“may,”and similar terms.Forward-looking statements are not guarantees of future performance and Apples actual results may differ significantly from the results discussed in the forward-looking statements.Factors that might cause such differences include,but are not limited to,those discussed in the“Risk Factors”sections of Apples most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings as filed with the Securities and Exchange Commission.Apple assumes no obligation to revise or update any forward-looking statements for any reason,except as required by law.This Report has been prepared for information purposes only.Apple does not make any warranties or representations as to the completeness or reliability of the information,opinions or conclusions expressed herein.This Report is not intended to provide the basis for the evaluation of any securities issued by Apple.This Report should not be construed and does not constitute an invitation,recommendation or offer to subscribe for or purchase any of Apples securities.Under no circumstances shall Apple or its affiliates be liable for any loss,damage,liability or expense incurred or suffered which is claimed to have resulted from use of this Report.2024 Apple Inc.All rights reserved.Apple and the Apple logo are trademarks of Apple Inc.,registered in the U.S.and other countries.March 202411Annual Green Bond Impact Report|Fiscal Year 2023 UpdateAppendixSustainalytics Review Ernst&Young LLP Use of Proceeds Examination Sustainalytics 2024 Apple Inc.Type of Engagement:Annual Review Date:24 February 2024 Engagement Team:Akshay Chandrakapure, Sidharth P R, Introduction In 2019,Apple Inc.(“Apple”)issued green bonds(the“2019 Green Bond”)to finance projects that have positive environmental impacts,with the goal of reducing the carbon footprint associated with Apples own operations and more broadly across its entire value chain.In 2023,Apple engaged Sustainalytics to review the projects to which green bond proceeds were allocated during Apples fiscal year 2023 and provide an assessment as to whether the projects met the use of proceeds criteria and the reporting commitments outlined in the Apple Green Bond Framework(the“Framework”).1 Sustainalytics provided a Second-Party Opinion on the Framework in November 2019.2 This is Sustainalytics fourth annual review of allocation and reporting of the instruments issued under the Framework,following previous reviews for Apples allocations for fiscal years 2020,3 2021,4 and 2022.5 Evaluation Criteria Sustainalytics evaluated the projects to which green bond proceeds were allocated in Apples fiscal year 2023(between 24 September 2022,and 30 September 2023)based on whether the projects financed:1.Met the use of proceeds and eligibility criteria defined in the Framework;and 2.Reported on at least one key performance indicator(KPI)for each use of proceeds category defined in the Framework.Table 1:Use of Proceeds Categories,Eligibility Criteria and Associated KPIs 1 For Apples Green Bond Framework,see the section“Use of Proceeds”in the Prospectus Supplement dated November 7,2019 filed with the U.S.Securities and Exchange Commission and available at https:/www.sec.gov/Archives/edgar/data/320193/000119312519288412/d804226d424b2.htm#supptoc804226_8 2 Sustainalytics,“Second-Party Opinion,Apple Inc.”,(2019),at:https:/mstar-sustops-cdn-mainwebsite- 3 Sustainalytics annual review of Apples Framework for the 2020 fiscal year is available on Apples website at:https:/ 4 Sustainalytics annual review of Apples Framework for the 2021 fiscal year is available on Apples website at:https:/ 5 Sustainalytics annual review of Apples Framework for the 2022 fiscal year is available on Apples website at:https:/ 6 Starting fiscal year 2022,Apple changed its methodology for quantifying the carbon benefits of eligible projects to a project lifetime calculation.As a result,Apple has revised its KPIs and is reporting on two KPIs for allocations:1)Lifetime carbon benefit of projects(tCO2e),which will also capture the previously reported average annual GHG emissions avoided KPI,and 2)Renewable energy capacity(MW).Apple believes that this change enables it to better reflect total benefits,while accounting for varying project lifetimes.7 Lifetime greenhouse gas emissions mitigated or offset includes the combined impact of all projects over the course of their lifetimes which range from 1 to 25 years.Use of Proceeds Category Eligibility Criteria Key Performance Indicators(KPIs)6 Low Carbon Design and Engineering Expenditures related to the development or procurement of less carbon-intensive products and materials(compared to an established“pre-activity”baseline),such as improving product power usage efficiency,using materials produced from manufacturing processes requiring lesser greenhouse gas emissions,or Lifetime carbon benefit(MT)7 Renewable energy capacity(MW)Annual Review Apple Inc.2 Issuers Responsibility Apple is responsible for providing accurate information and documentation relating to the details of the projects to which green bond proceeds have been allocated,including description of projects,amounts allocated and project impact.Independence and Quality Control Sustainalytics,a leading provider of ESG research and ratings,conducted the verification of the use of proceeds from Apples 2019 Green Bond.The work undertaken as part of this engagement included collection of documentation from Apple and review of said documentation to assess conformance with the Framework.Sustainalytics relied on the information and the facts presented by Apple with respect to projects to which green bond proceeds were allocated for Apples 2023 fiscal year.Sustainalytics is not responsible,nor shall it be held liable for any inaccuracies in the opinions,findings or conclusions herein due to incorrect or incomplete data provided by Apple.Sustainalytics made all efforts to ensure the highest quality and rigor during its assessment process and enlisted its Sustainability Bonds Review Committee to provide oversight of the review.sourcing materials with recycled or renewable content.Energy Efficiency Expenditures related to the development of energy efficiency projects intended to reduce emissions in new or existing corporate and supply chain facilities,such as sensors and controls,energy management systems,and facility design,commissioning,and retrofits.Renewable Energy Expenditures related to the development of renewable energy projects intended to reduce emissions in Apples corporate facilities and supply chain,such as solar and wind projects,or associated energy storage solutions,including work to advance market structures,regulations and policy that support renewable energy through coalition and capacity building.Carbon Mitigation Expenditures related to the development of projects intended to reduce direct and process emissions(compared to an established“pre-activity”baseline)from Apples and our suppliers operations,such as abating direct emissions from manufacturing or sourcing non-fossil low carbon fuels Carbon Sequestration Expenditures related to the development of projects that sequester carbon,such as habitat restoration and conservation Annual Review Apple Inc.3 Conclusion Based on the limited assurance procedures conducted,8 nothing has come to Sustainalytics attention that causes us to believe that,in all material respects,the reviewed projects do not conform with the use of proceeds and reporting criteria outlined in the Framework.Apple has disclosed to Sustainalytics that 39%of the proceeds from the 2019 Green Bond were allocated as of the close of Apples 2023 fiscal year.Detailed Findings Table 2:Detailed Findings Framework Requirements Procedure Performed Factual Findings Error or Exceptions Identified Use of Proceeds Criteria Verification of the projects to which green bond proceeds were allocated in FY2023 to determine alignment with the use of proceeds criteria outlined in the Framework and above in Table 1.All projects reviewed complied with the use of proceeds criteria.None Reporting Criteria Verification of the projects to which green bond proceeds were allocated in FY2023 to determine if impact was reported in line with the KPIs outlined in the Framework and above in Table 1.All projects reviewed reported on at least one KPI per use of proceeds category.None 8 Sustainalytics limited assurance process includes reviewing the documentation relating to the details of the funded projects,including description of projects,their estimated and realized costs and impact,as provided by the issuing entity,which is responsible for providing accurate information.Sustainalytics has not conducted on-site visits to projects.Annual Review Apple Inc.4 Appendices Appendix 1:Allocation Reporting by Eligibility Criteria Apple has allocated USD 157.7 million to eligible projects in its 2023 fiscal year(ending 30 September 2023),and a total of USD 864.2 million to 70 projects since Apples 2020 fiscal year,as outlined in the table below:Use of Proceeds Category Net Proceeds Allocation,FY 2023 (USD million)Net Proceeds Allocation,Cumulative(USD million)Low Carbon Design 30.7 87.9 Energy Efficiency 0.5 5.5 Carbon Mitigation 1.6 8.9 Renewable Energy 93.7 683.4 Carbon Sequestration 31.0 78.5 Total allocation 157.7 864.2 Net proceeds raised(USD million)2,192.9 Percentage allocation 39%Appendix 2:Reported Impact Key Performance Indicators(KPIs)Environmental Impact Reported Lifetime carbon benefit(tCO2e)9,10 13,800,000 Renewable energy capacity(MW)11 707 In addition to the above quantified benefits,Apple estimates that several projects will have indirect carbon benefits across its supply chain from investments in research and development,capacity building and policy advocacy.9 Projected lifetime benefits from cumulative allocations.Project lifetimes range from 1 to 25 years.As of the end of FY2023,none of the financed projects are beyond 25 years.10 GHG emissions mitigated or offset.11 Apple has communicated to Sustainalytics that this represents a cumulative impact over the life of the green bond.Annual Review Apple Inc.5 Disclaimer Copyright 2024 Sustainalytics.All rights reserved.The information,methodologies and opinions contained or reflected herein are proprietary of Sustainalytics and/or its third-party suppliers(Third Party Data),and may be made available to third parties only in the form and format disclosed by Sustainalytics,or provided that appropriate citation and acknowledgement is ensured.They are provided for informational purposes only and(1)do not constitute an endorsement of any product or project;(2)do not constitute investment advice,financial advice or a prospectus;(3)cannot be interpreted as an offer or indication to buy or sell securities,to select a project or make any kind of business transactions;(4)do not represent an assessment of the issuers economic performance,financial obligations nor of its creditworthiness;and/or(5)have not and cannot be incorporated into any offering disclosure.These are based on information made available by the issuer and therefore are not warranted as to their merchantability,completeness,accuracy,up-to-dateness or fitness for a particular purpose.The information and data are provided“as is”and reflect Sustainalytics opinion at the date of their elaboration and publication.Sustainalytics accepts no liability for damage arising from the use of the information,data or opinions contained herein,in any manner whatsoever,except where explicitly required by law.Any reference to third party names or Third-Party Data is for appropriate acknowledgement of their ownership and does not constitute a sponsorship or endorsement by such owner.A list of our third-party data providers and their respective terms of use is available on our website.For more information,visit http:/ issuer is fully responsible for certifying and ensuring the compliance with its commitments,for their implementation and monitoring.In case of discrepancies between the English language and translated versions,the English language version shall prevail.Annual Review Apple Inc.6 About Sustainalytics,a Morningstar Company Sustainalytics,a Morningstar Company,is a leading ESG research,ratings and data firm that supports investors around the world with the development and implementation of responsible investment strategies.For more than 30 years,the firm has been at the forefront of developing high-quality,innovative solutions to meet the evolving needs of global investors.Today,Sustainalytics works with hundreds of the worlds leading asset managers and pension funds who incorporate ESG and corporate governance information and assessments into their investment processes.Sustainalytics also works with hundreds of companies and their financial intermediaries to help them consider sustainability in policies,practices and capital projects.With 17 offices globally,Sustainalytics has more than 1500 staff members,including more than 500 analysts with varied multidisciplinary expertise across more than 40 industry groups.For more information,visit Or contact us Report of Independent AccountantsTo the Management of Apple Inc.:We have examined managements assertion,in Exhibit A,that$864.2 million of net proceeds from the 0.000%notes due 2025 and 0.500%notes due 2031 issued by Apple Inc.(“Apple”)were allocated,during the periodfrom September 29,2019 to September 30,2023(the“Reporting Period”),to qualifying Eligible Projects thatmeet one or more of the Eligibility Criteria(each as defined in the“Use of Proceeds”section of the ProspectusSupplement dated November 7,2019,to the Prospectus dated November 5,2018,filed by Apple on November8,2019,with the Securities and Exchange Commission pursuant to Rule 424(b)(2)under the Securities Act of1933,as amended).Apples management is responsible for the assertion,having a reasonable basis for itsassertion,selection of the Eligibility Criteria and the allocation,during the Reporting Period,of amounts toEligible Projects that meet one or more of the Eligibility Criteria.Our responsibility is to express an opinion onthe assertion based on our examination.Our examination was conducted in accordance with attestation standards established by the American Instituteof Certified Public Accountants(“AICPA”).Those standards require that we plan and perform the examinationto obtain reasonable assurance about whether managements assertion is fairly stated,in all material respects.An examination involves performing procedures to obtain evidence about managements assertion.The nature,timing,and extent of the procedures selected depend on our judgment,including an assessment of the risks ofmaterial misstatement of managements assertion,whether due to fraud or error.We believe that the evidencewe obtained is sufficient and appropriate to provide a reasonable basis for our opinion.We are required to be independent of Apple and to meet our other ethical responsibilities,as applicable forexamination engagements set forth in the Preface:Applicable to All Members and Part 1 Members in PublicPractice of the Code of Professional Conduct established by the AICPA.Our examination was not conducted for the purpose of evaluating(i)whether funds in excess of the netproceeds were allocated to Eligible Projects during the Reporting Period,(ii)the amount allocated to eachcategory of Eligible Projects during the Reporting Period,(iii)that any payments made pursuant to any powerpurchase agreements or virtual power purchase agreements to which amounts were allocated during theReporting Period were in accordance with such agreements,(iv)the environmental benefits of the EligibleProjects,(v)conformance of any Eligible Projects with any third-party published principles,standards orframeworks,such as the Green Bond Principles,dated June 2018,published by the International CapitalMarket Association or(vi)any information included in Apples Annual Green Bond Impact Report,FiscalYear 2023 Update,other than managements assertion.Accordingly,we do not express an opinion or any otherform of assurance other than on managements assertion included in Exhibit A.In our opinion,managements assertion,included in Exhibit A,that$864.2 million in net proceeds from the0.000%notes due 2025 and 0.500%notes due 2031 issued by Apple were allocated during the ReportingPeriod to qualifying Eligible Projects that met one or more of the Eligibility Criteria is fairly stated,in allmaterial respects.San Jose,CaliforniaFebruary 23,2024Exhibit A Apple Inc.Managements Assertion We assert that$864.2 million of net proceeds were allocated from our issuance of the 0.000%notes due 2025 and 0.500%notes due 2031,during the period from September 29,2019 to September 30,2023(the“Reporting Period”),to qualifying Eligible Projects that meet one or more of the Eligibility Criteria(each as defined in the“Use of Proceeds”section of the Prospectus Supplement dated November 7,2019,to the Prospectus dated November 5,2018,filed by Apple Inc.(“Apple”)on November 8,2019,with the Securities and Exchange Commission pursuant to Rule 424(b)(2)under the Securities Act of 1933,as amended).The Eligibility Criteria are also set forth in Table 1 below.Apples management is responsible for this assertion,including selection of the Eligibility Criteria and the allocation,during the Reporting Period,of amounts to Eligible Projects that meet one or more of the Eligibility Criteria.We worked with an outside party,a leading provider of second-party opinions for green,social,sustainability and KPI-linked bonds and loans,to provide a second party opinion on the Apple Green Bond framework at the time of issuance.We have engaged them annually thereafter to review the projects to which net proceeds were allocated and provide an assessment as to whether the projects met the Use of Proceeds criteria and the reporting commitments outlined in our Green Bond framework.Table 1:Eligibility Criteria Low carbon design and engineering expenditures related to the development or procurement of less carbon-intensive products and materials(compared to an established“pre-activity”baseline),such as improving product power usage efficiency,using materials produced from manufacturing processes requiring lesser greenhouse gas emissions,or sourcing materials with recycled or renewable content,Energy efficiency expenditures related to the development of energy efficiency projects intended to reduce emissions in new or existing corporate and supply chain facilities,such as sensors and controls,energy management systems,and facility design,commissioning,and retrofits,Renewable energy building on our successful transition to 100%renewable electricity at our facilities,expenditures related to the development of renewable energy projects intended to reduce emissions in our corporate facilities and supply chain,such as solar and wind projects,or associated energy storage solutions,including work to advance market structures,regulations and policy that support renewable energy through coalition and capacity building,Carbon mitigation expenditures related to the development of projects intended to reduce direct and process emissions(compared to an established“pre-activity”baseline)from Apples and our suppliers operations,such as abating direct emissions from manufacturing or sourcing non-fossil low carbon fuels,and Carbon sequestration expenditures related to the development of projects that sequester carbon,such as habitat restoration and conservation.Note 1:Apple Inc.or its subsidiaries directly invest in Eligible Projects in its own operations or its suppliers operations.Note 2:Proceeds are considered allocated upon the date of commercial operations for power purchase agreements or virtual power purchase agreements.The allocated amount is calculated as the net present value of future cash flows based on estimated annual production in megawatts and power price over the contract term.The determination of the amount to be allocated to the power purchase agreements and virtual power purchase agreements involves estimates.Actual results could differ from those estimates and those differences may be material.Note 3:The net proceeds allocated to carbon sequestration projects include the purchase of carbon offsets.
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Sustainability Report 2023Mercedes-Benz Group|Sustainability Report 2023 2 3 FOREWORD 5 GOVERNANCE 68 ENVIRONMENT 119 SOCIAL 179 KEY FIGURES 192 FURTHER INFORMATIONBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONMercedes-Benz Group|Sustainability Report 2023 3 Foreword GRI 2-22 Dear Reader,The unique history of Mercedes-Benz is rich in iconic cars,ground-breaking technologies and entrepreneurial success.The one motivation that has always driven us above all others:we can and want to change our com-pany and the world around us for the better.With this in mind,we have established our sustainable business strategy in recent years.It is a prerequisite for remain-ing economically successful in the long term and thereby also fulfilling the many different external requirements regarding sustainability,social responsi-bility and good corporate governance as well as those weve established for ourselves.2023 was a year full of challenges for Mercedes-Benz and the entire automotive industry.The market environ-ment was characterised by challenging conditions,and a wide variety of external factors influenced the econ-omy.However,this does not change the necessity and urgency of decarbonisation.For this reason,we con-tinue to drive our transformation forward.In 2023,we increased sales of fully electric Mercedes-Benz passen-ger cars by 73 per cent.Electrified vehicles comprised 20 per cent of total passenger car sales.We now offer an electric alternative in every segment in which we compete.And were also continuing to take the neces-sary steps to go all-electric.For us,this also includes a well-developed charging infrastructure.We want to install our own Mercedes-Benz high-power charging network with more than 10,000 chargers in our core markets by 2030.We expect our high-power charging network to support the ramp-up of electromobility.Customers and market conditions will set the pace of the transformation.This means:on our path towards CO2 neutrality,we will remain strategically focused and tactically flexible.Our focus isnt just on sustainable products:we take a holistic approach to sustainability.Our goal is to become net carbon-neutral across the entire value chain by 2039.We will expand battery production and open a battery recycling factory to close the loop.We are investing in the training and certification of our teams,and are developing our locations into centres of excellence for future technologies.In doing so,we are ensuring a transformation that is socially just.We are developing our own operating system and are increas-ingly utilising artificial intelligence(AI)in our digital products and services.For this reason,we developed and established principles for the responsible use of AI at an early stage.Both the integration of AI and a suc-cessful,sustainable business strategy require data from a wide variety of areas and sources.For us,the respon-sible handling of data is essential for strengthening our customers trust in digitalisation.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTContentGOVERNANCEFURTHER INFORMATIONMercedes-Benz Group|Sustainability Report 2023 4 Respecting human rights along the whole of our value chains is an important and fundamental aspect of our work.For this reason,we strive continuously to further improve transparency across our supply chains,for example.The measures we have instituted exceed basic regula-tory compliance standards and are,above all,aimed at protecting human rights.In August 2023,the Supervisory Board assigned the coordination role for all Mercedes-Benz Group sustain-ability issues to the Board of Managements Integrity,Governance&Sustainability department.This will ensure an even stronger focus upon and concentration and alignment of these important topics.We have already achieved a great deal in terms of sustainability.But many challenges still lie ahead,including the pro-fessional implementation of the regulatory components imposed by European Union legislation.We are well aware that we cannot accomplish these tasks by ourselves.This is why an ongoing dialogue of equals together with relevant internal and external stakeholders is of great importance.Not only do we need good cooperation with policymakers,but we also want to continue collaborating with the many different players involved.The Advisory Board for Integrity and Sustainability is an important body for our sustainability work.Its members are independent external specialists from the areas of science and academia,civil society and business and include experts from the fields of environmental and social policy,transport and mobility development,human rights and ethics.Another impor-tant instrument for us is the exchange with stakehold-ers in the form of our“Sustainability Dialogue”.In 2023,we organised several of these dialogues in China,Ger-many,India and the USA.We understand our responsibility to both our future and our environment.This is why we are committed to mak-ing our company sustainable and economically suc-cessful in the long term.It is important for us to exer-cise full transparency in reporting on both our achievements so far and our plans for the future.We hope youll enjoy our new Sustainability Report and look forward to continuing our constructive dialogue.YoursOla Kllenius Renata Jungo BrnggerBackKEY FIGURESSOCIALFOREWORDENVIRONMENTContentGOVERNANCEFURTHER INFORMATIONMercedes-Benz Group|Sustainability Report 2023 5GOVERNANCE 6 Sustainable business strategy 6 Sustainable business strategy 10 Along the value chain 11 Sustainability management 23 EU Taxonomy 36 Integrity and compliance 36 Integrity 39 Compliance management 52 Data responsibility 60 Partnerships and political commitment 60 Trusted partnerBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance6Sustainable business strategySustainability as a driver of change The Mercedes-Benz Group wants to create sustainable value economically,ecologically and socially.This is one of the central guiding principles.It applies not only to the Groups own products and production sites,but also encompasses the Groups upstream and down-stream value chain.The Mercedes-Benz Group trans-lates this approach into its sustainable business strat-egy and thus anchors its sustainability issues at the centre of its daily business.The aim is to fulfil expecta-tions and requirements of stakeholders,which are for example:customers,employees,investors,business partners,#E non-governmental organisations(NGOs)and society as a whole.#A Objectives and Strategy,Annual Report 2023One of the most important goals of the Mercedes-Benz Group is decarbonisation.The Group has firmly estab-lished this topic in its sustainable business strategy.In the Mercedes-Benz Groups strategy,this goal is reflected in the“Ambition 2039”.By 2039 the entire Mercedes-Benz new vehicle fleet is to be net car-bon-neutral across all stages of the value chain1.Mercedes-Benz Cars and Mercedes-Benz Vans are taking the necessary steps to go all-electric.Customers and market conditions will set the pace of the transfor-mation.Mercedes-Benz Cars and Mercedes-Benz Vans plan to be in a position to cater to different customer needs,whether its an all-electric drivetrain or a com-bustion engine,until well into the 2030s.1 Net carbon-neutral means not causing any CO2 emissions and compensating any CO2 emissions that do occur through certified projects to offset emissions.Sustainable corporate governanceThe Mercedes-Benz Group at a glance GRI 2-1/-2/-4/-6 The Mercedes-Benz Group AG is the parent company of the Mercedes-Group and has its registered office in Stuttgart(Germany).The Mercedes-Benz Group is a globally active automobile manufacturer and one of the largest suppliers of luxury vehicles and commercial vans in the premium segment.Financing and leasing products for end customers as well as dealers,fleet management,insurance brokerage,innovative and digi-tal mobility services,the provision of seamless payment methods and the expansion of the charging infrastruc-ture round off the range of services.In addition to the Mercedes-Benz Group AG,the Mercedes-Benz Group is made up of all subsidiary com-panies over which the Mercedes-Benz Group AG can exert a direct or indirect controlling influence.It decides on the Groups strategy,manages the Group and,as the Groups parent company,ensures legal,reg-ulatory and compliance functions throughout the Group.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance7The Mercedes-Benz brand is one of the most valuable brands in the world2.The following graphic provides an overview of the Groups brand world.2 Study by the US brand consultancy Interbrand in November 2023.Mercedes-Benz GroupMercedes-BenzCarsMercedes-BenzVansMercedes-BenzMobilityThe brand world of the Mercedes-Benz GroupThe operating activities of the Mercedes-Benz Group are managed by the Mercedes-Benz Cars,Mercedes-Benz Vans and Mercedes-Benz Mobility divisions.It sells vehicles and services in almost every country in the world and has over 30 production sites in Europe,North and Latin America,Asia and Africa.Global production network of the Mercedes-Benz Group*GERMANYBremenRastattSindelfingenDsseldorfLudwigsfeldeUntertrkheimHamburgBerlinKlleda/ArnstadtKamenzKuppenheimTuscaloosaCharlestonAguascalientesVitoriaBuenos AiresEast LondonUSA/MEXICOEGYPTARGENTINIAJaworSPAINPOLANDCZECH REP.HUNGARYSLOVENIAROMANIACHINATHAILAND/VIETNAM/MALAYSIAINDIASOUTH AFRICAKairoPuneMostKecskemtMariborSebeCugirBeijingFuzhouBangkokHo Chi Minh CityPekan*)including non-consolidated affiliated companies,associated companies,joint ventures and joint operationsVans plantwith EV-productionPowertrain plantwith EV-componentsBattery plantBattery-Recyclingplant(planned)grey:plannedCars plantwith EV-productionAffalterbachBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance8Company profile20232022Employees(status as of December 31)1166,051168,797Production sites30230Unit sales(in mill.units)2.4922.456Financial key figures(in millions)Revenue153,218150,017 Research and development expenditure Mercedes-Benz Cars and Mercedes-Benz Vans9,9968,541 Personnel expenses (wages and salaries,social welfare services and pension provisions)16,63316,501 Total dividend(in)5.305.201 Active workforce(employees without holiday workers,thesis writers,interns,working students,PhD students,senior experts and trainees)of Mercedes-Benz Group.2 Incl.non-consolidated affiliated companies,associated companies,joint ventures and joint operations.Fields of action and fundamentals of sustainability GRI 3-2 The Mercedes-Benz Group acts on the basis of the sus-tainable business strategy adopted by the Board of Management of Mercedes-Benz Group AG with the approval of the Supervisory Board in 2019.Sustainabil-ity matters form an integral part of the business strat-egy.#A Objectives and Strategy,Annual Report 2023With its sustainable business strategy,the Mercedes-Benz Group takes into account the regulatory require-ments relevant to its business activities as well as rec-ognised international frameworks,the expectations of external and internal stakeholders and global trends.It regularly carries out materiality assessments in order to identify the strategic fields of action.In doing so,the Mercedes-Benz Group is also guided by the 17 Sustaina-ble Development Goals(SDGs)of the United Nations,in particular SDGs 8 and 9 as well as 11 to 13 and concen-trates on the areas where it can create added value.It discusses the key areas for action with the involvement of relevant stakeholder groups.In the reporting year,the Mercedes-Benz Group confirmed the following six areas of action in this process and,where necessary,specified the associated strategic ambitions:1.Climate protection and air quality:By 2039,the Mercedes-Benz new vehicle fleet is to become CO2-neutral in the net effect3 along the entire value chain and is no longer to have any impact on NO2 pollution in urban areas by 2025.3 Net carbon-neutral means not causing any CO2 emissions and compensating any CO2 emissions that do occur through certified projects to offset emissions.2.Resource conservation:The Mercedes-Benz Group wants to decouple resource consumption from the growth in business volume.3.More sustainable urban mobility:The Mercedes-Benz Group aspires to improve the quality of life in cities through mobility and transport solutions.4.Traffic safety:The Mercedes-Benz Group is pursu-ing the vision of accident-free driving and develop-ing automated driving in consideration of social and ethical aspects.5.Data responsibility:Customer trust and the responsible handling of customer data are the basis for sustainable digital products and services.6.Human rights:The Mercedes-Benz Group assumes responsibility and is committed to safeguarding human rights along its own automotive value chainBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance9The Mercedes-Benz Group has defined three“enablers”which are critical for its success in these six areas of action:1.Integrity:In order to firmly anchorintegrityin all areas,the Mercedes-Benz Group considers two cru-cial aspects:for one,by establishing adequate structures with appropriate policies and processes,the organisation is able to provide the foundation for all parties to act with integrity.For another,the Group focuses on empowering each employee indi-vidually to understand the concept of integrity and thereby to act ethically and sustainably.2.People:As an attractive employer,Mercedes-Benz offers modern and flexible working conditions as well as extensive opportunities for continuing edu-cation for all employees at every stage of their lives.At the same time,the Mercedes-Benz Group is con-tinuously advancing the diversity of its workforce as the foundation of its corporate strategy and pro-moting an inclusive corporate culture.3.Partnerships:The Mercedes-Benz Group enters into partnerships with social and political players in order to achieve the goals of the sustainable busi-ness strategy against the backdrop of the ecological and social challenges of our time.The Groups prin-ciples for political dialogue and advocacy provide the basis for responsible and reliable action within these partnerships.United Nations Sustainable Development GoalsIn order to define and organise its key areas of action,the Mercedes-Benz Group is guided by the UN Sustain-able Development Goals.To this end,it concentrates on the areas in which it can create added value.The following SDGs are the focus of the work of the Mercedes-Benz Group:SDG 8 Decent work and economic growth:The Group has developed and now implements a risk-based management approach to respecting and safe-guarding human rights in its own units and in the supply chain.Through its production and large procurement volume,the Mercedes-Benz Group also creates jobs all over the world.SDG 9 Industry,innovation and infrastructure:Digitisation and electrification this is how the Mercedes-Benz Group is shaping the sustainable mobil-ity of the future and contributing to greater safety,for example.It also demonstrates the potential of digital innovations for society.SDG 11 Sustainable cities and communities:With its vehicles,data-based solutions for greater traf-fic safety for all road users or to improve traffic flow and the#E multimodal linking and mobility services,the Mercedes-Benz Group is making a contribution to more sustainable mobility in urban centres.SDG 12 Sustainable consumption and production:The Mercedes-Benz Group is working to increase the efficiency of its vehicles and significantly reduce its use of raw materials.One of the tasks here is to reinforce the closed material loops for the primary raw materials which are needed for electric vehicles.In this way,the Mercedes-Benz Group is setting the course for sustain-able production.SDG 13 Climate action:Through its sustainable business strategy and the asso-ciated measures and targets for reducing emissions from its own vehicles,plants and supply chains,the Mercedes-Benz Group aims to reduce its environmental impact on the climate.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance10Along the value chain GRI 2-6 The automotive industry is currently undergoing a profound process of change,which the Mercedes-Benz Group would like to actively shape.It considers the entire value chain.This covers the entire vehicle life-cycle from development through the supply chain and in-house production to the use and disposal of the vehicles.It aims to avoid or minimise the negative impacts of its business activities as far as possible,and to create sustainable value economically,ecologically and socially.The diagram below shows the main stages of the Mercedes-Benz value chain in simplified form.57%of production materials that harbour an increased risk of human rights violations and54%of the product groups from service supply chains with an increased risk of human rights violations were reviewedProductdevelopmentSupply chainProductionDrivingReuse&RecyclingRenewable energies in the production of Mercedes-Benz Cars and Mercedes-Benz Vans account for 100%of external electricity consumptionPilot plant for recyclinglithium-ion battery systems at the Kuppenheim site;72%of the returnable high-voltage lithium-ion batteries are being routed to remanu-facturing for reuse in vehi-cles or in energy storage systems(2nd Life)95%of all cars and vans over 3.5 tonnes total weight are recyclableMore than50,000 tCO-reduced steel with a scrap content of at least70%will be installed annually in Mercedes-Benz models in the future including the EQS SUV and the EQE SUVCO2 emissions at Group-wide production sites worldwide reduced by 5%compared to 2022744on-site audits regarding compliance with the RSSThe average CO2 emissions of the Mercedes-Benz new car fleet in Europe(European Union,Norway and Iceland)are expected to be 111 g/km(including vans registered as passenger cars),applying the statutory regulationsThe Mercedes me Charge digital charging service has integrated over 1,500,000AC and DC charging points worldwide in 2023The share of electrified vehicles(xEV)in Group sales at Mercedes-Benz Cars is 20%worldwide The share of electrified vehicles in Group sales at Mercedes-Benz Vans is 5%worldwideEnergy consumption per vehicle at Mercedes-Benz Cars down by 12%compared to 2022,at Mercedes-Benz Vans by8%Water consumption per verhicle at Mercedes-Benz cars down by8%compared to 2022,at Mercedes-Benz Vans by6%With the DRIVE PILOT2 automated driving system,the Mercedes-Benz Group is the only manufacturer to have an SAE-Level-3-System approved and certified in accordance with the specifi-cations of the United Nations Economic Commis-sion for Europe(UNECE)on the market in Germany,Nevada and California10 billion euros spent on research and development expendituresBy 2030,the Mercedes-Benz Group intends to invest a total of more than 1.3 billion euros in the qualification and training of employees in GermanyThe proportion of women in senior management posi-tions at the Mercedes-Benz Group worldwide is 25.7%1The“Responsible Sourcing Standards”(RSS)form the basis for the responsible procurement of materials and services by defining minimum requirements for ethical,social and environ-mental standards that are mandatory as a central contractual document for all new orders from Tier-1-suppliers1 Headcounts,fully consolidated companies.2 Availability and use of the DRIVE PILOT functions on motorways depend on equipment,countries and applicable laws.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance11Product development The Mercedes-Benz Group offers a broad product port-folio of passenger cars,vans and commercial vans.The aim of the Mercedes-Benz Group is to further expand its portfolio of electric vehicles.To this end,it is strongly involved in research and development.Supply chain Mercedes-Benz vehicles consist of several thousand components raw materials such as iron,copper or aluminium,primary products such as steel,sub-prod-ucts such as seats,wiring harnesses,etc.and the supply chain is correspondingly complex:it comprises several tens of thousands of direct suppliers for pro-duction and non-production materials,primarily from the regions of Europe,Asia and North America.These in turn have sub-suppliers.Production The Mercedes-Benz Group has more than 304 own pro-duction sites worldwide on five continents.Vehicles and components including transmissions,axles,engines,electric drive systems and batteries are pro-duced there.4 Incl.non-consolidated affiliated companies,associated companies,joint ventures and joint operations.Vehicle operation With its brands and mobility services,the Mercedes-Benz Group is represented in almost every country in the world.Around 2,492 million cars and vans were delivered by the Group to customers in 2023.The Group also wants to support its customers in adopting a climate-friendly driving style and making purchasing decisions in favour of locally emission-free vehicles.Reusing and recycling The Mercedes-Benz Group follows the#E waste hierar-chy.The primary objective is to avoid waste.Only then,according to the waste hierarchy,should measures be implemented to allow reuse of various components and parts through remanufacturing,or to recover materials through recycling.The following table shows some of the significant pro-gress made by the Mercedes-Benz Group in the various areas of action and with respect to its defined enablers over the course of 2023.Sustainability managementMateriality assessment GRI 3-1/-2 To determine which sustainability topics are particularly relevant for the Mercedes-Benz Group and its stake-holders,the Group carried out a comprehensive materi-ality assessment in 2021.This was finalised in summer 2022 and will also apply to 2023 following a review of the areas of action.In addition to the six strategic fields of action,further potentially relevant sustainability topics and trends were analysed.A total of 17 topics were assessed,which are broken down into further sub-topics.In its analysis,the Mercedes-Benz Group considered two perspectives:Inside out:The positive or negative influences of the Groups business activities on the economy,the envi-ronment and society are brought into focus.Outside in:The impact of external requirements and expectations of the Groups sustainability perfor-mance on its business activities,business results and general situation is considered.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance12The analysis consisted of several components.A comprehensive desk analysis and an international online survey formed the basis for assessing the rele-vance of sustainability topics and trends.Around 15,000 people from 52 countries took part they represent rel-evant stakeholder groups such as private and business customers,interested consumers,investors,employ-ees,suppliers and business partners,representatives from politics,science and administration,as well as#E non-governmental organisations(NGOs).In addition,the Mercedes-Benz Group conducted around 20 interviews with both internal and external experts from these stakeholder groups.The aim was to evaluate the Groups sustainability performance to date,to identify sustainability trends and thereby to assess the relevance of sustainability issues.The Mercedes-Benz Group also undertook an assess-ment of the impact of its business activities on the environment and society(inside out).The results were taken into account when assessing the relevance of topics in the inside-out dimension.For the assessment of topics in the outside-in dimen-sion,the Mercedes-Benz Group analysed the reporting of relevant competitors on their business development and sustainability performance,the media reporting on selected sustainability topics over a longer time period,central NGO positions,regulatory requirements,as well as information relevant to the capital market,and had these weighted by the stakeholder groups according to their relevance.As a further step,the Mercedes-Benz Group examined the sustainability issues arising from the analysis in terms of its net assets,financial position,operating results and business performance.The topics for the non-financial declaration were defined on this basis.#A Non-financial declaration,Annual Report 2023The materiality assessment thus fulfils both the report-ing requirements of the#G Global Reporting Initiative(GRI)and of the CSR Directive Implementation Act(CSR-RUG).The Group is currently working on a materiality assess-ment that reflects the requirements of the Corporate Sustainability Reporting Directive(CSRD).It is expected to be completed at the beginning of the second quarter of 2024 and will form the basis for the Sustainability Statement 2024,among other things.At the same time together with the materiality assessment,the sustaina-ble business strategy is being revised.The results of the materiality assessment as well as regulatory and strate-gic developments,stakeholder feedback and general trends are taken into account.For the reporting year 2024,the refocused sustainable fields(“Human Rights”,“People”,“Traffic Safety”,“Decarbonisation”,“Resouce Use&Circularity”,“Digital Trust”)will be incorporated into the sustainable business strategy.Procedure for materiality analysisThe materiality matrix shows the topics according to their relevance:“Climate protection and adaptation”,“Emissions reduction”and“Resource conservation”have the highest importance based on the analysis and the stakeholder survey.The same applies to the the-matic complexes of“Respect for human rights”and“Sustainable mobility”.This confirms the Groups own strategic areas of action.The results of the materiality assessment were dis-cussed in detail with all responsible specialist depart-ments and presented to the then Group Sustainability Board(GSB)in the third quarter of 2022.They provide an important basis for the critical consideration and further development of the sustainable business strat-egy.In addition,the Mercedes-Benz Group bases its identification of sustainability-related opportunities and risks on the topics identified in the materiality assess-ment.The Mercedes-Benz Group discloses significant risks and opportunities in the areas of environment,social and governance(ESG)in the Risk and Opportu-nity Report within the Annual Report.#A Risk and Opportunity Report,Annual Report 2023BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance13Materiality matrix1 For readability,the graph shows a section of the materiality matrix.2 The marked lines on the x and y axes show the materiality threshold set by the Mercedes-Benz Group,above which topics for this Sustainability Report were classified as material.Inside outOutside inClimate protection and adaptionIntegrity and complianceResponsible corporate transformationRespecting human rightsTraffic safetySustainability-oriented corporate cultureEmissions reductionEmployee health and safetyDiversity and equal opportunityStakeholder relationsand partnershipsCorporate citizenshipData responsibility Corporate governanceSocietyEnvironmentEmployeesResource conservationSustainable mobilitySustainable corporate governanceSustainable investment Sustainable customer value proposition0.51.00.51.0Topic clusters with significantly higher rankings compared to 2020Topic clusters that include important emerging issuesBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance14Thematic clusters and topicsThematic cluster Topics Sustainable corporate governanceAnchoring sustainability in the management of the company along the value chainConsideration of ESG risks in risk managementAnchoring sustainability in the business strategySustainability as a criterion for remunerationResponsible tax payment and use of public fundingTransparent reporting on sustainability mattersClimate protection and adaptationZero-emission vehicles/electric mobilityLow-carbon vehiclesDecarbonising production and further business activities of the Mercedes-Benz GroupClimate protection in the supply chain Green charging of electric vehiclesClimate adaptation of Mercedes-Benz sites and operationsEmissions reductionLow-pollutant vehiclesLow-pollutant productionNoise controlResource conservation Energy efficiency and renewable energiesSustainable use of waterPrevention of pollution from waste Nature conservation and biodiversityMaterial efficiency and use of sustainable materials The circular economyResource conservation in the supply chainThematic cluster Topics More sustainable mobilitySustainable mobility systemsAccess to mobilitySustainable logisticsExpansion of the charging infrastructureTraffic safetyVehicle safetySafe road trafficAutomated drivingData responsibilityData protectionCyber security Responsible use of artificial intelligenceData-based solutions for sustainable mobilityRespect for human rightsRespect for human rights in own unitsHuman rights due diligence in the supply chainHuman rights due diligence in salesIntegrity and complianceCompliance with laws and regulationsIntegrityIntegrity in business practices of suppliers and business partnersResponsible corporate transformationResponsible and sustainable employmentCorporate co-determination Vocational training and continuing educationEmployee health and safetyWorkplace health promotion Occupational health&safetySustainability-focused corporate cultureLeadership cultureModern forms of work and working timesDiversity and equal opportunitiesDiversity in the workforce Adequate remunerationConsideration of diversity in the development and marketing of products and servicesThematic cluster Topics Stakeholder relations and partnershipsPolitical dialogue at the national and interna-tional levelStakeholder dialogue at the corporate levelLocal and regional stakeholder dialogueCivic engagementCompany-run projects for the community(commitment to location)Voluntary employee engagementWorldwide promotion of projects run by non-profit organisations and foundations within the scope of the global responsibilitySustainable customer value propositionCustomer awareness of sustainabilityTransparent labelling of products and servicesSustainability of sales networkSustainable investmentMercedes-Benz as a sustainable opportunity for investmentMercedes-Benz as a sustainable investorBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance15Managing sustainability GRI 2-1/-6/-9/-11/-12/-13/-14/-18/-19/-20 GRI 303-1 The Mercedes-Benz Group AG is responsible for the Group governance and provides services for all corpo-rate entities.As the parent company,it also defines the strategy of the Mercedes-Benz Group.It decides on strategically important matters in its operational busi-ness and ensures regulatory,legal and compliance functions throughout the Group.The Groups own governance structure consists of the Board of Management and the Supervisory Board and corresponds to the dual management structure required for a joint stock company under German law.The Board of Management manages the Mercedes-Benz Group,while the Supervisory Board monitors and advises the Board of Management.The two bodies work together very closely for the benefit of the Group.The Mercedes-Benz Group adheres to the German Corpo-rate Governance Code,as documented by the annual statement of compliance.#A Statement of Compliance 2023The remuneration of the Board of Management and managers was adjusted in 2023.This was intended to reduce the complexity of the remuneration system,cre-ate transparency and ensure holistic incentivisation of sustainable management within the Group.In addition to financial targets,the variable remuneration of the Board of Management and managers of the other#E management levels one to three,and of parts of Governance&Sustainability(formerly Integrity and Law).The previous central management body for sustainabil-ity,the Group Sustainability Board(GSB),chaired by the two Board of Management members Renata Jungo Brngger and Markus Schfer,was replaced by the Group Sustainability Committee(GSC)in the reporting year.The new committee meets quarterly chaired by Renata Jungo Brngger as Sustainability Coordinator.It is made up of representatives from top management and manages ESG issues holistically across depart-ments,divisions and regions based on targets,KPIs and responsibilities.The members of the GSC first discuss selected sustainability-related topics and issues before submitting them to the Board of Management for deci-sion-making.The members of the GSC are also respon-sible for the implementation of sustainability issues in their respective departments.With the new structure,the Mercedes-Benz Group is pursuing the goal of creat-ing a leaner committee landscape,enabling more effi-cient decision-making processes and establishing responsibility for sustainability issues even more firmly in the individual departments and divisions.level four,includes short-term transformation targets for CO2 emissions,safety innovations and ESG stake-holder management;for 2023,for the first time it also includes long-term sustainability targets for the pro-portionate sales of#E plug-in hybrids(PHEV)and#E Battery electric vehicles(BEV)5 and for the review of high-risk production materials as well as for diversity and inclusion.Furthermore,the variable remuneration continues to include non-financial targets relating to customers,employees and integrity.#A Remuneration Report 2023#A Annual Report 2023The Mercedes-Benz Group manages the work in the strategic action fields in addition to other tasks using an internal reporting process with detailed score-cards.Clearly defined responsibilities in the manage-ment and organisation structures for each of the business divisions are in place to support this process.At the end of July 2023,the Supervisory Board decided to establish a cross-departmental management and coordination function for Group-wide sustainability management at the Board of Management level.Renata Jungo Brngger took over the corresponding function of Sustainability Coordinator on 1 August 2023.Her Board of Management central division is now called Integrity,5 Further information on sales of plug-in hybrids and fully electric cars can be found in the chapter“climate protection:measures and results”.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance16Governance GRI 2-1/-6/-9/-11/-12/-13/-14/-18/-19/-20 Mercedes-Benz AGCorporate StrategyChief Technology Officer,Vice President Group Research,Sustainability&RD FunctionsTop management level:Dedicated persons,responsible for ESGGroup Sustainability Committee(GSC)External Exchange FormatsE.g.Advisory Board for Integrity&SustainabilityBusiness units&functionscoordinatescoordinatescoordinatesBoard of ManagementSupervisory BoardMercedes-Benz Group AG Central FunctionsMercedes-Benz Mobility AGChairpersons:Renata Jungo Brngger,Sustainability CoordinatorMember of the Board of Management for Integrity,Governance&Sustainability at Mercedes-Benz Group AGMembers of the Board of ManagementSustainability Competence Office(SCO)Chief Compliance Officer Legal Product&Technology/Human Rights Officer At the Sustainability Coordination Meeting(SCM),the GSC engages in dialogue with representatives from all relevant departments and specialist areas.The SCM meets regularly on a fortnightly basis under the leader-ship of the Sustainability Competence Office(SCO).This in turn advises and supports the specialist depart-ments in implementing the tasks received from the Board of Management or GSC.The SCO also monitors the progress made with respect to the six areas of action and the three enablers defined in the sustainable business strategy.The results of the work carried out during the year are reported to the GSC and the Board of Management of Mercedes-Benz Group AG at least twice a year in the form of detailed scorecards.Regular dialogue with experts from the national compa-nies in existing networks was intensified.The“Sustaina-bility Forum”dialogue format launched in 2020 is now firmly established and offers colleagues from the inter-national subsidiaries a regular opportunity to find out about and exchange information on current develop-ments at Group headquarters and in the markets.The forum focuses on information and dialogue on current developments in sustainable business strategy,includ-ing involvement in the materiality assessment,sustain-ability goals and areas of action.The international experts also discuss local best practice examples,light-house projects and other relevant topics.#A Climate protection in production More sustainable sales operationsBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance17The Supervisory Board of Mercedes-Benz Group AG monitors the implementation of the sustainable busi-ness strategy.It is therefore important that it and its committees are appropriately informed about the rele-vant sustainability issues in the areas of environment,social affairs and governance.To ensure this,ESG top-ics are regularly addressed in the Supervisory Board meetings.ESG experts from different departments are consulted for this purpose.ESG-related topics were also discussed during the strategy meeting of the Supervisory Board.In addition,the members of the management and supervisory bodies regularly discuss the progress made in implementing the sustainable business strategy with the Advisory Board for Integrity and Sustainability.On the part of the Supervisory Board,Dame Polly Courtice,among others,contributes her extensive expertise in the field of sustainability in various areas.#A Integrity Advisory Sub-Committee for Integrity and SustainabilityPolicies,standards and principles GRI 2-23-/24 Integrity,compliance and legal responsibility are cor-nerstones of sustainable corporate governance and are obligatory for the actions of all employees of the Mercedes-Benz Group.The central requirements for this are set out in the Groups#G Integrity Code.It is supple-mented by other in-house principles and policies.Risk and opportunity management GRI 2-12/-23/-24/-25 GRI 3-3 GRI 201-2 GRI 413-2 The Mercedes-Benz Group is exposed to different risks that are directly linked with the business activities of Mercedes-Benz Group AG and its subsidiaries or that result from external influences.The Mercedes-Benz Group defines risk as the danger that events,develop-ments or actions will prevent the Group or one of its divisions from achieving its objectives.This includes monetary and non-monetary risks.At the same time,it is important to identify opportunities in order to safe-guard and enhance the competitive capability of the Mercedes-Benz Group.The Mercedes-Benz Group defines an opportunity as the possibility of securing or exceeding the planned goals of the Group or a business division as a result of events,developments or actions.In order to identify these risks and opportunities at an early stage and assess and manage them systemati-cally,adequate and effective management and control systems,which are clustered into a risk and opportunity management system,are applied.Opportunities and risks are not offset.The risk management system is intended to systemati-cally and continually identify,assess,control,monitor and report risks threatening the Mercedes-Benz Groups existence and other material risks in order to sustaina-bly support the achievement of the corporate targets and to enhance risk awareness in the Group.The risk management system is integrated into the value-based management and planning system of the The“House of Policies”is the digital platform for poli-cies.All internal policies and works agreements at the Mercedes-Benz Group are stored here in a user-friendly database,which is accessible to all employees.The policies are available in several languages.Employees can also access compact web-based training on poli-cies here,while Group companies can access advice on the local implementation of policies.The Mercedes-Benz Group also uses the ten principles of the UN Global Compact as fundamental guidelines for its business activities.As a founding member,it is particularly committed to the#E UN Global Compact(UNGC).The internal principles and policies of the Mercedes-Benz Group build on this international frame of refer-ence and other international principles.These include the core labour standards of the International Labour Organization(ILO),the Guidelines for Multinational Enterprises of the Organisation for Economic Co-opera-tion and Development(#E OECD)and the UN Guiding Principles on Business and Human Rights.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance18Mercedes-Benz Group and is also an integral part of the overall planning,management and reporting process in the legal entities,divisions and corporate functions.The opportunity management system at the Mercedes-Benz Group is based on the risk management system.The objective of opportunity management is to recog-nise the possible opportunities arising in business activities early on and to exploit them in the best possi-ble way for the benefit of the Group.This should result in planned targets being met or exceeded.As part of the planning process,risks and opportunities are recorded within an observation horizon of up to five years.Strategic risks and opportunities are also consid-ered in the risk and opportunity management process.Responsibility for operational risk management and risk management processes lies with the segments,corpo-rate functions,organisational units and companies.They report on the concrete risks and opportunities at regular intervals to their superordinate units.Unexpect-edly occurring material risks must be promptly reported.The information is passed on to Group Risk Management via the segments for reporting to the Board of Management,Audit Committee and Supervi-sory Board.The responsible divisions manage the risks and oppor-tunities in the Group through various measures.Their task is to define and,if necessary,initiate these meas-ures in order to avoid and reduce risks.Furthermore,measures must be implemented to seize identified opportunities.Whether a measure is cost-effective is assessed by the person responsible for the measure before it is implemented,with the involvement of Con-trolling.The Group Risk Management Committee(GRMC)is responsible for the continuous improvement and assessment of the appropriateness and effectiveness of the risk management system and the internal control system(including the Compliance Management Sys-tem CMS)in relation to the scope of the Groups busi-ness activities and risk situation.It is chaired by the members of the Board of Management of Mercedes-Benz Group AG responsible for Finance&Controlling,Mercedes-Benz Mobility,as well as Integrity,Govern-ance&Sustainability.Alongside these,as of 31 December 2023,the GRMC consisted of representa-tives from Mercedes-Benz Group Finance,Legal Affairs,Compliance,Group Security,Global Cyber&Informa-tion Security and the members of Mercedes-Benz Mobility AG responsible for Finance.Corporate Audit contributes significant findings regarding the internal controlling and risk management system.Firm integration of sustainability-related risks and opportunitiesSustainability-related risks and opportunities are an integral part of the Group-wide risk and opportunity management system.When identifying these risks and opportunities,the Mercedes-Benz Group is guided by the topics identified by the materiality assessment and thus includes the areas of action of the sustainable business strategy,which are assigned specific targets.Sustainability risks and opportunities are defined as conditions,events or developments relating to ESG issues whose occurrence may have an actual or poten-tial impact on the results of operations,financial posi-tion and net assets or on the reputation of the Mercedes-Benz Group or whose occurrence may have a positive or negative impact on the economy,environ-ment or society.ESG topics related to the environment include the effects of climatic conditions and changes.Risks to the transformation process of the Group could arise due to changes in the political framework,technological devel-opments and changing markets.Labour law standards,occupational and product safety as well as product liability and compliance with labour law standards at suppliers are examples of issues that fall under the heading of social affairs that could har-bour risks.The governance area deals with provisions from competition law and measures to prevent corrup-tion,for example.From todays perspective,there are no ESG-related risks and opportunities associated with the Mercedes-Benz Groups own business activities,business relation-ships or products and services that are very likely to have a serious negative impact on the non-financial aspects in accordance with Sections 315c and 289c of the German Commercial Code(HGB).Risks and oppor-tunities in connection with the recommendations of the#E Task Force on Climate-Related Financial Disclosures(TCFD)are environmental factors and are therefore also BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance19identified and assessed as part of the risk management process.#A Risk and Opportunity Report,Annual Report 2023Dialogue with stakeholders GRI 2-12/-16/-29 The Mercedes-Benz Group attaches great importance to engaging in dialogue with its interest groups.This dialogue enables the organisation to look at its sustain-ability commitment from different angles,to identify and pick up on new trends and to exchange experi-ences.The prerequisite for this is that the Mercedes-Benz Group knows its stakeholders.Stakeholders are individuals and organisations that have legal,financial,ethical or ecological claims on or expectations of a company.Based on this,the Mercedes-Benz Group has identified customers,employees,investors and suppli-ers as its primary stakeholders.In addition,the Mercedes-Benz Group regularly engages in dialogue with civic groups such as NGOs.The Group also main-tains contact with associations,trade unions,the media,analysts,local authorities,people from the sur-rounding neighbourhood of the Groups locations,and figures from the worlds of science and politics.Exemplary instruments of the stakeholder management approachIn order to implement dialogue with its stakeholders across the organisation,the Mercedes-Benz Group has defined clear responsibilities and communication chan-nels for this process and established specific forms of dialogue.The various dialogue formats are initiated by the Integrity,Governance&Sustainability central divi-sion and other areas such as External Affairs.#A Trusted partner Dialogue with stakeholders#A Further Information Memberships,associations and initiatives Mercedes-Benz Sustainability Report and regional reports Groups website Employee portal and additional internal communication channels Press and public-relations work Blogs and social media Plant tours,receptions,Mercedes-Benz Museum Environmental declarations by the plants Capital market communication“Climate Policy Report”Sustainability rankings and ratings Annual Sustainability Dialogue(Germany/regions)Local dialogue with residents and municipalities Internal dialogue sessions on integrity and compliance Supplier Portal Involvement in sustainability initiatives and networks Specialist conferences on social topics and debates Topic-and project-related discussions Dialogue formats on future-oriented questions:think tanks,hackathons,idea competitions“The Sustainability Forum”Capital market events:capital market days,investor conferences,roadshows Stakeholder consultation in topic-related working groups Advisory Board for Integrity and Sustainability Peer review within the framework of sustainability initiatives such as the UN Global Compact and the Global Reporting Initiative InformationDialogueParticipationThe Mercedes-Benz Group makes use of various forma in order to engage in dialogue with relevant stakehold-ers.Among other things,it organises annual“Sustaina-bility Dialogues”,conducts stakeholder surveys as well as specialist conferences and thematic dialogues for example in the form of workshops or via the Advisory Board for Integrity and Sustainability.In addition,it monitors current public discussions and gathers infor-mation about related expectations by participating in sector-specific and cross-sector networks and initia-tives.Studies and other scientific publications are also evaluated and internal media analyses undertaken.This helps the Group to identify developments and stake-holder expectations at an early stage in addition to the dialogue it initiates.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance20The Sustainability DialogueAn important tool for the implementation is the exchange with stakeholders in the form of the“Sustain-ability Dialogue”.It has been held once a year in Stutt-gart(Germany)since 2008 and brings together stake-holders from different areas with members of the Board of Management of Mercedes-Benz Group AG and man-agement.In addition to presentations and panel dis-cussions,the participants discuss selected sustainabil-ity topics in various workshops organised by the respective departments and work together to further develop their approaches.In the 2023 reporting year,the Mercedes-Benz Group#G“Sustainability Dialogue 2023”took place in China,Germany,India and the USA.Sustainable investment The increasing demand for ESG-oriented investment products from institutional and private investors,as well as the regulatory momentum of recent years,has led to a demand for greater transparency about how ESG factors are taken into account in asset manage-ment and investment decisions.At the same time,this offers companies an additional opportunity to differen-tiate themselves in the competition for equity and debt capital by demonstrating a sustainable business strat-egy,ambitious ESG targets and transparent ESG report-ing along the entire value chain.A large number of reporting frameworks now exist for this purpose.This includes both voluntary standards,such as the recom-mendations of the#E TCFD or the framework of the Sustainability Accounting Standards Board(#E SASB)as well as statutory disclosure requirements.Among them are included the#E EU taxonomy and the Corpo-rate Sustainability Reporting Directive(CSRD)with the European Sustainability Reporting Standards(ESRS),which will apply from the 2024 reporting year and are intended to ensure greater transparency for investors.This makes ESG reporting both more complex and more demanding.The Mercedes-Benz Groups external reporting focuses on the reporting standards relevant to the Groups investors in the reporting year(including TCFD,SASB,GRI)and on more extensive publications such as the#G Climate Transition Action Plan Report(CTAP),the#G Climate Policy Report or the#G Raw Materials Report.Meanwhile,the Mercedes-Benz Group is constantly monitoring how the requirements of its investors regarding ESG reporting are developing and,in addition to the legal requirements,is reviewing their implemen-tation in its own reporting.#A TCFD reference table#A SASB reference tableFinancing the sustainable business strategyThe implementation of the sustainable business strat-egy of the Mercedes-Benz Group requires substantial investments.One of the Groups objectives is therefore to ensure that its own securities are recognised even more strongly on the capital market as sustainable investments.To this end,the Mercedes-Benz Group maintains a continuous dialogue with capital market players on both the equity and debt capital markets.It uses various platforms for this purpose.In the 2023 reporting year,for example,the Mercedes-Benz Group informed investors and analysts about the latest devel-opments in its sustainable business strategy at its sec-ond digital ESG conference.The Investor Relations&Treasury unit of Mercedes-Benz Group AG works closely with the internal sustaina-bility departments on ESG communication and is incor-porated into the relevant committees(e.g.the GSC).The Mercedes-Benz Group is thus taking account of the fact that sustainable investing has become a key invest-ment strategy especially for institutional investors.They place particularly high demands on the transpar-ency of external reporting according to ESG criteria.#A Sustainable corporate governance Managing sustainabilityBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance21Ratings and bondsESG rating agencies such as MSCI,Sustainalytics,ISS ESG or CDP are important players on the capital market and in the sustainability-oriented investment process;they serve as a further decision-making aid for many investors.In the disclosure of its climate-related activities in the CDP climate questionnaire,the Mercedes-Benz Group achieved an A-rating in the reporting year.In addition,it has reported on water-related activities for the sec-ond time in the separate CDP water questionnaire and subsequently achieved an A-rating.The ESG rating agencies MSCI,Sustainalytics and ISS ESG rank the Mercedes-Benz Group among the top companies rated in the automotive sector.The various specialist units of the Mercedes-Benz Group work closely together with the aim of providing the rating agencies with adequate information.The Group intends to continue the ongoing development of its external reporting,close any gaps and initiate inter-nal change processes.In order to position the Mercedes-Benz Group as a sus-tainable corporation for investments even more strongly and to utilise ESG-based capital for business development,the Group updated its#G“Green Finance Framework”.This framework makes it possible to finance investments in the development,production and customer financing of all-electric vehicles in a tar-geted manner,for example through bonds or loans.On In coordination with the Investment Committees,the Mercedes-Benz Group is paying greater attention to the consideration and transparency of sustainability aspects in the investment process as part of its sustain-ability concept.When sustainable investments are made,consideration is also given to the associated risk and profitability aspects.In relation to liquid asset classes,the Mercedes-Benz Group works exclusively with asset managers who have signed the#E UN Princi-ples for Responsible Investment(PRI).Using a negative list,investments in companies and countries that do not fulfil the Groups own core requirements should be excluded.The Mercedes-Benz Group utilises opportuni-ties arising from sustainable developments by imple-menting ESG-themed investments.It is also focussing on successively integrating sustainability aspects into its mandates,for example via benchmarks or sustaina-bility indicators.To this end,it set sustainability targets in 2023 for some of its mandates with external asset managers and anchored these accordingly in the invest-ment policies.Taking into account the available data coverage,the Group was thus able to achieve lower carbon footprint for its asset classes equities and cor-porate bonds of the German pension assets compared to the aggregated benchmark.Whereas the aggregated benchmark is determined by the indices awarded to the asset managers,the carbon footprint is calculated based on externally bought ESG data.In addition,the Mercedes-Benz Group established internal reporting on various sustainability indicators for the German pension assets.this basis,the Mercedes-Benz Group again issued bonds with terms of three and eight years in May 2023.In June 2023,it also issued another bond outside the European market as a Green Panda Bond in China.The framework is based on the Green Bond Principles,voluntary process guidelines of the International Capi-tal Market Association(ICMA),the Green Loan Princi-ples,joint voluntary guidelines of the Loan Market Association(LMA)and the Asia Pacific Loan Market Association(APLMA).The revised framework was devel-oped by the#G Centre for International Climate and Environmental Research(CICERO)and received the highest rating of“Dark Green”and an“Excellent”for its governance structure.Sustainable investment of pension assetsWhen investing pension assets,the Mercedes-Benz Group itself acts as an investor.ESG criteria also play an increasingly important role for this.For the German pension assets,the following objectives have been defined for the consideration of ESG criteria:creation of transparency in dealing with sustainability aspects,utilisation of opportunities from sustainable developments,and appropriate consideration of sus-tainability risks.The majority of the German pension assets are invested via asset managers,to whom the Group issues individual mandates.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance22The measures implemented as part of the sustainability concept are regularly reviewed and adapted to current developments.Mercedes-Benz Pensionsfonds AG takes into account adverse effects on sustainability factors within the framework of the Sustainable Finance Disclo-sure Regulation.For investing foreign pension assets,country-specific requirements regarding consideration of ESG criteria apply.Tax obligation GRI 3-3 GRI 207-1/-2/-3 The Mercedes-Benz Group sees itself as a responsible corporation that strives to comply with the tax obliga-tions applicable worldwide and to make responsible use of public subsidies.In doing so,the Group also wants to fulfil its social and ethical responsibility.The Group tax strategy is oriented to the following prin-ciples in particular:By using efficient,high-quality and reliable expertise,processes,systems,methods and controls,the Mercedes-Benz Group aims to ensure that the tax obligations of the corporate entities are met and integrity standards are maintained.In line with the principle of being a good corporate tax citizen,the Mercedes-Benz Group undertakes legal,proactive and non-aggressive tax planning activities on the basis of economic considerations(“tax follows business”).The Mercedes-Benz Group is also endeavouring to make its collaboration with the tax authorities even more cooperative,transparent and constructive.At the same time,it safeguards its legal positions and represents its interests where it deems this appropriate and legitimate.The Groups tax strategy defined by the Board of Management of Mercedes-Benz Group AG sets out the framework for action and is specified and implemented through organisational and content-related policies,specifications and instructions.The tax strategy is regu-larly checked for the need for adjustment.The tax policies regulate the responsibilities,tasks and duties of the Groups personnel entrusted with tax affairs.In addition,they provide specific implementa-tion guidelines for legal compliance and thus raise employees awareness of tax-related issues.Manage-ment is informed via monthly reports,rolling regular communications and as and when required regarding relevant tax topics,and is involved in compliance pro-cesses:regular meetings between CFO and Head of Tax Affairs regular information to the Supervisory Board covering risks and opportunities as well as current regulatory issuesAccording to the Integrity Code,intentional violations of external and/or internal tax requirements must be reported and investigated.The same applies to any fail-ure to make corrections to procedures performed in an erroneous manner,as outlined in the Groups internally applicable rule violation policy.#A Compliance management The Whistleblower System BPOWith the aim of ensuring tax compliance throughout the Group,Mercedes-Benz Group has established a Tax Compliance Management System(Tax CMS).The Tax CMS is a separate sub-unit of the Groups internal Com-pliance Management System.An integral part of the Tax CMS is active tax risk man-agement that is consistent throughout the Group.It has the task of monitoring and controlling whether tax obli-gations are met and supporting those responsible in this regard.Furthermore,it serves to identify and reduce tax risks in the Group and any associated per-sonal risks of the active employees.The system includes numerous measures for example,continuous monitoring of tax risks and the incorporation of tax risk issues into the internal control system and the Group-wide risk management process in line with its risk man-agement policy.In the 2023 reporting year,no material breaches became known.#A Compliance managementBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance23EU TaxonomyOne of the important goals of the Commission Action Plan on Financing Sustainable Growth in the context of the European Green Deal is to divert capital flows to sustainable investments.This is also the logic behind the EU Taxonomy Regulation(EU 2020/852)that came into force in mid-2020.This regulation governs the establishment of a standardized and legally binding classification system that defines the types of eco-nomic activity in the EU that are considered to be Tax-onomy-aligned-and thus environmentally sustainable with regard to six environmental objectives established by the regulation:Climate change mitigation Climate change adaptation Sustainable use and protection of water and marine resources Transition to a circular economy Pollution prevention and control Protection and restoration of biodiversity and ecosystemsCompanies that are required to publish a Non-Financial Declaration must also comply with the Taxonomy Regu-lation.According to Article 8 of the Taxonomy Regula-tion,the Taxonomy-aligned proportions of revenue,capital expenditure and operating expenditure accounted for by environmentally sustainable economic activities are to be reported on an annual basis.Taxonomy-eligibilityTaxonomy-eligibility is assessed in an initial step.For an economic activity to be Taxonomy-eligible,that activity must be mentioned and explained in further detail in the delegated acts for the Taxonomy Regulation.The EU delegated acts(Commission Delegated Regulation(EU)2021/2139 and its supplement,Commission Delegated Regulation(EU)2023/2485),which was adopted by the European Commission in June 2023,contain descrip-tions of relevant economic activities and technical screening criteria for the environmental objectives cli-mate change mitigation and climate change adaptation.The supplement to the delegated regulation includes new technical screening criteria that refer to both the existing economic activities and to new economic activ-ities.Furthermore,a new EU delegated act(Commission Delegated Regulation(EU)2023/2486)containing eco-nomic activities and technical screening criteria rele-vant for the remaining environmental objectives,was published in 2023.The economic activities relevant to the Mercedes-Benz Group in this context are to be found under the envi-ronmental objectives climate change mitigation,climate change adaptation and transition to a circular economy.On the basis of the descriptions contained in the dele-gated acts relating to climate change mitigation,the following Taxonomy-eligible economic activities have been identified for the Group:Economic activity 3.3 encompasses manufacture of low-carbon technologies for transport in connection with the production of cars and vans Economic activity 6.5 encompasses leasing and financing of low-carbon cars and vans Economic activity 6.6 encompasses leasing and financing of low-carbon commercial vehicles Economic activity 6.15 encompasses infrastructure enabling low-carbon road transport and public trans-port(charging infrastructure)In a Commission Notice(2022/C 385/01)published by the European Commission on 6 October 2022,the Commission stated that the term“low-carbon”only relates to the assessment of Taxonomy-alignment within the framework of the technical screening crite-ria and is not relevant for reporting on the Taxono-my-eligible economic activity 3.3.With regard to car manufacturer in particular and as an example,the document shows that the activity“manufacture of low-carbon vehicles”also includes vehicles with com-bustion engines.For the Mercedes-Benz Group,this clarification by the European Commission means that the manufacture of all Group vehicles is to be classi-fied as Taxonomy-eligible.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance24Economic activity 6.5 relates to leasing and sales financing of all cars and vans purchased from third parties.Economic activity 6.6 essentially covers the remaining commercial vehicle portfolio of Mercedes-Benz Mobility after the spin-off and hive-down of the Daimler com-mercial vehicle business(see Note 3 of the Notes to the Consolidated Financial Statements).Economic activity 6.15 relates to the establishment and operation of company-owned charging infrastruc-ture by means of high-power charging stations,which are a prerequisite for zero tailpipe CO2 operation of zero-emissions road transport.The economic activities in specific energy sectors contained in the supplement to the delegated act relating to the climate goals are only present to an immaterial extent at the Mercedes-Benz Group and are performed exclusively in support of carrying out economic activity 3.3.The economic activities contained in the delegated acts relating to climate change adaptation are only present to an immaterial extent at the Mercedes-Benz Group and are reported exclusively under the environmental objective climate change mitigation.The Taxonomy-eligible economic activity 5.4 that encompasses the sale of second-hand goods,which are purchased by the Mercedes-Benz Group from third par-ties,was identified on the basis of the descriptions in the delegated act relating to the transition to a circu-lar economy.For the 2023 reporting year,simplified reporting obligations apply for economic activities newly introduced by the delegated acts.These stipulate that only reporting in relation to Taxonomy-eligibility is required.The Mercedes-Benz Group reports economic activity 5.4 as Taxonomy-eligible but not environmen-tally sustainable.An assessment of Taxonomy-align-ment has not been carried out.The individual economic activities are additionally to be classified according to enabling activities and transi-tional activities.An enabling activity is an economic activity that makes a substantial contribution to one or more environmental objectives by directly enabling fur-ther activities to also make a substantial contribution.At the Mercedes-Benz Group this mostly applies to the economic activities 3.3 and 6.15.A transitional activity,in contrast,is an economic activity for which there is no technological and economically feasible low-carbon alternative but which makes a substantial contribution to climate change mitigation by supporting the transi-tion to a climate-neutral economy.Taxonomy-alignmentIn a further step,Taxonomy-alignment must be assessed for Taxonomy-eligible economic activities.Only Taxonomy-eligible activities can be considered as environmentally sustainable activities,or as being Tax-onomy-aligned,provided they meet certain technical screening criteria.Here,the fulfilment of certain techni-cal screening criteria with regard to the relevant eco-nomic activities must make a substantial contribution to an environmental objective defined by the Taxonomy Regulation and,on the basis of defined“do no signifi-cant harm”criteria(DNSH criteria),also exclude the possibility of significant interference with another envi-ronmental objective.It must also be ensured that mini-mum standards are met with regard to issues such as upholding human rights or combating corruption(mini-mum safeguards).Fulfilment of a substantial contribution to the environmental objective climate change mitigationAccording to the delegated act,all vehicles below the current limit value of 50g CO2/km per vehicle(in accordance with the WLTP)as defined in the technical screening criteria make a substantial contribution to the climate change mitigation environmental objective.At Mercedes-Benz Group all-electric vehicles as well as the majority of plug-in hybrid vehicles are below this threshold.These vehicles are hereafter referred to as“low-carbon vehicles”.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance25Furthermore,according to the delegated act,high-power charging stations that are intended for the oper-ation of vehicles with zero tailpipe CO2 emissions make a substantial contribution to the environmental objec-tive climate change mitigation.Exclusion of the possibility of significant interference on the basis of the“do no significant harm”criteriaIn a second step,compliance with the DNSH criteria for the further environmental objectives for the respective economic activities was analysed on the basis of the defined criteria in the reporting year.With regard to economic activity 3.3,the fulfilment of these criteria was basically assessed at the level of those consolidated production sites where low-carbon vehicles or associated components are currently being manufactured or plans call for them to be manufac-tured in the future.With regard to economic activity 6.5,the analysis of the criteria is to be performed on the basis of the low-car-bon vehicles in the leasing and financing portfolio.In addition to Group-brand vehicles,the vehicle portfolio also includes vehicles from other manufacturers.The latter are reported as Taxonomy-eligible but not Taxon-omy-aligned,as it is not currently possible to carry out an adequate DNSH analysis due to the current data availability.With regard to economic activity 6.15,the fulfilment of the DNSH criteria was reviewed at the level of the oper-ational high-power charging stations.Climate change adaptation With regard to economic activity 3.3,the EU Taxonomy requires a climate risk analysis to be carried out.In accordance with the DNSH requirements,this analysis was carried out for taxonomy-relevant production sites in connection with economic activity 3.3,in order to assess potential physical climate-related risk factors on the basis of material climate risks in line with Appendix A(Annex I)of the delegated act of the EU(Delegated Regulation(EU)2021/2139).The analysis took into account climate scenarios from the Intergovernmental Panel on Climate Change(IPCC)and different time hori-zons,including 2040.Adaptation measures were ana-lysed on the basis of the results.In addition,the verificiation of the DNSH criteria for economic activity 6.5 is essentially based on the con-sideration of use and environmental conditions,such as heat and cold requirements in the context of vehicle development and testing.With regard to economic activity 6.15,potential climate risks according to Appendix A(Annex I)of the delegated act of the EU(Delegated Regulation(EU)2021/2139)were assessed by relevance for the implementation of the economic activity and manufacturers specifications for the charging stations were taken into account.Sustainable use and protection of water and marine resources With regard to economic activity 3.3,fulfilment of the DNSH criteria according to the Taxonomy Regulation is intended to be ensured mainly on the basis of estab-lished environmental management systems and the internal environmental risk assessment(environmental due diligence process).The company has established environmental management systems at its own produc-tion sites around the world in accordance with ISO 14001.In addition,all German and the two European manufacturing locations in Kecskemet(Hungary)and Vitoria(Spain)have also been validated in accordance with EMAS.As part of the internal environmental risk assessment,consolidated production sites are evalu-ated according to a number of factors,including those relating to water quality,in a five-year cycle.Recom-mendations for minimizing risks are then drawn up,pri-oritized and tracked.The Group also uses external data sources to identify sites that harbour potential risks relating to water scarcity.With regard to economic activity 6.15,the analysis shall assess that the use of the charging infrastructure does not give rise to any significant risk to the water quality and the water scarcity corresponding to the DNSH cri-teria.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance26Transition to a circular economy With regard to economic activity 3.3,the EU Taxonomy Regulation requires an assessment and,if possible,the application of measures that promote the transition to a circular economy,including the use of secondary mate-rials,high durability of products and waste manage-ment in production.When developing products,the Mercedes-Benz Group considers the concept of circular economy from the very start and has set itself the over-arching goal of increasing its use of secondary materials in vehicles.In addition,the DNSH criteria for economic activity 6.5 are taken into account through the imple-mentation of the legal requirements on recyclability and reusability for passenger car models and light commer-cial vehicles.The Mercedes-Benz Group is intensifying its efforts to use lower volumes of raw materials and other materials in its production operations.In accordance with the waste hierarchy,the companys primary goal is to avoid waste.For its own production sites worldwide,the Mercedes-Benz Group has set reduction targets for fac-tors such as total waste volume and waste volume for disposal per vehicle.Waste management is also a com-ponent of the Groups internal environmental risk assessment.For economic activity 6.15,the applicable DNSH criteria were analysed and checked for adherence.This includes the verification of the recycling or disposal of waste generated during construction and demolition.Pollution prevention and control With regard to the DNSH criteria,for economic activity 3.3 under Appendix C(Annex I)of the delegated act of the EU(Delegated Regulation(EU)2021/2139),the Tax-onomy Regulation refers to the concept of avoiding the manufacturing,placing on the market or use of restricted and reportable substances subject to current European legislation on chemicals.The implementation of internal processes for specification,approval and control is intended to ensure compliance with European regulations(according to Appendix C)and respective national legislations.The Global Automotive Declarable Substance List(GADSL)forms the basis for the prohibi-tion and declaration requirement of substances in Mercedes-Benz products.The Mercedes-Benz Group also defines specifications for substitution analyses,and thus for the use of less critical hazardous sub-stances.With regard to economic activity 6.5,the DNSH criteria refer to compliance with various product-related Euro-pean regulations and directives.As a result,all-electric vehicles are currently considered in the Taxono-my-aligned scopes of economic activity 6.5.In due consideration of the applicable legislation and of a Notice(C/2023/267)published by the EU Commission on 20 October 2023,only tyres corresponding to the two highest classes for rolling resistance coefficients available on the market and at the same time the high-est class for external rolling noise available on the mar-ket fulfil DNSH requirements for the respective vehi-cles.For the assessment of the respective classes available on the market,the data of the European Prod-uct Database for Energy Labelling(EPREL)shall be used.The time of market placement of the vehicles in the leasing and financing portfolio was used for the analysis,and a percentage share of the vehicles with the respective highest tyre classes according to EPREL was determined on the basis of a representative time period.This proportion is applied to the leasing and financing portfolio of all-electric vehicles worldwide wherever the corresponding data is available.For economic activity 6.15,the applicable requirements from the Taxonomy Regulation on noise,vibration,dust and pollutants must be complied with.Protection and restoration of biodiversity and ecosystems To demonstrate the requirements for economic activity 3.3,ecologically sensitive or protected areas in the neighbourhood of sites are documented and taken into account as part of the internal environmental risk assessment(environmental due diligence process).Fur-thermore,environmental impact assessments or com-parable audits outside the EU are carried out in the context of a new site or the extension of an existing site,if legally required.In addition,the Group has established environmental management systems in accordance with ISO 14001 at its production sites.During the reporting year,an environmental impact assessment was not required for the charging infra-structure(economic activity 6.15)that was put into operation.Furthermore,the locally applicable BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance27requirements in the construction and approval process according to the DNSH requirements were taken as a basis.The analysis of the DNSH requirements for economic activities 3.3 and 6.15 forms the basis for considering the taxonomy-compliant shares.With regard to eco-nomic activity 6.5,the reductions due to the DNSH requirements of the environmental objective pollution prevention and control were taken into account in the Taxonomy-alignment of revenues and investments.Fulfilment of minimum safeguards An economic activity can only be classified as environ-mentally sustainable within the meaning of the Taxon-omy if it is also conducted in accordance with certain minimum standards that are based on international frameworks.Here,Article 18 of the Taxonomy Regula-tion references the OECD Guidelines for Multinational Enterprises,the United Nations Guiding Principles on Business and Human Rights(including the basic princi-ples and rights from the eight core conventions defined in the International Labour Organizations Declaration on Fundamental Principles and Rights at Work),and the International Bill of Human Rights.The Taxonomy Regu-lation itself does not further specify the standards.The report published by the Platform on Sustainable Finance in October 2022(Final Report on Minimum Safeguards)assists companies with the interpretation of the scope and application of the minimum standards.This report forms the foundation for the application of minimum standards and the associated reporting at the Mercedes-Benz Group.Key issue areas here are human rights and labour rights(see the chapters Social compli-ance and Occupational health and safety),the prevention of corruption and the promotion of fair competition(see the chapters Compliance management system,Combat-ing corruption and Promoting fair competition),and responsible tax practices(see the chapter Tax obliga-tion).The verification of compliance here basically involves demonstrating compliance with the existence of corresponding due diligence processes at the Group level and the fact that no judicial rulings relating to seri-ous violations in the aforementioned areas have been made in the final instance.Reporting on the Taxonomy-aligned proportions of environmentally sustainable economic activitiesThe sections below present information on the propor-tion of revenue,capital expenditure and operating expenditure accounted for by environmentally sustaina-ble economic activities at the Mercedes-Benz Group.The individual figures for revenue,capital expenditure and operating expenditure are precisely allocated to a specific economic activity and environmental objective.The calculations for the key figures are based on the Consolidated Financial Statements in accordance with IFRS.The provision of comparative information,except where concerning the economic activities newly introduced by the delegated acts supplement-ing the Taxonomy Regulation,was legally required in the reporting year.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance28Revenue2023Criteria for a substantial contribution2022Economic activitiesCode1Revenue2Proportion of revenue2Climate change mitigationClimate change adaptationWater Circular economyPollution BiodiversityDNSH criteria(“do no signifi-cant harm”)5Minimum safeguardsProportion of Taxono-my-aligned(A.1)or Tax-onomy-eligi-ble(A.2)revenueCategory:enabling activityCategory:transitional activity in millions of eurosin%Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y/NY/Nin%ETA.TAXONOMY-ELIGIBLE ACTIVITIESA.1 Environmentally sustainable activities(Taxonomy-aligned)Manufacture of low-carbon technologies for transportCCM 3.320,70414%YN/ELN/ELN/ELN/ELN/ELYY10%ETransport by motorbikes,passenger cars and light commercial vehiclesCCM 6.53190%YN/ELN/ELN/ELN/ELN/ELYY0%Infrastructure enabling low-carbon road transport and public transportCCM 6.15.0%YN/ELN/ELN/ELN/ELN/ELYY-ERevenue from environmentally sustainable activities(Taxono-my-aligned)(A.1)21,023140%0%0%0%0%0%YY10%of which enabling activity20,704140%0%0%0%0%0%YY10%E of which transitional activity00%0%0%TA.2 Taxonomy-eligible activities that are not environmentally sustain-able(not Taxonomy-aligned activities)EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4Manufacture of low-carbon technologies for transportCCM 3.3107,04570%ELN/ELN/ELN/ELN/ELN/EL72%Transport by motorbikes,passenger cars and light commercial vehiclesCCM 6.521,56114%ELN/ELN/ELN/ELN/ELN/EL15%Freight transport services by roadCCM 6.61,6831%ELN/ELN/ELN/ELN/ELN/EL1%Sale of second-hand goodsCE 5.44480%N/ELN/ELN/ELELN/ELN/EL-Revenue from Taxonomy-eligible activities that are not environmentally sustainable(not Taxonomy-aligned)(A.2)130,737850%0%0%0%0%0%A.Turnover of Taxonomy-eligible activities(A.1 A.2)151,760990%0%0%0%0%0%B.TAXONOMY NON-ELIGIBLE ACTIVITIES Revenue of Taxonomy non-eligible activities 1,4581%2%Total(A B)153,2181000%1 The Code constitutes the abbreviation of the relevant environmental objective to which the economic activity is eligible to make a substantial contribution.Climate change mitigation:CCM,climate change adaptation:CCA,water and marine resources:WTR,circular economy:CE,pollution prevention and control:PPC,bio-diversity and ecosystems:BIO.2 The key figures were audited in order to obtain“limited assurance”.An exception to this is the total(total A B),which was audited with reasonable assurance as a Group key figure.3 Description:Y Yes,Taxonomy-eligible and Taxonomy-aligned activity with the relevant environmental objective,N No,Taxonomy-eligible but not Taxonomy-aligned activity with the relevant environmental objective,N/EL Not eligible,Taxonomy non-eligible activity for the relevant environmental objective.4 Description:EL Eligible,Taxonomy-eligible activity for the relevant objective,N/EL Not eligible,Taxonomy non-eligible activity for the relevant environmental objective.5 A breakdown of the DNSH criteria has not been provided here,as activities may only be designated as Taxonomy-aligned when any significant effect on the other environmental objectives has been ruled out.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance29The following table shows the scope of the Taxono-my-eligibility and the Taxonomy-alignment for the reve-nue by environmental objective:Revenue proportion/total revenue6 Taxonomy-alignment per objectiveTaxonomy-eligibility per objectiveClimate change mitigation(CCM)14%Climate change adaptation(CCA)0%0%Water and marine resources(WTR)0%0%Circular economy(CE)0%0%Pollution prevention and control(PPC)0%0%Biodiversity and ecosystems(BIO)0%0%Taxonomy-eligibility of revenue For the share of Taxonomy-eligible revenue(under A.in the table Revenue),the Taxonomy-eligible revenue is considered in relation to the total revenue of the Group.In this process,the denominator takes into account the consolidated revenue generated by Group companies that are to be included in the calculations.The revenue,as disclosed in the consolidated statement of income,amounted to 153,218 million in the reporting year(2022:150,017 million)(see Note 5 in the Notes to the Consolidated Financial Statements).The numerator was calculated by examining this reve-nue to determine how much of it was generated in con-nection with the manufacturing,the leasing or the 6 The key figures were audited in order to obtain“limited assurance”.financing of vehicles;the operation of high-power charging stations;or the sale of second hand-goods which were purchased from third parties by the Mercedes-Benz Group.This applies to almost all of the revenue generated by the Mercedes-Benz Group.In the previous year,the revenues from the sale of sec-ond-hand goods,which Mercedes-Benz Group pur-chased from third parties,were assigned to the revenue from Taxonomy non-eligible activities.Since the report-ing year,this revenue has been assigned to the eco-nomic activity 5.4.Taxonomy-alignment of revenueIn order to calculate the Taxonomy-aligned proportion of economic activities(under A.1 in the table Revenue),revenues were examined to determine whether they were generated with low-carbon vehicles in order to assess whether a substantial contribution had been made to climate change mitigation.Compliance with the DNSH criteria was also monitored.For the major proportion of the revenue,in particular from the new and used vehicle business and leasing and sales financing activities,a direct attribution was made of the revenue accounted for by low-carbon vehicles.With regard to other revenue components,especially revenue from the spare parts business and service and maintenance contracts,or attribution of discounts granted for large procurement volumes,it is not possible to directly assign revenue to low-carbon vehicles.In these cases,suitable allocations were therefore used for the various revenue components.These classifications are based on current or historical vehicle sales data for the fleet that is currently on the market and data on production volumes.In the report-ing year,the share of Taxonomy-aligned revenue increased to 14%6.The main reasons for this were an increase in unit sales of all-electric vehicles and the expansion of the product portfolio for low-carbon vehi-cles.The revenues shown below are included as an aggrega-tion across the various economic activities.Revenue 20232022Taxonomy-aligned revenue6 Total revenue Proportion of Taxonomy-aligned revenue6Taxonomy-aligned revenue6 Total revenue Proportion of Taxonomy-aligned revenue6in millions of eurosin millions of eurosin%in millions of eurosin millions of eurosin%Revenue according to IFRS 1520,223136,98715,419136,00811%Other revenue80016,2315W514,009 4%Total21,023153,21814,994150,017 10ckKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance30Capital expenditure2023Criteria for a substantial contribution2022Economic activitiesCode1Capital ex-penditure2Proportion of capital expenditure2Climate change mitigationClimate change adaptationWater Circular economyPollution BiodiversityDNSH criteria(“do no signifi-cant harm”)5Minimum safeguardsProportion of Taxono-my-aligned(A.1)or Taxon-omy-eligible(A.2)Capital expenditure Category:enabling activityCategory:transitional activity in millions of eurosin%Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y/NY/Nin%ETA.TAXONOMY-ELIGIBLE ACTIVITIESA.1 Environmentally sustainable activities(Taxonomy-aligned)Manufacture of low-carbon technologies for transportCCM 3.34,60521%YNN/ELN/ELN/ELN/ELYY20%ETransport by motorbikes,passenger cars and light commercial vehiclesCCM 6.55853%YN/ELN/ELN/ELN/ELN/ELYY2%Infrastructure enabling low-carbon road transport and public transportCCM 6.15300%YN/ELN/ELN/ELN/ELN/ELYY-ECapital expenditure of environmentally sustainable activities (Taxonomy-aligned)(A.1)5,220240%0%0%0%0%0%YY22%of which enabling activity4,635220%0%0%0%0%0%YY20%E of which transitional activity00%0%0%TA.2 Taxonomy-eligible activities that are not environmentally sustain-able(not Taxonomy-aligned activities)EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4Manufacture of low-carbon technologies for transportCCM 3.34,06519%ELELN/ELN/ELN/ELN/EL22%Transport by motorbikes,passenger cars and light commercial vehiclesCCM 6.512,18657%ELN/ELN/ELN/ELN/ELN/EL56pital expenditure of Taxonomy-eligible but not environmentally sustainable activities(not Taxonomy-aligned activities)(A.2)16,251760%0%0%0%0%0 x%A.Capital expenditure of Taxonomy-eligible activities(A.1 A.2)21,4711000%0%0%0%0%00%B.TAXONOMY NON-ELIGIBLE ACTIVITIES Capital expenditure of Taxonomy non-eligible activities 00%0%Total(A B)21,4711000%1 The Code constitutes the abbreviation of the relevant environmental objective to which the economic activity is eligible to make a substantial contribution.Climate change mitigation:CCM,climate change adaptation:CCA,water and marine resources:WTR,circular economy:CE,pollution prevention and control:PPC,biodi-versity and ecosystems:BIO.2 The key figures were audited in order to obtain“limited assurance”.An exception to this is the total(total A B),which was audited with reasonable assurance as a Group key figure.3 Description:Y Yes,Taxonomy-eligible and Taxonomy-aligned activity with the relevant environmental objective,N No,Taxonomy-eligible but not Taxonomy-aligned activity with the relevant environmental objective,N/EL Not eligible,Taxonomy non-eligible activity for the relevant environmental objective.4 Description:EL Eligible,Taxonomy-eligible activity for the relevant objective,N/EL Not eligible,Taxonomy non-eligible activity for the relevant environmental objective.5 A breakdown of the DNSH criteria has not been provided here,as activities may only be designated as Taxonomy-aligned when any significant effect on the other environmental objectives has been ruled out.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance31The following table shows the scope of the Taxono-my-eligibility and the Taxonomy-alignment for the capi-tal expenditure by environmental objective:Proportion of capital expenditure/total capital expenditure1Taxonomy-alignment per objectiveTaxonomy-eligibility per objectiveClimate change mitigation(CCM)24v%Climate change adaptation(CCA)0%0%Water and marine resources(WTR)0%0%Circular economy(CE)0%0%Pollution prevention and control(PPC)0%0%Biodiversity and ecosystems(BIO)0%0%1 The key figures were audited in order to obtain“limited assurance”.Taxonomy-eligibility of capital expenditure For the share of Taxonomy-eligible capital expenditure(under A.in the table Capital expenditure),the Taxono-my-eligible capital expenditure is considered in relation to the total relevant capital expenditure of the Group.All additions to intangible assets,property,plant and equipment and right-of-use assets as defined in IFRS 16 in accordance with the statements of changes in non-current assets as well as additions to equipment on operating leases,including the additions to the named assets as part of company acquisitions are taken into account in the denominator.Equipment on operating leases only takes into account vehicles acquired by dealers from outside the Group.Goodwill acquired is not taken into account here.If a divestment is planned,capital expenditure on non-current assets is only taken into account until the point in time at which they were first classified as held for sale in accordance with IFRS 5.The relevant additions to the assets to be taken into account amounted to 21,471 million in the reporting year(2022:18,369 million)(see Notes 11,12 and 13 in the notes to the consolidated financial state-ments).Additions that result from a purchase in the context of a company acquisition are of secondary importance in the reporting year.According to the Commission Notice(2022/C 385/01)that the European Commission published on 6 October 2022,the definition of an economic activity is charac-terized by the achievement of an output.In line with the Mercedes-Benz Groups business model,the numerator was therefore determined by examining whether capital expenditure is made in connection with the manufacturing of vehicles,the establishment of the charging infrastructure or the implementation of trans-port solutions for people and goods.This applies to nearly all of our investments.Taxonomy-alignment of capital expenditure To calculate the Taxonomy-aligned proportion of eco-nomic activities(under A.1 in the table Capital expendi-ture),capital expenditure was examined to determine the extent to which it was associated with low-carbon vehicles(economic activities 3.3 and 6.5)and with high-power charging stations(economic activity 6.15)in order to assess whether a substantial contribution had been made to climate change mitigation.Table Capital expenditure(p.121)shows the Taxonomy-aligned capital expenditure,aggregated across all economic activities.Compliance with the DNSH criteria was also monitored.The size of the share of Taxonomy-aligned expenditure of total capital expenditure is mainly due to the dispro-portionately low share of Taxonomy-aligned vehicles in the additions to the equipment on operating leases.As a result,this share only partially reflects our invest-ments in sustainable products for the future.When looking at Taxonomy-aligned investments in intangible assets(mainly in capitalized development costs)and property,plant and equipment of the Mercedes-Benz Group shows much higher shares of Taxonomy-aligned capital expenditure(table Capital expenditure).All of the capital expenditure of the Mercedes-Benz Group during the reporting year included in the numera-tor of the economic activities 3.3 and 6.5 relates to assets or processes in the context of already existing technologies which are connected to already existing Taxonomy-aligned economic activities 3.3 and 6.5.For most of the capital expenditure relating to the industrial business,a direct attribution was made to all-electric vehicle projects.In the case of capital expenditure in low-carbon plug-in hybrids and assets that are used to produce both vehicles with combustion engines and low-carbon vehicles,suitable allocations based on planned vehicle sales figures for the respective model series or vehicle platforms were used.Capital expendi-ture that is not directly related to the manufacturing BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance32process was allocated on the basis of the planned unit sales figures for low-carbon vehicles.With regard to financial services,it is possible to match the additions to equipment on operating leases directly to low-carbon vehicles.At 24%7,the percentage of Taxonomy-aligned capital expenditure was at the prior-year level.There was a sharp addition to capitalized development costs,the effect of which was offset by the higher total capital expenditure compared to the previous year.CapEx plan for economic activity 6.15A capital expenditure(CapEx)plan that has been adopted by management must exist for capital expendi-ture that leads to an expansion of Taxonomy-aligned economic activities or enables the conversion of Taxon-omy-eligible economic activities into Taxonomy-aligned economic activities.At the Mercedes-Benz Group this affects capital expenditure for economic activity 6.15 Infrastructure enabling low-carbon road transport and public transport(charging infrastructure)that is expected to fall under the environmental objective cli-mate change mitigation.7 The key figures were audited in order to obtain“limited assurance”.The Board of Management of Mercedes-Benz Group AG has adopted the planned capital expenditure for the construction of Mercedes-Benz own high-power charg-ing stations as part of the corporate planning covering the period 2024 to 2028.The CapEx plan contains total capital expenditure in the amount of around 1.4 billion(whereof 30 million are accounted for in the reporting year).Capital expenditure20232022Taxonomy-aligned capital expenditure1 Total capital expenditure Proportion of Taxonomy-aligned capital expenditure1Taxonomy-aligned capital expenditure1 Total capital expenditure Proportion of Taxonomy-aligned capital expenditure1 in millions of eurosin millions of eurosin%in millions of eurosin millions of eurosin%Intangible assets2,7644,51361%1,874 3,480 54%Property,plant and equip-ment1,7683,71848%1,507 3,421 44%Right-of-use assets 1304692891 923 42%Equipment on operating leases55812,7714(5 10,545 3%Total5,22021,47124%4,057 18,369 22%1 The key figures were audited in order to obtain“limited assurance”.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance33Operating expenditure2023Criteria for a substantial contribution2022Economic activitiesCode1Operating expenditure2Proportion of operating expenditure2Climate change mitigationClimate change adaptationWater Circular economyPollution BiodiversityDNSH criteria(“do no signifi-cant harm”)5Minimum safeguardsProportion of Taxono-my-aligned(A.1)or Tax-onomy-eligi-ble(A.2)operating expenditureCategory:enabling activityCategory:transitional activity in millions of eurosin%Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y/NY/Nin%ETA.TAXONOMY-ELIGIBLE ACTIVITIESA.1 Environmentally sustainable activities(Taxonomy-aligned)Manufacture of low-carbon technologies for transportCCM 3.32,33632%YN/ELN/ELN/ELN/ELN/ELYY35%EOperating expenditure of environmentally sustainable activities (Taxonomy-align
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Kingsoft Cloud Holdings Limited金山云控股有限公司Incorporated in the Cayman Islands with limited liabilityStock Code:NASDAQ:KC;HKEX:3896Environmental,Social and Governance Report2023ContentsBusiness Ethics 16Intellectual Property Management 17Integrity 21About the Report 02Statement from the Chairman 03About Kingsoft Cloud 04Corporate Governance 08ESG Strategy 11Green Development 46Addressing Climate Change 47Green Data Center 49Low-carbon Office 54GHG Emissions Inventory 56Environmental Statistics 57Responsible Operations 24Product and Service Excellence 25Data Security and Privacy Protection 30Driving Technology Innovation 34Sustainable Supply Chain 58Supplier Management Requirements 59Supplier Full Lifecycle Management 59Responsible Procurement 61Supplier Capacity Building 62Prioritizing Talent Development 36Creating a Happy Workplace 37Supporting Employee Development 41Human Resources Statistics 45Fulfilling the Corporate Responsibility 63Cloud for Good 64Public Welfare and Charity 65Appendix 66About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|02The report is released by Kingsoft Cloud Holdings Limited(hereinafter referred to as“Kingsoft Cloud”,the“Company”,or“We”),aiming to present,on an objective and fair basis,the environmental,social and governance(hereinafter referred to as“ESG”)performance and practices of the Kingsoft Cloud,Kingsoft Cloud s subsidiaries,variable interest entities and subsidiaries of variable interest entities in 2023.It is recommended to read the section on corporate governance in conjunction with the Corporate Governance Report in the 2023 Annual Report.REFERENCESThe report is prepared in accordance with the Environmental,Social and Governance Reporting Guide(hereinafter referred to as the“ESG Reporting Guide”)set out in Appendix C2 to the Main Board Listing Rules on the Stock Exchange of Hong Kong Limited(hereinafter referred to as the“Stock Exchange”).The report also leverages reporting frameworks and standards such as the National Association of Securities Dealers Automated Quotations(NASDAQ)ESG Reporting Guideline 2.0,the Global Reporting Initiative Standards(GRI Standards),and the United Nations Sustainable Development Goals(UN SDGs),Sustainability Accounting Standards Software&IT Services issued by Sustainability Accounting Standards Board(SASB),aiming to systematically reflect Kingsoft Cloud s performance in all relevant aspects and respond to the concerns of various stakeholders.About the ReportREPORTING PRINCIPLESIn preparing this ESG report,the principles of“Materiality”,“Quantitative”,“Balance”,and“Consistency”are applied to define the content of the report and how the information is presented.Materiality:During the preparation of this report,the Company has identified the main stakeholders and key ESG issues of their concern and made targeted disclosure according to their relative materiality.For more information on materiality assessment,please refer to the sections“Stakeholder Communication”and“Materiality Analysis”below.Quantitative:This report adopts quantitative information to disclose the key performance indicators(“KPI”)in the environmental and social aspects.The measurement standards,methods,hypothesis and/or calculation tools,and the source of conversion coefficient used for the KPIs are explained in their respective paragraphs.Balance:This report objectively discloses both positive and negative information,ensuring that the content reflects our sustainable development performance within the given time frame without bias.Consistency:The data disclosed in this report adopts the statistical method consistent with previous years,with individual changes explained to ensure consistency.REPORTING SCOPEThis report covers the period from 1 January to 31 December 2023(hereinafter referred to as“the reporting period”,“this year”or“2023”).This may,however,includes certain information beyond this period for the comparability and completeness of this report.The sources of information and data used in this report include public data from governmental departments,statistical data in the course of Kingsoft Cloud s operations,internal company documents and statistical reports.ACCESS TO THE REPORTThis report can be accessed and downloaded on our Investor Relations website(https:/ the website of the Stock Exchange(.hk).We welcome comments or suggestions related to the ESG management of Kingsoft Cloud,and please contact us at ksc- for any questions or comments that arise.The report is available in Chinese and English versions.Should there be any discrepancy between the Chinese and English versions,the Chinese version shall prevail.About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|03In this fast-changing era,Kingsoft Cloud continues to explore the best practices of integrating social responsibility and business value in response to changes in domestic and international policies,social environments,and the expectations of various stakeholders.Leveraging our technological advantages,we incorporate the concept of sustainable development into our business in a more systematic way,and actively take actions to implement practices of low-carbon sustainable development and facilitate low-carbon transformation within the industry.We continuously enhance our corporate governance capabilities.Kingsoft Cloud actively responds to national development strategies,constantly optimizes the ESG governance structure and system,and integrates ESG into business operations and daily management.We continue to promote the diversity and independence of our Board of Directors,maintain close communication with various stakeholders,and actively respond to their expectations.We focus on ESG-related risks and opportunities,steadily driving the Company s sustainable development with a more mature governance system.We consistently promote business ethics.In 2023,we implemented various measures to firmly uphold ethical boundaries in business.We conducted the company-wide audit of business ethics,strengthened integrity controls in key risk areas and risk groups,carried out the annual departmental integrity inspections and interviews,and strengthened the cultivation of business ethics awareness among executives and employees through a variety of activities and training.In addition,we continue to improve our intellectual property management system by respecting and safeguarding both our intellectual property rights and those of third parties,and to work with industry peers to jointly create a favorable ecosystem for innovation.We regard innovation as our core driving force.Upholding the principle of“building success based on technology and innovation”,we are committed to providing customers with high-quality and efficient cloud products and services.In 2023,we have launched the new artificial intelligence product and technology development strategy,to continuously strengthen the Company s core competitiveness in the fields of big data,artificial intelligence,and other areas.As a leading cloud service provider,we continue to accelerate technological innovation and deliver excellent products and services to our customers,while focusing on safeguarding data security and customer privacy,so as to make cutting-edge technology serve the society in a safer way.We recognize talents as our most valuable asset.Focusing on every dimension of employee well-being,we constantly optimize the compensation management system and the performance incentive policy,and actively construct a fair and effective promotion and development system to ensure that every employee shares in the fruits of corporate development based on their contributions.In 2023,we initiated the Wuhan Talent Strategy,started to establish the construction of the Kingsoft Cloud Wuhan R&D Center,set up the Kingsoft Cloud Star Academy with the R&D Center as the main body,and created the Kingsoft Cloud Star Campus,which lays a solid foundation for individuals to pursue high-quality employment and career development while cultivating promising technical talents for the construction of Digital China and the development of cloud computing industry.We adhere to the green and low-carbon operation model.By means of green technologies and equipment,green operation and maintenance management,we continue to promote the green and efficient development of data centers in the planning,design,operation and other stages.All self-built data centers achieved the energy consumption targets for 2023.In addition,we vigorously promote paperless offices,continuously improve the efficiency of energy and resource management in the office area,and successfully achieve the 2023 environmental objectives for the office area,fully demonstrating Kingsoft Cloud s commitment to environmental protection concepts of green office and low-carbon operation.We uphold the business philosophy of win-win cooperation.We continuously improve our supplier lifecycle management approach,provide targeted resources and assistance to empower suppliers in ESG construction.Together with upstream and downstream suppliers,we build a fair,honest,transparent and prosperous business environment.This year,we improved the supplier visit management by further expanding its scope,comprehensively promoting the construction of supply chain integrity system.We never forget our initial commitment to giving back to the society.We always pay attention to the field of public service,leveraging Kingsoft Cloud s technological and business advantages in cloud computing,big data and artificial intelligence to collaborate with local governments in healthcare,digital governance and other fields,and assist in the digital transformation of public services.Additionally,we actively participate in various public welfare and charity programs initiated by Kingsoft Foundation to express our gratitude to society through practical actions.Greatness comes from dreams,and growth comes from persistence in dreams.Kingsoft Cloud always believes that the dream of“being our customers most trusted cloud partner and creating a digital future together”will eventually come true.This dream carries our“cloud-based”product and service ecosystem,bears witness to our commitment to integrity and ethics,and will lead us to the brilliant and innovative future of the industry!Mr.Jun LEIApril 30,2024Statement from the ChairmanAbout the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|04COMPANY OVERVIEWFounded in 2012,Kingsoft Cloud Holdings Limited is the leading independent cloud service provider in China,listed on NASDAQ in the United States in 2020,and completing the dual primary listing on the Main Board of the Hong Kong Stock Exchange in 2022.Kingsoft Cloud adheres to the principle of“building success based on technology and innovation”,and gradually builds a complete cloud computing infrastructure and operation system.By seamlessly combining advanced technologies such as big data,artificial intelligence,offers more than 150 solutions that carter to various industries including the Internet,public services,digital health,financial services and other fields,cumulatively providing high-quality cloud services to nearly 500 high-quality customers.About Kingsoft CloudAs an independently operated and business-independent professional cloud service company,Kingsoft Cloud is committed to providing high-quality cloud solutions for enterprises and organizations in various industries,relying on Kingsoft Group s 35 years of enterprise-class services experience of Kingsoft Group.We have built a comprehensive and reliable cloud platform that includes extensive cloud infrastructure,advanced cloud-native products,industry vertical solutions and end-to-end service and delivery capabilities.Kingsoft Cloud has deeply laid out the cloud computing track,exploring the depth and breadth of the cloud industry with continuous agile technology evolution and deep enterprise service experience.We have been ramping up our core technologies,precisely focusing on fast-growing vertical fields such as the Internet,public services,healthcare,gaming,financial services,artificial intelligence,energy vehicles,and working with the industry to reach a new stage of digitization.For more than a decade,Kingsoft Cloud has been committed to building an end-to-end cloud ecosystem with its partners in multiple dimensions,such as joint innovation,joint expansion,and business opportunity sharing,in order to build a high-quality,sustainable,and win-win Internet ecosystem.In the future,Kingsoft Cloud will continue to consolidate its market position in strategically selected vertical industries,invest in infrastructure and technology,and strengthen cooperation with business partners so that we can bring the value of cloud computing to the world.Total revenue of RMB 7 billion in 2023Offers more than 150 solutions Cumulatively providing high-quality cloud services to nearly 500 high-quality customersMay 2023April 2023Included in the list of“Beijing Enterprises of Integrity”Awarded“Top 100 Innovative Enterprises”,“Brand Power Influential Enterprise of the Year”,“Top 10 Innovative Enterprises(IT Service Industry)”by Brand Power Economic ForumObtained the global software high-level certification CMMI Level 5 Certification for the third timeJune 2023Included in the first issue of S&P Globals Sustainability Yearbook(China Edition)Awarded the“2023 Employer of the Year for Recruitment Experience”by ACMcoder of CIIC Guiyang Human Capital Technologies,Ltd.Awarded the“Best ESG Rookie Award”in the 7th China Excellence IR by International Roadshow Center(IRSC)Passed the Level 3 Capability Maturity Assessment of DevOps Capability Maturity Model Part 3:Continuous Delivery by CICTAMSCI ESG Rating upgraded to ASelected as a member of“Beijing General Artificial Intelligence Industry Innovation Partnership Program”Awarded the“Trusted Cloud Technology Best Practice Award”by the China Academy of Information and Communications Technology(CAICT)The“Industry DaaS Platform Project”passed the Level 2 Capability Maturity Assessment of the Integration of Development and Operation(DevOps)Capability Maturity Model Part 4:Technology Operation by CAICTAwarded the“Top 50 2023 China Intelligent Enterprise”by Dark HorseAwarded the“WISE 2023 Future Business King”by 36 Kr as the“Enterprise of the Year in the Field of Artificial Intelligence”Passed the annual assessment of National Intellectual Property Advantageous EnterpriseAwarded“Best Hong Kong Stock Connect Company”by Wisemen Financial Technologies Services(HK)Ltd.Awarded the“2023 Excellent Digital Innovation Enterprise”by Economic Observer“Kingsoft Cloud-Chibi Smart City Project”was awarded the“2023 Best Smart City Solution”by China Internet Weekly.Won the“2023 Most Innovative AI Solution”award jointly issued by China Internet Weekly and the Informatization Research Center of the Chinese Academy of Social Sciences(CIS)July 2023October 2023November 2023December 2023January 2024HONORS&RECOGNITIONSKingsoft CloudCamelot11 Camelot Employee Scheme Inc.,which was acquired in September 2021 by Kingsoft Cloud.Awarded“Top 100 Innovative Enterprises”,“Brand Power Influential Enterprise of the Year”,“Top 10 Innovative Enterprises(IT Service Industry)”by Brand Power Economic ForumObtained the global software high-level certification CMMI Level 5 Certification for the third timeJune 2023Included in the first issue of S&P Globals Sustainability Yearbook(China Edition)Awarded the“2023 Employer of the Year for Recruitment Experience”by ACMcoder of CIIC Guiyang Human Capital Technologies,Ltd.Awarded the“Best ESG Rookie Award”in the 7th China Excellence IR by International Roadshow Center(IRSC)Passed the Level 3 Capability Maturity Assessment of DevOps Capability Maturity Model Part 3:Continuous Delivery by CICTAMSCI ESG Rating upgraded to ASelected as a member of“Beijing General Artificial Intelligence Industry Innovation Partnership Program”Awarded the“Trusted Cloud Technology Best Practice Award”by the China Academy of Information and Communications Technology(CAICT)The“Industry DaaS Platform Project”passed the Level 2 Capability Maturity Assessment of the Integration of Development and Operation(DevOps)Capability Maturity Model Part 4:Technology Operation by CAICTAwarded the“Top 50 2023 China Intelligent Enterprise”by Dark HorseAwarded the“WISE 2023 Future Business King”by 36 Kr as the“Enterprise of the Year in the Field of Artificial Intelligence”Passed the annual assessment of National Intellectual Property Advantageous EnterpriseAwarded“Best Hong Kong Stock Connect Company”by Wisemen Financial Technologies Services(HK)Ltd.Awarded the“2023 Excellent Digital Innovation Enterprise”by Economic Observer“Kingsoft Cloud-Chibi Smart City Project”was awarded the“2023 Best Smart City Solution”by China Internet Weekly.Won the“2023 Most Innovative AI Solution”award jointly issued by China Internet Weekly and the Informatization Research Center of the Chinese Academy of Social Sciences(CIS)July 2023October 2023November 2023December 2023January 2024April 2023September 2023About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|05About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|06ESG PERFORMANCE HIGHLIGHTS IN 2023By the end of 2023Accumulated 904 granted patents worldwideIncluding 753 invention patents150 design patents1 utility model patentOffered customer services 50,462 timesAchieved a response rate of 98.90%within 90 secondsAs of December 31,2023,the proportion of female employees in executive management reached 20.93%,and female employees accounted for 34.02%of the total employees in the CompanyZero concluded corruption lawsuit against the Company or its employeesObtained the Data Protection Trustmark(DPTM)Certificate from the Infocomm Media Development Authority of Singapore(IMDA)A total of 513 computer software copyright registrations100%pass rate of operation and maintenance(O&M)safety related assessment for frontline O&M personnelLaunched the Wuhan Talent Strategy,created Kingsoft Cloud Star Campus,and built Wuhan Research and Development CenterPassed the annual assessment of National Intellectual Property Advantageous EnterpriseServed as chairman company of the Internet Intellectual Property Opening and Cooperation AllianceSet up the Working Group on Algorithm Security to manage and coordinate algorithmic security work in an integrated mannerLaunched the“Qingyun Project”to promote the leadership development of young employees and strengthen the Companys talent poolBusiness Ethics and InnovationResponsible OperationsPrioritizing Talent DevelopmentA resolution rate of 94.73%within 30 minutesA customer satisfaction of 97.43out the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|07Launched the“Smart Chibi”Project,assisting the Chibi Municipal Government to carry out the construction of smart city and promoting the digital transformation of Chibis public servicesAssisted the Jiangsu Provincial Government in completing the first phase of construction of the Jiangsu Image Cloud,saving an estimated annual medical image cost of approximately RMB2.4 billionParticipated in education donation and other public welfare projects initiated by Kingsoft FoundationESG PERFORMANCE HIGHLIGHTS IN 2023Fulfilling the Corporate Responsibility2 PUE:Power Usage Effectiveness.3 WUE:Water Usage Effectiveness.4 UPS:Uninterruptible Power Supply.The percentage of suppliers that comply with the relevant management policies of suppliers accounted for 100%Visited more than 30 supplier companies to inspect and monitor suppliers integrity complianceSustainable Supply ChainThe average annual PUE2 value of Beijing Yizhuang Data Center achieved 1.362,average annual WUE3 value achieved 1.98,which both meet the 2023 targetsThe average annual PUE value of Tianjin Yixianyuan Data Center achieved 1.379,average annual WUE value achieved 2.01,which both meet the 2023 targetsWithdrew part of the UPS4 system running at low load,saving more than 1 million kWh of electricity annuallyGreen DevelopmentCorporate GovernanceKingsoft Cloud carries out high-standard corporate governance,strictly complies with the Company Law of the People s Republic of China,the U.S.Securities Exchange Act,and the Main Board Listing Rules of the Stock Exchange of Hong Kong Limited and other relevant laws and regulations.We continuously optimize our corporate governance system,improve internal controls,and actively create a good internal and external governance environment,to effectively safeguard the long-term interests of all our shareholders,and promote the healthy and stable development of the Company.01About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|08GOVERNANCE STRUCTUREThe Board of Directors(hereinafter“the Board”)determines the Company s strategic direction and overall strategy measures,supervise the Company s operations and financial performance,and ensures the establishment of a thorough internal control and risk management system.The Board subordinates the Audit Committee,the Compensation Committee,the Nomination Committee,and the Corporate Governance Committee to oversee specific issues.The Corporate Governance Committee of the Board supervises ESG-related matters,such as business ethics,product and service quality,privacy and data security,climate change,etc.The information related to ESG governance will be detailed in the“ESG Strategy”section of this report.The terms of reference of the specialized committees of the Board,the background of the Directors and more detailed information related to Kingsoft Cloud s corporate governance are published on the Company website.BOARD INDEPENDENCE AND DIVERSITYThe Board consists of seven Directors,including two executive Directors,two non-executive Directors and three independent non-executive Directors.The number of independent non-executive Directors accounts for more than one-third of the total number of Board members,fully playing to a balancing role to safeguard the interests of shareholders and the Company.The chairman and members of the Nomination Committee,the Audit Committee and the Compensation Committee are all non-executive Directors and independent non-executive Directors.We think that the Board diversity brings different perspectives and professional experiences for the development of the Company,further improving the decision-making ability of the Company.We clearly state in Board Diversity Policy that the selection of Director candidates will be based on a range of diversity perspectives,including but not limited to gender,age,cultural and educational background,industry experience,technical capabilities,professional qualifications and skills,knowledge,length of service,etc.The Nomination Committee of the Company annually evaluates the composition of the Board from the aspects of the independence,knowledge,skills and experience of the Board members,contributing the best candidates in accordance with the principle of diversity.The Committee believes that the current composition of the Board meets the needs of the Company s business development with balanced and diversified skills and experience.At present,the Board includes one female Director.Directors of the Board have a balanced mix of knowledge and skills,including corporate management and strategic development,finance,accounting and risk management,obtained degrees in various areas,such as computer science,chemistry,electronic engineering,business administration and economics,and have rich experience in various industries,including TMT5,consumer products,technical services,and financing.5 TMT refers to Telecommunications,Media,Technology.About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|09Board of DirectorsCorporate Governance CommitteeNomination CommitteeCompensation CommitteeAudit CommitteeAbout the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|10RISK MANAGEMENT AND INTERNAL CONTROLThe Board of Kingsoft Cloud is responsible for evaluating and determining the nature and extent of risks that the Company is willing to take in achieving the Company s strategic objectives,and ensuring that the Company establishes and maintains appropriate and effective risk management and internal control systems.The Board oversees management in the design,implementation and monitoring of the risk management and internal control systems and is responsible for reviewing the effectiveness of the systems.The Company follows the management process of“planning and communication,problem identification,reporting and supervision,rectification and improvement”to establish and maintain an internal control and supervision system that is in line with the development strategy and business policy,so as to provide a strong guarantee for the implementation of strategy and risk management.The Internal Audit and Internal Control Department of the Company integrates auditing work into the management processes,aiming to identify weak points,detect problems in a timely manner,and achieves the purpose of improving the fundamental management practices;carries out risk assessment work on a regular basis to promptly identify major risks in the course of the Company s operation and adopts appropriate risk management measures;continuously maintains the validity and appropriateness of the Company s institutional system by designing an evaluation system for the system to be issued,regularly assessing the results of its implementation,and maintaining and updating the system as needed.Risk management and internal control processes:Risk Identification&AssessmentTo identify internal and external matters that affect the achievement of the Company s objectives,analyze risks and opportunities,assess the likelihood of occurrence and degree of impact of risks with respect to the identified risk factors,and reasonably determine risk response strategies;Business controlTo take a series of measures and procedures based on the results of the risk assessment,including segregation of authority and responsibility,risk authorization systems,adequate documentation and records,asset security,independent verification,and appropriate segregation of duties to keep risks within acceptable levels;Information&CommunicationTo identify and gather the relevant information from within and outside the Company,and transmit it to relevant personnel in a timely manner;MonitoringTo supervise and inspect the establishment and implementation of the Company s internal controls,evaluate the effectiveness of internal controls,identify internal control deficiencies,and making continuous improvements.We have engaged an independent consulting firm to assist us in evaluating the effectiveness of the design and implementation of internal controls and making timely improvements to the identified issues to enhance the overall level of risk management and internal controls.ESG Strategy02About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|11About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|12The Board of Kingsoft Cloud is the highest decision-making body for ESG governance and fully accountable for the Company s ESG strategy and reporting.The Corporate Governance Committee of the Board oversees and makes recommendations on the management of ESG matters.With reference to the results of materiality analysis on ESG issues,Kingsoft Cloud develops ESG strategies before integrating them into the Company s operation.The Board participates in the evaluation,prioritization,and management of important ESG issues.For detailed information on the specific evaluation process and results of ESG issues,please refer to the“Stakeholder Communication”and“Materiality Analysis”sections of this report.This year,the Company actively conducted work on important ESG issues related to privacy and data security,employee development and training,product and service stability and quality,etc.,and the progress and results of the work on the corresponding key ESG issues have been described at the appropriate places in this report.STATEMENT OF THE BOARDDuring the reporting period,the Company has established environmental management targets,and the Board has reviewed and discussed the establishment of the targets and examined the achievement of the environmental targets to continuously promote ESG management.For details of the review of the targets,please refer to the section“Green Development”section in this report.This report discloses in detail the progress and effectiveness of the Company s ESG work in 2023,which has been reviewed and approved by the Board on April 30,2024.Kingsoft Cloud highly values the significant impact of ESG-related risks and opportunities and incorporates ESG risks into the risk management system.The Board participates in the assessment of ESG-related risks and opportunities,and continuously monitors the implementation of ESG risk management policies to ensure that the internal control system effectively identifies,manages and reduces ESG risks associated with business operations.This year,the Company conducted risk identification,assessment,and management work on ESG issues such as information technology,human resources,legal&compliance,climate change,etc.About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|13ESG GOVERNANCE FRAMEWORKIn order to better integrate the concept of sustainable development into the Company s overall strategy,we have incorporated ESG objectives and achievements,such as business ethics and information security,into the CFO s objectives and key results(OKRs),and realized the linkage between executive compensation and sustainability performance.In addition,the Company issued the Kingsoft Cloud Compensation Recoupment Policy,which applies to,but is not limited to,the CEO,CFO,and Finance Director.The policy clearly stipulates that if material errors are found in the financial reports and the financial restatement are made as a result,the Company will recover from the relevant persons the excess amount of erroneously awarded compensation(including cash and equity)obtained on the basis of the materially incorrect financial reports.The formulation of this policy helps to raise employees awareness of risk and responsibility,reduce the Company s legal risks and protect shareholders rights and interests.Kingsoft Cloud has established a comprehensive and complete ESG governance structure and management system to promote ESG governance and performance at three levels:governance,management and executive levels,and improve the Company s overall sustainable development performance.Governance levelManagement levelExecutive levelThe BoardThe Board of Kingsoft Cloud is the highest decision-making body for ESG governance and fully accountable for the Company s ESG strategy and reporting.The Corporate Governance Committee of the Board oversees and makes recommendations on the management of ESG matters.ESG related departmentsAll ESG related departments are responsible for implementing ESG management strategy,and regularly reporting ESG action plans and work progress to the Corporate Governance Committee and management.The Chief Executive Officer(hereinafter“CEO”)office6The CEO office is responsible for assisting the Corporate Governance Committee to make overall decisions on Kingsoft Cloud ESG matters,guide and supervise the implementation of ESG work in ESG related departments,comprehensively promote the effective implementation of Kingsoft Cloud ESG strategies and actions;and manage communication with stakeholders on ESG matters.6 The CEO Office includes senior executives responsible for operation,finance,organizational human resources,etc.We have incorporated ESG objectives and achievements,into the CFOs objectives and key resultsKingsoft Cloud issued the Kingsoft Cloud Compensation Recoupment PolicyAbout the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|14STAKEHOLDER COMMUNICATIONBased on business and operational characteristics,industry dynamics and external socio-economic macro environment,we identify stakeholders including regulatory bodies,shareholders and other investors,employees,and clients,etc.Kingsoft Cloud regularly communicates with stakeholders through effective communication mechanisms and multiple communication channels,responds to the concerns and expectations of all parties in a timely manner,and constantly improves and updates the Company s business and ESG strategies and practices.During the year,the main communications between the Company and stakeholders are as follows:ClientsShareholders and other investorsEmployeesGovernment and regulatory bodiesSuppliers and other business partnersMedia,NGOs and industry associationsPublic and communityStakeholdersIssues of ConcernCommunication Channels Privacy and data security Product stability and quality Quality service Technology innovation Reasonable product and service costs Company official website Product launch Satisfaction survey Customer communication and complaint channels Business compliance Return on investment Climate change and business continuity Green operations Shareholders meeting Regular reports and announcements Roadshow events Investor communication via email Investor communication via online and offline meetings Rights and benefits protection Compensation and benefits Health and safety Development and training Diversity and equality Online and offline training activities Regular research feedback Employee grievance channels Internal office system Internal communication meeting Business compliance Privacy and data security Business ethics Green operations Government consultation Project cooperation Regular reports and announcements Supervision and inspection by regulatory bodies Fair cooperation Mutual benefit and win-win cooperation Business ethics Green operations Bid invitation/business bidding Purchasing activities Contracts&agreements On-site visits Corporate social responsibility Cooperation and development Green operations Regular reports and announcements Roadshow events Company website and social media platforms Press conferences Product launch Public welfare activities Charitable donation Volunteering services Green operations Public welfare activities Company website and social media platformsAbout the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|15MATERIALITY ANALYSISTo fully understand the expectations and demands of various stakeholders for the Company s ESG work,better identify and manage our ESG risks and opportunities,and respond to stakeholders concerns in a timely manner,we communicate with stakeholders through regular reports and announcements,emails,products and other means.We identified 18 key issues according to global sustainability goals,Exchange requirements,investor concerns,domestic and international policies,and overall company strategy.We actively communicate with internal and external stakeholders to understand their suggestions on Kingsoft Cloud from the two dimensions of“materiality to Kingsoft Cloud”and“materiality to stakeholders”of each ESG issue,and rank the importance of key issues.This year,we evaluated 9 issues of high importance and 9 issues of general importance,and generated a matrix of ESG issues based on the assessment results as follows:Highly materialHighly materialGenerally materialGenerally materialMateriality to StakeholdersMateriality to Kingsoft CloudSocietal Impact of Products&ServicesProducts&Services Stability and QualitySustainable Supply ChainIntellectual Property Rights ProtectionDevelopment&TrainingEthical Business PracticesPrivacy&Data SecurityCustomer ServicesRenewable&Energy EfficiencyTechnological InnovationGreen OperationOperational WasteEmployee RightsTalent Attraction&RetentionClimate Change&Business ContinuityCorporate ResponsibilityHealth&SafetyLabor StandardsBusiness EthicsKingsoft Cloud strictly abides by the relevant laws and regulations of the places where it operates and requires all employees and partners to adhere to business ethics,and jointly establish a business ecology of compliance,fairness,and mutual trust.Applicable SDGs:03About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|16About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|17INTELLECTUAL PROPERTY MANAGEMENTProtecting Our Independent Intellectual PropertyWe emphasize the importance of the independent intellectual property protection and keep strengthening its life-cycle management.This year,the Company revised the Kingsoft Cloud Measures for Intellectual Property Management to further restrict the delivery of independent IPs and source codes by listing non-deliverable IPs categories and establishing strict approval processes for deliverable IPs,to further standardize the creation and delivery of independent IPs and strengthen the protection of the Company s intangible assets.For trade secrets for which no intellectual property rights have been applied for or granted,the Company established a unified management system,and released and implemented the Trade Secret Management Measures of Kingsoft Cloud.We have strengthened the confidentiality management of important information and classified and graded trade secrets such as technical data,source codes,product design documents,achieving coordinated and unified management of the Company s intellectual properties and trade secrets.The Company has established a strict review mechanism for the protection of trademarks and brands.Any external use of the trademarks requires the joint review of the Marketing Department,the Capital Market Department and the Legal Department with a written authorization.In case of infringement of the Company s IP rights,or impairing the rights and interests of the brands,the Company will immediately trigger the emergency response mechanism to minimize the negative impact of infringements and effectively defend Kingsoft Cloud s intellectual property rights as well as the legitimate rights and interests.The Legal Department learns about the information of the issues upon communication and verification with relevant departments,and figures out the response mechanism quicklyAskThe relevant department informs other parties involved(if any)of handling results.The Legal Department takes supplementary measures together with the Public Relations Department if required,such as information disclosure via media for maintaining sound public relations,and reassurance among investorsReportThe Legal Department leads the work of handling infringement issues via consultation,response and communication;in case of special circumstances,the Legal Department updates investment departments and the management on circumstance details,and proposes the adoption of the company-level response mechanismFixEmergency Response MechanismIntellectual property(“IP”)serves as the vital assets in cultivating brand competitiveness and achieving business breakthroughs of Kingsoft Cloud.The Company strictly complies with laws and regulations related to intellectual property protection,such as the Patent Law of the People s Republic of China,the Copyright Law of the People s Republic of China,the Trademark Law of the People s Republic of China,and the Advertising Law of the People s Republic of China.In addition,the Company keeps optimizing the integrated management system covering patents,copyrights and trademarks to strengthen IP protection.About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|18Preventing Intellectual Property Rights InfringementWhile protecting our own IPs,we respect and protect others IPs.The Company monitors the latest patent applications and technical papers in the global patent database and the Internet domain from time to time according to technical characteristics and changes in product lines,and assesses the possibility of their hindrance to the Company s technical development to reduce the risk of the Company infringing others IPs.To avoid infringing third parties IPs and to strengthen the management of genuine software,the Company launched the Kingsoft Cloud Management Policy for Software Compliance this year in which it clarifies the application process for the procurement and use of daily and special applications,therefore promoting the use of legitimate software.The Company incorporates the key granted patents into the core IPs package and prepares strategic documents for similar patents in the industry to prepare for possible patent infringement lawsuits and to avoid patent invalidation.In case of infringement complaints,the infringement emergency response team formed by the Legal Department and relevant departments will carry out infringement emergency process in accordance with the company-level management mechanism,and deal with the relevant issues in accordance with the law.The Group serves to control risks for promotion purposed press releases,content of official website,large-scale activities and other work.The risks include the infringement risk,information leakage risk,advertising legal risk and sensitive information publicity risk.Content Screening Email GroupOver the past decade,Kingsoft Cloud has been widely recognized for its IP management and protection.The Company has been awarded as Beijing Intellectual Property Demonstration Corporation,National High-tech Enterprise,China Intellectual Property Excellent Management Team,Excellence Award of China Patent Award,and National Intellectual Property Advantageous Enterprise,etc.In 2023,the Company successfully passed the annual assessment of National Intellectual Property Advantageous Enterprise,marking that the Company s IP deployment and management level had been certified at the national level.In this yearKingsoft Cloud added 241 granted patents and registered 25 copyrights of computer softwareBy the end of 2023We have been granted 904 patents globally,including 753 invention patents,150 design patents and 1 utility model patent,and a total of 513 computer software copyright registrationsAbout the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|19Intellectual Property Promotion and EducationIn 2023,the Company conducted 10 IP-related online and in-person training sessions in various forms.These sessions covered employees from various product lines,such as cloud computing,cloud storage,and digital healthcare.In April 2023,Kingsoft Cloud invited 60 representatives from 51 enterprises to participate in the“Intellectual Property Open Day”,where the Company demonstrated its IP achievements and management experience to famous enterprises,law firms and organizations,reinforcing the Company s profile of respecting IP achievements and defending IP rights.Kingsoft Cloud 426 Special Event on Intellectual PropertyIntellectual Property Open DayThis year,the Company organized a special event during the World Intellectual Property Day on April 26.In the activity,the Company conducted IP promotion among all employees through announcements,emails,posters and other channels,and launched educational videos and introduced award-winning questions on IP protection.During the event,employees from all departments of the Company took the online tests a total of 651 times.The event enriched employees knowledge of intellectual property and raised their awareness of IP protection.About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|20Intellectual Property CooperationKingsoft Cloud actively carries out IP cooperation and is committed to creating a favorable innovation ecology in the industry.The Company has joined the Internet Intellectual Property Opening and Cooperation Alliance as the chairman company.We have led other alliance members to jointly carry out cooperation on IP operation and licensing,industrial technological development and the study of trends in patent deployment,etc.,and established the joint defense and risk response mechanism for overseas intellectual property.This year,we assisted the Beijing Intellectual Property Protection Association and related enterprises to jointly set up the“Data Asset Management and Processing Ecosystem”,the first original and cross-industry chain patent pool in the field of digital economy in China.With this patent pool,we can improve the utilization efficiency of idle IP resources and enhance the ability to profit from such resources.In December 2023,Kingsoft Cloud attended the Suiyuan Intellectual Property Forum themed with“Data Empowerment and Intellectual Property Protection”,hosted by Nanjing Normal University.At the forum.Kingsoft Cloud delivered a keynote speech,sharing the Company s data IP registration,the basic logic of data transaction as well as different subjects definition and requirements regarding data compliance,and put forward suggestions on how to build a proper management system for corporate data compliance.The forum is conducive to advancing the development of IP theories and practices,thus providing effective guidance for promoting the high-quality development of Jiangsu s digital economy.In December 2023,Kingsoft Cloud assisted the Beijing Municipal Intellectual Property Office to conduct the training on“Big Data,Artificial Intelligence and Data Asset Circulation”.The training provided a detailed introduction to the actual functions and core features of big data generation,transmission and circulation,and elaborated on the latest technological trends and development opportunities for the breakthrough of big data,cloud computing,and artificial intelligence.In addition,the training also compared the similarities and differences of key contents of data IP registration policies in different regions and analyzed the far-reaching impact of Chat GPT on the IP industry.The training deepened the understanding of all participants on big data,artificial intelligence and data asset circulation,and promoted an in-depth implementation of data IP work.Suiyuan Intellectual Property Forum in NanjingTraining on“Big Data,Artificial Intelligence and Data Asset Circulation”About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|21INTEGRITYSticking to the“Integrity and Ethics”governance principle,Kingsoft Cloud strictly abides by applicable laws and regulations including the Civil Code of the People s Republic of China,the Criminal Law of the People s Republic of China,the Supervision Law of the People s Republic of China,the Company Law of the People s Republic of China,the Anti-money Laundering Law of the People s Republic of China,and the Opinions on Strengthening the Development of a Clean Culture in the New Era.In addition,Kingsoft Cloud regularly reviews and updates internal rules and policies such as the Employee Manual,shows zero tolerance for any form of bribery,extortion and fraud,and constantly improves risk prevention and management capabilities for anti-corruption and anti-money laundering.Anti-corruptionKingsoft Cloud actively carries out integrity control of key risk areas and risk groups,continuously increases input and manpower to deal with internal clues and cases,and reviews and traces back past events.The Company keeps pushing ahead withthe annual integrity inspections and interviews on departments.This year,focusing on the Public Services Department,the Financial Services Department and other business lines,the Company conducted interviews with relevant departments and personnel in terms of business processes,job responsibilities,business risks etc.,to collect recommendations and clues,thus promoting the efficient implementation of integrity investigation and risk management.We provide channels for integrity compliance counseling to help employees understand the rules and process of handling gifts and gratuities to reduce the risk of accepting gifts in violation of policies.In addition,we systematically identify areas with high corruption risks,such as potential conflicts of interest and illegal payment.We establish a response mechanism to reduce the risks of corruption behaviors along business process.We conduct company-wide business ethics audits every year,including accounts receivable,the use of vehicles,admission of procurement suppliers and other key business processes.Corrective actions are taken and monitored for any issues identified.In 2023,there was no concluded corruption lawsuit against the Company or its employees.For more information on anti-corruption in the supply chain,please refer to the section“Sustainable Supply Chains”Supplier Capacity Building.Fostering the Awareness of Business EthicsWe enhance anti-corruption awareness of all employees through a wide range of business ethics awareness-raising activities such as special training,video campaigns,graphic tweets,and mini games,in an effort to form a corporate culture of compliance,transparency and integrity.This year,the Company carries out targeted integrity training according to specific cases and business lines.The Company provides new employees with integrity education and training so that they have a good knowledge of the current internal policies on business ethics.The Company offers procurement staff and sales staff anti-fraud empowerment training through channels such as interviews,training meetings,and learning&testing.These training sessions cover topics such as laws and regulations,case study,risk prevention,and integrity guidelines.Kingsoft Cloud s Legal Department and other departments jointly conduct anti-corruption and integrity training for the Board to help the board members in sorting out and understanding important anti-corruption laws and regulations,domestic anti-corruption policies,the overall anti-corruption landscape and other important contents.Business Ethics Education ActivitiesNearly 30 integrity publicity documents were published and the Measures for Registration and Submission of Gifts and Monetary Gifts was released to all employees through“Integrity and Ethics”of our Kingsoft Teams official account.All employees including Directors,management,general stuff and interns participated in the integrity training and took integrity tests.Experts were invited to give lectures on the Case Study and Prevention of Job-related Crimes in Enterprise and other topics.In 2023,the Company launched a number of online and offline business ethics education programs,mainly including the following:In October 2023,the Integrity Awareness Month,Kingsoft Cloud organized employees,including employees at all levels,outsourced employees,employees under labor contract and interns,to participate in the integrity building activity themed with“Embracing the Sunshine of Integrity”,held in the Xiaomi Science and Technology Park(hereinafter“the Park”).The activity includes interactions such as integrity quizzes,interactive games,demonstration of cautionary cases,and on-site lectures given by policemen,to raise employees integrity awareness and help build a clean workplace.In 2023,the Company carried out more than 20 integrity education activities with the theme of“Integrity Coffee”,which provided free coffee to employees to effectively improve employees engagement and help the Company fully understand how well employees know about integrity,detect clues of non-compliant conducts,identify fraud risks,and further promote the construction of an integrity culture.In addition,we published relevant educational materials,legal awareness videos and other contents through“Integrity and Ethics”of Kingsoft Teams official account.The pass rate of the integrity tests for all employees during the year was 92%.Integrity Building Activity:“Embracing the Sunshine of Integrity”Themed Education Activity:“Integrity Coffee”About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|22About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|23Whistleblowing Mechanism and Whistleblower ProtectionKingsoft Cloud encourages all relevant stakeholders and the public to report the corruptions and frauds of employees or related person.We encourage real-name reports and also welcome anonymous reports.This year,we set up the Integrity Monitoring Service Desk to provide employees with a 24-hour online reporting channel.The Company handles reported information and clues by category in accordance with the Kingsoft Cloud Measures for Complaints and Whistleblowing Management to improve the efficiency of handling and resolving reported problems.The Company complies with the whistleblower system issued by the U.S.Securities and Exchange Commission(SEC)and strictly protects whistleblower information.Any infringement of whistleblowers privacy or any retaliation against whistleblowers,witnesses and investigators will be punished severely and,if constituting a crime,will be transferred to judicial authorities in accordance with the law.Once reported cases are verified,the Company will reward whistleblowers appropriately.The integrity report platform has been established on our website where the reporting notice and channels have been disclosed.Anti-money LaunderingThe Company strictly abides by the laws and regulations regarding anti-money laundering of the countries and regions where the Company operates.We assess non-compliance risks from multiple dimensions by arranging anti-money laundering risk audits for the departments involved in financial transactions,and puts countermeasures in place,to avoid the use of our facilities,products and services in financial crimes.The Company will strictly select customers,potential customers and suppliers to ensure its products and services are not used in money laundering or terrorist activities.Besides,we provide large-scale corporate customers with anti-money laundering and anti-fraud software products and services to timely identify and report suspicious transactions and actions,therefore enhancing customers anti-money laundering and anti-fraud capabilities.Learn more about our Code of Business Conduct and Ethics Anti-money Laundering Policy at Kingsoft Cloud.Mailing address:Supervision Department of Kingsoft Cloud,Building D,Xiaomi Science and Technology Park,Xierqi Middle Road,Haidian District,Beijing,Postal code:100085 Report hotline:010-62927777 6356 E-mail: Online reporting channel for employees:Corresponding reporting portals are set up in the Integrity Monitoring Service Desk and the“Integrity and Ethics”of official accountIntegrity Whistleblowing ChannelsResponsible OperationsAt Kingsoft Cloud,we are committed to upholding the value of“customer first,building success based on technology and innovation”.While ensuring data security and personal privacy,we have been committed to providing our customers with premium products and services driven by technical innovation and progress.We remain steadfast in our commitment to supporting the healthy and sustainable development of businesses.04Applicable SDGs:About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|24About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|25PRODUCT AND SERVICE EXCELLENCEOperational StabilityKingsoft Cloud has implemented internal policies such as the Kingsoft Cloud Data Center Access Technical Specifications and Kingsoft Cloud Server Hardware Introduction Specifications.Focusing on factors such as potential hazard control,quality monitoring,operation and maintenance automation and emergency response,we have developed and improved quality management systems and technical specifications,and optimized quality control processes to ensure the operational stability of the cloud platform.Potential Hazard ControlPotential hazard control is crucial for ensuring the operation stability of cloud services.We have stepped up efforts in enhancing code quality control,identified and handled risks in the business structure in a timely manner,and improved our infrastructure to provide protection against system failures.By taking a range of optimization measures,the Company has further improved the quality of software code to enhance the operational stability and reliability of software.This year,we carried out stress testing on the system through user operation simulation,checking the reliability of the cloud network and cloud storage code in peak traffic scenarios,so as to ensure the stable performance of cloud services in actual use.The Company identifies possible risks by means of comprehensive review and evaluation of business structure,and develops corresponding management measures.This year,we identified risks that might cause failure of the cloud computing system or jeopardize the stability of cloud storage,and took targeted measures to eliminate these risks.This year,we also made comprehensive upgrades to our infrastructure.This includes improving the server room management and enhancing skills of employees in the data centers,to significantly improve the service quality.In 2023,we replaced aging network transmission equipment and upgraded the network architecture by adding a backup system to ensure the stable and continued operation of network in case of failure.And we also upgraded software and installed patches in a timely manner to enhance the system stability and reliability.As a leading high-quality cloud service provider,Kingsoft Cloud continuously improves the quality of products and services by taking standardized and systematic measures.We are committed to providing customers with“industry-leading and high-quality cloud services”and to becoming“our customers most trusted cloud partner”.By leveraging our extensive infrastructure,we have developed modularized cloud products relying on the extensive cloud infrastructure,and customized solutions for enterprises and institutions in different industries to cater to customer demands.By doing so,we fully unleash the potential of infrastructure resources and provide customers with safe,reliable,stable and high-quality cloud computing services,contributing to enterprises sustainable development.Quality AssuranceIn order to ensure the effective implementation of quality management,the Company has set up the Technology Platform Center to coordinate and manage quality-related work,and merged the business operation and maintenance teams of each product line into the Technical Assurance Department,therefore improving the efficiency of communication and collaboration between business lines and the Technical Assurance Department.This year,the Company established a quality assurance team led by the Vice President on the basis of the existing quality management structure,with each product line appointing one quality specialist to follow up on the implementation of departmental quality management.We also included relevant quality indicators into the performance assessment for employees,encouraging employees to improve the quality and efficiency of their work and thus contributing to the overall quality management objectives of the Company.About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|26 Operation and Maintenance AutomationTo handle common failures in the computing and storage product lines during operation and change,we integrate common failure scenarios,frequent and repetitive problems and their solutions into the Bianque system,an automated operation and maintenance platform.The system automates cause analysis and failure repair with automation script,tools,etc.,thereby improving the efficiency and accuracy of troubleshooting.In 2023,we achieved the white screen rate7 of 93.0%.Emergency Response SpecificationsWe standardize the handling process of major incidents through the Kingsoft Cloud WarRoom,a service failure emergency command platform,and effectively allocate resources to realize fast response,recovery and resolution.This year,we developed a range of emergency plans for different failures,covering scenarios like storage server failure,network access interruption,computer room failure and traffic control.We also formulated the WarRoom Troubleshooting White Paper to further standardize the troubleshooting process and ensure clear division of duties and cooperation between troubleshooters from all teams,so as to improve the troubleshooting efficiency and enhance the customer recognition and satisfaction.Awareness PromotionTo ensure the stability and continuity of our business operations,we have organized employees to study the Kingsoft Cloud Management Specifications for Operation and Maintenance Permissions and the Kingsoft Cloud Management Specifications for Operation and Maintenance Security.We aim to avoid security risks and online failures due to employees lack of security awareness and operation and maintenance violations by helping employees understand online operation and maintenance,login,and operation permissions.In 2023,we organized exams to check employees learning outcomes and achieved a 100%pass rate for frontline operation and maintenance personnel.Product Quality MonitoringIn strict compliance with the Kingsoft Cloud Service Monitoring Comprehensiveness Review Checklist(hereinafter“the Checklist”),the Company monitors basic indicators including physical equipment and operating system.Outliers will be reported immediately upon instant alerts.All basic indicators were monitored this year.For cloud services not yet launched,we review basic indicators against the Checklist.For cloud services that are already online,we regularly conduct inspection to ensure that those services continuously meet the Checklist requirements during the subsequent maintenance and change process.This year,we conducted a systematic risk and potential hazard mapping against the Checklist and the software architecture diagram of the Company,and fixed all potential failures found during the mapping.Change Operation ManagementThe Company has formulated the Change Management Specifications and built the Aoge Cloud platform for operation&maintenance changes.This platform offers a range of functions such as automatic writing of change operation programs,change process control,and change policy control,enabling online,standardized,and seamless change operations,reducing change risks and enhancing the stability of cloud services.During the year,there were zero failures due to changes in the platform.7 White screen rate refers to the percentage of the number of maintenance operations accessing the site reliability engineering SRE platform out of the total number of maintenance operations.About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|27Service Quality AssuranceKingsoft Cloud always upholds a“customer-centric”approach and is committed to providing customers with satisfactory service experience.This year,we focused on customer service proactivity by formulating the Active Service Action Guide.In addition to meeting stated demands from customers,we proactively seek to identify potential needs from the customer s perspective and offer tailored professional advice accordingly.The Company has updated its after-sales service system,and revised the service system documents in three key areas of standardization,management,and process,thus further standardizing the operations of our after-sales team.The Company has set up a specific customer service team to support the efficient and stable operation of cloud systems for customers.Besides,we have a team of senior technical experts who work alongside our frontline customer service team to standardize their work,therefore reducing the response time and improving the problem tackling capabilities.Meanwhile,we offer various service models based on the different requirements of our customers.We assign dedicated VIP after-sales personnel in the technical domain.The assigned personnel are responsible for helping customers solve problems quickly in a professional way after a full understanding of their product operating environment.For core customers who use our products on a large scale,we introduce a virtual team of Technical Account Managers(TAMs)to assist VIP after-sales personnel.Focusing on our core customers industry features,product usage,technological needs,and service requirements,the TAMs team engages in frequent and in-depth discussions with them to better understand their business structure,needs,and pain points,laying a solid foundation for providing them with tailored consulting and planning support.This year,our TAMs virtual team completed a total of 137 proactive visits and service reports.We have also launched the“Multi-Cloud Resource Alarm”and“Kingsoft Cloud Advisor”,providing robust support for monitoring,inspection,troubleshooting,and other services.Empowering Service TeamsWhile continuously improving our service quality assurance mechanisms,we are committed to nurturing an after-sales service team that excels in both service proficiency and quality.The Company actively organizes diverse empowerment training,such as video learning,practical exercises,case studies and FAQs.Based on dimensions such as industry,product,and job roles,we have developed a comprehensive list covering attitude,skills,and knowledge development for our service personnel.Serving as a guidance,this list requires service teams to master their respective proficiency.This year,we further intensified our efforts in enhancing training quality through various measures,including random training inspections,questionnaires,tests,periodic skill assessments,analysis of assessment results,and training interviews.Based on the results of these assessments,we made targeted improvements to our trainers,course materials,and examination contents to boost the effectiveness of our trainings.In 2023,we conducted a total of 193 thematic training sessions aimed at improving service quality.We also provide business scenario-based training for our service teams,depicting a comprehensive customer profile from perspectives such as customer organizational structure,business architecture,and historical problems,to prepare failure response plans.We require that all business departments organize at least one case sharing session per week to discuss with customer service teams on problems encountered and improvement measures,ensuring a timely and accurate resolution of customer problems,and improving the professional proficiency of our teams.Training Specifically Designed for ManagersThis year,we introduced targeted empowerment training specifically designed for managers in our after-sales Service Department,aiming to enhance their service awareness and management capabilities.Through weekly meetings and reports,we enable our management team to reasonably delegate management authority,facilitate internal and cross-departmental communication and collaboration,set clear delivery deadlines,and take responsibility for results,ensuring meticulous planning before action,diligent supervision during execution,and thorough post-action reviews.General Skills TrainingBesides,we focus on general skills training centered on communication and management skills.With regard to communication skills,we organize specialized training sessions on the use of reporting tools and presentation techniques,which significantly improve the abilities of managers and their teams in preparing and delivering materials;additionally,we provide managers with education on fundamental management theories,team communication methods,and conflict resolution strategies,coupled with case studies,to foster their personal growth and propel the overall development of the service team.In 2023,we implemented a service personnel review mechanism specifically for our after-sales service team.By updating personnel files of service teams and conducting a thorough talent review analysis,we compared the results with specific business and job requirements.We assess their performance contributions and potential capabilities as the main criteria,with an aim to pinpoint critical areas for recruitment and training.Furthermore,we use common problems encountered during the review to identify internal training needs and correspondingly update our training materials,thereby enhancing the pertinency and effectiveness of training.Service Personnel Review MechanismWe have a team of senior technical experts who work alongside our customer service teamWe introduce a virtual team of Technical Account Managers(TAMs)to assist VIP after-sales personnelTAMs virtual team completed a total of 137 proactive visits and service reportsWe conducted a total of 193 thematic training sessions aimed at improving service qualityAbout the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|28Customer Inquiries and ComplaintsTo reduce the repeated errors in the handling of customer complaints,we turn complaints into the knowledge repository through failure analysis,case study,FAQ generation,and knowledge accumulation.The Company utilizes EZONE system to follow up complaint handling process,categorize and store common problems and solutions in a real-time manner.In 2023,we added 112 FAQ entries and improved 338 product requirements.The total number of complaints incorporated into the knowledge repository is 4,560.The Company has put in place standardized workflows of customer complaint handling and follow-up visits in accordance with the Customer Complaints Management Framework,ensuring efficient and high-quality handling of customer complaints and feedback.We deliver 7*24 inquiry and complaint channels,including hotline,online support,technical order and expert services.By clearly defining the primary responsibility for customer management and establishing the first inquiry-based accountability system,we quickly respond to and handle the inquiries,fault reports and requirements of customers in a closed-loop manner.In addition,we have integrated our product research and development,operation and maintenance,and order system to further improve problem solving efficiency.This year,the Company expanded its channels for customer to inquire and complain.Customers are now able to access product and technical support through Kingsoft Cloud WeChat public account,which is directly linked to our after-sales service platform,enabling us to provide customers with one-stop inquiry services.In 2023,the artificial intelligence team of Kingsoft Cloud introduced the“QZHOU”question-and-answer system,which leverages robotic process automation.This system utilizes generative AI to manage,retrieve,filter,summarize,extract,and discern knowledge,thereby significantly improving the accuracy and professionalism of our post-sales responses.After the rollout of the version 1.0 of“QZHOU”in 2023,it provided after-sales personnel with services such as intelligent documentation,knowledge tracing,and dialogue and knowledge management.These services assisted after-sales personnel in efficiently resolving 70%of customer inquiries,thereby improving the efficiency and service effectiveness of the service team.Customer Complaint Handling ProcessThis year,the Company revised the documents about the customer complaint and feedback follow-up system to further standardize the case collaboration and escalation mechanism.Specifically,we have formulated escalation and notification rules tailored to different failure scenarios,ensuring a coordinated approach during failure handling and decision-making.Additionally,we have also conducted post-mortem reviews of failures to identify and develop improvement plans.These efforts aimed at enhancing the customer service experience.In 2023We added 112 FAQ entriesWe improved 338 product requirementsThe total number of complaints incorporated into the knowledge repository is 4,560 On-call response within 90 seconds Brief customers about handling progress and investigation direction every 15 minutes Present detailed handling reports to customers within 24 hours after complaints are solved Complete internal review and work out optimization and improvement plans within 24 hours after complaints are solved,and follow up the optimization and improvement results 100%customer follow-upComplaint handlingComplaint handling reportSubsequent improvement and follow-upCustomer follow-upAbout the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|29Service Quality AssessmentThe Company requires customer service team to regularly set quantitative targets,and incorporates indicators such as“rate of resolution within 30 minutes”and“rate of invalid feedback to the back-end departments”8 into the KPI of the teams,stimulating customer service personnel to provide quality services.The Company organizes monthly service quality inspections for customer service personnel to standardize their workflow of communication with customers.According to the Specifications on After-sales Quality Control Process,we rate the customer service personnel in five aspects,namely problem response,work order specification,service attitude,communication skills,and sense of responsibility.We develop targeted improvement plans and supervise their implementation based on the scoring results to constantly boost the professional skills and service competence of our teams.In 2023,the number of orders we received for customer service investigation and troubleshooting decreased by 3%compared to 2022,and we offered customer services up to 50,462 times.Furthermore,we received 90 customer complaints,achieved a response rate of 98.90%within 90 seconds,a resolution rate of 94.73%within 30 minutes,and a customer satisfaction rate of 97.43%.The Company continuously refines the customer satisfaction questionnaire in terms of business,pre-sale delivery,products,and after-sales services to better understand the customer experience.This year,customers rated our service personnel s professionalism,service proactivity,response time,and problem handling efficiency.Based on survey results,we identified key issues and typical failures that may significantly impact customer service experience.This allowed us to develop a rectification plan by conducting targeted analysis and optimization,with the ultimate goal of delivering more satisfactory and superior services to more customers.In addition,we conducted special word-of-mouth research this year,focusing on key customers of the Company s major business lines,which accounts for approximately 60%of our revenue.Through third-party departmental interviews and other means,we interviewed over 80 customers and collected 460 customer feedback,with relevant responsible person responding to customer feedback in a timely manner and communicating with customers to address their demands.We also set up a special team to solve customer problems,thereby enhancing customer service satisfaction.Offered customer services 50,462 timesAchieved a response rate of 98.90%within 90 secondsA resolution rate of 94.73%within 30 minutesA customer satisfaction of 97.43%8 Invalid feedback to the back-end departments:The customer issues that cannot be solved by the customer service team due to its limited authority and capabilities need to be communicated to product R&D,operation,and maintenance departments for resolution.The rate of invalid feedback to the back-end departments refers to the percentage of customer issues that customer service teams should have been familiar with and able to tackle wrongly pass on to the back-end departments.About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|30DATA SECURITY AND PRIVACY PROTECTIONAdhering to the concept of“user privacy first and information security first”,Kingsoft Cloud has strengthened the foundation of data security from multiple dimensions,such as management system optimization,workflow standardization,awareness promotion and external cooperation to improve data security management capability in all aspects,and fully respect and safeguard users privacy and data security.The Company strictly complies with applicable laws and regulations related to data security and privacy protection,such as the Data Security Law of the People s Republic of China,the Personal Information Protection Law of the People s Republic of China,and the Cybersecurity Review Measures,and timely traces and identifies the laws and regulations that may have impact on our information security operation.We have formulated the Kingsoft Cloud Privacy Policy,the Specifications on Data Security Management and other policies to improve internal compliance management system for data security and privacy protection.Governance StructureOur Security and Privacy Committee(hereinafter the“Committee”)consists of members from multiple departments,such as Data Security,Privacy Compliance,Internal Control,Audit and Supervision Departments.The Company s CEO appointed the Vice President responsible for research and development as the Chairman of the Committee,the General Manager of the Legal Department as the Vice Chairman of the Committee,and an independent Data Privacy Officer(DPO).The Committee is under the direct authority of the Board,and responsible for the coordination of data security and privacy protection under the supervision and guidance of the Board.For overseas data security protection,we have assigned a regional DPO in some of our overseas operations,responsible for overseeing data security and privacy protection of our local operations with independent authority,and reporting directly to the Chairman of the Committee.This year,the Company has built the Working Group on Algorithm Security and responsible members to further strength algorithmic security protection and ensure algorithmic compliance and content compliance.In 2024,the Company held a Committee meeting,in which representatives from a total of 12 departments participated,to discuss issues related to data security and privacy protection encountered in the course of the Company s actual operations,and to propose targeted solutions to promote the continuous improvement of the Company s data security governance system.The BoardSecurity and Privacy Committee ChairVice President Responsible for SecurityVice President Responsible for PrivacyData Protection Officer(DPO)Safety Work Group LeaderPrivacy Work Group LeaderInternal Control and Internal Audit Committee MemberAlgorithm Safety Committee MemberSupervisory Safeguard Committee MemberSecurity Privacy Committee MemberSecurity Compliance ExecutivePrivacy Compliance ExecutiveAbout the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|31Data Security Risk ManagementAccording to Kingsoft Cloud s Data Protection Impact Assessment(DPIA)process,we regularly conduct assessments on information systems.DPIA mainly evaluates the compliance with the principles of personal information protection in information collection and processing,as well as the impact of information processing activities on the rights and interests of other subjects,and identifies and manages the risks to the security of the Company s data.When the Company identifies new laws and regulations related to data security and privacy protection,major personal information security incidents occur,or business model,information system and operation environment have significant changes,the DPO will lead business departments to re-conduct DPIA and prepare the assessment report,which need to be approved by the Privacy Work Group,and the DPO will propose compliance recommendations and countermeasures in response to the assessment results.This year,the Company has formulated the Measures for the Detection and Emergency Management of Cybersecurity Threats and made a lifecycle emergency response plan including incidents discovery,time confirmation,information reporting,and emergency response.We have also set up a special emergency response team to identify security vulnerabilities and issue vulnerability risk notices.At the same time,we actively collect industry security information,keep informed about supply chain security vulnerabilities,and notify each product team of the security information to carry out troubleshooting,therefore reducing the possibility of data risk events.User Privacy ProtectionKingsoft Cloud is committed to providing users with safe products and services and high-quality experience.To this end,the Company has formulated the Kingsoft Cloud Privacy Policy,and the Kingsoft Cloud ERN-SDK Privacy Policy.Such policies have clarified how to collect,use,store and delete the personal information of users by Kingsoft Cloud in the provision of its website-based services,cloud services and products,and indicated the personal information rights users enjoy.In 2023,Kingsoft Cloud optimized its privacy policy,adding special protection for the personal information of overseas minors,by specifying that relevant privacy protection measures should be implemented in accordance with local laws and regulations.Moreover,we have streamlined the process of deleting local information when users quit.For example,users have the option to withdraw their real-name authentication information at any time through the account management on Kingsoft Cloud s official website,or they can directly delete their accounts,resulting in the permanent deletion of all services,data,and private information associated with the account,with no possibility of recovery.Learn more about our Privacy Policy and Cookie Policy at Kingsoft Cloud.We disclose our privacy reporting guidelines and reporting channels on the Company s official website.We allow users to submit any questions,comments or suggestions regarding privacy policy or matters related to personal information through multiple reporting channels such as the console,reporting hotline,e-mail,and on-site reporting.Installed data leakage prevention system(DLP)on all the computers in the office to prevent the risk of information leakage.Invited third parties to carry out cybersecurity attack and defense drills by simulating attacks on Kingsoft Cloud products and assets,to identify security protection vulnerabilities,and formulate corresponding repair plans,thus improving the Company s data security protection system.Engaged third parties to assess the Company s security risks from three aspects:security management,security technology,and security operation,to clarify the key aspects for safeguarding Kingsoft Cloud s cybersecurity before formulating targeted rectification measures,and comprehensively promote the Company s security compliance capabilities.Held monthly review meetings for new product inception to implement the privacy design concept by evaluating the personal information and data security risk factors of new products and proposing targeted compliance suggestions.Kept track of applicable domestic and foreign legislation,policies and law enforcement trends monthly,and discussed typical cases with in-depth analysis.Besides,we initiate a number of practices to prevent data security incidents:Console:Create a work order to submit comments and suggestions via Work Order Management Reporting hotline:400-1070-808 Reporting e-mail:KC-P Mailing address:Kingsoft Cloud Legal Department,Building D,Xiaomi Science and Technology Park,Qinghe Subdistrict,Haidian District,Beijing,Postal code:100085Reporting Channels for UsersAbout the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|32External RecognitionsThe privacy policy and practices of Kingsoft Cloud meet the enterprise privacy and data governance practice assessment standard of TrustArc,a global leader in data and privacy management.This year,Kingsoft Cloud has passed the annual review of TRUSTe Enterprise Privacy&Data Governance Certification by TrustArc.To ensure the smooth operation of the Company s business in Singapore,we have formulated the Personal Data Management Policy,and the Manual for Data Protection Management Procedures in line with the Personal Data Protection Act of Singapore.Meanwhile,our company in Singapore requires all suppliers engaging in data processing to sign data processing agreements.This year,the Company obtained the Data Protection Trustmark(DPTM)Certificate from the Infocomm Media Development Authority of Singapore(IMDA).This certification will assess the practices in consumer data protection from the dimensions of governance and transparency,personal data management and personal data protection.Kingsoft Cloud has passed the audit of the System and Organization Controls(SOC)for internal control of service organizations,conducted by an independent third-party auditor for four consecutive years.We have made timely improvements based on the issues identified during the audit process to further enhance the Company s management capabilities in terms of internal control effectiveness,security,availability,process integrity,confidentiality and privacy.Kingsoft Cloud have been widely recognized by domestic and international authoritative institutions for its competence in data security management and technology:ISO 20000 ISO 22301 ISO 27001 ISO 27018 ISO 27017 C-STAR CSA STAR SOC1/SOC2/SOC3 TRUSTe PCI DSS Trusted cloud certification Trusted cloud service security certification “Trusted financial cloud solution”competence assessment certification Cyber-security level protection ITSS cloud computing service competence assessmentGDPRDPTM Qualification CertificationApplicable country/regionEuropeChinaInternationalSingaporeAbout the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|33Enhancing the Information Security AwarenessKingsoft Cloud has set the information security red lines according to Data Security Red Line Policy to prohibit data leakage by employees.New employees are required to complete information security courses and pass the exam within one month of onboarding.Meanwhile,we organize training on personal information security awareness for all employees(including outsourced employees and employees under labor contract)through online courses and offline publicity,to promote the development of information security culture.In addition,we encourage employees to learn professional courses accredited by the International Association of Privacy Professionals(IAPP)to strengthen their information security awareness.Co-building the Data Security EcologyWhile continuously improving its own data security management,Kingsoft Cloud has proposed strict requirements on data security protection for its suppliers.Suppliers engaging in data processing are required to conduct self-assessment according to the breakdown list of data compliance requirements of Kingsoft Cloud before admission.For suppliers that need to process mass data,we engage third parties to conduct supplier due diligence in terms of information security protection level,data compliance operation qualification,supplier privacy policy and complaint channels,and require suppliers to sign data processing agreements with us in order to ensure the data security and privacy protection efforts of suppliers meet our requirements,reducing the possibility of information security accidents due to the poor management of suppliers.The suppliers that dispose downstream assets are required to have corresponding information security and privacy protection qualification certifications,such as ISO 27701 Privacy Information Management System Certification and ISO 27001 Information Security Management System Certification,and strictly control the disposal process of storage media in scrapped IT equipment to safeguard data and information security.Kingsoft Cloud initiates the phishing email simulation program,and arranges security awareness training for employees who fail in this program,minimizing the loss of the Company arising from phishing email attacks.We also post information security articles weekly in the“Organization Security Assistant”of Kingsoft Teams official account,such as security knowledge,and hot information security issues,and organize information security interaction activities irregularly.Through Kingsoft Teams“Organization Security Service Platform”,we offer employees information security management policies,procedures and other contents to provide guidelines for employees to keep their work information secure.This year,around the protection of data privacy and business secrets,Xiaomi Corporation,Kingsoft Corporation and Kingsoft Cloud jointly organized a data compliance seminar,discussing the industry s data compliance experience.This seminar enabled employees to better understand data compliance governance such as the key points of corporate lifecycle data processing,and the user rights response mechanism.About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|34DRIVING TECHNOLOGY INNOVATIONGuided by the management philosophy of being“technology oriented”,Kingsoft Cloud continues to increase its investment in technology innovation,encouraging innovation in terms of technical talents,culture,and organization.This year,Kingsoft Cloud consistently strengthened the technology of its fundamental public cloud products and enhanced the competitiveness of its core offerings.Additionally,Kingsoft Cloud embarked on its R&D investment to propel the development of AI products,aiming to further solidify core competitive advantages in technology fields such as big data and AI.The Kingsoft Cloud Technology Committee is tasked with assisting in the management of the technology development of the Company.This includes providing guidance on cutting-edge technology R&D,participating in discussion and formulation of the technical standards,promoting the cultivation of technical talents and the development of technology culture.Technology Innovation AchievementsKingsoft Cloud has been continuously optimizing and upgrading fundamental public cloud offerings,significantly enhancing the integration of hardware and software across areas such as computing virtualization,cloud hosting networking,elastic bare metal,and network virtualization technology.Furthermore,the Company has launched the Model as Service(MaaS)Mutual Trust Dedicated Zone Solution to bolster services and applications in the realm of Artificial Intelligence Generative Content(AIGC).In terms of cloud storage technology,Kingsoft Cloud has fully commercialized ESSD technology and provided the All-Flash Object Storage service.Additionally,the Company has tailored high-performance storage products and solutions for large models,catering to the needs of AIGC application scenarios.For more information about the product technology,please refer to Kingsoft Cloud s official website and Kingsoft Cloud s 2023 Annual Report.Kingsoft Cloud s MaaS mutual trust dedicated zone solutions won the“2023 Most Innovative AI Solution”award jointly issued by China Internet Weekly and the Informatization Research Center of the Chinese Academy of Social Sciences.Kingsoft Cloud was awarded the“Top 50 2023 China Intelligent Enterprise”by Dark Horse.Technology Innovation AwardsKingsoft Cloud was awarded the“WISE 2023 Future Business King”by 36 Kr as the“Enterprise of the Year in the Field of Artificial Intelligence”.Kingsoft Cloud was awarded the“2023 Excellent Digital Innovation Enterprise”by Economic Observer.About the ReportAbout Kingsoft CloudCorporate GovernanceESG StrategyBusiness EthicsResponsible OperationsPrioritizing Talent DevelopmentGreen DevelopmentSustainable Supply ChainFulfilling the Corporate ResponsibilityAppendixStatement from the Chairman2023 ESG Report|35Technical Talent DevelopmentTo foster and develop a sustainable R&D talent pool that drives the Company s long-term and high-quality growth,Kingsoft Cloud has formulated the Wuhan Talent Strategy.By leveraging the support of the governments and tapping into the rich talent resources of Wuhan-based universities,we aim to cultivate a talent hub in Wuhan for our future talent development.In 2023,the Company launched the construction of Wuhan Research and Development Center,with the aim of attracting and recruiting technical R&D talents through campus recruitment,social recruitment,and the Kingsoft Cloud Star Campus program.This endeavor has led to a rapid expansion of the talent pool within the Wuhan R&D Center.By the end of 2023,the total number of employees(including interns and outsourced employees)in the Wuhan R&D Center had exceeded 500.In the process of building a talent base in Wuhan,Kingsoft Cloud Wuhan R&D Center collaborated with various entities,including Wuhan Kingsoft Corporation,Wuhan Kingsoft Office Software,Kingsoft Shiyou(Wuhan)and Xiaomi Wuhan,to deliver professional and technical talents to the national core technology fields like big data,cloud computing,and artificial intelligence,thereby contributing to the advancement of an innovation-driven digital economy.Technology Culture ConstructionKingsoft Cloud has been insisting on the principle of“building success based on technology and innovation”to make efforts in the development of technological innovation culture.In 2023,Kingsoft Cloud collaborated with Intel to host the 3rd Hackathon(hereinafter“Hackathon”).This year,the Hackathon spotlighted cutting-edge technological fields,including AI,big data,and cloud computing,aiming to cultivate young technical talents and uphold our corporate culture of“building success based on technology and innovation”,thereby driving the growth of the cloud computing industry.This year,the Hackathon has up to 40 teams regis
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2023SUSTAI NAB ILIT Y REPORTContentsNavigation References to chapters in the Sustainability Report References to websites6 Foreword9 About This Report12 Sustainability in the Groups DNA13 Corporate Governance 17 NEW AUTO Group Strategy 22 ESG Performance Management and Materiality Analysis25 Sustainability Management 27 Sustainability Impact of New Mobility Options 30 Stakeholder Management 33 Environmental Compliance Management42 Risk Management45 Corporate CitizenshipFocus Topics1 Decarbonization 48 Decarbonization 69 EU Taxonomy2 Circular Economy 83 Circular Economy3 People in the Transformation 90 People in the Transformation4 Diversity 104 Diversity5 Integrity and Compliance 109 Integrity and Compliance6 Supply Chain and Human Rights 117 Supply Chain and Human Rights131 Appendix132 Independent Auditors Limited Assurance Report135 Contact Information 2Volkswagen GroupSustainability Communication2023ANNUAL REPORT2023SUSTAI NAB ILIT Y REPO RT Information Accompanying the ReportingESG KPIsIndicators along our focus topics are clearly presented in Excel.GRI indexGRI content index(with reference)SASB indexAutomobiles indexReports on Special IssuesResponsible Raw Materials ReportProgress on transparency and risk mitigation in the raw material supply chain(annual)Association Climate Review ReportOverview of climate policy positionsGreen Finance ReportImplementation of sustainable financing strategies(annual)Further ESG topicsInformation on further topics of importance for sustainability and ESG Information on the Group WebsitePoliciesVoluntary commitments and principles that apply across the GroupESG controversiesFactual information on current and ongoing controversiesInternational InitiativesUN Sustainable Development GoalsActivities and projects that help achieve the sustainability goals(annual)UN Global Compact Implementation of the Ten Principles of the UN Global Compact(annual)CDP Score Report Climate ChangeAssessment of climate-related risks,goals and measuresCDP Score Report Water SecurityAssessment of water resources Sustainability and ESG Are Part of the Group StrategyESG PerformanceESG PerformanceThe aim is to improve performance in the capital markets ESG ratings and rankings so as to increase the ability to invest and optimize the cost of capital.As we transition from automotive manufacturer to mobility group,we are resetting our priorities with the NEW AUTO Group strategy and positioning ourselves for the future.We are keeping our aim of being a world-leading provider of sustainable mobility firmly in our sights and making the Group more focused,efficient,innovative,customer-oriented and sustainable,as well as systematically gearing it toward profitable growth.The NEW AUTO Group strategy defines the six key focus issues shown above for the area of sustainability and ESG in Group initiative 6.This Sustainability Report including nonfinancial report is structured in accordance with these.In addition,the Sustainability in the Groups DNA chapter provides a definition of sustainability for the Group andaninsight into topics such as risk management,environmental management,stakeholder management and corporate citizenship.Sustainability in the Groups DNA Decarbonization Circular Economy People in the Transformation Diversity Integrity and Compliance Supply Chain and Human RightsProgressiveCoreSport LuxuryTrucksArchitectureSoftwareBattery,Charging&EnergyVolkswagen Group Mobility06|ESG,Decarbonization and IntegrityHighlights 20231 DecarbonizationAccess to600,000 charging pointsin EuropeBy 2030,the whole dealer networks carbon footprint is to be decreased by at least 30%.Circular EconomyMore than850,000 metric tons of COhave been saved in net terms since 2017 through the Aluminum Closed Loop.In 2023,we processed 77,090 toolsto make them suitable to return to use.People in the Transformation14.3 million training hours in theVolkswagen Group72 locationsare certified in accordance with ISO 45001.Diversity94%of managers have taken part in the Diversity WinsVolkswagen program.Proportion of women in management worldwide andinternationality of top management increased.In 2023,more than 4,100 business partnerswere audited.1,551inquiries were processed at the compliance information point.Supply Chain and Human RightsIntegrity and Compliance7,791 direct suppliers worldwide were trained on sustainability.Suppliers with a positive S rating account for 79%of revenuein the total procurement volume.1 Further information on the figures on this page,such as definitions and scope,can be found in the relevant chapters.6GRI 2-22Dear stakeholders and colleagues,Values create value.We in the Volkswagen Group remain true to this principle.Its an important compass for our actions.And this stance lets us sustainably create long-term added value.For our staff,for our customers,for our investors and for society as a whole.As one of the worlds largest industrial groups,we carry a special responsibility.We can make a dif-ference.We want to and will seize this opportunity.We think of sustainability holistically in terms of nature,people,society and value-adding entrepreneurship.From the supply chain through our production to the delivery and use of our products.Our goal is to help to shape nature and society positively.Thats ambitious.And it will take a great deal of work.At the same time,achieving this goal is an obligation internally to our colleagues and externally to our customers,society and,in particular,future generations.Sustainability Strategy:Clear Goals,Clear Responsibility Sustainability is one of our top priorities.As a strategic field,we set ourselves clear goals and plans for sustainability which are binding with clear responsibilities.The focus is on implementing our strategic measures.We also leverage the synergies in the Volkswagen Group here:All goals are systematically broken down into goals for the brands and Group companies.Management has personal re-sponsibility for complying with these.Decarbonization:What Drives Us The Volkswagen Group is clearly committed to electric mobility.Inspirational product innovations of recent weeks and months such as the Audi Q6 e-tron,the VW ID.7,the Porsche Macan electric or the long wheelbase version of the ID.Buzz show that e-mobility is synonymous with emotion and fascination.Our delivery figures confirm this trend too.In 2023,the Volkswagen Group delivered 771,100 all-electric vehicles.This is equivalent to a year-on-year rise of 34.7%.The share of deliveries accounted for by all-electric vehicles increased to 8.3%.Oliver Blume,Chairman of the Board of Management of VolkswagenAGDaniela Cavallo,Chairwoman of the General and Group Works Council of Volkswagen AG Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human RightsForeword 7A key lever for reducing emissions is production:Our aim is to reduce production-related CO emissions from passenger cars and light commercial vehicles by 50.4%by 2030 compared with the base year 2018.The renowned Science Based Targets initiative(SBTi)con-firmed that our Group meets the requirements for contributing to limiting global warming to 1.5 degrees Celsius with this objective for the production phase(Scope 1 and 2).SBTi has confirmed that the aim of reducing CO emissions by 30%in the use phase(Scope 3)is in line with limiting global warming to two degrees Celsius.This confirmation spurs us on.The Volkswagen Group is aiming to reduce the average CO emissions per vehicle(passenger cars and light commercial vehicles)over the entire life cycle by 30%by 2030 compared with 2018.Ramping up electric mobility and expanding renewable ener-gies go hand in hand here.Thats why we are supporting the construction of wind farms and solar parks on an industrial scale.New wind farms and solar parks are to be constructed in several regions of Europe by 2025.In Germany,for example,Volkswagen supported the construction of a solar plant with a total capacity of 170million kWh a year.The plant in Tramm-Gthen in Mecklenburg in northeastern Germany is the largest of its kind in Germany with around 420,000 solar panels.The Team:Engine of the Transformation Employees are any companys most valuable asset.The Volkswagen Group is only as strong as the people who work for it.Particularly in times of skills shortages,employer at-tractiveness is vital for companies future viability.Our sectors shift toward e-mobility but also toward new business models and digitalization brings with it considerable changes for many workers.Jobs are being realigned,and new fields of work are emerging,while others permanently disappear.We are managing and monitoring these changes in a sustainable and socially responsible manner in the inter-ests of our colleagues.This is also very much intended to ensure corporate success.Because employer attractiveness has long been more than a question of salary.Talented indi-viduals also assess potential employers on factors such as flexibility,work-life balance,diversity,social benefits and personal responsibility.What do these changes mean for the Volkswagen Group?The responsibility for“people in the transformation”is at the core of our current and future activities in human resources.The“Transform to Tech”Group People Strategy,which the Group Board of Management adopted in 2021,plays a key role.When it comes to training,the Volkswagen Groups focus is on training colleagues on future technologies.This includes closely supporting them in the transformation process.For example,Volkswagen specifically added courses on e-mo-bility to its professional training program with the aid of the Volkswagen Group Academy.Newly designed and innovative programs from our Health department look after our em-ployees psychological safety during the transformation.And where major changes are planned in a factory or office,we have transformation offices on hand.They are intended to give people an outlook for the future and provide a clear direc-tion for the change process in the transformation.Job secu-rity until 2029 at Volkswagen AG gives employees the sup-port they need.Holistic Responsibility:The Supply Chain at a Glance In addition to responsibility for its own employees,the Volkswagen Group also has a global responsibility.The Ger-man Supply Chain Due Diligence Act,which has been in force in Germany for more than a year,has a special role here.Focuses include protecting human rights and minimizing environmental risks both topics the Volkswagen Group identifies with through and through.The Sustainability Pro-curement Network shares information between our brands and regions,which serves as a component in managing sus-tainability in our supply chains.More than 110 experts from five continents work together in the network.The network allows the identification of current developments and chal-lenges in the regions of the world and enables joint solutions to be developed.This is crucial because Volkswagen has over 63,000 direct suppliers in more than 95 countries.Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human RightsGRI 2-22 8Technology:The True Key to Sustainability The Volkswagen Group has been a technology company for many decades.This is expertise we will also use in sustain-ability because we believe that technology is the key to prog-ress in the sustainability strategy.As the Volkswagen Group,we are one of the few companies in the world that is taking the strategic expansion of technology leadership in electric mobility fully into its own hands from cell and battery re-search to the development and production of breathtaking electric vehicles.Since PowerCo was launched in July 2022,the battery com-pany has already defined three sites(Salzgitter,Valencia and St.Thomas),introduced the concept of the unified cell,founded a joint venture with Umicore to produce cathodes and introduced activities to secure the supply of raw materials.We are also taking on the task of expanding the charging in-frastructure.By 2025,the Volkswagen Group wants to en-able more than 40,000 fast-charging points in China,North America and Europe to be put into operation.The Volkswagen Group stands for tradition and for strong brands.For advancing developments and overcoming chal-lenges.Today,we are undergoing automotive historys greatest transformation:We want to enable sustainable mo-bility for generations.Sustainability is deeply rooted in the Volkswagen Groups identity.It is an integral part of our Group strategy.For 2024,we are providing important and targeted new impetus.The Volkswagen Group is aware of its role,importance and responsibility.Together,we will do ev-erything we can to make our important contribution with team spirit,fairness and passion.Daniela Cavallo and Oliver Blume Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human RightsGRI 2-22 9Report StructureThis 2023 Group Sustainability Report is based on interna-tionally established frameworks and requirements,such as the standards of the Global Reporting Initiative(GRI,see also following section),the German CSR Directive Implementation Act(CSR-Richtlinie-Umsetzungsgesetz CSR-RUG),ESG sustainability ratings(Environmental,Social,Governance)and stakeholder expectations.The report is supplemented by a detailed description of the sustainability activities of our brands and regions and of the Volkswagen Groups corpo-rate citizenship projects.Further information,particularly information relevant to ESG investors for example,ESG KPIs is available on the Groups corporate website and is not part of this report.www.volkswagen- ESG-Performance&ReportingFor reporting year 2023,Volkswagen AG is issuing a non-financial statement at Company level and a nonfinancial Group declaration,which are being published together as a com-bined separate nonfinancial report within the meaning of German Commercial Code(Handelsgesetzbuch HGB)sec-tions 289b para.3 and 315b para.3.The nonfinancial report is drawn up in accordance with HGB section 315c,in con-junction with sections 289c through 289e.In line with the German CSR Directive Implementation Act(CSR-RUG),this nonfinancial report concentrates on the focus issues necessary for an understanding of the Volkswagen Groups business development,overall performance and position as well as the Volkswagen Groups impact on nonfinancial aspects.We are again reporting on our climate protection activities in line with the requirements of the Task Force on Climate-related Financial Disclosures(TCFD).Furthermore,the GRI Standards are used as the framework for drawing up the nonfinancial report.In this Sustainability Report,Volkswagen systematically uses the GRI Standards(with reference)as the underlying structure for reporting on management approaches and the specific standard disclosures.The GRI Content Index has been separated from the 2023 Sustainability Report and can be found as a separate document in the Group portal:www.volkswagen- ReportingVolkswagen Group Sustainability Communicationwww.volkswagen- Press Releases www.volkswagen- SustainabilityADDITIONAL COMMUNICIATIONwww.volkswagen- ESG-Performance&ReportingWEBSITE2023 SUSTAINABILITY REPORT2023 Nonfinancial Statementincluding Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human RightsAbout This Report 10The KPIs presented in this report build on the indicators presented in previous years.Any material changes to data collection or to measurement methods for our sustainability performance are explicitly disclosed by the respective KPIs.All figures shown in the report are rounded,so minor discrepancies may arise from addition of these amounts.Report AuditingEY GmbH&Co.KG Wirtschaftsprfungsgesellschaft con-ducted a voluntary,limited assurance engagement in accor-dance with ISAE 3000(Revised)on the combined separate nonfinancial report prepared in accordance with HGB sections 289b para.3 and 315b para.3 to verify that its disclosures comply with the relevant statutory requirements.Further in-formation on the engagement can be found in the indepen-dent practitioners report on a limited assurance engagement on the nonfinancial reporting.Disclosures in Connection with the Annual Financial Statements No material special items in connection with the diesel issue were recognized in fiscal year 2023.To hedge the currently known legal risks related to the diesel issue,the provisions for litigation and legal risks as of De-cember 31,2023 include an amount of around 0.9(1.4)billion,based on existing information and current assessments.I nsofar as these can be adequately measured at this stage,contingent liabilities relating to the diesel issue were dis-closed in the notes to the consolidated financial statements in an aggregate amount of 4.0(4.2)billion,whereby 3.8(3.6)billion of this amount results from lawsuits filed by in-vestors in Germany.The provisions recognized,the contingent liabilities disclosed,and the other latent legal risks in the context of the diesel issue are in part subject to substantial estimation risks given the complexity of the individual relevant factors,the ongoing coordination with the authorities,and the fact that the fact-finding efforts have not yet been con-cluded.Should these legal or estimation risks materialize,this could result in further substantial financial charges.In particular,adjustment of the provisions recognized in light of knowledge acquired or events occurring in the future cannot be ruled out.The remaining provisions relate to a wide range of identifi-able individual risks,price risks and contingent liabilities,which are factored in in the amount of their probable occur-rence.Depending on the jurisdiction concerned,risk provisions for any non-compliance with statutory emissions limits are also included.Their measurement takes into account,As a member of the United Nations Global Compact,we also continuously report how we are putting the Ten Principles into corporate practice.Our current progress report can be found on the UN Global Compacts website:United Nations Global CompactThe strategy chapter and the six following chapters on focus issues in the report each consist of a text section plus a con-solidated KPI table at the end of each chapter.References to disclosures outside the nonfinancial report are supplementary information and do not form part of this report.The following passages are also not part of the non-financial report:Volkswagen Group Sustainability Communication(pp.34)Foreword(pp.68)The German Corporate Governance Code A Blueprint for Successful Corporate Governance(p.15)Further Information;The Volkswagen Value Chain(p.16)Making the Social and Environmental Impact of Our Actions Measurable(p.24)The information in this report relates to the Volkswagen Group as a whole.Where information relates to individual Group di-visions only,this is clearly indicated in the text.Unless indi-cated otherwise,any information provided for the Group also applies to Volkswagen AG.In addition to Volkswagen AG,the Group includes all major subsidiaries inside and out-side Germany that are directly or indirectly controlled by Volkswagen AG.In the financial data,our joint ventures in China are reported using the equity accounting method.However,they are in-cluded in full(100%)in volume-related data(sales,production and workforce)and in production-related environmentally relevant data.The management approaches described in this report(e.g.,the environmental compliance management system)apply to all the Volkswagen Groups controlled companies.With our non-controlled companies i.e.,com-panies that are not controlled by a company of the Volkswagen Group as the majority owner we work to the extent feasible and permitted by law toward implementation of the adjusted management approaches.The Chinese joint ventures are included in the information on the Volkswagen Group in the KPIs and the associated targets on the topics of reduction of the environmental impact of production(UEP),the decarbonization index(DCI),the Opinion Survey,the di-versity index,training hours per employee,accident indices and accident figures.The risks of the Chinese market are assessed by Volkswagen China Investment Company Ltd.GRI 2-2,2-4,2-5 Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 11among other things,the respective sales volume and the legally defined fee or the cost of acquiring emission rights from other manufacturers.Advantage has been taken of synergies between individual brands of the Volkswagen Group by establishing emission pools where possible.Addi-tional information on this matter and the valuation assump-tions and bases can be found in the Annual Report in the notes to the consolidated financial statements.Additional Reporting within the GroupBy referencing this combined separate nonfinancial report,all Group companies that are required by national legislation to disclose nonfinancial and diversity-related information pursuant to Directive 2014/95/EU but do not issue their own nonfinancial statement are exempted from the obligation to submit their own nonfinancial reports.Terminology Relating to Climate ProtectionThe use of the term CO emissions in this report includes the consideration and identification of additional climate-dam-aging greenhouse gases such as methane(CH)and laughing gas(NO)(CO equivalents).All figures in this report on CO emissions correspond to CO equivalents,except for fleet emission figures.Net carbon neutrality is achieved when anthropogenic CO emissions are balanced worldwide through avoidance,re-duction and offsetting over a specific period of time.With regard to climate protection,in addition to CO emissions,Volkswagen also pays attention to other relevant greenhouse gases.Avoidance and reduction have priority over offsetting for the Volkswagen Group.For offsetting measures,the Group follows internationally established standards.Editorial NotesWhenever this report uses the term Sustainability Report,this expression includes the nonfinancial report each time it is mentioned,to the extent described on page 10.Reporting PracticesThe nonfinancial report is published annually.The last non-financial report was published on March 12,2023.In addi-tion to information about the Groups sustainability activities in the 2023 fiscal year(January 1 to December 31,2023),this 2023 nonfinancial report also contains selected infor-mation from the 2024 fiscal year.About This ReportThe editorial deadline was February 14,2024.The Group Sustainability Report is published in the first quarter of 2024 and is also available in the original German.In the event of any discrepancies,the German authoritative version of the document takes precedence over the English translation.Legal InformationThis sustainability report contains statements relating to the future business development of the Volkswagen Group.These statements are based on assumptions relating to the development of the economic,political and legal environ-ment in individual countries,economic regions and markets,and in particular for the automotive industry,which we have made on the basis of the information available to us and which we consider to be realistic as of the time of going to press.The estimates given involve a degree of risk,and the actual developments may differ from those forecast.Any changes in significant parameters relating to our key sales markets,or any significant shifts in exchange rates,energy and other commodities or the supply of parts relevant to the Volkswagen Group will have a corresponding impact on the development of our business.In addition,there may be de-partures from our expected business development if the as-sessments of the factors influencing sustainable value en-hancement,and of risks and opportunities,presented in this sustainability report develop in a way other than we expect at the time of publication,or if additional risks and opportu-nities or other factors that affect the development of our business emerge.GRI 2-3 Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 12Sustainability in the Groups DNA13 Corporate Governance 17 NEW AUTO Group Strategy 22 ESG Performance Management and Materiality Analysis25 Sustainability Management 27 Sustainability Impact of New Mobility Options 30 Stakeholder Management 33 Environmental Compliance Management42 Risk Management45 Corporate Citizenship 13Outline of the Legal Structure of the GroupVolkswagen AG is the parent company of the Volkswagen Group.It develops vehicles and components for the Group brands,but also produces and sells vehicles,in particular pas-senger cars and light commercial vehicles for the Volkswagen Passenger Cars and Volkswagen Commercial Vehicles brands.In its capacity as parent company,Volkswagen AG holds direct or indirect interests in AUDI AG,SEAT S.A.,koda Auto a.s.,Dr.Ing.h.c.F.Porsche AG,TRATON SE,Volkswagen Financial Services AG,Volkswagen Bank GmbH and a large number of other companies in Germany and abroad.More detailed dis-closures are contained in the list of shareholdings in accor-dance with sections 285 and 313 of the German Commercial Code(Handelsgesetzbuch HGB),which can be accessed on the website and is part of the annual financial statements.www.volkswagen- Annual Financial StatementsVolkswagenAG is a vertically integrated energy supply company as defined by section 3 no.38 of the German Energy Industry Act(Energiewirtschaftsgesetz EnWG)and is therefore subject to the provisions of the EnWG.In the elec-tricity sector,Volkswagen AG generates,sells and distributes electricity as a group together with its subsidiaries.The Volkswagen AG Board of Management has sole respon-sibility for managing the Company.The Supervisory Board appoints,monitors and advises the Board of Management;it is consulted directly on decisions of fundamental significance for the Company.Corporate GovernanceVolkswagen AG Shareholder Structure as of December 31,2023,in%of voting capitalEmployees by Marketas of December 31,2023,in%State of Lower SaxonyQatar Holding LLC German institutional investors Porsche Automobil Holding SE Foreign institutional investors Private shareholders/others11.810.02.231.920.024.1Asia-Pacific 16North America 7South America 5Europe(excluding Germany)/other markets 29Germany 44Organizational Structure of the GroupThe Volkswagen Group is one of the leading multi-brand groups in the automotive industry.The Groups business activities comprise the Automotive and Financial Services divisions.Our core brands within the Automotive Division with the exception of the Volkswagen Passenger Cars and Volkswagen Commercial Vehicles brands are independent legal entities.The Automotive Division comprises the Passenger Cars,Commercial Vehicles and Power Engineering business areas.The Passenger Cars Business Area primarily consolidates the Volkswagen Groups passenger car brands and the Volkswagen Commercial Vehicles brand.Activities focus on the develop-ment of vehicles,engines and vehicle software,the production and sale of passenger cars and light commercial vehicles,and the genuine parts business.The product portfolio ranges from compact cars to luxury vehicles and also includes motorcycles and is supplemented by mobility solutions.The Commercial Vehicles Business Area primarily comprises the development,production and sale of trucks and buses,the corresponding genuine parts business and related services.The commercial vehicles portfolio ranges from light vans toheavy trucks and buses.The collaboration between the commercial vehicle brands is coordinated within TRATONSE.GRI 2-1,2-6 Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 14The Financial Services Divisions activities comprise dealer and customer financing,leasing,direct banking and insurance activities,fleet management and mobility services.With its brands,the Volkswagen Group is present in all of the markets around the world that are relevant for the Group.The key sales markets currently include Western Europe,China,the USA,Brazil,Trkiye,Mexico,Poland and the Czech Republic.VolkswagenAG and the Volkswagen Group are managed by the VolkswagenAG Board of Management in accordance with the VolkswagenAG Articles of Association and the rules of procedure for VolkswagenAGs Board of Management issued by the Supervisory Board.Accordingly,responsibilities in the Board of Management are currently divided among ten Board functions.In addition to the“Chair of the Board of Management”function the other Board functions are“Technology”,“Finance and Operations”(formerly“Finance”),“Human Resources and Trucks brand group”(formerly“Human Resources and Truck&Bus”),“In-tegrity and Legal Affairs”,“Progressive brand group”(formerly“Premium”),“Sport Luxury brand group”(formerly“Sport&Luxury”),“IT”,“China”,and“Core brand group”(formerly“Volume”).The Chair of the Board of Management is also re-sponsible for the“Sport Luxury brand group”Board function.Directly attached to the Board are a number of Group Man-agement functions that act as an extension to the Board functions.These comprise the“Group Sales”,“Group Pro-duction”,“Group Procurement”and“Group Research and Development”functions.The allocation of responsibilities on the Board of Management is based on the rules of procedure decided by the Supervisory Board.The way this is structured helps the Board of Manage-ment to focus on key tasks such as strategy,central deci-sions on the Companys direction,capital allocation and fi-nancial requirements.The task of the extended board-level management functions is to leverage synergies in the Group and to connect the brands and divisions.Board of Management committees exist at Group level for the following areas:products,technologies,investments,digital transformation,integrity and compliance,risk management,human resources and management issues.In addition to the responsible members of the Board of Management,the rele-vant central departments and the relevant functions of the divisions are also represented on the committees.We are continually revising and optimizing these and other top management committees in the Group in order to verify that they still align with our corporate strategy and to further in-crease the efficiency of their decision making.This reduces complexity and reinforces governance within the Group.As part of the“Group Steering Model”base initiative from the NEW AUTO Group strategy,a new leadership model for the Group was presented at the Capital Markets Day in June 2023 that will sharpen the focus on customer orientation,entre-preneurship and team spirit.It follows the“value over volume”principle,prioritizing sustainable value creation over volume growth.As part of this,the brand groups will receive a new steering model.In addition,the brand positioning and the product range are to be sharpened.The realignment also in-cluded a renaming of the brand groups:Volume has become Core,Premium is now called Progressive,Sport&Luxury has been changed to Sport Luxury,and Truck&Bus to Trucks.The Core brand group comprises the Volkswagen Passenger Cars,koda,SEAT/CUPRA and Volkswagen Commercial Vehicles brands.The Progressive brand group comprises the Audi,Lamborghini,Bentley and Ducati brands.The Sport Luxury brand group consists of the Porsche brand.The com-pany responsible for this brand,Dr.Ing.h.c.F.Porsche AG(Porsche AG),has been listed on the stock market since the end of September 2022.In the Trucks brand group,TRATON SE acts as the umbrella for the Scania,MAN,Volkswagen Truck&Bus and Navistar commercial vehicles brands.TRATON SE is also a listed company.In addition to the strengthening of the brand groups,the reorganization and expansion of new units also enabled substantial progress to be made with the“Architecture”,“Software”,“Battery,Charging&Energy”,and“Volkswagen Group Mobility”technology platforms in the reporting year.The structures and product processes at the software subsidiary CARIAD will be optimized further.We are convinced that our corporate structure,which effi-ciently connects not only the brand groups but also the technology platforms,will enable us to make better use of existing expertise and economies of scale,leverage synergies more systematically and accelerate decision making.Clear responsibilities and a high degree of business responsibility in the brand groups and technology platforms will enable comprehensive implementation of the Groups NEW AUTO strategy.GRI 2-6 Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 15Legal Factors Influencing BusinessLike other international companies,the business of Volkswagen companies is affected by numerous laws in Germany and abroad.In particular,there are legal requirements relating to services,development,products,production and distribu-tion,as well as supervisory,data protection,financial,com-pany,commercial,capital market,anti-trust and tax regula-tions and regulations relating to labor,banking,stateaid,energy,environmental and insurance law.The German Corporate Governance Code A Blueprint for Successful Corporate GovernanceCorporate governance provides the regulatory framework for corporate management and supervision.This includes a companys organization and values and the principles and guidelines for its business policy.The German Corporate Governance Code(the Code)contains principles,recommen-dations and suggestions for corporate management and supervision.Its principles,recommendations and suggestions were prepared by a dedicated government commission on the basis of the material provisions and nationally and inter-nationally accepted standards of sound,responsible corpo-rate governance.In the interests of best practice,the govern-ment commission regularly reviews the Codes relevance in light of current developments and updates it as necessary.The Board of Management and the Supervisory Board of Volkswagen AG base their work on the principles,recom-mendations and suggestions of the Code.We consider good corporate governance to be a key prerequisite for achieving a lasting increase in the Companys value.It helps strengthen the trust of our shareholders,customers,employ-ees,business partners and investors in our work and enables us to meet the steadily increasing demand for information from national and international interest groups.The Group Corporate Governance Declaration is available in the Annual Report and is permanently accessible on our website.www.volkswagen- Declaration of ConformityEach brand within the Volkswagen Group is managed by a brand board of management,which is responsible for the brands independent and self-contained development and business operations.To the extent permitted by law,the board adheres to the Group targets and requirements laid down by the Board of Management of Volkswagen AG,as well as with the agreements in the brand groups.This allows Group-wide interests to be pursued,while at the same time safeguarding and reinforcing each brands specific charac-teristics.Matters that are of importance to the Group as a whole are submitted to the Volkswagen AG Board of Man-agement to be agreed upon,to the extent permitted by law.The rights and obligations of the statutory bodies of the relevant brand company thereby remain unaffected.The Volkswagen Group companies are managed solely by their respective managements.The management of each in-dividual company takes into account not only the interests of its own company but also the interests of the Group,the relevant brand group and the individual brands in accordance with the framework laid down by law.Material Changes in Equity InvestmentsIn May 2023,the Volkswagen Group completed the sale of its shares in OOO Volkswagen Group Rus(Volkswagen Group Rus),Kaluga/Russia and its local subsidiaries(OOO Volkswagen Components and Services,Kaluga/Russia,OOO Scania Leasing,Moscow/Russia,OOO Scania Finance,Moscow/Russia,OOO Scania Insurance,Moscow/Russia)to OOO ART-FINANCE,Moscow/Russia,which is supported by the Russian automotive dealer AO Avilon Automotive Group,Moscow/Russia.On registration of the transaction also in May 2023 ownership of the shares in Volkswagen Group Rus was transferred from the seller to the buyer.The trans-action includes the production facilities in Kaluga,the im-porter structure of the Group brands Volkswagen Passenger Cars,Volkswagen Commercial Vehicles,Audi,koda,Bentley,Lamborghini and Ducati for potential after-sales business and the warehousing activities as well as Scania financial services activities with all associated employees.GRI 2-6 Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 16Further Information Explanations of the composition,working methods and diver-sity concept of the Board of Management and the Supervisory Board and information on voting rights are available in the Corporate Governance chapter in the 2023 Annual Report.2023 Annual Report Corporate GovernanceExtensive explanations of the remuneration system and the individual remuneration of the members of the Board of Management and Supervisory Board can be found in the Re-muneration Report for fiscal year 2023,which forms part of the 2023 Annual Report,in the notes to Volkswagens 2023 consolidated financial statements and in the notes to the 2023 annual financial statements of Volkswagen AG.www.volkswagen- RemunerationThe Volkswagen AG Group Board of Management has adopted an update of the tax strategy principles,which has been published on Volkswagen AGs website.Each year,Volkswagen AG sends the German Federal Central Tax Office a country-by-country report,which includes infor-mation on tax payments and tax expenses/income by country.The Volkswagen Group has the ambition of implementing its marketing and communication activities transparently and responsibly.This includes attentiveness toward our environ-ment and requires us to treat all individuals with respect and honesty and as equals.This applies internally and externally,online and off.To this end,the Group has developed principles that serve as a compass for implementing the Volkswagen Groups values with regard to marketing and communication activities.www.volkswagen- PoliciesGRI 2-6,207-4The Volkswagen Value ChainResearch&DevelopmentThe Automotive Divisions research and development costs in the reporting year totaled 21.7 billion and were thus 14.8%higher than in the previous year.In addition to new models,our activities focused above all on the electrification of our vehicle portfolio,digitalization,new technologies and enhancements of our modular and all-electric toolkits and platforms.ProcurementEvery year,the Volkswagen Group purchases a wide range of raw materials,components and other goods.A sustainable supply chain and environmentally compatible transportation are important for fully assuming responsibility for human rights,environmental protection and the battle against corruption.ProductionThe Volkswagen Group manufactured an average of more than 26,660vehicles globally every working day in 2023.Efficient production ranks alongside environmental protection and employee health and safety as one of our core goals.Marketing&SalesBusiness relationships with fleet customers are often long-term and stable partnerships.The Volkswagen Groups share of commercial fleet customers is 47.0%in Germany and 27.6%in the rest of Europe.After Sales&Financial ServicesOur service includes supporting dealerships to ensure they can provide quality advice and maintenance,managing our original parts business,and providing vehicle-related financial services.RecyclingIn addition to recycling vehicles at the end of their useful life,we pay close attention during the new-vehicle development stage to the recyclability of the required materials,the use of high-quality recycled materials,and the avoidance of pollutants.Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 17In the context of the fast-changing environment and the challenges resulting from it,the Group Board of Management adopted the Group strategy“NEW AUTO Mobility for gener-ations to come”in May 2021 with the approval of the Super-visory Board.The strategys focus is the world of mobility in 2030.As technology advances,the automotive industry is rapidly forging ahead with its transformation toward e-mobility and digitalization.We therefore expect the market for electric vehicles to continue to grow in the next few years,meaning that the cost-efficient and sustainable production of battery systems and the expansion of the charging infrastructure will be crucial to success.The shift to connected,intelligent and eventually self-driving vehicles,will,however,bring more wide-reaching changes for the automotive industry.Autonomous driving will change the customers mobility experience forever and lay the ground for new business models.Sources of revenue will gradually shift and will expand beyond the core product of the auto-mobile.Increasing software development capabilities in order to excite customers with constantly improving digital func-tionality is the prerequisite for this.In equal measure to technological trends,the global eco-nomic and geopolitical environment is also posing increased challenges for the automotive industry.These include,forexample,the economic influence of the largest mobility markets,China,the USA and Europe,and their diverging development.Sustainability will continue to be a recurring theme in the business world and will gain further pertinence,driven by the increasingly noticeable consequences of climate change,a greater consciousness of sustainable lifestyles on the part of the customer and,not least,underlying factors such as the Paris Climate Agreement.As we transition from automotive manufacturer to mobility group,we have reset our priorities with NEW AUTO and are positioning ourselves for the future.We are keeping our aim of being a world-leading provider of sustainable mobility firmly in our sights and making the Group more focused,efficient,innovative,customer-oriented and sustainable,as well as systematically gearing it toward profitable growth.To this end,we have established clearly defined Group initia-tives across the brand groups,with a focus on our central technology platforms:“Architecture”,“Software”,“Battery,Charging&Energy”,and“Volkswagen Group Mobil ity”.Furthermore,base initiatives form the foundation for the Volkswagen Groups strategic realignment.These are“ESG,Decarbonization&Integrity”,“Business Model 2.0”,“North America(NAR)Region”,“China Region”,“Group Steering Model”,“People&Transformation”and“Financing the Trans-formation”,which are described below.The most important targets for each calendar year are de-fined,and a Top 10 program is developed at Group level so that the strategy can be implemented in operations throughout the year.Priorities in the Groups Top 10 program for 2023 were financial robustness and planning,products,the China and North America regions,software,technologies,battery and charging,mobility solutions,sustainability,and capital markets.This Top 10 program methodology has been adopted by many business units in their functional area strategies,and it is being used to accelerate the implementation of the strategy with a high level of focus.NEW AUTO Group Strategy Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 18To make the progress in our focus topics consisting of the initiatives of the NEW AUTO strategy and the objectives of the Groups Top 10 program applicable to the fiscal year as transparent as possible for management and employees,the Group Board of Management decided to structure and regu-larly measure the strategic objectives and milestones using the OKR(Objectives and Key Results)method.Accordingly,strategic objectives and envisaged key results are defined for all focus topics.These are to be realized largely through time-limited projects and work packages,each of which is measured by specific key performance indicators.The degree of achievement is usually presented to the Board of Manage-ment three times a year.As such,the relevance of the focus topics,and their objectives,milestones,projects and work packages,are regularly reviewed at Group level.Their focus is continuously monitored and adjusted as necessary or inte-grated into standard operations.We report on the main targets achieved and key results in the fiscal year in the“Management and Key Figures”,“Structure and Business Activities”and“Sustainable Value Enhancement”chapters of the Annual Report.2023 Annual Report Group Management ReportArchitecture A future-oriented mechatronics platform will form the back-bone for innovations,technology and lasting competitiveness at Volkswagen.With the Scalable Systems Platform(SSP),we are creating the next generation of an all-electric,fully digital and highly scalable mechatronics platform on the basis of a standardized software architecture.With this standard-ized platform,which can be scaled from the smallest vehicles all the way up to the premium segment,the Volkswagen Group aims to rapidly and efficiently provide its customers with in-novative functions and technologies in their vehicles,across all brands.By reducing complexity and the number of versions,the SSP will offer us maximum synergy effects and make fast,regular technology updates possible,while lowering in-vestment costs and ensuring the necessary differentiation between the products of the individual brands in the Groups portfolio.NEW AUTO with Focus on Technology Platforms ProgressiveCoreSport LuxuryTrucksArchitectureSoftwareBattery,Charging&EnergyVolkswagen Group Mobility Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 19Software The purpose of the Groups own software and technology company CARIAD is to create the technical basis for data-based business models,new mobility services and automated driving(Level 4)and to leverage cross-brand synergies.Here we are pursuing the following strategy:We intend to develop software for central control points in the vehicle either in-house or together with third parties in strategic partnerships.CARIAD is collaborating with leading technology companies to integrate further innovative solutions.Together with the Porsche and Audi brands,CARIAD is working to introduce the new E3 1.2 platform,which optimizes the interaction between the hardware and the vehicle software and is also intended to serve as a key lever for data-driven development and for the introduction of new services even after vehicle produc-tion has begun.In the long term,the standardized E3 2.0 software architecture is to form the basis of a complete digital ecosystem,offering customers a wide range of software-based services through-out the entire product life cycle.The software-centric ap-proach of the E 2.0 architecture constitutes a paradigm shift in vehicle development.This is to form the basis for the Volkswagen Groups software-defined vehicles.The aim is for every function that is needed or requested,and for every service,to be customized for the customers in the various markets and to be available for download at any time.This will also open up new sources of revenue for us.Applications at various levels of automated driving(up to Level 4)are to be gradually introduced to the new vehicle models in the Group brands.In this context,CARIAD is responsible for developing software and a tech nology stack for automated driving.Battery,Charging&Energy Cell and Battery StrategyThe battery is a key component in an electric vehicle and an important cost factor.The appeal and market success of e-mobility is determined not only by the price,but also by the vehicles range and its charging speed.In order to achieve our objective of transforming into a world-leading provider of sustainable mobility,we intend to become a profit-generating expert across the entire battery life cycle.To this end,the Cell and Battery Strategy tech initiative pools expertise across the Group and is driving the transfor-mation process in cooperation with our strategic partners.The aspects covered include battery development,cell pro-duction,vertical integration,large-scale storage systems,and recycling.Our primary aim is to develop battery cell tech-nology into a core competence in the Group,and we are also working with partners to achieve this.At the heart of this strategy is the unified cell,which can contain differing chemistries and is to be used in up to 80%of Group models by 2030.The economies of scale this generates are expected to reduce costs by up to 50%and put us in a leading cost po-sition.To cover the high demand for battery cells,Volkswagen plans to build its own gigafactories around the world.The cornerstone for these activities was laid in Salzgitter/Germany.Using the standard factory concept to optimize investment,further factories are to follow swiftly in Valencia/Spain and St.Thomas/Canada.The aim is to meet about half of the rapidly growing need for battery cells ourselves by 2030.Battery,Charging&Energy Charging and Energy ServicesA sustainable,stable charging and energy infrastructure is a key prerequisite for accelerating the transformation to the battery-electric mobility of the future.It is therefore our in-tention to also become a comprehensive charging and energy service provider in future,and we are investing heavily in the worldwide development of an open,fast-charging network.By 2025,we and our partners plan to create around 45,000 high-power charging points in Europe,China and the USA.The product portfolio also includes the full range of charging solutions for private customers and companies.In addition to our own wall box and flexible fast-charging station(Flex-pole),the focus is particularly on contract-based charging services and smart green electricity tariffs.The aim is for charging processes to be controlled in such a way that they tap into renewable energy,thus reducing the pressure on the power grids.In a next step,Volkswagen intends to use the electric vehicle as a mobile power bank,and thus help to enable electric vehicles to act as additional storage units and become an active part of the energy system in the future.In this way,Volkswagen wishes to make its customers part of the smart-charging and energy ecosystem for decarbon-ized mobility.Our goal here is farsighted use of scarce re-sources in the electric power industry.Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 20Volkswagen Group Mobility In keeping with its mission statement,“Mobility for genera-tions to come”,the Volkswagen Group is developing mobility solutions for the future,taking into account global trends and changes in customer needs.The Group plans to bring together all of its brands mobility services on one mobility platform over the coming years.Autonomous driving combined with new mobility solutions is expected to mark Volkswagens transformation into a leading provider of sustainable mobility.A vehicle fleet covering all of the many services,from vehicle rental to car subscription and ride pooling,is to ensure high availability,usage and profitability.With these solutions,we plan to gain market shares and generate long-term competi-tive and attractive margins.ESG,Decarbonization and IntegrityESG(Environmental,Social,and Governance)refers to the basic principles of doing business sustainably.The Groups stakeholders(e.g.,investors,employees,customers and non-government organizations)have high expectations of the Companys ESG performance,including in areas such as decarbonization,circular economy and integrity,and also of its conduct as an employer and as part of society.The Groups ESG performance therefore directly affects its market capitalization,cost of capital and investing activities.We aim for a top position relative to our competitors in sustainability ratings.We are committed to the Paris Climate Agreement and align our own activities with the 1.5 degree target.We aim to achieve net carbon neutrality by 2050.By 2030,we have also set ourselves the target of reducing CO emissions from passenger cars and light commercial vehicles over the total life cycle by 30%compared with 2018.As part of this effort,we are looking for ways to increase the proportion of renewable energy sources used in the product emergence process and the proportion of recyclable materials in our vehicles.We also wish to be perceived as a benchmark for ethical corporate conduct.Volkswagen sees itself as an equal opportunities employer.The intention is therefore for at least a fifth of Group management positions to be held bywomen by 2025,and for at least a quarter to be held by international managers.Business Model 2.0The Business Model 2.0 base initiative is developing a Group-wide portfolio of services,the purpose of which is to create a seamless and innovative product experience to connect brands,customers,dealerships,our partners and whole markets.The aim is for the key technologies needed for this to be integrated into a majority of theplatform-based vehicles by 2030.Using connected vehicles,the Groups brands are to be able in the future to remain in contact with their cus-tomers throughout the entire vehicle life cycle and thus to offer them services and functions for their individual needs.This will allow us to build a competitive,data-driven service portfolio that also maintains our strong position in the auto-motive market in future.North America(NAR)RegionFor the Volkswagen Group,the North America region,and particularly the USA,has a great growth potential,especially where e-mobility is concerned.We intend North America to become our third core region alongside Europe and China by 2030.Our aim there is to achieve a very strong increase in total market share for the Volkswagen Group by then.We aspire to further expand our presence in the region with strong brands and prepare ourselves for the future with market-specific products.We also wish to participate to a disproportionately high extent in the growth of the increasingly electrified markets in the USA and Canada.We will therefore substantially expand our range of all-electric models across the Group and develop models specifically for these markets.With our new vehicle brand Scout,we intend to address the core segments of the North American electric vehicle market with tailor-made products.The proportion of battery-electric vehicles in our sales in the USA and Canada is to increase to 55%by 2030.In addition,we wish to maximize the potential for synergies in the region and build more expertise,industrial capacity and vertical value chains in the North America region.Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 21China RegionChina is of major strategic significance to the Volkswagen Group as its largest single market.All key measures are therefore brought together in this strategic base initiative in order to continue Volkswagens success story in China.These include localized development activities that are tailored to the market(the in China for China approach),competitive products,the deepening of our existing partnerships and forging of new ones,and a comprehensive program of mea-sures for achieving a permanent reduction of costs to safe-guard long-term profitability.Our aim for 2030 is to take a leading role in China as an in-ternational mobility provider and manufacturer of fully con-nected vehicles.As part of our localization strategy(in China for China),we therefore want to pool and expand our local development capacity to a greater extent in the coming years.In so doing,we want to considerably speed up the develop-ment of intelligent connected vehicles(ICVs)and be in a position to offer tailor-made products to our Chinese custom-ers faster.In the market for vehicles with conventional drive systems,we want to further strengthen our share of the market with new vehicles and secure it for the long term,as these vehicles high unit sales will also make a correspond-ing contribution to profitability in future.Group Steering ModelTo achieve the objectives of the Group strategy and thereby safeguard the Volkswagen Groups long-term success,we are extensively optimizing our Group Steering Model.It is es-sential that we establish a consistently high level of mecha-nisms that facilitate swift decision-making,the development and use of platform technologies and the exploitation of syn-ergies,and that we constantly enhance these.The updated Group Steering Model places the brand groups and technol-ogy platforms center stage in order to scale up the latter while maximizing synergies across the entire Group product portfolio.A new strategy and product planning process that has been optimized for efficiency is being developed on the basis of this approach.The package of measures for this initiative hones the definition of roles and responsibilities in the Group and improves transparency in this respect both inside and outside the Company.It also promotes the entre-preneurship of the independent units and brands and at the same time strengthens collaboration across the Group.People&TransformationAs it becomes a global tech company,the Volkswagen Group will see the biggest transformation of its workforce in its corporate history.To ensure the Group remains competitive in the future,we need to attract top talent and support ex-isting employees by providing extensive training where re-quired.Our aim is to retain staff for the long term.It is there-fore fundamental that we address the changing needs of our employees and offer them an outstanding employee experi-ence.To achieve our Groups ambitious objectives,we must also create and promote an environment for productive teams,resulting in a strong,sustainable and socially respon-sible corporate culture that fosters a sense of belonging and loyalty to the Company.A further focus is on aligning the Company with society and the environment.Financing the Transformation The transformation being driven by digitalization and elec-trification will require extensive investment.To meet this need for financing,the Financing the Transformation base initiative aims to leverage even more Group-wide synergies across all functional areas along the value chain,focusing on costs and efficiency.The Group has therefore set itself the objective of lasting improvements to its fixed-cost structure,plant productivity,procurement costs,distribution expenses and working capital management.Strategic Financial Performance Indicators20222030 targetOperating return on sales8.1%9 to 11%Automotive investment ratio 13.6%9sh conversion rate in the Automotive Division129.2%Net liquidity in the Automotive Division 43.0 billion2 15.4%of consolidated sales revenue Return on investment(ROI)in the Automotive Division 12.0%1 Net cash flow as a percentage of the operating result in the Automotive Division.2 Including cash inflows from the IPO of Dr.Ing.h.c.F.Porsche AG.Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 22Materiality Analysis Linked with Group Strategy and ESG PerformanceThe materiality process is used to identify and evaluate the most important sustainability issues for the Group.Based on the business model and its impact on society,the focus is on key ESG requirements,stakeholder expectations,and com-pliance with legal requirements and internationally established reporting standards.The Group conducted a materiality analysis in 2022.In review-ing a large number of potentially material issues,we consid-ered both external and internal company perspectives.For the external side,80 topic clusters were derived from 700 topics and weighted along 330 criteria.This was based on:Results of dialog processes with the Sustainability Council and the Stakeholder Panel Reputation surveys Requirements of relevant international and national frame-works such as the EU Taxonomy,the German Commercial Code(Handelsgesetzbuch HGB),the UN Global Compact,the Sustainability Accounting Standards Board(SASB),the Global Reporting Initiative(GRI)or the Sustainable Development Goals(SDGs)Key ESG ratings AI-supported trend analyses and management studiesFor the internal dimension,we primarily took account of all Group policies on sustainability management,materiality analyses of the Group brands and country-specific risk ana-lyses of Volkswagen Group production sites.The focus topics prioritized for the NEW AUTO Group strategy were confirmed with the 2022 materiality analysis and classified as material by the Group Sustainability Steering Committee.The five nonfinancial matters arising from the German CSR Directive Implementation Act(CSR-Richtlinie-Umsetzungsgesetz CSR-RUG)are covered by the six focus issues.In addition,these six focus areas,in turn,cover a significant part of the assessment criteria of ESG ratings:Decarbonization Circular economy People in the transformation Diversity Integrity and compliance Supply chain and human rightsThe focus topics identified were reviewed in 2023,taking into account the requirements of the German Supply Chain Due Diligence Act(Lieferkettensorgfaltspflichten gesetz LkSG)and changes in the material ESG ratings.Ultimately,the six focus topics were reconfirmed.A comprehensive ma-teriality analysis in accordance with the requirements of the European Corporate Sustainability Reporting Directive(CSRD)and European Sustainability Reporting Standards(ESRS)is being conducted in a separate process to prepare for the 2024 reporting.Each focus issue is to the extent currently possible linked with clear targets and milestones and with KPIs and packages of measures.ESG-related KPIs such as the decarbonization index(DCI),the diversity index,and the governance factor are already reflected in the remuneration of members of the Board of Management.2023 Annual Report Remuneration ReportThe topics classified as material also provide the foundation for the structure of this sustainability report and serve as thebasis for managing the Volkswagen Groups sustainability program.ESG Performance Management and Materiality AnalysisGRI 2-19,3-1,3-2 Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights ESG rating scales MSCI:CCCAAA;Sustainalytics:1000;ISS:D-A 1 Disclaimer:https:/ 2022 2023B B B29.6(medium risk)26.1(medium risk)26.4(medium risk)C C C 23Action Program for Optimized ESG PerformanceThe NEW AUTO Group strategy focuses not only on techno-logical and product-related initiatives but also on improving the Groups ESG performance.This is because this directly and indirectly impacts Volkswagens market capitalization,costs of capital and attractiveness to investors.This is partly due to increasing density of regulations on sustainability as a result of frameworks such as the EU Taxonomy,CSRD,or regulations on the responsible shaping of supply chains.More-over,capital market players such as institutional investors not only expect transparency on the Groups sustainability performance but also an effectively implemented strategy that leads to continuous improvement in sustainability per-formance.A significant share of globally managed assets is already oriented toward ESG criteria.In the past reporting year,we significantly expanded our action program that targets improvement of our results in ESG ratings by 2025.It consists of four pillars:1.ESG performance management:We close existing gaps in ESG performance and create additional transparency by disclosing our measures and key performance indicators.2.ESG engagement:We are intensifying our communication on ESG and sustainability in the capital market by com-municating our messages and results in roadshows,in-vestor conferences and other formats.In this way,we ex-plain our current performance and at the same time benefit from the learning effects and knowledge transfer that this dialog makes possible.www.volkswagen- Financial Calendar3.Management of controversies:We aim to reduce the neg-ative impact of legal or media controversies regarding the Volkswagen Group on our rating results.Our own web-based information on existing ESG controversies around Volkswagen makes a contribution to clarification and ob-jectivization.www.volkswagen- ESG Controversies4.Internal ESG data infrastructure:We are working on es-tablishing comprehensive ESG data reporting tools for better data-supported infrastructure and aim to create comprehensive ESG information offerings for relevant stakeholders in the future.Compared with prior years,the Groups score in the ESG rating from ISS improved from C to C .The Volkswagen Groups Sustainalytics rating remained stable in 2023 at a rating level of“medium risk”(2022:26.1;2023:26.4).In fiscal year 2023,Volkswagen continued to have a score of B from MSCI and had a climate rating of A from CDP.Volkswagen reported material content in the Water Disclosure Project(WDP)but was not assessed in fiscal year 2023.A change in valuation methods meant that,at the end of 2022,financial services provider MSCI ESG Research gave Volkswagen AG a red flag in its ESG Controversies report for alleged human rights violations in a plant in rmqi inthe Xinjiang region that is operated by a subsidiary of Volkswagens Chinese joint venture SAIC Volkswagen Auto-motive Co.Ltd.No signs of human rights violations were found either during the visit by the member of the Board of Management of Volkswagen AG for China,Ralf Brandsttter,in February 2023 or after Loening Human Rights&Re-sponsible Business GmbH conducted an independent audit of the plant in November 2023.On December 11,2023,MSCI ESG Research raised Volkswagen AGs rating from red flag(score 0)to orange flag(score 1).Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 24Making the Social and Environmental Impact of Our Actions MeasurableThe Volkswagen Group wants to measure the impact of its actions even more comprehensively in quantitative terms in the future and,if possible and reasonable,to monetize this.This involves assessing positive and negative effects on,among other things,the environmental and social systems for the purpose of the inside-out perspective.This impact relates to the Groups entire business,including its supply chains and its products and services.This means we are not only taking on board impetus from regulatory developments as it emanates from the requirements of the CSRD or the EU Green Bond Standard,but also impetus from international initiatives and organizations such as the Organisation for Economic Co-operation and Development(OECD)and the World Business Council for Sustainable Development(WBCSD).At the same time,like other global companies,we are en-deavoring to make even greater use of an impact assessment in our decision-making and management processes,risk management,reporting and communication with our stake-holders.Impact assessments already represent tried-and-tested tools at Volkswagen,particularly for the assessment of mobility concepts.Here,new options are continuously investigated for their sustainability impact and readjusted as necessary.Sustainability Impact of New Mobility OptionsWe are currently developing a Group-wide concept for valuing impact with the name of“Impact Valuation Volkswagen Group.”The concept is based on the successful implementa-tion of two pilot projects at site and brand level.In order to advance the topic of impact valuation and develop comparable concepts,the Volkswagen Group is a member of the Value Balancing Alliance(VBA)together with the Porsche brand.This initiative champions the development of uniform assessment standards for impact valuation and the financial balancing of sustainability impacts on an interna-tional level across sectors.In addition to the Volkswagen Group,the VBAs members include numerous global companies,such as Bosch,BASF,BMW,Michelin and SAP.Value Balancing Alliance Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 25Structure and Tasks of the Sustainability OrganizationSustainability means maintaining intact environmental,social and economic systems with long-term viability at global,regional and local level.The Volkswagen Group can influence these systems in various ways and actively takes responsi-bility to make a contribution to preserving their sustainability.An extensive sustainability management system was set up for this purpose.The related structures,processes and re-sponsibilities are codified in a specific Group policy.We view sustainability management as a continuous improvement process.The Chairman of the Board of Management of Volkswagen AG has cross-functional overall responsibility for sustainability.Additional responsibility is taken by members of the Board of Management with their responsibility for specific manage-ment systems relating to sustainability and by the newly appointed Chief Sustainability Officer at Group level.Sustainability is part of the Top 10 program and is managed through the NEW AUTO strategys strategic management structure.The content is regularly evaluated and reported in the Board of Management.Furthermore,the Groups sustainability function(Group Sus-tainability)coordinates all sustainability-related activities and the Group-wide and cross-functional network for sus-tainability.Communication with Group functions,brands and companies is structured via defined core processes.They serve to create transparency on external requirements and translate these into corporate action.The core processes include the sustainability strategy and materiality analysis,stakeholder management,ESG ratings and rankings,sus-tainability policies and sustainability reporting.Group Sus-tainability is allocated to Group and Product Strategy and to the Office of the Corporate Secretary in order to ensure that sustainability is closely linked with the strategic corporate goals and the core business.In the reporting period,the Volkswagen Group began revising its structure and workflows in light of new and upcoming regulatory requirements and is expected to complete this process in 2024.Sustainability ManagementGRI 2-9,2-12,2-13,2-14Board of Management levelGroup levelGroup levelRegion levelBoard of ManagementChairman of the Board of Management(CEO)Members of the Board of ManagementGroupfunctionsGroup Sustainability(CSO)Group strategy and Office of the Corporate SecretaryGroup ProductionGroup HRBrand functionsProductionHRBrand Sustainability Manager(Audi,Porsche.)Region/siteCEO=Chief Executive OfficerCSO=Chief Sustainability OfficerManagement of cross-functional topicsManagement of function-specific topicsGroup function sustainability managersDiscussion of core sustainability processesDiscussion of function-specific topicsSustainability Embedded in the Volkswagen Group Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 26At brand level,the brand sustainability managers carry out the cross-functional coordination of sustainability topics,develop the sustainability strategy,are responsible for content and reporting on sustainability topics within the brand,represent the brand on sustainability topics externally and coordinate with Group Sustainability.The Sustainability Committee as an Independent Driving Force and PartnerAt Group level,the Sustainability Council has a prominent position.This advisory committee,which was created in 2016,supports the Volkswagen Group with important strategic sustainability topics and is made up of internationally re-nowned experts from the academic world,politics and society.The committee establishes its own working methods and areas of focus independently,has extensive rights for the purposes of exchanging information,consultation and initi-ating action,and consults regularly with the Board of Manage-ment,top management and the employee representatives.The previous Sustainability Councils mandate ended at the end of 2022.In the reporting period,we began to reorganize its strategy and composition.Further information is available on the Sustainability Committees website:www.volkswagen- Sustainability CouncilUN Global CompactVolkswagen AG is a participant in the UN Global Compact,the worlds largest corporate sustainability initiative,and participates in national and international initiatives together with other Group companies,including AUDI AG,MAN Truck&Bus SE,Dr.Ing.h.c.F.Porsche AG,Scania AB and TRATON SE.Fund managers in the capital markets view membership of the UNGC as an important factor when deciding to invest in shares and bonds of Volkswagen.Sustainability-oriented funds have grown in recent years and have become indispens-able as stakeholders.As part of the annual Communication on Progress,the Volkswagen Group and its brands report on their progress in implementing the ten UNGC principles and their activities to support the Sustainable Development Goals(SDGs).The progress reports of Volkswagen AG,AUDI AG,Dr.Ing.h.c.F.Porsche AG and TRATON SE,which comprise all other participants in the Group,can be viewed on the UN Global Compact website.UN Global Compact VolkswagenGreen Finance Framework for Investments in SustainabilityMassive investment is needed to transform the Volkswagen Group.At the same time,investors are looking for sustain-able investment options.Volkswagen AG has had a Green Finance Framework for various forms of financing such as green bonds since 2020.This document defines the frame-work for financial instruments geared to sustainability.In the reporting year,we refinanced fiscal year 2022 capital expenditure aligned with the EU Taxonomy on the basis of the Green Finance Framework newly published in 2022 by issuing 3.5 billion in green bonds.The Volkswagen Group has thus issued a total of 9.5 billion in green bonds to refi-nance capital expenditure for all-electric vehicles(BEVs)since 2020.In 2022,the Volkswagen Group published a new Green Finance Framework that was further developed in particular through the integration of the EU Taxonomy.As was the case in the previous Green Finance Framework,the Volkswagen Group continues to focus on the exclusive in-clusion of BEVs in sustainable financing.Under the new Green Finance Framework,the only investments that will be con-sidered are investments for BEVs produced by the Volkswagen Group that are aligned with the EU Taxonomy.This system-atically links our corporate objective of net carbon neutrality by 2050 with our financing strategy.The funds raised under the Green Finance Framework are specifically used to refi-nance environmentally friendly projects such as e-mobility.This both fulfills the clean transportation category of the Green Bond Principles of the International Capital Market Association(ICMA)and is in line with the goals of the United Nations and the European Union for sustainable development.Sustainalytics has confirmed again for the new Green Finance Framework that the framework complies with the ICMAs Green Bond Principles and the Green Loan Principles of the Loan Market Association(LMA).Volkswagen published its third Green Finance Report,which contains the Allocation Report and the Impact Report,during the reporting year.More information is available on our corpo-rate website.www.volkswagen- Green FinanceGRI 2-12,2-13 Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 27Mobility Solutions with Measurable Benefits for People and the EnvironmentOur global society today faces the major challenge of find-ing the right balance when shaping mobility.The pressures of noise,traffic jams,accidents,traffic areas or air quality need to be reduced in many areas.At the same time,many people do not have sufficient,affordable and accessible transportation,limiting their participation in society.This is not only the case in economically weaker regions but also in rural areas and suburbs.The Volkswagen Group offers both innovative vehicle technol-ogies and forward-looking mobility services.Through these,the Group wants not only to meet its customers requirements but also to help to solve local environmental and traffic prob-lems and protect the climate.The global cooperation with partners outside the Group plays an important role.We are guided here by the“Mobility for generations to come”vision that our NEW AUTO Group strategy describes.NEW AUTO Group Strategy Our expectation is that most people will still prefer individual mobility by 2030,but their focus will be more on using vehicles than on owning them.In light of this,Volkswagen Financial Services AG is developing a platform for the Volkswagen Group and its brands that covers customers different mobility needs from using a vehicle for a few minutes to a subscrip-tion for multiple years.The Europcar Mobility Group will be an important element of this platform.Assessing the Sustainability of Mobility Services Using SimulationsIt has been shown many times that new mobility concepts increase the range of options in urban areas but are not auto-matically sustainable.Creating a basis of assessment is there-fore important so that mobility solutions can be assessed for their sustainability impact and also influenced.This is be-cause determining the right framework conditions and regu-lations is of decisive importance to make substantial contri-butions to sustainable cities and tap into business models for the Group.Political players and cities are also increasingly requiring early proof that mobility solutions actually have sustainability effects,and operating licenses may be condi-tional on this proof.Against this background,the Volkswagen Group is continu-ously developing the mobility simulation framework.Its focus is on impact assessments that digitally replicate mobility on the basis of real data.Technologies such as data analytics and machine learning help us to virtually pilot certain services in advance on a large scale in what is known as a digital twin.This means that possible improvements and also any unde-sirable side effects can be discovered early and taken into account when developing mobility solutions.We also developed the Mobility Impact Analyzer(MIA)in the reporting year to present the complex effects of a solution such as ride pooling over time and geographically for cities or public transportation operators.This data-supported cloud application shows how a mobility solution can be integrated into a citys mobility system and what effects certain scenarios have.MOIA,our on-demand ride pooling provider,presented MIA to an expert audience at the UITP Global Public Transport Summit in Barcelona in June 2023.Sustainability Impact ofNew Mobility Options Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 28We endeavor to regularly communicate with stakeholders on mobility solutions and analyze trends on an ongoing basis so that we can update targets and criteria as needed.The methods and models for mobility simulation are also being continuously developed.For example,in the reporting year we developed a new method that reduces a simulations lengthy computing times.It was presented at the meeting of the Transportation Research Board in the USA.In addition,we aim to steadily improve the quality of our results by compar-ing these with mobility providers real data and experience.We use various key figures that are scientifically recognized and also reflect the requirements of various players to evaluate mobility services.Customers value short and reliable journey times,while access for citizens and the reduction of CO emissions is important for society.Towns and cities for their part want traffic to occupy as little space as possible and to improve air quality,while good utilization of its services is essential to the mobility provider.MOIA:Recognizing and Serving Mobility NeedsMeasures for increasing efficiency and better capacity utiliza-tion continue to be important steps on the path to sustainable mobility.In the case of ride pooling services such as MOIA,the transport needs of various customers must be linked as optimally as possible in order to balance detours and waiting times with high utilization of capacity.Modeling and impact assessments provide valuable services here in order to represent the high level of complexity.It should be noted that these analyses always take an overarching view of traffic.This is because users take other options into account when making decisions.Central to the sustainability assessment is what users of new services for example,ride pooling,e-scooters or car sharing would otherwise use or have pre-viously used.For example,there is a much debated question about whether ride pooling might ever overtake public trans-portation.Initial fears are,however,proving wrong.MOIAs accompanying research instead proved the opposite:The research showed that the mobility network and especially public transportation would benefit from the expansion of ride pooling.MOIA expanded its revenue model in the reporting year.The company has introduced a licensing model for ride pooling and established a new business unit Mobility Analytics.Asa result,MOIA will no longer operate exclusively in the customer market but also offers cities,public transportation operators and local authorities all the services necessary toimplement ride pooling within the framework of public transportation.In addition to service design and consulting,the new licensing model includes operating models,the fully integrated ride-pooling and operating software required for this and,where applicable,the use of the MOIA brand.In Hamburg,MOIA has been providing its ride pooling service in close partnership with the transportation company Ham-burger Hochbahn since 2019.Since the start of 2023,the company has been integrated in Hamburgs local public transportation system as a self-sustaining on-demand ride pooling service licensed under the amended Passenger Transportation Act.MOIA has carried more than 8.9 million passengers in Hamburg to date.Achieving More with Comprehensive Solutions The intermodal impact assessments and analyses provide important pointers to which levers can be used to improve the sustainability impact of new mobility solutions.One factor that impacts the effectiveness of an individual solution is its integration into the transportation and energy system.A good example of this is an e-car sharing pilot project in southern Germany,in which AUDI AG is involved as a partner.The project is being run in our rural area where,for the most part,private vehicles predominate and car sharing has so far barely gained acceptance.It aims to close mobility gaps in public transportation services and contribute to reliable mobility.In addition to electric vehicles,other partners from the Group are also contributing solutions for charging infra-structure(Elli)and booking systems(SEAT:Code).The value of solutions that do not isolate the energy and mobility systems but take a holistic view of them was also evident in another context.As a long-standing member of the World Business Council for Sustainable Development(WBCSD),in 2023 the Volkswagen Group continued its in-volvement in the“Transport and Mobility Pathway”one of the new action areas in the WBCSDs Vision 2050.The energy sector focal issue of charging infrastructure was considered together with mobility behavior here.The result was that the location and power of public charging points should also take account of the real routes taken by e-vehicle drivers so that they can charge their e-vehicles without unnecessary detours and as close to the destination as possible.During the vehicles idle time,charging or feedback of power into the grid should be synchronized with the availability of renew-able energy.Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 29Improving Participation in Society In addition to environmental and economic objectives,social aspects,such as access to and participation in society,also play an important role for mobility solutions.This includes attractive public transport,especially in urban areas.Our MAN brand,for example,makes a contribution that benefits the population as a whole with electric,efficient,digital,and,in the future,also automated transportation solutions.In addition,for example,Volkswagen Passenger Cars and Volkswagen Commercial Vehicles provide people with disabilities with barrier-free access to their own vehicle for example,through hand controls.So that passengers with mobility restrictions such as wheelchair users can also spontaneously and con-veniently get from A to B,MOIA has been operating 15 acces-sible vehicles in Hamburg with appropriately trained drivers since the start of 2023.And like in Hamburg public trans-portation,people with severe disabilities also travel for free with MOIA.AUDI AGs electric car-sharing project described above goes a step further when it comes to inclusion.The plan is to found an inclusion company together with partners to help people with impairments to find their way into per-manent employment.Astypalea:Transformation to a Smart and Green IslandAstypalea is a living lab for smart and sustainable mobility solutions in Europe.The Greek island is located in the Aegean Sea,has 1,300 inhabitants and is similar in size to the German island of Sylt.In addition,36,000 tourists on average visit the island every year.Astypalea is now to be transformed into a smart and green island by 2026.To this end,the Volkswagen Group has joined forces with the Hellenic Republic.Traffic on Astypalea will be converted to e-mobility.This in-cludes the public transport system,local authority vehicles(e.g.,police),company vehicles and the private vehicles of the inhabitants.All new vehicles registered here are now ex-clusively electric vehicles.At the same time,an extensive network of private and public charging stations is being set up.The all-electric vehicle-sharing service astyGO and the ride-sharing service ASTYBUS have been launched.Unlike the previous bus system,ASTYBUS operates the whole year and can call at all the hot spots on the island.In the first year of operation since June 2022,it has completed more than 200,000 customer kilometers,and a fourth of the inhabitants use the service regularly.E-cars,e-scooters and e-bikes make up the vehicle-sharing service.Bookings are made by smart phone using the integrated astyMOVE app.The results of an independent,accompanying scientific study show a high level of approval from the people of Astypalea:In general,80%see the transformation positively and ASTYBUS even has an approval rating of 97%.The energy system of Astypalea will also be gradually converted to solar and wind energy under the leadership of the Hellenic Republic:In 2024,the existing solar park will be expanded to an output of 3.5 MW and a storage battery will be added to not just supply the e-vehicles with green energy but also cover up to 60%of the islands entire energy needs with renewable energy.Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 30Strategic Stakeholder ManagementOur stakeholders are individuals,groups or organizations who have a material influence on or are materially influenced by the way in which the Group reaches its corporate decisions and the implications of those decisions.Our employees and customers are at the center of our stakeholder network.Inaddition,we have identified eight further groups.Continuous communication between internal and external stakeholder groups is important to us.In this context,the Supervisory Board and the Works Council act not only as supervisory and advisory bodies but also as interfaces between internal and external stakeholders.Stakeholder ManagementVolkswagen Group StakeholdersGRI 2-29 Policymakers and associationsBusiness partners and suppliersCompetitorsAcademics and expertsResidents and local authoritiesNGOs/non-profit organizationsVolkswagen GroupWORKS COUNCILSUPER VISORY BOARDCUSTOMERSEMPLOYEES123MediaOwners,investors and analysts Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 31For us,stakeholder management means interacting with the Companys key stakeholder groups systematically and con-tinuously as part of the Group initiative with the focus topics of ESG performance,decarbonization and integrity,which is part of the NEW AUTO Group strategy.Our aim is open,con-structive and also critical communication with the stakeholder groups listed in the diagram about their requirements and ex-pectations of us,as well as central issues of our Group strategy and its implementation.Our brands and regions have their own stakeholder management strategies.The Groups task is to bring together and orchestrate these activities in an inte-grated framework.This framework includes:Stakeholder engagement on a Group level with specific committees,formats and a focus on stakeholders relevant across the Group Advising and coordinating the brands and regions on the implementation of their stakeholder engagement activities Carrying out regular stakeholder analyses and stakeholder surveysStakeholder management is one of the core processes of sus-tainability management in the Group.Tasks,responsibilities and organization are set out in the Group policy on sustain-ability management.Sustainability ManagementAs an international group,our business activities impact the lives of a large number of different people.Appropriately aligned stakeholder management is essential so as to determine the sustainability strategys material areas for action and become aware of stakeholders changing expectations of us at an early stage.It also involves continuously informing andregularly communicating with all business areas.This communication not only helps us to identify our stakeholders requirements,it also plays a key role in achieving corporate goals and complying with reporting standards and legal requirements.The transformation of the Volkswagen Group from a vehicle manufacturer to a world-leading,software-driven mobility provider is being expanded through new areas of expertise such as autonomous driving,battery technology,charging in-frastructure and energy services.This changes the range of relevant stakeholder groups and their expectations and re-quirements of the Group.Here,too,our aim is to take all stake-holders into consideration equally.We want to inform them in a way appropriate to the target audience,actively involve them in the transformation process by requesting and encouraging their feedback and suggestions for the sustainable develop-ment of our Group and society.Our aim is to position our Group robustly for the future amid ever faster and more strongly changing economic,environmental and social framework conditions and sustainably improve its acceptance and repu-tation.The Volkswagen Group is a player in numerous networks of experts and decision-makers who have a significant influence on our business and the agenda in the sociopolitical environ-ment.An overview of the Groups most important member-ships is available online.www.volkswagen- MembershipsReputation KPI Measures Stakeholder TrustThe reputation key performance indicator(KPI)makes a decisive contribution to anchoring stakeholder management in the sustainability strategy.The indicator reflects the degree to which external stakeholders trust the Volkswagen Group.Since 2017,we have asked annually for an assessment of the Volkswagen Groups reputation.Eliciting this KPI enables a holistic view of attitudes and opinions on the Group and allows us to identify whether and how evaluations change over the course of time.The Audi,Porsche and Volkswagen Passenger Cars brands are consistently represented in the survey.The survey data are based on personal telephone interviews conducted with rep-resentatives of importance to the Volkswagen Group from the fields of politics and associations,media,academia,NGOs,investors and analysts and also business partners.Fundamen-tally,representatives of the highest possible decision-making level are surveyed in all the stakeholder groups.In Germany,the 2023 reputation KPI for the Volkswagen Group is 83%.GRI 2-28,2-29 Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 32From 2017 through 2022,the survey was conducted in the three markets of Germany,China and the USA.Due to the homogeneous competitive environment,there were no sig-nificant changes in the results in the USA or China in the past few years from which we were able to derive important impetus for action for the markets.This particularly applies to China,where,since the start of the study,the Volkswagen Group has gained and held the top position.The situation is different in Germany,where the competitive environment is becoming increasingly varied and thus more challenging due to international competitors.As one of the Groups most important and sensitive core markets,closely monitoring the market is vital here for future decisions and activities.For this reason,the 2023 survey was only conducted in Germany.Additional open questions were added to the reputation study in 2023.The aim was to proactively obtain individual feedback from stakeholders by these means in order to be able to identify and validate requirements and expectations even more specifically and include these in future decision-making processes.The Group obtained the following results in 2023:83%of stakeholders in Germany stated that they trust the Volkswagen Group(2022:78%).The reputation KPI thus improved sig-nificantly compared with 2022.In contrast to the previous years results,this is not in line with the overall competitive environment in Germany and is partly due to stable business performance despite the economically and politically chal-lenging situation.A fundamental revision and realignment of the study is planned for 2024 in line with the changing eco-nomic,social and regulatory framework conditions.Stakeholder Panel as a Critical CompanionThe Volkswagen Group has also established a Stakeholder Panel,which has now overseen the Group sustainability ac-tivities for over 20 years.The whole panel(Germany/Austria/Switzerland;EU)currently comprises more than 200 institu-tions and organizations.In 2023,the Volkswagen Group started to develop a systematic analysis process for stake-holders,which is to be implemented in 2024.Following the interruption caused by the pandemic in 2020 and 2021 and the resumption of our communication activities in 2022,we started to restructure and redesign our stakeholder manage-ment in the reporting year.We want to incorporate our stakeholders suggestions and recommendations even better in the future through the introduction of new formats in-tended to create the opportunity for even more interactive and transparent communication on important sustainability issues relevant to corporate strategy and society.GRI 2-29 Table of Contents The Groups DNA|Decarbonization|Circular Economy|People in the Transformation|Diversity|Integrity and Compliance|Supply Chain and Human Rights 33Consistent Compliance with Environmental RequirementsCompliance with environmental laws and requirements at all our sites is a high priority for Volkswagen.Our effective environmental compliance management is intended to ensure that we not only meet legal requirements but also the re-quirements of other internal or external stakeholders.At the same time,it allows us to live up to our binding commitments on environmental matters and compliant behavior.The envi-ronmental compliance management system is,in particular,a risk provision against breaches of regulations that may be associated with damage to the environment,our Group and society.It helps us to continuously improve our environmental performance and reduce our environmental impact.One of the focuses of the NEW AUTO Group strategy is the Groups ESG performance.In environmental protection,de-carbonization and circular economy are the focus issues.At the same time,the environmental compatibility of our prod-ucts,services and processes is one of our Group Essentials.With electric drives,digital connectivity and autonomous driving,we want to make the car cleaner,more intelligent,quieter and safer.We use our innovative power in order to reduce our environmental footprint over the entire life cycle Environmental Compliance Managementof our products and mobility solutions.Our innovations are at the same time intended to help our customers to be more environmentally friendly.The goTOzero Mission Statement:Minimization of Negative Effects on the EnvironmentThe goTOzero environmental mission statement serves as the framework for all the Volkswagen Groups environmental activities.With this mission statement,we aspire to reduce environmental impact along the entire life cycle from raw material extraction until end-of-life for all our products and mobility solutions in order to keep ecosystems intact.Compliance with environmental regulations,standards and voluntary commitments is a basic prerequisite of our actions.The Group mission statement combines all strategic and compliance-related aspects of the Groups environmental activities and forms the basis for linking targets,key perfor-mance indicators,programs and measures.The mission statement is continuously reviewed,and its objectives are adjusted to new requirements and changes in conditions.The mission statement puts the Groups focus on the four fields for action presented in the diagram below and their underlying objectives.goTOzero Environmental Mission Statement:Action AreasPROTECTINGthe climateWe are committed to the Paris Climate Agreement and aim for an ambition level of 1.5 degrees Celsius.We systematically focus on the electrification of our products,decarbon
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1 Copyright 2024 JAGGAER All Rights Reserved2023 Environmental,Social&Governance Impact Report2 Copyright 2024 JAGGAER All Rights ReservedContentForward from the CEO 32023 Highlights 4JAGGAER Overview 5Embedding ESG 6Mission,Vision&Values 7Our ESG Corporate Governance 8External Validation of JAGGAER Sustainability Performance 9Materiality Assessment 10JAGGAER as an ESG Exemplar 11Environmental Impact 12Social Impact 18Corporate Governance 26Customer Success Stories 40Looking Ahead to 2024 433 Copyright 2024 JAGGAER All Rights ReservedImageForward from the CEO“Considering global supply chain challenges and economic uncertainty,JAGGAER is exceeding traditional procurement expectations by leveraging ESG principles.Im thrilled to help lead the digital transformation in source-to-pay processes for JAGGAERs thousands of global customers and partners.Our latest ESG Impact Report sets out how we have further enhanced our best-in-class ESG offering for customers,created an engaging environment for our talent,and established ambitious environmental targets in 2023.”Andy Hovancik,Chief Executive OfficerAs Leaders in Autonomous Commerce-we are embedding ESG in procurement.This is our third Environmental,Social and Governance Impact Report,that outlines how ESG forms an integral part of our Autonomous Commerce journey.3 Copyright 2024 JAGGAER All Rights Reserved4 Copyright 2024 JAGGAER All Rights Reserved2023 Highlights2023 Emissions figuresScience Based Target Initiative(SBTi)on trackIncrease in Volunteering UptakeAward:Best-In-Class Employer Award for North AmericaEcoVadis CertificatesUpdated Information Security Policy,including responsible AIUN GC Signatory5 Copyright 2024 JAGGAER All Rights ReservedJAGGAER OverviewJAGGAER Facts and FiguresAmericasAPACEMEAAt JAGGAER,we are transforming the way businesses conduct enterprise commerce.We streamline the experience between buyers,suppliers,and partners.As leaders in the Autonomous Commerce revolution,we have embedded ESG best practices in our operations,products and services.Autonomous Commerce is a journey a transformation from tactical purchasing to an automated self-governing B2B commerce experience.We have a clear plan to evolve our platform into a self-governing community where talented workforce can focus on high value,strategic work,such as ensuring that ESG criteria are always automatically built into sourcing,supplier management and purchasing decisions.Procurement that works for you,your budget,and the planet1,200Global Employees$2.8T Annual Spend Management 1,400 Customers with Average Tenure 6 Years 13MSuppliers on Platform4MUsers on Platform 28Years in Business6 Copyright 2024 JAGGAER All Rights ReservedEmbedding ESGThe Commitment from our Shareholder,CinvenOur shareholder,Cinven,is a signatory to the United Nations Principles for Responsible Investment(UNPRI).Cinven sets high expectations with respect to ESG for its portfolio companies,and at JAGGAER we aim to uphold best practices and follow guidelines set by Cinven when it comes to our ESG approach,as demonstrated by the efforts outlined in this report.When sourcing and assessing prospective investment opportunities,and subsequently during its funds ownership period,Cinven seeks to invest in,and build,businesses that are:Mitigating and adapting to climate change Ensuring the efficient and sustainable use of resources Following responsible production and consumption practices Embedding inclusion and diversity into their strategy and operations Upholding best-in-class moral,ethical,governance and labor standardsThis report outlines JAGGAERs progress on its ESG practices.While pursuing and continuously developing our ESG practices,we have the full support and encouragement of Cinven.7 Copyright 2024 JAGGAER All Rights ReservedMission,Vision&ValuesMission“We are leaders in Autonomous Commerce driving customer value for buyers and sellers through our globally connected network.”At JAGGAER,we create efficient and effective procurement.We drive sustainable procurement from sourcing goods and services,through to payment.By simplifying and streamlining procurement,JAGGAER is enabling and supporting customers and stakeholders in the pursuit of ESG objectives.VisionOur portfolio of solutions provides customers and partners with the most intelligent,transparent,and frictionless commerce in the markets they serve making us an ESG enabler.ValuesBe CollaborativeBe AccountableBe Adaptable8 Copyright 2024 JAGGAER All Rights ReservedOur ESG Corporate GovernanceJAGGER has a fully developed ESG Governance structure.Our Global ESG Manager is responsible for the development,execution,and continuous improvement of our ESG strategy and initiatives,as well as for engaging with our key internal and external stakeholders.The ESG Taskforce is made up of our senior management committee,chaired by the Global ESG Manager.The Taskforce provides senior management oversight and drives continuous improvement towards ESG initiatives.The Taskforce has regular bi-monthly meetings reviewing Ethics,Labor&Human Rights,Sustainable Procurement,Environment and Product ESG topics.Our CFO is our Executive ESG Sponsor,overseeing global ESG strategy and reporting to the CEO.He collaborates with the Executive Leadership Team,ESG Taskforce and ESG Manager to establish and implement initiatives.Under the CEOs direction,the company undertakes initiatives to protect the environment,enhance social practices,and maintain ethical standards in our operations,as well as promoting good ESG practices for our customers through our products and services.In 2022,the Board of Directors created an ESG Committee to oversee our program and assist the Board in accountability for our strategy.The committee consists of at least three directors appointed by the Board and meets quarterly,chaired by a non-executive director.Board of DirectorsESG CommitteeCEOExecutive ESG SponsorESG TaskforceGlobal ESG Manager“We all recognize that ESG is a journey,not a destination,and JAGGAER has demonstrated both progress and determination in meeting specific targets over the course of the past year.JAGGAER has been living and breathing the cultural value to be adaptable by embracing changing customer demands,regulations,and expectations for innovation with products,partners,and processes.”-Jeff Laborde,Chief Financial Officer and ESG Sponsor 9 Copyright 2024 JAGGAER All Rights ReservedExternal Validation of JAGGAER Sustainability PerformanceOutside of our own governance structure,JAGGAER also relies on independent third-party assessments.EcoVadis1 is one of the most trusted independent corporate sustainability rating providers,used by over 90,000 companies worldwide to measure their absolute and relative sustainability performance across four key pillars:Environment,Ethics,Labor&Human Rights,and Sustainable Procurement.The EcoVadis platform is also useful for benchmarking our performance against other companies.At JAGGAER we regularly review our sustainability performance in the industry,and in 2023 we were awarded a Silver Medal for our overall sustainability rating,putting us in the top 9%of the Data processing,hosting,and related activities industry,and the top 20%of all companies EcoVadis rated in that year.Our highest score was in the sustainable procurement section,coming out in the top 6%of all companies undergoing assessment in the same industry.The improvement from a 2022 Bronze Rating to the 2023 Silver Medal validates our commitment to building and improving our sustainability practices.JAGGAER France undertook their own EcoVadis assessment at a local level and also received a Silver Medal in 2023.For the second year in a row in 2023,JAGGAER was named Best in Class Employer by Gallagher,a global insurance brokerage,risk management and consulting service.The award was given based on our strategic investment in employee benefits,compensation,retirement,and employee communication.1 https:/ Copyright 2024 JAGGAER All Rights ReservedMateriality AssessmentJAGGAER is focused on the environmental,social and governance topics where we have the biggest impact,and those that hold the greatest importance to our internal and external stakeholders.This process involves undertaking a materiality assessment every two years,or when there is a material operational change,to define the topics that matter most to our organization and our stakeholders.These topics then serve as a foundation for alignment of a successful ESG strategy with JAGGAERs long-term growth priorities.In 2023,we reviewed our material ESG topics and found that they remained the most material and relevant to our business.In 2024,we plan to undertake a double materiality assessment.This will provide more comprehensive insights into the organizations outward influence on society and the environment,as well as how the environment and society impact the organization as a whole from finance to customer engagement and from supply chains to future growth.Matrix of material topics from internal assessment 11 Copyright 2024 JAGGAER All Rights ReservedJAGGAER as an ESG Exemplar“ESG is a journey,and not a destination.”We are proud to call ourselves ESG enablers,but we cannot be enablers without being an exemplar first.Our holistic approach to ESG topics considers not only our own impact on society and the environment but the impact of our customers and vendors.Underpinning our ESG Principles are the UN Sustainable Development Goals.We have identified the goals that most align with our core values and ESG strategy:JAGGAER Principles:Principle 1:Equality We aim to eliminate all forms of discrimination based on gender,nationality,race,disability,age,religion,political affiliation or sexual orientation.SDG 5,10Principle 2:Diversity and Inclusion We aim for our company to be highly inclusive,open,and welcoming to all people and take the positive steps necessary to help drive towards this.SDG 5,10Principle 3:Respect of Human RightsWe respect the human rights of our employees and those people working for our partners and suppliers,including the right to a private and family life.SDG 3,5,8,10Principle 4:Climate Action We act responsibly with respect to the environment,our impact on the climate and the use of natural resources.SDG 12,13Principle 5:ComplianceWe comply with the letter and the spirit of the law,wherever it applies.SDG 8Principle 6:Adequate Corporate GovernanceWe train our employees to be mindful of governance issues such as bribery,aiming to maintain the highest ethical standards in all our business dealings.SDG 8Principle 7:Continuous ImprovementWe recognize that ESG is a journey and not a destination,and we actively monitor industry guidelines and best practices in the spirit of continuous improvement.SDG 8We are signatories of the United Nations Global Compact(UNGC)and use their guiding principles to implement universal sustainability principles across our operations and across our global footprint.Also,we will be reporting on our progress against the ten universal principles of UNGC,covering human rights,labor,environment,and anti-corruption.2 Additionally,the UN Sustainable Development Goals,which have been included in each section of this report,underpin our approach to tracking JAGGAERs progress in ESG.2 https:/unglobalcompact.org/what-is-gc/mission/principles12 Copyright 2024 JAGGAER All Rights ReservedEnvironmental ImpactGreenhouse Gas(GHG)EmissionsDuring 2023 we had our carbon reduction targets verified by the Science-based Targets Initiative(SBTi),which led to the establishment of JAGGAERs new Plan Zero ambition and targets-further elaborated within this section.The nature of our operations as a software development company is not as carbon intensive as manufacturing,travel or some other industries.Nonetheless,we believe as a responsible business that we should take action to reduce our direct and indirect emissions.We measure ourselves against an established GHG emissions calculation methodology based on the Greenhouse Gas Protocol a globally recognized carbon accounting standard.We have been calculating our Scope 1,Scope 2 and Scope 3 GHG Emissions since 2021,and where possible,we use actual or activity-based data.If that data is unavailable,we opt for spend-based data.Our total GHG emissions in 2023 were 8,699 tonnes CO2e.The majority of emissions come from Scope 3(92%)while Scope 1 and Scope 2 emissions account for 3%and 5%respectivelyJAGGAER 2023 GHG Emissions by Scope-tCO2eOur calculations include the following categories within each emissions scope:81%Scope 33Scope 1 Company owned cars Fuels Refrigerant and fugitive emissionsScope 23 These are all upstream activities that create our Scope 3 indirect GHG emissions.Electricity consumed by all offices in 2023 Purchased goods&services Capital goods Fuel-and energy-related activities Waste generated in operations Business travel Employee commuting13 Copyright 2024 JAGGAER All Rights ReservedEmissions202320222021Scope 1 227444400Scope 2 424948503Scope 38,04810,98113,322Total GHG Emissions 8,69912,37314,224Year-on-year GHG Emissions4(in tonnes of CO2e)202320222021Energy consumption-electricity&heating(MWh)1,2242,5891,699Energy intensity-carbon (CO2e per employee)0.350.740.48Energy intensity electricity&heating(MWh per employee)12.031.5We are proud to have been able to reduce our Scope 1,Scope 2 and Scope 3 GHG Emissions,and remain on track to meet our SBTi targets.We have achieved a 28%reduction in overall Scope 1 and Scope 2 emissions compared to 2021.5Furthermore,we reduced our Scope 3 emissions our largest emissions category by 40%compared to our 2021 baseline.This is partly due to the migration of our services to a third-party cloud-based hosting infrastructure provider,Amazon Web Services(AWS),which is expected to be 100%powered via renewable energy by 2025.With Scope 3 forming such a large part of our overall emissions,it is important that we take ownership of engaging with suppliers and vendors for accurate data where we can.Working with AWS means we can use actual data rather than the spend-based data used for previous calculations.We also developed a Plan Zero that is now coming into effect in order to keep reducing overall carbon footprint.(see pg.15 of this report)4 Location based method was used for Scope 2.Recalculations for 2022 data were made due to changes in methodology.The increase in Scope 2 Emissions in 2022 is mainly due to the reopening of our Morrisville office in 2022.5 Part of the drop in Scope 1 emissions in 2023 is due to more accurate input data compared to 2022.Scope 2 emissions are due to the reduction and/or closure of our offices in the US.14 Copyright 2024 JAGGAER All Rights ReservedScience-Based Targets InitiativeIn 2023 our science-based GHG reduction targets were verified by the Science-Based Targets Initiative(SBTi),and we are now communicating our progress against those targets.The SBTi is a global initiative that defines and promotes the best-practice target setting for emissions reductions and net zero pathways,in line with the latest scientific recommendations and the Paris Agreement.6 With our reduction targets now verified by the SBTi,we are happy to share that we are currently on track to meet our near-term and long-term targets overall.More progress is to be made in 2024,with Plan Zero in effect and addressing Scope 1,Scope 2 and Scope 3 emissions.6 https:/sciencebasedtargets.org/target-dashboard15 Copyright 2024 JAGGAER All Rights ReservedPlan ZeroIn 2023,we set our ambitions on becoming net zero by 2040,with the near and long-term targets laid out below.This was the crucial prerequisite required to implement Plan Zero effectively.Now,with targets externally verified and more reliable data on-hand,we can focus resources on reducing our largest sources of emissionsPlan Zero Key Focus AreasBaseline Year42%reduction in absoluteScope 1 and Scope 2 GHG emissions42%reduction in absolute Scope 3 emissions90%reduction in absolute Scope 1 and Scope 2 GHG emissions90%reduction in absolute Scope 3 emissionsProcuring renewable electricity for officesLower emissions company fleetEngaging with suppliers and vendorsMindful business travel16 Copyright 2024 JAGGAER All Rights ReservedWater,Waste and Air PollutionAs we are not a manufacturing company our impact on the environment regarding water use,waste generation and air pollution is limited.Nonetheless,we are committed to a responsible use of natural resources and aim to reduce the potential negative impact of our operations on the environment.Our water consumption comes only from our office spaces.In 2023 we used 6,305 cubic meters of water in our offices.Our goal is to achieve a 10%reduction of total water consumption by 2030 from a 2023 baseline.We aim to conduct a detailed assessment of 100%of our company car fleet by 2026 assessing the potential of using more hybrid and electric vehicles,as well as reducing our overall fleet.Given that our only contribution to air pollution is from company cars and air travel we aim to reduce NOx emissions from company cars by 15%by 2030 compared to 2023.Our emissions of NOx in 2023 amount to 6.7 tons of NOx.Total waste generated in our operations in 2023 is 11.5 tonnes.By 2030 we aim to cover 100%of operational sites with waste sorting measures.Furthermore,we aim to reduce the amount of waste generated in our operations by 10%by 2030 from a 2023 baseline.Sustainable Office SpacesWe are proud that our Belgrade office has a LEED Gold Certification,a prestigious recognition awarded to buildings that meet high standards for environmental sustainability and energy efficiency.Our Belgrade and Madrid offices also have a WELL Health and Safety Certification,which acknowledges the rigorous health and safety standards of these buildings.Our Vienna office has a BREEAM certification at the Outstanding level,the highest level of sustainability when it comes to BREEAM Certificates.Furthermore,it has 100%green electricity,Class A energy-efficiency,green facades,and green rental agreements.We have an ISO9000 Certification in place that covers 75%of all our operational sites.17Partnering to Restore EcosystemsOur partnership with ReforestAction7 supports the regeneration of terrestrial ecosystems across the globe.Our annual financial contribution to the project has helped restore ecosystems in Spain,Indonesia,Tanzania,France,South Africa,and Peru.Since 2019,the planting of over 9,000 trees equates to the following environmental and social benefits:7 https:/ Copyright 2024 JAGGAER All Rights Reserved1,373.436.6429.15627.468tons of CO2 stored in 30 yearsmonths of oxygen generatedhours of workshelters for animals created18 Copyright 2024 JAGGAER All Rights ReservedSocial ImpactA diverse,equitable and inclusive workplace helps us to better serve our customers and partners,resulting in more positive impact from JAGGAERs products and services.A culture based on mutual respect is essential to drive value through our globally connected network.In 2023,we launched a dedicated DE&I project team to assess diversity across the business and across our networks,and work on an action plan to continuously improve.We are committed to maintaining a diverse,inclusive,and equitable working environment for our employees.Our internal policies and practices reflect the principles of the United Nations Global Compact,meaning employment opportunities are equal to all,with no difference in treatment regardless of any protected human characteristic.8 Our core values of being collaborative and fostering a culture of mutual accountability with others underpin our approach to employee wellbeing,diversity,and community engagement.“DE&I has a significant impact on our business success,as a diverse workforce with different perspectives and experiences can contribute to solving complex problems.In addition,a diverse and inclusive environment creates a sense of belonging among employees and makes them feel more engaged and connected to JAGGAER.”-Mora Balsan(HR Manager France&Benelux),leader of the global DE&I project8 As defined by The Equality Act 2010,protected characteristics include:age,gender reassignment,being married or in a civil partnership,being pregnant or on maternity leave,disability,race including colour,nationality,ethnic or national origin,religion or belief,sex,and sexual orientation.Diversity,Equity,and Inclusion(DE&I)19 Copyright 2024 JAGGAER All Rights ReservedGlobal workforce diversity targetsOur global workforce diversity targets are:Achieve at least 20%of female participation in Board structure until 2030.Achieve at least 30%of female participation the ELT,management,and overall employees by 2030.9JAGGAER strives to maximize all diversity types,and while there is always room for improvement,we are proud to be leading the way and exceeding our targets with 42%of the company-wide workforce being female.At JAGGAER,we strongly feel that diversity in the workplace is key to unlocking creativity and innovation across all functions.In 2023,our HR team created metrics to measure the progress of our DE&I goals year-on-year.We are proud to disclose the following KPIs for 2023 which demonstrate our commitments to gender equity across multiple leadership levels,and cultural and generational diversity:An Inclusive WorkplaceGlobal InitiativesA global Womens Network:uniting women,men and non-binary allies across diverse roles,levels,locations,and cultures willing to support and empower the women of JAGGAER.Yearly celebration of International Womens Day across all our offices worldwide with the JAGGAER team coming together to mark the event with breakfasts,team lunches,insightful roundtables,and discussions.Flexible/hybrid working policy:we take pride in doing things the other way around.While many companies may be slowly returning to office-working we stand firm in our commitment to our trust-based,flexible working culture.In particular,we believe this flexibility is key to supporting working parents in finding the right balance between work and personal life.In addition to our strong remote work culture,in 2023 we launched a Working from Abroad Policy enabling employees to reconcile work and family/personal needs.Mandatory online anti-harassment and bullying trainings for all employees:Harassment and bullying threaten a respectful workplace.This course provides instruction on ways that individuals can help prevent harassment and bullying or respond to this conduct if it occurs.It also addresses retaliation against individuals who report improper conduct or assist in an investigation.Providing a supportive work culture during Maternity and Paternity leave:At JAGGAER,we value working parents as key to our overall company success and support new parents returning from parental leaves to reengage with their roles.We are proud of JAGGAERs numerous success stories of employees being promoted or evolving to a new role just before or after such leaves.Nationalities among our global workforceWomen in Management positionsWomen in Executive Leadership TeamGenerations in the workplaceWomen in our global workforceMetrics are from July 2023.8 These targets were set in 2021,and as we have already achieved them,we will review these targets next year.20 Copyright 2024 JAGGAER All Rights ReservedLocal InitiativesOur local HR teams are committed to fostering an inclusive workplace for all and especially for women,LGBTQ ,parents,mentally/physically challenged employees,and people from different cultural background and age generations.A sample of regional DE&I activities includes:Women Inclusion In 2023,we hired another woman onto the Executive Leadership team,bringing the gender equity at ELT(Executive Leadership Team)level to 43%.In 2023,in collaboration with its Works Council and with the Trade Unions,JAGGAER Spain has launched its first Gender Equality Plan with a set of concrete actions to ensure a fair work environment.LGBTQ Inclusion In the UK,our Gender Reassignment Policy advocates that transgender job applicants and employees are not required to inform us of their gender status or gender history.The gender in which an individual chooses to present will always be acknowledged and respected.We commit to promoting a workplace that is inclusive of transgender people.Inclusion of People with Disabilities In Italy,4%of our employees are living with mental and physical disabilities.We are proud to recognize their critical contributions to JAGGAERs success.In France,we prioritize the hiring of contractors living with mental disabilities for gardening and catering services.Parent Inclusion In Serbia,to support our employees juggling work and parenting,we grant a day off on the first day of school,reduce working hours during the first month back from maternity leave and offer 10 days of parental leave to fathers.In India,JAGGAER goes beyond local legal requirements and entitles every male-employee with 3 days off at each childs birth.Cultural Diversity Inclusion:As a company present on several continents and in multiple countries with over 20 different nationalities coexisting harmoniously,we celebrate our various communities throughout the year with festive events that promote inclusivity.21 Copyright 2024 JAGGAER All Rights ReservedEmployee Health and SafetyWorking Conditions and Labor RelationsJAGGAER gives the outmost priority to employee health and safety and has several policies around employee health and safety.63%of employees are covered by workplace risk assessments.10 We aim to achieve a 50%coverage of employees that receive annual health and safety training by 2030.Our employees work 35 to 40 hours over five days a week.We also offer employees part-time contracts.Employees who work in shifts are reimbursed for night shifts work.In 2023 we didnt have any work-related accidents.Our goal is to cover 60%of our employees with living wage analysis by 2026.JAGGAER aims to engage yearly with all employees in the Global Employee Engagement Survey.Our goal is to keep the 100%coverage by the Global Employee Engagement Survey by 2030.11Furthermore,all new hires in JAGGAER have a 90-day feedback survey.100%of our operational sites in countries that require collective bargaining agreements are covered by collective bargaining agreements.100%of our operational sites are aligned with local regulations regarding labor and human rights.10 Percentage calculated based on the number of employees that work from JAGGAER offices.11 Excluding New Hires who joined less than 60 days prior to the survey,as they are coved by the New Hire Survey.1234522 Copyright 2024 JAGGAER All Rights ReservedCareer ManagementDiversification of our Supply Chain100%of our employees have access to over 300 courses in JAGGAER University.Courses cover different topics around the features of our products as well as sales enablement.Our goal is to achieve a 20%increase in the average training hours per employee by 2030 compared to 2023.100%of our employees receive formal performance evaluation and feedback at least annually,as attested by an independent third party in the Type 2 SOC 2 Report.We aim to keep independently attested 100%coverage of employees that receive formal performance evaluation and feedback at least annually by 2030.As part of our sustainability commitment and our dedication to promoting good working conditions and respecting human rights,we have initiated screening evaluations across our supply chain.This process allows us to assess the social performance of our vendors,ensuring alignment with our values.In 2022,we introduced a new questionnaire for our vendors that encompasses social criteria,and 100%of our new suppliers now undergo a diversity screening as part of our onboarding process.123423 Copyright 2024 JAGGAER All Rights ReservedWe invest in company-wide benefits,which vary by location,to help reinforce a strong organizational culture and a healthy employee population.JAGGAER has maintained the hybrid working set-up that evolved after the COVID-19 pandemic,with employees across the business valuing the flexibility and work-life balance benefits that hybrid working offers.Also,we make our office days count with weekly breakfasts,drinks,regional townhalls,in person onboarding and socials to keep everyone connected.In 2023,all regions held employee wellbeing programs,workshops,and team days,and in most offices,fruit is delivered to foster a healthier lifestyle.The UK,Ireland and Nordics regions have kicked off a Mental Health&Wellbeing platform,driven by employee feedback and led by volunteers from different functions as Wellbeing Ambassadors.They come together once a month to plan and execute the regions wellbeing agenda and they get an extra day off each year for their contributions to employee wellbeing.The region also has a formal charity partner,the Switch,to contribute to a shared cause together.Meanwhile,employees in the US had access to non-mandatory learning events covering a range of topics related to health,wellbeing,personal finances,and company socials.In 2024 we plan to implement a new global wellbeing strategy and policy.To ensure that we are offering the appropriate initiatives,as of the date of this report in 2024 we have concluded a global employee survey to help shape our go-forward global wellbeing strategy and inform our key focus areas.Employee Wellbeing24JAGGAER 2023 Global Wellbeing InitiativesEurope&UK12 Wellbeing workshops Charity:Donations for kids without parental care,and fundraising for children living with mental,physical and emotional difficulties Physical exercise:Monthly group physical activities“JAGGAER in Motion”Mental health workshops Recognition:Seniority awards and Rockstar celebration Physical exercise:Yoga activities Social interaction:Monthly afterwork events,Summer&Christmas partiesUAE/KSA:Social interaction:Office breakfast,In-office entertainment room Wellbeing workshops Partnership with mental health support providersIndia:Social interaction:team gathering activity in December Wellbeing workshopsUS:Wellness Challenges Walk for Mental Health Month Regular wellbeing webinars Several local social events(BoxCar event,Christmas party etc.)12 This is a summary of JAGGAER initiatives across our European offices covering:Spain,Italy,Serbia,France,Netherlands,UK and the DACH region.Copyright 2024 JAGGAER All Rights Reserved25 Copyright 2024 JAGGAER All Rights ReservedInvesting in employee well-being,learning and development is an essential component to boost productivity and shared team successes.We adopt a proactive and structured approach to planning,developing,and implementing comprehensive benefits,training,and HR programs.Additional training programs offered to employees in 2023 included:Leadership coaching Language courses Project management courses Negotiation training Sales psychology training Our commitment to supporting ongoing improvements in employee well-being and building a resilient culture has been recognized for the second year in a row.JAGGAER(North America)was named a 2023 Gallagher Best-in-Class Employer.Working effectively and productively with others represents a material part of our collaborative values.By engaging with the wider community,we can,as an organization,empathize from a broad range of perspectives,maximizing the positive impact that we can have.Community EngagementEvery JAGGAER employee is offered two days of paid volunteering time each year.In 2023,we saw an increase in uptake of 156ross the organization.This equals just over 300 hours of time given back to local communities across our country locations.In addition to volunteering time,several offices dedicate time and resources to specific local community engagement initiatives.Specific examples to note in 2023:Spain:toy collection for disadvantaged children Serbia:donations for orphaned children France:career planning and support for teenagers UK:fundraising for children living with mental and physical disabilities,and partnership with educational charity,Switch26 Copyright 2024 JAGGAER All Rights ReservedCorporate GovernanceAt JAGGAER we put a strong emphasis on being clear and open about how we do business,our ethical practices and policies and how we manage data.Code of ConductJAGGAERs Code of Conduct embodies our shared values collaboration,accountability,and adaptability.It provides our employees,stakeholders,and partners with a globally recognized framework to operate ethically within their respective jurisdictions.The Third-Party Code of Conduct applies to organizations of any type,including channel partners,suppliers,and consultants,working with JAGGAER.It is expected,from the very start of any relationship,that our Third-Party Code of Conduct is adhered to and engaged with.The expectation is that third parties are responsible for maintaining compliance with the standards laid out by their employees,workers,representatives,suppliers,and sub-contractors.Anti-corruptionAll JAGGAER employees receive regular,mandatory anti-corruption training relevant to their role.This training includes how to speak up about potential conflicts of interest,enabling the identification of potential risks well in advance of business disruption.Our core values embody this,with accountability being central to the way in which we always do business.Employees receive training on corruption and bribery prevention and are asked to review the Code of Conduct each year.We are strongly committed to doing business fairly,and equitably.All partners,vendors and suppliers are selected solely on their merits,and we adhere to the strictest anti-bribery and anti-corruption standards.This includes adherence to the Foreign Corrupt Practices Act(FCPA)and the UK Bribery Act.27 Copyright 2024 JAGGAER All Rights ReservedAgainst All Forms of Modern Slavery At JAGGAER we take the risks of potential modern slavery very seriously.We have a commitment to all relevant laws regarding modern slavery,such as the UK Modern Slavery Act of 2015.We regularly review and publish our Modern Slavery Statement on our website.Adhering to these minimizes the chance of risks,fines or scandals happening.Our ESG sourcing questionnaire has helped us to increase the visibility of our supply chain,and we are committed to the further enhancement of our supply chain screening this further.Our commitment to avoiding modern slavery is also laid out in the Third-Party Code of Conduct,meaning that all third parties are required to have the same level of commitment.The commitment includes validating the following:All third-party vendors must observe applicable laws and regulations concerning fair wages,hours,recruitment and employment contracts.Compliance with all applicable environmental,health&safety laws and regulations to provide safe and healthy working conditions that have no adverse effect on local communities.Respecting human rights throughout business operations,prohibiting employment of individuals under 16,and preventing any form of worker abuse.Reporting FacilityAs part of our Code of Conduct,JAGGAER employees have a duty to report concerns about any potential violations of laws,policies,or misconduct otherwise known as Integrity Concerns.If an employee feels that they cannot share their concern with a supervisor or manager,there are other options available.By agreeing to the Code of Conduct,employees are aware of the steps that need to be taken to share any concerns.Employees also have the option to go external should they feel more comfortable doing so.The Lighthouse service is an independent third-party reporting service that allows employees to make an anonymous comment 24-hours a day,in every jurisdiction where JAGGAER operates.28 Copyright 2024 JAGGAER All Rights ReservedData Privacy&Information Security As a data processor,JAGGAER has implemented technical and organizational measures that provide the appropriate level of security required by both local legal requirements and JAGGAERs constituent contractual requirements.All JAGGAER employees undergo regular mandatory data privacy and information security training,and we are continuously working to strengthen our operational,product and IT security.In 2023,we were able to reinforce security measures even further by consolidating our customer-facing services onto Amazon Web Services.13 We regularly review legal and regulatory frameworks with data protection across the globe,to ensure that we are continuously meeting all applicable standards across the countries in which we operate.JAGGAER takes the protection of personal data very seriously.Data protection is enshrined in law,the European Unions General Data Protection Regulation(GDPR)being one of the most widely recognized.We aim to collect only the necessary amount of data.Since the publication of GDPR regulations,JAGGAER has proactively assisted customers in understanding their responsibilities as data controllers.As a data processor,JAGGAER has implemented technical and organizational measures to provide the appropriate level of security based on the risk.Any new products undergo a privacy impact assessment at the early design stages to support our privacy-by-default posture.The privacy and data security of our customers,suppliers,partners,and other stakeholders is always protected with the utmost importance.We do this by code analysis,systems architecture reviews,vulnerability management,penetration testing,and validation with independent third-party audits.We also take full accountability for the operational governance of our software by continually monitoring,hardening,and performing reviews and assessments.Our approach involves the following steps:Continuously looking for vulnerabilities with surface attack monitoring,meaning we can quickly assess and measure emerging threats.Proactively mitigate cybersecurity risks,consistently securing the operating environment.Creating a secure and trusted environment for customers to supply data and manage risks collaboratively.Maintaining continuity and service availability by consistently developing and implementing organization-wide processes.We make certain that our AWS environments have the necessary resilience,failover and redundancy capabilities to endure adverse conditions and unforeseen physical or environmental events.Conducting regular data security and cyber security certifications and audits to provide assurance that the proper controls are in place,monitored,and tested.13 We have two regional co-location data centers.29 Copyright 2024 JAGGAER All Rights ReservedJAGGAER Security and Compliance Certifications and AssuranceCertificationPurpose and value for JAGGAERSOC 1 ReportQuality and operating effectiveness of controls relevant to an audit of customer financial statements.SOC 2 ReportControls that relate to security,availability,and confidentiality.ISO 27001Information security management system(ISMS)for the best practice in managing information security.ISO 27018Demonstratable personal identification information(PII)protection in public clouds.ISO 22301Reduce the likelihood of incident occurrence and prepare for,respond to and recover from disruptive incidents if they arise.ISO 9001Demonstrable ability to consistently provide quality products and services that meet customer and regulatory requirements.Cyber Essentials PlusA UK Government certification recognizing protection against the most common cyber-attacks.PCI DSSGlobally recognized compliance standard securing online credit and debit card payments against data theft and fraud.Trust Center:Our customers business data is of the utmost importance.We provide high-level data protection and compliance across our entire platform.Our customers and partners are always updated on issues around reliability,data security and privacy via our online JAGGAER Trust Center,in plain and easy-to-understand language.Secure Software Development Lifecycle:Trust,security and privacy awareness are integrated throughout the entire software development process,and the JAGGAER Secure Software Development Lifecycle(SSDL).We operate on a privacy-by-default design principle,and this mantra represents our core philosophy throughout the product lifecycle from creation to end of life.The security and privacy threat landscape constantly changes,and we evolve our approach by reviewing the latest threats and vulnerabilities,so that we can always defend ourselves.ISO Certificates coverage:67%of our operational sites are covered by ISO 27001 Certification.67%of our operational sites are covered by ISO 27018 Certification.51%of our operational sites are covered by ISO 22301 Certification.30 Copyright 2024 JAGGAER All Rights ReservedThreat modelling security:Threat modelling allows us to review,understand and prioritize potential security risks at the component,application,or system level,and expose potential design vulnerabilities.We take a structured approach to any threat scenarios,allowing us to identify risks where the data or system could be compromised.This also allows us to develop responsive mitigation strategies to minimize risk.By utilizing the hybrid STRIDE14 and LINDDUN15 approach,we adopt a comprehensive approach to address security and privacy threats during threat modelling.Cloud security:We take care to develop our solutions in line with industry-specific frameworks,such as the Center for Internet Security(CIS)Benchmarks,and align with compliance by maintaining certifications,such as SOC 2 Type II,ISO 27001,and ISO27018.By doing this,we can integrate global security and privacy compliance activities into the workflow,while continuously supporting our overall cloud security posture.Code analysis:Delivering a secure customer experience requires commitment and focus on secure code development with peer review and with static and dynamic analysis testing(SAST and DAST).JAGGAER performs daily static code analysis using Enterprise tools.Code is validated against Open Web Application Security Project(OWASP)rules in addition to our code conventions.Before each release,applications are scanned using dynamic application security testing(DAST)tools to test application and interconnections in a running environment to look for exploitable vulnerabilities to assess risk.Vulnerability&penetration testing:To continuously identify any defects and vulnerabilities,we have adopted a vulnerability and risk management approach that consists of complementary programs designed to understand and monitor our attack surface and continuously improve our ability to defend against cyberattacks,mitigate,and control risk.We have employed a defense-in-depth approach and adopted enterprise-class tools to scan and monitor for threats and test these controls by conducting third-party web application and penetration testing.Product launch:Our security team at JAGGAER takes accountability for operational governance through continual monitoring,hardening,reviews and assessments,penetration testing,and integrating security into the Disaster Recovery/Business Continuity programs.Meanwhile,our privacy team confirms that cross-border transfers,data-sharing and retention periods are monitored,and that data is only processed for the purpose for which the data was collected.Reporting vulnerability:JAGGAER established a Product Security Incident Response Team to minimize risks associated with security vulnerabilities in our products.All users are asked to report any potential vulnerabilities to our Global Security team.Doing so helps us to track risks and set goals to minimize them as much as possible.Training:Employees are required to complete training for Internet Security,Data Protection,Code of Conduct,and Information Security.14 Model for identifying computer security threats developed by Praerit Garg and Loren Kohnfelder at Microsoft.Considers security threats in six categories:Spoofing,Tampering,Repudiation,Information disclosure(privacy breach or data leak),Denial of service,Elevation of privilege.15 Privacy threat modeling framework,developed by privacy experts at KU Leuven.Considers following privacy threat types:Linking,Identifying,Non-repudiation,Detecting,Data Disclosure,Unawareness,and Non-compliance.31 Copyright 2024 JAGGAER All Rights ReservedMandatory Compliance TrainingTrainingCoverage 2023Security Awareness Training100ta Protection Training100%Anti-Bribery/Anti-Corruption Training100%Anti-Harassment&Discrimination Training(US)100%Anti-Harassment&Discrimination Training(non US)100%PoliciesCoverage 2023Information Security Policy100%Code of Business Conduct&Ethics100%The average number of training hours per employee on mandatory compliance training is 4 hours.In addition to this our employees have over 300 courses available in JAGGAER University.100%of all new hire employees receive ESG New Hire Onboarding Training.Our training targets are:Maintain the coverage of 100%employees for Security Awareness and Data Protection Training by 2030.1Maintain the coverage of 100%employees for Anti-Bribery/Anti-Corruption/Anti-Harassment&Discrimination Training until 2030.2Maintain the coverage of 100%employees acknowledgement of Code of Conduct by 2030.3Maintain the coverage of 100%employees acknowledgement of Information Security Policy by 2030.432Responsible AI Artificial Intelligence(AI)is an emerging and rapidly evolving technology.At JAGGAER,we are currently defining the responsible use of AI in alignment with the NIST AI Risk Management Framework,part of NISTs Trustworthy&Responsible Artificial Intelligence program.We are also monitoring regional and governing body developments,such as the latest ISO 42001 standard.Our approach to AI is top-down,with responsible use guidance now included in our Information Security Policy and training,which is reviewed and acknowledged annually by all JAGGAER employees and third parties.AI has been leveraged in the delivery of many JAGGAER capabilities,including spend management,category management,supplier management,sourcing,contracts,eProcurement,and invoicing.Copyright 2024 JAGGAER All Rights Reserved33 Copyright 2024 JAGGAER All Rights ReservedJAGGAER Supply Chain ManagementThe EcoVadis platform also assists JAGGAERs efforts to continuously drive transformative business practices across our supply chain.All JAGGAER suppliers must comply with our third-party code of conduct and complete a self-assessment ESG questionnaire.This data enables us to strengthen supplier relationships,share best business practices and challenge each other to continuously do better on ESG matters.By using EcoVadis to assess some of our suppliers,we can be sure that relative supplier strengths and weaknesses are underpinned by actual data.Furthermore,EcoVadis provides a sustainability performance monitoring solution to compare overall scores by industry and purchasing category over time.In 2023 JAGGAER requested its largest vendors to undergo further independent assessment through EcoVadis,and the results showed particularly high scores in the environment and labor&human rights sections.15Results from vendor assessment through EcoVadis15 10%of our entire supplier base was screened through EcoVadis34Diving into this level of detail helps us to collaborate with our suppliers and identify areas for improvement.Additionally,at JAGGAER,we are committed to educating and innovating with our partners and customers.During REV 2023,our annual customer conference,together with our technology partners and our customers,we explored in depth some of the following topics:Building resilient and adaptable supply chains Reaching beyond cost savings Engaging suppliers to achieve ESG success Elevating procurement automation Copyright 2024 JAGGAER All Rights ReservedWe aim to train 100%of our employees from the procurement team on environmental issues in the supply chain by 2028.We aim to train 100%of our employees from the procurement team on social issues in the supply chain by 2028.We aim to increase the number of new suppliers assessed through a questionnaire on environmental topics by 20%by 2026.We aim to increase the number of new suppliers assessed through a questionnaire on social topics by 20%by 2026.Our sustainable procurement targets are:123435 Copyright 2024 JAGGAER All Rights ReservedOur Customer JourneyAt JAGGAER,our customers are paramount to everything we do.Every decision we make is centered on enhancing their experience.We meticulously chart the Customer Journey,a comprehensive framework guiding us through the various stages of our relationship with customers.Within each stage,we diligently analyze customer feedback,leverage advanced data analytics,and stay attuned to current market trends to identify areas for enhancement.Subsequently,we embark on strategic initiatives aimed at propelling these areas forward.To achieve this,we assemble cross-functional task forces comprised of experts from diverse departments,ensuring holistic solutions that address our customers needs effectively.36 Copyright 2024 JAGGAER All Rights ReservedEnabling Our CustomersSupporting organizational ESG goals by enhancing supplier visibility and supply chains,while managing risk and enabling compliance.As a global leader in Source-to-Pay and Supplier Collaboration,JAGGAER recognizes the significant impact of sustainable procurement practices.To that end,JAGGAER champions ESG integration within supply chains by empowering organizations to seamlessly integrate ESG principles into their procurement decisions.This enables early identification of potential risks,safeguarding reputation and preventing negative supply chain impacts.Solution-Based Approach Delivering value for over 25 years,JAGGAERs solutions have been leveraged by leading global organizations to screen suppliers against sanction lists,evaluate their Corporate Social Responsibility,track their diversity background or sustainability ratings,and assess their CO2 emissions per product.As a responsible and transparent partner,JAGGAER places significant importance on its own impact on the environment and people and is proud to serve as both an ESG exemplar and enabler.Organizations require critical intelligence on suppliers non-financial information and achieve this visibility through JAGGAERs Supplier Management,Risk,and Performance solution.JAGGAER solutions unlock the ability for procurement and supply chain teams to qualify their suppliers,assess ESG performance,identify areas for improvement,and align sustainability goals with suppliers through collaborative actions.01Including ESG criteria into the negotiation process with JAGGAERs Sourcing solution enables organizations to make decisions based on cost and other ESG factors like Carbon Emission calculations per product per supplier,or ESG risk scores.02JAGGAERs comprehensive ESG data collection and analytics solution simplifies regulatory compliance.JAGGAER partners and integrates with leading industry Information Providers including EcoVadis,Moodys,Sphera,Dun&Bradstreet,Descartes,Tealbook,and carbmee to enrich supplier and product information with the most accurate and up-to-date ESG information,providing actionable insights that informs and supports policy compliance.0337ESG&Risk Management Capabilities in JAGGAERRisk Monitoring&Prevention Leverage ESG and risk information across different Source-to-Pay(S2P)events through assessments,evaluations,and monitoring practices.Evaluate and provide assessments around supplier risk and ESG during supplier onboarding and sourcing events.Reducing Carbon Footprint Monitor and visualize the CO2 emission and Spend per Purchasing Category.Reducing CO2 emissions by awarding to low-emission suppliers and building corporate reports.Reporting&Data-Driven Decisions Use a single source of truth to maintain supplier ESG data and assess based on custom criteria/scoring.Making strategic and data-driven decisions based on current statuses around different ESG dimensions.Copyright 2024 JAGGAER All Rights Reserved38 Copyright 2024 JAGGAER All Rights ReservedESG&Risk ManagementJAGGAER OneInformation Proviers Partner EcosystemEthics/Governance Corruption&Bribery Anti-Competitive Practices Data SecurityEnvironmental Impacts Operations/ProductsEnergy,Water,Biodiversity,Pollution,Materials&Waste,Customer Safety,Advocacy,etc.Fraud Prevention&Preventing PenaltiesTIN MatchingRestricted PartyScreening to secure collaboration and businessSustainability,Quality and Good CertificatesScope 3 emissions,Supplier Carbon Footprint and Product Carbon FootprintSustainability Ratings,Reports with automated udpatesChecking risk from different angles-political,country,corporate,news ESG,etc.Assess on risk(Compliance,corporate,financial,MKT,Hierarchies,etc.Fraud Prevention-Bank InformationSustainable ProcurementProcurement Team&Supply Chain39 Copyright 2024 JAGGAER All Rights ReservedSustainable Procurement Supplier Environmental Performance Supplier Social PerformancesSocialHuman Resources/Human RightsEmployee Health&Safety,Working Conditions,Social Dialogue,Child&Forced Labor,Diversity,Discrimination,Inclusion,External Human RightsJAGGAER OneInformation Proviers Partner Ecosystem(continued)Procurement Team&Supply ChainESG Insights New Data Package(supporting LkSG and sustainable info)Diverse Spend Analytics and Strategic SourcingSupporting Diversity&Quality CertificatesESG Ratings and Company ReportsDiversity InsightsSupporting LkSG,CSDDD and live news/supply chain risk managementSupporting LkSG,CSDDD and live news/supply chain risk managementSustainable Procurement40 Copyright 2024 JAGGAER All Rights ReservedCustomer Success StoriesESG Case StudyLeading Global Supplier of Engineering and Technology ServiceA leading global supplier of engineering and technology services that employs roughly 402,600 associates worldwide and had a turnover of 78,74 billion in 2021.The organization is divided into four business sectors:Mobility Solutions,Industrial Technology,Consumer Goods,as well as Energy and Building Technology.The NeedThe organization needed to assess suppliers CO2 emissions and leverage CO2 emission information into other modules such as sourcing and category management.The ApproachA Supplier Segmentation Assessment has been implemented to create a new status linked in with the CO2 emissions at supplier level.Information gathered from this assessment is leveraged into other modules/solutions.Solutions Supplier Management Sourcing Contracts JAGGAER AdoptOutcome Making use of the Supplier Segmentation Assessment to create a CO2 status element within the JAGGAER platform.Key Data Points 7,500 Buyer Users 150,000 Suppliers 86,000 RDQs 11,500 AuctionsJAGGAER as a Driver for Environmental Initiatives41 Copyright 2024 JAGGAER All Rights ReservedCustomer Success StoriesESG Case StudyA Large Energy Company in EuropeThis energy company needed to evaluate and provide an assessment around supplier Corporate Social Responsibility and demonstrate ESG capabilities during the onboarding process and sourcing events.Approach Suppliers are provided with assessments in areas such as IT,Data Security,Modern Slavery,CSR,and Creditsafe data Assessments are qualitative and suppliers rank themselves using multiple option answers For the sourcing process,they link templates to specific categories Questionnaires are built into technical envelopes for RFQ templates Data is later exported via bulk data exportSolutions JAGGAER One Sourcing Savings Management Outcome All answers can be exported out of JAGGAER to carry out business intelligence in analytics platforms such as PowerBi Make data-driven decisions around ESG and CSR Key Data Points 112M savings captured in JAGGAER in 2022.Centralized tracking of savings,contract visibility and sourcing.The JAGGAER-built TER(Tender Evaluation Report)summarizes in one place all event details,processes,savings and awarding,fulfilling the companys obligations for a transparent and auditable selection process.Due to the ambitious growth and targets towards renewable energy and carbon reduction,the managed spend is due to double in the next five years to 24Bn.Therefore,digital transformation of the business by 2025 to give visibility on spend and supplier compliance is key to this strategy and JAGGAER is at the heart of this.JAGGAER Enabling Positive Impacts on Society42 Copyright 2024 JAGGAER All Rights ReservedCustomer Success StoriesESG Case StudyA Renewable Energy Company in EuropeA Spanish renewable energy company whose mission is to become the first vertically integrated 100%renewable energy operator in the Iberian Peninsula.They are committed to transitioning to an entirely renewable generation value chain and have solar projects with more than 30 gigawatts of capacity.In July 2022,they embarked on an ambitious project to digitalize 100%of its procurement processes and have chosen JAGGAER to execute this.Approach Achieve significant savings across procurement needs,ranging between 10%and 15%Increase management efficiency by reduction in time spent on tasks,up to 30%Minimize general spend costs Digitize 100%of purchasing processesSolutions Supplier Management Sourcing Contracts eProcurement Invoicing The project includes the JAGGAER OneSolution integrated with the companys ERPOutcome Homogeneous procurement processes Traceability and transparency of the negotiation processes Increased control of the whole process,including internal approval flows Automatic generation of management dashboards Multi-level deployment:two countries(Spain and Portugal)Key Data Points 1,600 Suppliers 7,000 PRs managed per annumJAGGAER Platform Providing Robust Governance43 Copyright 2024 JAGGAER All Rights ReservedLooking Ahead to 2024“Im thrilled to have joined JAGGAER at a time of such growth and am pleased to share our progress in 2023.Its fantastic to see such advancement in our journey to net zero we are on track to meet our carbon reduction targets,now verified by the Science Based Targets Initiative(SBTi).Our attention will now turn to addressing our scope 1 and 2 emissions as part of our Plan Zero in the coming year.We are also preparing for CSRD reporting and look forward to conducting our first double materiality assessment.Employee wellbeing,diversity and human rights remain a priority,and we will begin reporting on the principles of the UN Global Compact.I would like to extend my thanks to our Board of Directors ESG Committee and our sponsor Cinven for their continued support and dedication into 2024.”Andy Hovancik,Chief Executive OfficerImplement Plan Zero and continue lowering emissionsIncrease supplier&vendor screening through EcoVadisConduct double materiality analysis and readiness review for EU SCRD44 Copyright 2024 JAGGAER All Rights ReservedDisclosureReport Location2-1 Organizational detailsJAGGAER Overview2-2 Entities included in the report JAGGAER Overview,GHG Emissions2-6 Activities,value chain and other business relationshipsJAGGAER Overview,JAGGAER Supply Chain Management2-7 Employees Social Impact 2-9 Governance structure and compositionESG Corporate Governance,Corporate Governance2-12 Role of the highest governance body win overseeing the management of material topicsESG Corporate Governance 2-13 Delegation of responsibility for managing impacts ESG Corporate Governance 3-2 List of material topicsMateriality 305-1,2,3&5 direct Scope 1,energy indirect Scope 2,other indirect Scope 3,and reduction in GHG emissionsEnvironmental Impact,GHG Emissions 205-2 Communication and training about anti-corruption policies and procedures Corporate Governance401-2 Benefits to full-time employees that are not provided to temporary or part-time employeesSocial Impact,Employee Wellbeing 403 6 Promotion of worker healthSocial Impact,Employee Wellbeing 404 2 Programs for upgrading employees skills and transition assistance programsSocial Impact,Employee Wellbeing 405 1 Diversity of governance bodies and employees Social Impact,Diversity,Equity&Inclusion413 1 Operations with local community engagement,impact assessments and development programs Soc
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welcomeprosperitypeopleplanetgovernanceappendix1 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trustwelcome Welcome from Our Chairman and CEO M&T Bank:A Bank for Communities M&Ts Sustainability Strategyfostering prosperity Our Approach to Community Investment Supporting Our Communities Through Access to Finance Improving Access to Housing Providing Financial Education Improving the Diversity of Our Supplier Pool Equitable and Accessible Banking Investing in Small Businesses Evolving to Better Serve Our Customers Innovating to Meet the Needs of Our Customers and Communities Thirty Years Strong:The M&T Charitable Foundations Legacy of Impact Responding to a Crisis with Compassionnurturing our people Committed to Investing in Human Capital Attracting and Recruiting Talent Throughout Our Footprint Nurturing New Talent Pipelines Engaging Our Talent Supporting Our Valued Team Members Developing Our People Promoting Diversity,Equity,and Inclusion(DEI)preserving our planet Supporting Climate Resilient Communities Growing Climate Finance Reducing Our Carbon Footprint Integrating Climate Risk into Our Risk Frameworkstewarding our principles of governance Sustainability Governance Assuring the Quality of Our Board of Directors Compensating Our Executive Officers Managing Risk Respecting Human Rights and Labor Rights Ensuring Ethical Behavior Keeping Vigilant Against Fraud and Financial Crimes Protecting Our Companys and Customers Information:Information Security,Cybersecurity,and Data Privacy Providing Continuity During Times of Crisis:Business Continuity Management Committed to Fair and Responsible Banking Addressing Customer Feedback and Working to Improve the Customer Experience Defining Our Political Activities Fulfilling Our Regulatory and Risk Annual Training Requirement Being Transparent on Taxappendices ESG Metrics Index Task Force on Climate-related Financial Disclosures(TCFD)Index Sustainability Accounting Standards Board(SASB)Index Disclosureswelcomeprosperitypeopleplanetgovernanceappendix2 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustThe following terms are used throughout this report:EmployeeAny individual who is employed as an executive,officer,manager,exempt,nonexempt(full-or part-time),or temporary employee of M&T.Contingent workerAny individual who is engaged by M&T to address particular needs but is not permanently or temporarily hired by M&T as an employee.Contingent workers are engaged by M&T on an individual contractual basis,through a temporary employment agency or outsourcing providers.PersonnelAny individual who is either an employee or contingent worker,following the above definitions.SustainabilityAn approach,core to M&Ts business model,focused on creating long-term value for all of our stakeholders so we can meet their needs today without compromising the ability of future generations to meet their own needs.Environmental,Social,and Governance(ESG)A framework that M&T uses to measure and report on our performance across sustainability topics,providing a way for us and our stakeholders to evaluate progress.contentsThank you for your interest in our 2023 Sustainability Report.I welcome the opportunity to share with you why and how we fulfill our purpose of making a difference in peoples lives.How are purpose and sustainability connected?Its simple,really.We believe that the long-term prosperity of the people and communities we serve,and the long-term prosperity of M&T,are interdependent.Thats not to say its a simple process,but one that we are constantly working toward and seeking to improve every day.We are embedding sustainability into every aspect of our business,community by community,focusing on how our products,services,investments,partnerships,and business decisions will impact our stakeholders today,and over the long term.We believe we can make the biggest difference by investing in our incredible people,fostering prosperous and inclusive communities,and preserving our planet.Our approach is founded on strong governance practices and the ongoing engagement of all of our stakeholders.Our community-focused business model has fostered our growth at M&T.We are deeply rooted in the areas we serve,not only as a business but also as neighbors,volunteers,and advocates.When a community is in need,we are there,ready to lend support and resources.Being deeply involved where we work and live helps us protect what matters most.Let me share just a couple of examples of how our purpose translates into actionable results:Unlocking the potential of our people It is critically important that we nurture and invest in the emerging talent in our communities,as the workforce of the future.We do so through both traditional pathways in our branches and nontraditional pathways such as our apprenticeship programs,which provide students an opportunity to gain valuable on-the-job training.Another way we invest in local talent is through long-standing partnerships with nonprofit organizations such as the Asian American Civic Association in Boston,whose mission supports self-sufficiency through training and access to jobs.By hiring from these trusted organizations,we are able to access incredible talent in our communities while supporting the work of our partners in growing a strong workforce,the bedrock of a thriving economy.Responding to crises in our communitiesJust this past year,July and October 2023,two of our communities faced severe crises that,though vastly different,were both devastating.After the widespread flooding damage in Vermont and the tragic killing of 18 innocent people in Lewiston,Maine,our teams activated quickly to lend a hand to neighboring residents and community organizations where partnership and support was needed the most.In total,The M&T Charitable Foundation committed$165,000 for initial flood relief efforts in Vermont and$100,000 to five separate charities in Maine.Importantly,our employees volunteered their time to both causes to make a positive impact any way they could.Looking ahead,I am inspired by the perseverance of our team members in what we strive to do every day:make a difference for our communities,our colleagues,our planet,our business,and our stakeholders.I am honored and proud to be part of our organization and our efforts to fulfill this important purpose.Ren F.Jones Chairman and CEO welcomeprosperitypeopleplanetgovernanceappendix3 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustFROM OUR CHAIRMAN AND CEOwelcomeM&T BANK:A BANK FOR COMMUNITIESFor more than 165 years,M&T has taken an active role in our communities and built long-lasting relationships with our customers.We are,and will continue to be,a community-focused bank,understanding how each community is unique;with its own characteristics,cultures,economy,and challenges.This knowledge is essential to our business model because we know that the success of our communities and our bank is deeply intertwined.We succeed when our communities are thriving and growing,and our products and services help that happenwhether through a small business loan,mortgage,or retirement investmentswe can make a difference inpeoples lives.As we have grown in size,it is increasingly important to maintain this connectivity to and understanding of our communities.To do so,we organize our geographic footprint into 28 Community Banking regions.Each region is led by a local president and leadership team comprising business line managers and community development leaders.In most regions,we also engage a regional Directors Advisory Council.This provides us with the insights to keep decision making local and tailored to each community while bringing capabilities from across the enterprise to our customers and stakeholders.To measure and manage our Community Banking approach,each regions progress is tracked through our“4 Cs”framework:CommunityMeasuring our teams engagement in the community through volunteerism,board service to nonprofits,charitable contributions,and recognition in the market ColleagueMeasuring colleague engagement,turnover,and demographic diversity CustomerMeasuring our customers satisfaction with M&T and customer growthContributionMeasuring financial performance of each Community Banking regionwelcomeprosperitypeopleplanetgovernanceappendix4 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust“Building the Directors Advisory Council in 2022 has been a crucial part of how we understand and meet the needs of Tarrytown.We focused on finding talented leaders who represent the entirety of the community,which has led to high engagement and comprehensive,well-informed decisions and discussions contributing to M&Ts growth in the region.”Tyr Robinson,Tarrytown Regional PresidentTop 15 U.S.-owned,commercial bank holding company*Over 22,000 employees More than 960 branches28 Community Banking regions$208.3 billion in total assets as of 12/31/23*S&P Global Market Intelligence as of December 31,2023.Methodology excludes subsidiaries of foreign bank parents,investment banks,credit card companies,insurance company subsidiaries,brokers,and asset managers.M&TS SUSTAINABILITY STRATEGYTo successfully serve our stakeholders(read more about how we identify and listen to our stakeholders on page 71),we focus on the issues and the efforts in which we can have the most impact.To that end,we have developed seven sustainability priorities that span the enterprise,leverage our core capabilities,address key sustainability risks and opportunities,and support our overall strategy.Underpinning these priorities are our corporate governance structures,which are designed to promote accountability,ethical behavior,risk management,and transparency.With the appropriate governance structures in place,we believe that we are better positioned to advance our sustainability priorities.As we continue to evolve our sustainability journey,we share our key focus areas from 2023,highlighting our successes and exploring opportunities for improvement.We hope you find this report insightful and encourage your feedback.welcomeprosperitypeopleplanetgovernanceappendix5 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustStrategyExamples(pages)Grow Climate FinanceProvide guidance,insights,and capital for our customers to prepare for and take advantage of the physical and economic implications of the changing climate46-48Reduce Our Carbon FootprintLessen the impact of our operations on the environment51-57Support Climate Resilient CommunitiesPlay a key role in preparing our communities forand helping them throughphysical impacts of climate change and the economic transition to a low-carbon economy44-45StrategyExamples(pages)Finance an Equitable EconomySupport thriving,inclusive,sustainable,and equitable economies in the communities we serve through our products,services,investment,and purchasing power 8-21Attract,Develop,and Retain TalentStrive to be the best place our colleagues have ever worked and be the employer of choice for people who want to make a difference in our communities23-41Colleague,Leadership,and Customer DiversityAim for our colleagues,leadership,and customers to be fully representative of the communities we serve11,38-41Integrate Climate RiskUnderstand and address the risks to internal and external stakeholders of physical climate changes and focus on transitioning to a low-carbon economy58-65M&T has aligned our sustainability strategy and disclosures to the goals and recommendations for Sustainable Development.These 17 Sustainability Development Goals(SDGs)are a universal call to action to end poverty,protect the planet,and improve the lives and prospects of all people.We have a role to play in all 17:however,13 align particularly well to our work.2023 HIGHLIGHTSwelcomeprosperitypeopleplanetgovernanceappendix6 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust“M&Ts success has been built by showing up for our communities,year after year,generation after generation.Understanding what our communities will need decades into the future,and the role we can play to support them,is the critical work were doing today.”Erin Komorowski,Director of Sustainability$3.1billion made in total sustainable finance loans and investments$670.9million made in environmental sustainable finance loans and investments$2.5billion made in social sustainable finance loans and investmentsOutstandingCRA Rating249,382hours dedicated by M&T staff to volunteering in our communities1,822SBA 7(a)loans made in FY 202394%participation by M&T employees in M&Ts 401(k)plan7%year-over-year reduction in electricity consumption40average training hours per employee60%of our$1 billion commitment to renewable energy projects achieved94%of Board directors met the criteria for independence required by the New York Stock Exchange and our Corporate Governance Standards90%of employees believe the company is committed to ethical business practicesprosperitypeopleplanetgovernancewelcomeprosperitypeopleplanetgovernanceappendix7 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustPutting the needs of our customers first,building relationships,and positioning our communities for success.fosteringprosperitywelcomeprosperitypeopleplanetgovernanceappendix8 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustWe strive to help our communities prosper by focusing on two key prioritiesFinance an Equitable EconomyColleague,Leadership,and Customer DiversityProsperity has many meanings.To us,it is about doing what we can as a community-focused bank to build an equitable economy and financial system for all our neighbors.When our communities have access to the services and solutions they need to thrive,then we have fulfilled that mission.$690.5million made in financing to projects that include affordable housing1,822Small Business Administration loans originated,totaling$224.2 million249,382hours dedicated by M&T staff to volunteering in our communities$53.6 million contributed by M&T and the M&T Charitable Foundation to supporting our communities$2.5billion made in social sustainable finance loans and investmentsSDGs alignment“M&Ts strength is in the pairing of our deep knowledge of the community with the scale of a large regional bank.Our community-focused approach enables our bankers to meet community members where they are,bringing to bear a full spectrum of community investment capabilities.Whether its through small business loans,affordable housing,or financial education,we do whats right for our customers and communities.Our communities success is our success.”Mike Keegan,Head of Community BankingOur Approach to Community InvestmentM&T is successful when the communities we serve are successful.For more than 165 years,we have lived,worked,volunteered,and invested in our neighborhoods,sharing their successes.As a community-focused bank,our strength is in the power of our relationships.For decades,we have invested in trusting relationships with community members,community leaders,and other organizations in our neighborhoods.Our community investment approach considers the needs of each of our customers and seeks to bring the full power of the bank to every customer interaction.Whether it is business banking,commercial real estate,equity investment,tax credits,or charitable grants,we have the capabilities to meet our customers financial needs,wherever they are in their journeys.What makes M&Ts approach unique is the care and attention we bring to our customers,combined with the resources and scale of a mature bank.Even with our significant growth,our ethos is still one of a community-focused bank that puts the needs of our customers first.Our community investment strategy is rooted in relationships.It takes time and intentionality,and it requires listening to the needs of our communities.We do this work because we believe it produces the best results for our customers and other stakeholders.Supporting Our Communities through Access to FinanceMany of the community investment services we provide are evaluated by the Federal Reserve Bank of New York and the New York State Department of Financial Services through the Community Reinvestment Act(CRA).These services include mortgages to low-and moderate-income(LMI)homeowners and customers living in LMI areas,low-income housing tax credits,small business lending,support to nonprofits,and financial education.We remain committed to our many communities across our footprint through these and other financial interventions.M&T has a long track record of community investment,as evidenced by our CRA rating.Our most recent CRA rating was Outstanding.We continually seek new ways to meet the needs of organizations serving our communities.Among the many ways we do so are New Markets Tax Credit Program investments and community development loans.Our New Markets Tax Credit Program provides equity investment for projects that create jobs and services for LMI community members.In 2023,we provided$1.4 billion in new originations for community development loans as well as letters of credit to assist small business and nonprofit community development organizations.welcomeprosperitypeopleplanetgovernanceappendix9 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustImproving Access to HousingThe foundation for a thriving and equitable community is the availability of safe,high-quality,affordable housing.2023 was another tough year for renters and homeowners.With inflation and mortgage rates climbing,owning a home is still a challenge for many of our community members.Overcoming this challenge requires long-term commitment from both the public and private sectors,and we are committed to lending and investing in the creation and preservation of affordable housing.M&T Bank and M&T Realty Capital Corporation have teams dedicated to the financing of affordable housing(which typically has rent or income restrictions to help keep housing below market price),from construction and bridge loans to mortgages and tax credits.In 2023,M&T Bank and our affiliates provided$690.5 million in financing to 63 transactions that have an affordable housing component.This includes$487.4 million in CRA-eligible financing for 2,709 affordable units within M&Ts footprint.In 2023,we committed$205.7 million in investments through the Low-Income Tax Credit Program,which will add an estimated 1,181 new or renovated affordable housing units in the communities we serve.The total book value of our Low-Income Housing Tax Credit(LIHTC)investment portfolio was$1.3 billion as of December 31,2023.Providing Financial EducationFinancial education is another integral component of serving our communities.We pride ourselves on strong partnerships with innovative nonprofits,such as Ariva,Home HeadQuarters,Pathstone Corporation,Goodwill of Western New York,and many others across our footprint,to help facilitate the delivery of in-person education.One of the many ways we support the work of our nonprofit partners is through our financial education program,M&T Money Mentor.This in-person financial education delivery supplements the work that our relationship bankers do with our customers every day.To complement our in-person education,we offer online tools to promote financial wellness and deliver financial education,such as:A digital version of M&T Money Mentor,available through our online Financial Education Center.This online portal provides access to topics such as emergency savings,credit management,banking for entrepreneurs,and financing your small business.Its user-friendly,interactive lessons take just three to six minutes,making them easy to fit into busy routines.A suite of financial scenario calculators added to our website in 2023 to help customers make savvy financial decisions.M&T Money Smart in the M&T mobile banking app and online banking,which helps customers track spending and income,as well as projected cash flow and spending trends.M&T Money Mentor Playlist TopicsSeveral of our M&T Money Mentor playlists are available in Spanish,including Teen Banking,Banking for College Students,Becoming a Homeowner,and Preparing for Retirement.welcomeprosperitypeopleplanetgovernanceappendix10 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustSPOTLIGHT Providing Financial Education to Asylum-Seekers in MaineIn 2023,Maine experienced an influx of new residents as asylum seekers arrived in towns across the state,many seeking refuge from violence,political repression,and human rights abuse in their home countries.As part of the effort to help support this new population,officials from the state of Maine reached out to M&T to provide financial education.M&T Senior Branch Manager Mark Foster responded by quickly organizing a series of financial education workshops based on M&Ts Money Mentor curriculum.Mark,with support from M&T regional leadership in Maine,delivered an eight-week program to a packed classroom of more than 40 people eager to learn about the U.S.banking system in order to build a financial foundation in their new home country.Mark and the team were able to deliver these resources quickly and effectively because of the capabilities M&T has built across financial education,language accessibility,and cultural competency.The team that stepped up represented an internal coalition across retail banking,strategy,and business development functionsa truly collaborative cross-functional effort.Improving the Diversity of Our Supplier PoolAnother way we drive equitable growth in our communities is by doing business with diverse suppliers.We take seriously the role that our spending power can play in the growth journey of diverse and small businesses who can in turn deliver immense value to M&T and our stakeholders.Diverse suppliers are defined by M&T as businesses that are at least 51 percent owned and controlled by women,people of color,Veterans,members of the LGBTQ community,and people with disabilities.Diverse suppliers accounted for 7 percent of our sourcing spend in 2023.We are building on this by proactively seeking to make M&T a trusted partner for diverse businesses through outreach and engagement.We strive for the diversity of our suppliers to match the diversity of our communities.To that end,we examine our sourcing policies and seek to address factors that may have impeded entry for new diverse vendors in our supplier pool.Internally,we are enhancing communication,transparency,and data access to educate and empower our stakeholders to make prudent procurement decisions and understand how those decisions impact M&Ts overall supplier portfolio.Meanwhile,to connect with diverse suppliers,we are increasing our participation in networks such as the National Minority Supplier Development Council and local organizations focused on supplier diversity throughout our markets.welcomeprosperitypeopleplanetgovernanceappendix11 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustM&Ts Supplier Diversity Commitment StatementWe strive to work with diverse suppliers at every stage of their business journey.This includes small,local businesses that are the lifeblood of our communities.What truly drives us is the impact we can make on the prosperity of our communities.The prospect of being part of the growth journey of local diverse businesses is what gets us up in the morning,especially since we may be one of the largest banks they have ever worked with.We commit to seeking out opportunities to engage small and mid-sized diverse suppliers in our footprint who are eager to take that next step in their growth journey.As a community-focused bank,we are committed to the well-being of our customers,colleagues,and communities,and our purchasing power is a critical tool that we put to work in service to this commitment.Tier 1 Diverse Spend:20232023Diverse spend$97,458,057Total sourceable spend$1,392,753,420Diverse share of sourceable spend 7.0%Tier 1 Spend by Diversity Status:2023CategoryNumber of suppliers by diversity statusNumber of suppliers as a share of total suppliers by diversity statusDollars of sourceable spend by diversity statusDollars of sourceable spend as a share of all sourceable spend by diversity statusVeteran-owned28 0.23%$20,178,049 1.45%Minority-owned57 0.46%$36,165,431 2.60%Women-owned117 0.95%$44,398,018 3.19%Disability-owned7 0.06%$860,131 0.06%LGBTQ -owned3 0.02%$110,114 0.01%Total diverse-owned*186 1.51%$97,458,057 7.00%Total suppliers12,334 100.00%$1,392,753,420 100.00%*This total does not equal the sum of the diverse supplier categories(i.e.,Veteran-,minority-,women-,disability-,and LGBTQ -owned)because a supplier may have more than one diverse ownership categoryEquitable and Accessible BankingOur role in supporting financial wellnessFinancial wellness at M&T means empowering people with the tools and trusted support they need to make confident,well-informed decisions,which can help them feel secure in their financial future while living their best possible lives.We believe that financial wellness is an effective driver of long-term value and provides us a new pathway for creating positive financial outcomes for the communities we serve.For decades,M&T has been supporting customers throughout their financial life cycles as they plan,spend,save,and borrow.The foundation of our service model has always been building trusted relationships with our customers so that we understand what is important to them and can help make their goals a reality.Our bankers follow a process to understand customers financial journeys and speak regularly with them about building savings plans,managing credit,and paying down debt.By understanding these goals,bankers can offer the right solutions and bring in the appropriate support partners.Equitable and accessible banking productsWe are committed to assisting customers in managing their financial wellness and are a proud member of the Bank On coalition.Bank On is a national initiative,led by the Cities for Financial Empowerment(CFE)Fund,which supports the efforts of locally led partnerships among private and public institutions to connect consumers to safe,affordable bank accounts.Beyond our participation in local Bank On coalitions within our footprint,we acknowledge the diverse financial needs of our communities and are dedicated to serving them through equitable and accessible banking.This means removing structural barriers to participating in the economy and enabling access to financial services to foster financial inclusion and wealth creation across our communities.M&T provides banking solutions with those goals in mind,including the following:MyWay Banking is a certified Bank On account that meets Bank Ons criteria as a safe and affordable checking account.It has low or no monthly service charges,depending on the number of transactions per month.MyWay Banking is designed to improve access to banking for customers,including minors aged 13 to 17 with a parent or guardian as joint owner.If the account has insufficient funds,a transaction will,in most cases,be declined.If the account is overdrawn,an overdraft fee will not be imposed.In 2023,we opened 51,094 new MyWay accounts,adding to our 142,893-strong portfolio.Several states in M&Ts footprint have established standards for low-cost Basic Banking Accounts to meet consumers most essential banking needs.In New York and New Jersey,our EZChoice Checking Accountwhich has no monthly maintenance feeis a Basic Banking Account.In Connecticut,our MyWay Banking Account is a Basic Banking Account.welcomeprosperitypeopleplanetgovernanceappendix12 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustSPOTLIGHT M&T Hosts Diverse Suppliers at the 2023 NMSDC ConferenceM&T strives to increase our support of diverse-owned businesses through engagement,investment,and purchasing power.As part of that effort,M&T sponsored the annual National Minority Supplier Development Council(NMSDC)Conference in 2023.The conference is the largest gathering of minority-owned business enterprises(MBE)in the country with more than 5,000 attendees.It took place in Baltimore,Maryland,a key part of our footprint,from October 22 to 25.The NMSDC is one of several organizations that offer multicultural and diverse-owned business certification as well as access to corporate members like M&T and contracting opportunities,education support,and more.In addition to sponsoring the conference,M&T also hosted an event that brought together MBEs and supplier diversity professionals in the financial services industry for a networking opportunity.More than a dozen M&T employees attended the conference from across the Northeast and Mid-Atlantic regions of our footprint.Having a presence at these events and creating new opportunities for engaging with MBEs is one way that we can build a more inclusive economy while sending a clear message to potential customers in the communities we serve:Inclusive procurement is the way we do business.M&T employees gather at the 2023 NMSDC Conference in Baltimore,Maryland.Secured Credit Card allows customers to rebuild or start building credit,with the option to graduate to an unsecured card.M&T Alerts allows customers to set up an alert notifying them when funds reach a certain level that requires a money transfer or spending reduction.Overdraft Policy and Protection:No insufficient funds fee for returned payments.Overdraft Protection Transfers are offered for free through a linked savings account or,for a fee,through a line of credit or a credit card.Reduced overdraft fees of$15 and no more than one fee per day when M&T pays a transaction without available funds.Mobile Flash Funds:This service provides immediate access to mobile check deposits for a fee.It supports customers who may not have a financial safety net and offers security to small business owners who rely on immediate liquidity.MagnusCards is a free app featuring digital guides that provide visual cues and step-by-step instructions to help people with autism and other cognitive disabilities access fundamental banking services.Virtual appointment scheduling with branch representatives is available,including in Spanish and Korean.Equitable and accessible banking services We have expanded the services we provide to communities with high concentrations of individuals with Limited English Proficiency and communities with ethnic and racial diversity by designating bank branches across our footprint as multicultural branches.Many of these branches employ bankers who speak the customers preferred languages and develop an understanding of the cultural nuances and unique needs of the individuals and neighborhoods they serve.We currently have 189 designated multicultural branches across our footprint.The centers create opportunities for bankers to respect and welcome the unique demographics and cultures of their diverse communities,build trust,and foster meaningful relationships.The designations are chosen based on insights from community members,M&Ts local bankers,and neighborhood-level census data on population characteristics,growth potential,and concentration of non-English speakers or speakers with limited English proficiency(LEP).In 2023,we provided these branches with merchandising in the language(s)of the communities they serve,including signage to indicate branch availability and to welcome them to the branch.In 2021,we launched a program to certify our colleagues who successfully demonstrate proficiency in a language besides English as bilingual.As of December 31,2023,there were a total of 22 languages for which an employee could become LEP certified,including Spanish,Korean,Chinese,welcomeprosperitypeopleplanetgovernanceappendix13 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustBurmese,Hindi,and Russian.In 2023,our focus was on expanding our language certification to our new colleagues who joined us from Peoples United Bank(PUB)in 2022.Throughout the year,two cohorts of employees successfully passed language assessments and completed our web-based training.This brought our total number of LEP-certified speakers to 858.Customers can recognize when a branch employee speaks their preferred language through signage on the branch doors and identification on employees name badges,tent cards,and business cards.To make our banking tools easier to navigate for our Spanish-speaking community members,we have a Spanish language provides access to financial information and resources.We also enhanced our customer experience by translating core components of our financial education curriculum to Spanish,Haitian Creole,Portuguese,and French,and we updated our ATM network to provide services in Chinese and Korean.At 1,740 ATMs,customers can complete cash transactions in English,Spanish,Chinese,and Korean.We also offer phone assistance through third-party interpretation in 240 languages at 800.724.2440.These developments are part of our wider efforts to enhance the customer experience and contribute to inclusive growth in our communities.Through ongoing engagement with faith-based organizations,neighborhood groups,and other community organizations,we learn and develop new ways to serve local families,individuals,and businesses.welcomeprosperitypeopleplanetgovernanceappendix14 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustSPOTLIGHT Supporting customers when it matters mostHelping customers stay in their homes has always been a priority for M&T.In 2021,with customers still feeling the economic effects of the pandemic,we expanded our support to help address the increasing service needs of customers challenged by the economic environment and struggling to meet ongoing expenses through our collaboration with SpringFour.SpringFour,a woman-led,social impact fintech,empowers the financial services industry and employers to connect their consumers with nonprofit and government financial health resources,increasing payment performance and improving consumer financial health.Their offering crosses over the origination,servicing,collections,and financial health spaces.In 2023,M&T and SpringFour provided more than 223,735 financial health referrals to local nonprofit and government resources for M&T customers.Customers appreciate this program and have given plenty of positive feedback.Aligned with M&Ts Sustainability Strategy,SpringFour is helping us build thriving communities through access to financial assistance resources for both M&T customers and employees.The areas of assistance requested most by our customers were those helping with heating and utility costs,food savings,employment services,and financial counseling.Another way we help our customers challenged with hardship is through employment support.Since 2013,we have supported homeowners during employment uncertainty alongside NextJob,a nationwide reemployment solutions company.To those who meet our unemployed/underemployed criteria,we offer training as they prepare to reenter or progress in the workforce.To bolster our support,we also offer an additional service from NextJob called JobSeekers,available to all M&T customers.This online toolkit provides resources to help customers navigate the changing job market,develop strategies for searching for job opportunities,and prepare for an interview.In 2023,50 percent of those who went through the program confirmed they secured a job.“Feedback from qualifying customers has been positive.They love having additional resources to help reduce their bills,especially because it isnta one-and-done program.Some borrowers have seen their heating and utility bills entirely paid thanks to local resources provided through SpringFour.In my opinion,this is one of the best tools offered by the bank.”Chrissy Lucas,Loss Mitigation Liaison Investing in Small BusinessesWorking with small businesses to create jobs,build our communities,and develop our economy is at the core of our business model.Small businesses generate long-term growth,keep money circulating through the economy,and create new opportunities for community members.Although we cover just 3 percent of the nationwide market,we ranked 6th nationwide in units for U.S.Small Business Administration(SBA)lending in fiscal year 2023.We originated 1,822 SBA 7(a)loans,totaling$224.21 million,and topped the SBAs lenders list in Baltimore,Buffalo/Rochester,Delaware,Connecticut,Syracuse,and Washington,DC.M&T also supports Small Business Investment Companies(SBIC)to provide low-cost capital and other critical services.In 2023,we deployed$42.8 million in capital to SBICs.Increasing small business capacityWe continue to support small businesses in our local communities by meeting them where they are.In 2021,we launched several programs,described here,with local entities such as universities and governmental agencies,to build and enhance the capabilities of small businesses,better equipping them to scale and compete in a complex economy.In 2023,those programs are still thriving.Our Multicultural Small Business Lab series,piloted in Buffalo in 2021,expanded to include multiple programs across our footprint,including in Harlem,New York;Harrisburg,Pennsylvania;Worcester,Massachusetts;and Bridgeport,Connecticut,where we presented the entire curriculum in Spanish for the first time.An intensive,weekslong program designed to empower,develop,and scale multicultural small businesses,the Small Business Innovation Labs aim to promote business and financial inclusion through empowerment,providing diverse owners access to the information,tools,resources,and connections needed to grow and thrive.Through the curriculum,delivered in collaboration with local organizations,business owners learn about creating business plans,marketing and branding,credit,and other business fundamentals.By the end of 2023,we reached 201 multicultural small business owners and awarded$87,000 in pitch competition award money to support winning participants business ventures.Our Maryland-based Ignite program,going strong since 2019,continued to serve multicultural and diverse small businesses through our business growth,or accelerator,programs,expanding to five counties in Maryland:Baltimore,Howard,Montgomery,Frederick,and Prince Georges.The Prince Georges county program included a curriculum for Spanish-speaking business owners.The accelerators provide formal education in business structure,finance,access to capital,pricing models,marketing,risk,and networking.welcomeprosperitypeopleplanetgovernanceappendix15 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust1 Number and dollar amount of originations calculated based on SBAs fiscal year.SPOTLIGHT Small Business Innovation Lab in Bridgeport,ConnecticutM&T hosted our second Multicultural Small Business Lab in Bridgeport,Connecticut in the fall of 2023.This years cohort included 82 local multicultural businesses.These business owners spent eight weeks at the University of Bridgeport in an intensive program,the goal of which is promoting business and financial inclusion by providing business owners access to the information,tools,resources,and connections they need to grow and thrive.On the final night,nine businesses pitched business plans in front of a panel of judges,and the top four were awarded cash grants.“I was inspired to start my business from a personal story.I was bathing my nephew Alex,who was ten months old,and he slipped.I did some research and learned that 43,000 children slip and fall in bathtubs,and there really wasnt a product on the market for children over eight months old,so I started Tubee.What keeps me motivated is seeing people believing in me and rooting for me.One of the best lessons Ive learned since starting my business is that people really want to help you.You just have to ask for help.If you keep going,the universe will put people in front of you and open doors,so you have to keep going,and you just cant quit.”First-place winner Clovia McIntosh,founder and CEO of Tubee,earned the$10,000 top prize.In 2023,M&T hosted eight of these accelerators in the region,serving 223 multicultural-and women-owned small businesses and awarding$37,000 in prize money to the small business owners who won the culminating pitch competitions.Measuring sustainable businesses and financed activities across our business linesAs a financial products and services provider,we continue to enhance our ability to measure sustainable finance activities across our business lines.This is expected to allow us to better manage and expand the capital we deploy in support of sustainable activities(e.g.,decarbonization and pollution prevention activities).Our sustainable finance taxonomy and framework outline our definition of sustainable lending and investment activities across four social categories:access to essential services,affordable housing,socioeconomic advancement and empowerment,and access to financial services.Our eligibility criteria are aligned with the International Capital Market Association(ICMAs)Green,Social,and Sustainability-Linked Bond Principles and the Loan Syndications and Trading Association(LSTAs)Green,Social,and Sustainability-Linked Loan Principles and associated Guidance.These standards are designed to create consistency and transparency for the types of companies,investments,and projects classified as sustainable finance.2For detail on our environmental categories in our sustainable finance framework,see page 46 in the Planet section.A Sustainable Finance Review Group was established in 2023 to assess and validate sustainable finance transactions(equity,debt,tax products,loans,leases,etc.).3welcomeprosperitypeopleplanetgovernanceappendix16 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust2 Our sustainable taxonomy also includes environmental categories.3 The metrics and methodologies included in sustainable finance reporting are subject to change based on the best information available.We plan to continue to review and enhance our reporting capabilities in linewith applicable legal and regulatory requirements and industry standards and practices.Access to essential services:$661.9 millionInvestments or financings related to services that support a healthy,sustainable,and high-functioning community,including access to health care services,education,financing,financial services,internet and broadband access,and other community services.Affordable housing:$1.35 billionInvestments,financings,or placements related to the construction,development,acquisition,and maintenance of affordable housing,including multifamily projects,where spends are associated with housing restricted to households who earn less than 80 percent of the average median income(AMI)and/or households who earn less than 120 percent of the AMI for properties located in high-cost areas as defined by HUD.Socioeconomic advancementand empowerment:$136.4 millionFinancing of programs supporting the reduction of income inequality or socioeconomic advancement and empowerment for Black,Hispanic,or other minority communities;women;Veterans;people with a disability;immigrants;or refugees.Access to financial services:$332.5 millionInvestments or financings related to the number of people provided with access to financial services and the number of low-income people with access to affordable credit,insurance,and/or savings products.2023 Social Sustainable FinanceEvolving to Better Serve Our CustomersAt M&T,we are on a mission to empower our employees to create extraordinary and distinctive experiences for our customers,communities,and for each other,each and every day.The Customer Experience team builds and maintains many of the products and services that enable us to listen and respond to customer and employee needs.The launch of our My Voice platform in 2021 enables our employees to share real-time feedback on ways we can improve our customer and employee experience.Weve experienced great adoption of the platform,with employee feedback growing 41 percent from 2022 to 2023.The Customer Experience team also leverages surveys,focus groups,Net Promoter Score,and in-depth interviews to track and analyze customer and employee sentiment.Additionally,we partner with internal teams to understand and use customer complaints to drive a better experience.As a result of creating efficiencies in our complaint capture and resolution process,weve reduced the resolution time of complaints,resulting in an average time of 0.92 days to resolve a customer complaint in 2023.We also created a root cause program that aids business lines in identifying the underlying reason for customer pain points in order to act on solutions.Innovating to Meet the Needs of Our Customers and CommunitiesM&T is committed to creating products and services that support our customers and communities changing needs.Our approach to innovation is inclusive and broad:We engage the full organization and our communities,and we build,partner,and invest to acquire new capabilities.Our New Ventures team focuses on building and commercializing capabilities that provide strategic advantages for organizations by meeting identified needs for customers.Fintech and impact investmentIn addition to incubating innovations,M&T engages in the fintech ecosystem through targeted investments,with the goal of bringing innovative capabilities to our work.We recognize the opportunity that new technology provides to the banking industry.Through venture capital investments and strategic commercial relationships,we aim to drive innovation for our business lines who are providing new solutions to our customers.From facilitated learning to commercial engagement and investments,M&T is an active participant in the fintech and innovation ecosystem.In 2023,M&T focused on building infrastructure to support scale and innovation.We established several strategic relationships with fintechs from our innovation portfolio to support the continuous enhancement of our fraud management strategy.M&T continued to support Massachusettss community-focused fintech ecosystem as a sponsor of Mass Fintech Hub.M&T committed$13.5 million in fintech and impact investments in 2023,including$8.5millionto equity impact investments supporting communities within our footprint and beyond.To date,M&T has committed$78.0 millionin fintech and impact investments,including$4.5 million in direct venture investments in both fintech and impact companies.welcomeprosperitypeopleplanetgovernanceappendix17 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustFintech and Impact Investment Activity through 2023*Direct InvestmentsVenture Fund Investments*In previous reports,M&Ts Fintech and Impact Investment portfolio included Bitwise Industries.In 2023,Bitwise ended its operations nationwide,including in Buffalo,New York.We remain dedicated to supporting the technology ecosystem in Buffalo and will continue to invest in efforts to support talent growth in the tech field through the M&T Tech Academy and trusted local partnerships.Thirty Years Strong:The M&T Charitable Foundations Legacy of ImpactEstablished in 1993,The M&T Charitable Foundation(the Foundation)supports thousands of nonprofit organizations focused on improving the quality of life of our customers,employees,and neighbors.Over the 30 years of the Foundations history,M&T and the Foundation have contributed$588.3 million to 10,549 nonprofits.The work of the Foundation is led by Foundation staff in partnership with regional committees comprised of M&T employees who live and work in those communities.The regional committees make local funding decisions that help M&Ts philanthropy to address the needs of our charitable giving footprint and support our enterprise strategy.The Foundations decision making is guided by three core values:Access:Eliminating barriers and building toward inclusive participation Equity:Driving toward fairness and closing gaps in opportunity Responsiveness:Meeting the needs of all people where they are and remaining adaptivewelcomeprosperitypeopleplanetgovernanceappendix18 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustSPOTLIGHT Reinventing the Corner Store with The Community GrocerDuring the Covid-19 pandemic,a crisis came into sharper focus:Much of the population struggles to access healthy food.More than 200,000 Philadelphia residents are considered food insecure,or about 21 percent of the regions population.Philadelphiafollowsnational trendswith children and people of color experiencing food insecurity at a higher rate than others.Alexandre Imbot and Eli Moraru,graduates of the University of Pennsylvania,were volunteering in West Philadelphia with a local organization called the Resident Action Committee,handing out free boxes of food to residents in the majority Black neighborhood,where,together with their neighbors,they co-created the model and collective vision for The Community Grocer(TCG).TCG is an innovative nonprofit reinventing the corner store to ensure that its neighbors have access to the ingredients they need to live stronger,healthier lives and that its customers have access to pathways to transform those ingredients into healthy,nutritious Supplemental Nutrition Assistance Program(SNAP)eligible meals.For the first time ever,TCG enables residents to purchase locally sourced and preportioned meal kits,which they can take home and prepare,or they can trade the ingredients for a meal that is prepared by a separate workforce development kitchen,right next door at no additional cost.This approach celebrates the intention of SNAP while,for the first time ever,allowing SNAP recipients to use their benefits to walk away with a fresh,hot,delicious,and nutritious meal.Through their mission to make eating well easier for all,TCG is promoting food justice,economic justice,workforce development,and health justice in our most underserved communities.The M&T Charitable Foundation donated$300,000 to help TCG build their original location in 2022.Financing for the refurbishment of TCGsPhiladelphialocation was provided by Community First Fund(CFF),aPhiladelphia-based nonprofit partner of M&T.CFF is a Community Development Financial Institution(CDFI)dedicated to aligning capital with social justice for low-income communities and low-wealth individuals.In addition to funding,M&T is providing human capital and education to bolster our support of TCGs mission.Brandon Smith,head of consumer operations and risk at M&T Bank,serves on TCGs board of directors and works with M&T volunteers to host free financial education workshops for customers and the community at the resource center.“By leading community workshops,our goal is to equip our neighbors with the skills and understanding needed to establish a secure financial future,unlocking the potential for stronger communities,”said Brandon Smith head of consumer operations and risk at M&T.“TCGs commitments are to our neighbors and the positive impact we have in our community,”saidEli Moraru,TCGs president and co-founder.“As a nonprofit,we are able to stay true to our mission and to our partners on every step of this journey.”In 2023,M&T and the Foundation together contributed$53.6*million to 4,250 nonprofit organizations.These beneficiaries comprise a diverse range of organizations,including those that represent civic affairs,human services,education,arts and culture,and health care.These contributions fund work in areas such as food security,homelessness,frontline health care,and racial equity,as well as needs exposed and magnified by the pandemic,such as digital access and workforce development.Investing in our expanded footprint through the Amplify FundIn 2022,M&T announced the creation of the Amplify Fund,a$25 million supplemental charitable giving program to provide further support in the legacy PUB communities throughout New England and New York.The funds were designated by The M&T Charitable Foundation to benefit LMI communities and underrepresented populations using a racial equity and social justice lens.Since 2022,M&T has made commitments totaling$20.1 million through the Amplify Fund,some of which are planned to be paid out over the next two to three years.As of the close of 2023,$10.8 million has been distributed.Funding was focused on equity and environmental initiatives,mission-driven and capacity-building work,community and tenant organizing,and financial empowerment and education for individuals and small businesses.Phase II of the Amplify Fund was announced in 2023 and prioritized funding for organizations with initiatives that address family stability,income and wealth equity,workforce development,and health equity.Buffalo Promise Neighborhood:An investment in families through educationM&T has had a long-standing commitment to education in our communities,providing volunteers and charitable funding to education-related organizations.In 1993,M&T began supporting education in a new way when we partnered with Buffalo Public School 68,converting to Westminster Community Charter School in 2004.From this partnership,Buffalo Promise Neighborhood(BPN)was established in 2010 as a separate entity to manage several educational operations and initiatives.Buffalo Promise Neighborhood aims to provide a continuum of solutions to children and families with a focus on building a strong educational foundation that carries children from cradle to career.M&T employs a team of dedicated professionals with backgrounds in business,academia,and human services whose primary focus is revitalization through education.In addition to our dedicated staff,1,476 volunteers have contributed 11,325 hours to BPN since its inception.Thesevolunteers play a vital role in supporting our BPN community to help address educational,social,and environmental needs.Through volunteerism and donations from M&T employees,along with our community members,our programs have empowered thousands of students and strengthened our Western New York community.Our students and their families enroll in programs such as tutoring,after-school clubs,financial education,and community events.Seventy-five percent of our eighth grade graduates have gone on to attend criteria-based public high schools,private high schools,or charter schools.Of the graduates who have attended private high schools,59 have attended through our Promise Scholars Program,which provides tuition assistance through scholarships and college preparatory coaching during their four years in high school.In May 2023,our second cohort of Promise Scholars graduated from college.In addition to 13 college graduates,there are 30 Promise Scholars currently attending colleges,universities,and trade schools.Within BPN,there is an early childhood education center for infants through pre-K children.There are also innovative parent support programs providing resources aimed at helping parents achieve the best for themselves and their children.With an on-site Family Resource Specialist and a Financial Coach,families receive one-on-one coaching promoting career and financial wellness,housing stability,continuing education,and job training.To date,798 children have attended BPNs Childrens Academies and 594 parents and caregivers have engaged in BPNs adult-centered programs.BPNs overall focus on family well-being also includes community initiatives,such as neighborhood beautification projects and health and wellness programs.Through BPN,M&T invests in the Western New York community in a unique and different way,revitalizing the community through holistic education.welcomeprosperitypeopleplanetgovernanceappendix19 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust2023 contributions$53.6*million contributed by M&T and The M&T Charitable Foundation4,250nonprofit organizations received contributions from M&T and The M&T Charitable Foundation*Inclusive of Amplify funds.Giving our time to local organizationsBeing a community-focused bank means being active in the communities we serve,as an organization and as individuals.Volunteering plays a strong role in M&Ts culture and is a key driver that colleagues cite for joining M&T.We empower our people to be active in their communities and provide every full-time employee with up to 40 hours of paid time off each year for volunteerism.Our colleagues who serve on boards and committees of local organizations help advance the work of these organizations and make our communities more vibrant and successful.Serving as a board or committee member is not only a rewarding experience for colleagues but also a great leadership development opportunity.To create a more seamless and accessible experience for colleagues,we use a platform to promote volunteer opportunities and to track volunteer time.We also issue a mandatory digital learning course to help employees understand the importance of volunteering and tracking their impact across the organization.In 2023,our colleagues dedicated 249,382 hours to volunteering in our communities.welcomeprosperitypeopleplanetgovernanceappendix20 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustSPOTLIGHT Nourishing Tomorrows Leaders:Making a difference through board serviceMany M&T employees use a portion of their 40 volunteer hours to serve on the boards of local organizations.Through board service,M&T employees gain leadership experience,contribute to their local communities,and benefit from gaining a deeper understanding of community needs.Although M&T has a strong legacy of employee board service,one local partnership between M&T and a nonprofit went a step further by seeking to grow the diverse representation of local boards.Since 2014,the Gifford Foundation,a private foundation based in Syracuse,New York,has partnered with M&Ts Syracuse team on an initiative called Nourishing Tomorrows Leaders.The goal of this partnership is to increase the inclusivity and diversity of local boards of directors while also educating and inspiring those who participate in local board service.Participants go through a nine-week program with weekly workshops.Danielle Carvaretta,an M&T senior branch manager and a Nourishing Tomorrows Leaders alum,says that being on a board makes a big impact:“You make a difference by being on a board.Your voice is heard.”249,382hours that colleagues spent volunteering in our communities in 2023778employees served on 946 boards or committees for community organizationsResponding to a Crisis with CompassionOn October 25,2023,the community of Lewiston,Maine experienced the tragic killing of 18 innocent people.We have colleagues who live in the community of Lewiston,and we share their pain and grief as we mourn those lives lost.Following the May 14,2022 massacre at a grocery store in Buffalo,New York that killed 10 people and wounded several more,we developed a program for responding quickly to community crises.This program was activated in Lewiston when our Maine regional leadership,in partnership with our crisis response team,jumped into action to support our colleagues,customers,and community members.Our Employee Assistance Program and emotional/mental health resources were made available to employees in the wake of the tragedy.Our leadership,CRA,and the Foundation teams banded together to support community organizations on the front lines of caring for the community.And our employees living in the area rushed in to contribute their volunteer time to helping support recovery efforts in the community.In total,the Foundation committed$100,000 to five separate charities in Maine to support the ongoing response to the tragic shooting.The Maine Community Foundations Lewiston-Auburn Area Response Fund,Maine Association of the Deaf,Tree Street Youth,Spurwink,and Maine Paws for Veterans each received grants to support their work in response to the shooting,as well as their ongoing work in the Lewiston community.In addition to the contributions to local organizations,M&T provided employees throughout our footprint with an opportunity to make donations to the Maine Community Foundation.We also hosted a campaign to deliver letters of support from M&T employees to theLewiston-Auburncommunity.We stand in support of our communities,and our hearts are with our Maine colleagues,customers,and community.welcomeprosperitypeopleplanetgovernanceappendix21 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust“The tragedy inLewistonis unfathomable and the effort to recover is immense,”saidPhil Cohen,regional president ofMainefor M&T Bank.“We are committed to supporting the community every step of the way.”welcomeprosperitypeopleplanetgovernanceappendix22 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustEngaging employees through purpose,development,and connection,unlocking their true potential.nurturingour peoplewelcomeprosperitypeopleplanetgovernanceappendix23 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustM&Ts investment in human capital is guided by two key prioritiesAttract,Develop,and Retain TalentColleague,Leadership,and Customer DiversityOur people are,and always have been,our greatest competitive advantage.As talented and purpose-driven individuals,they are key difference makers in helping us enrich our communities and make M&T a fulfilling place to work.In turn,our focus on the sustainability priorities highlighted below help us to create an environment that effectively supports their efforts.40average hours of training per employee63employees joined the organization through apprenticeship programs since 20209.6years average employee tenure94%participation by M&T employees in M&Ts 401(k)planSDGs alignment“M&T is investing in human capital as a strategic differentiator and competitive advantage.Accordingly,the investments we make in our people underscore the important role that our people play in driving results for our organization.As a community-focused bank,it is crucial that we continue to fulfill our mission to make a difference in peoples lives by building the capabilities and capacity of the organizationand that starts with our people.”David Hollis,Chief Human Resources Officer249,382hours volunteered by M&T employeesCommitted to Investing in Human CapitalAs a community-focused bank,the value we provide to the communities we serve is built upon deep and positive relationships with our customers,community members,and colleagues.Our employee experience is inextricably tied to our customer and community experience and is the cornerstone of our community-focused bank model.Our holistic human capital management delivery model combines the expertise of various Centers of Excellence,including Total Rewards(compensation and benefits);Human Resources(HR)Shared Services and Employee Relations;Talent Acquisition;HR Business Support;Learning and Development;Employee Experience;and Diversity,Equity,and Inclusion.Together,these services provide a support framework to enable our employees to bring their best selves to work,provide the best experience for our customers,and engage in the highest service to our communities.Attracting and Recruiting Talent Throughout Our FootprintRecruiting top-tier talent is vital to our success.We use various channels to identify and recruit high-caliber talent throughout our footprint and provide a positive recruiting experience.In addition,we leverage candidate experience surveys to continually improve the applicant experience.Talent attraction is the first step in creating a valuable relationship with candidates as they consider M&T for their next role.welcomeprosperitypeopleplanetgovernanceappendix24 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust44T%2%Persons of colorWhiteNot disclosed55D%1maleMaleNot specifiedNew hire diversity compositionRace/Ethnicity DiversityGender DiversityAttracting diverse talentM&T makes all employment decisions without regard to race,gender,and other characteristics and strives to create and maintain inclusive representation at all levels and areas of the organization to promote a sense of belonging among employees and a discrimination-free workplace.Our recruiting efforts focus on achieving inclusivity among a variety of factors,including but not limited to,educational background,work experience,perspective,life experience,culture,all races and genders,and others.One way that we do that is through our Talent Acquisition Ambassadors(TAA)program.4 This program was implemented in 2020 and leverages a diverse group of employees from across M&T to help create diverse talent mobility throughout the enterprise.This group of 61 employees have together dedicated 1,872 hours to promoting awareness of M&T career opportunities within our communities.This includes representing M&T at career fairs and events,building relationships with candidates,and using personal community connections to drive awareness of new opportunities at M&T.In partnership with TAA and Employee Resource Groups,our Employee Referral Program generated 11,632 job applications in 2023 and resulted in 19%of new hires.Demographic reporting for our hiring is included in the Appendices on page 106.For more on Employee Resource Groups,see page 40.Partnering to attract talent throughout our footprintWe continually seek opportunities to expand our partnerships with universities and colleges with strong ties to our communities and a focus on supporting underrepresented populations.In 2023,in addition to recruiting at a broad range of higher education institutions throughout our footprint,we continued to recruit at several Historically Black Colleges and Universities(HBCUs),including Bowie State University,Cheney University,Coppin State University,Delaware State University,Howard University,Lincoln University,Morgan State University,the University of the District of Columbia,and the University of Maryland Eastern Shore.We also worked with nonprofit organizations such as the Thurgood Marshall College Fund and attended events,including HBCU Marketplace in Baltimore,Maryland,to help us reach top talent.welcomeprosperitypeopleplanetgovernanceappendix25 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust4 This program is open to all qualifying applicants withoutregard to race,gender,or other characteristics protected under federal,state,or local laws.39X%4%Persons of colorWhiteNot disclosed47Q%2maleMaleNot specifiedEmployee referral program applicant diversity compositionRace/Ethnicity DiversityGender DiversityIn addition to an extensive roster of colleges,universities,and industry groups,we also engage with other organizations to promote job opportunities at M&T,including:The Consortium Reaching Out MBA MBA Veterans National Society of Black Engineers Society of Hispanic Professional Engineers Out in Science,Technology,Engineering and Mathematics(oSTEM)Forte Department of Defense SkillBridge Hiring Our HeroesCultivating a pipeline of talentUsing multiple outreach tactics and deep relationships with educational and institutional partners,we work throughout the year to supplement our talent pipeline with bright and talented students and recent graduates.Hiring early career talent helps us bring in a broad range of diverse perspectives.We have several successful early career hiring and development programs that remain a popular entry point to M&T for new-to-career colleagues.These development programs have a formal training curriculum and designated development days throughout the program,and they provide immediate access to peer support groups and senior management,with work on highly visible projects.See page 35 for details about M&Ts early career programs.Nurturing New Talent PipelinesSupporting VeteransIn 2023,we continued our Corporate Fellowship Program,in partnership with the Department of Defense(DoD)SkillBridge and Hiring Our Heroes(HOH)programs,for active service members within their last 180 days with the military.DoD SkillBridge helps active service members discover opportunities for work experience and industry training before exiting the military.Candidates can review positions available immediately or apply for development programs through third parties such as HOH.The 12-week HOH Corporate Fellowship Program delivers the same valuable work experience and industry training,with additional career development opportunities and mentorship provided by HOH and the host company.We are proud to offer these opportunities to service members.Our program,piloted in 2022,provides direct hire positions on the DoD SkillBridge site,and we also served as a 2022 HOH Fellowship host company.In 2023,we saw one of our HOH fellows transition to a full-time role at M&T.To date,M&T has hired 12 participants from the DoD SkillBridge and HOH programs upon completion of their fellowships.Since 2022,we have had dedicated internal resources focused on the Veteran job-seeking experience and creating new ways to reach out to Veterans,knowing that they have a unique and valuable perspective to offer us as an employer.Investing in apprenticeshipM&T also works to make jobs more accessible to a broad range of talent through investment in apprenticeships.Apprenticeships provide a model for talent development that incorporates on-the-job training so apprentices can“earn while they learn.”This model doesnt require candidates to have a higher education degree and gives talent a shorter,more accessible path to start or switch careers and earn a competitive salary.In 2023,we welcomed our fourth class of apprentices to our Z Development Program(ZDP),an apprenticeship focused on training the next generation of mainframe technologists.5 The ZDP,a partnership with Franklin Apprenticeship and IBM,aims to grow the talent pool for enterprise computing through IBM Z Mainframe System Administrator and Mainframe Application Developer Apprenticeship pathways.The program aims to bring new talent into the technology field,and is ideal for career switchers.Apprentices complete pre-apprenticeship training,then engage in ongoing learning and receive support from managers,peer coaches,and mentors.In 2023,we hired and onboarded our second cohort of youth apprentices.6 In partnership with CareerWise Greater Buffalo,Say Yes to Education Buffalo,and the Buffalo Public School system,M&T now hosts two Buffalo-based cohorts of youth apprentices,totaling 13 apprentices working in various departments.These young professionals,who just completed high school,commit to a three-year apprenticeship to gain career experience while also earning college credit.welcomeprosperitypeopleplanetgovernanceappendix26 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust5 This program is open to all qualifying applicants without regard to applicants race,gender,or other characteristics protected under federal,state,or local laws.6 This program is open to all qualifying applicants without regard to applicants race,gender,or other characteristics protected under federal,state,or local laws.Developing our local workforce through partnershipAnother way we are approaching building sustainable talent pipelines in a highly competitive market is through investment in local workforce development partnerships.We partner with nonprofits,trainers,and workforce development organizations within our footprint to source,build relationships,and reskill or upskill the wealth of untapped local talent.For eight years,M&T Bank has been a key partner to Zip Code Wilmington,a nonprofit that trains individuals from all backgrounds into skilled software engineering roles through intensive 12-week bootcamps.Over the course of the partnership,Zip Code alumni have joined M&T Tech as employees in the Wilmington,Delaware M&T Tech Hub.welcomeprosperitypeopleplanetgovernanceappendix27 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustSPOTLIGHT Jumpstarting careers with M&T Youth Apprenticeship programYouth Apprenticeship at M&T pairs hands-on work experience with classroom learning,supported by wraparound services to promote success for the apprentices.Started in 2022 in Buffalo,New York,the program targets ambitious Buffalo Public School students who are eager to begin their careers while pursuing higher education.This innovative program is a collaboration between national nonprofit CareerWise USA,local education-centered nonprofit Say Yes Buffalo,and several Western New York-based employers,including M&T Bank.In 2023,M&T collaborated with CareerWise and Say Yes for a second year to hire a new cohort of apprentices across several different departments.Our first cohort of youth apprentices entered their second year of the three-year apprenticeship.Between the two cohorts of apprentices currently working at M&T,there are apprentices supporting teams in Tech,Treasury,Finance,Banking Services,Sustainability,and Customer Service,among other areas.Over the past year,apprentices have been able to work on a variety of tasks spanning business operations and technology,such as business surveys,industry research,and task automation.While they work at M&T on a part-time basis,students also work toward professional certificates or an associates degree at partner institutions Hilbert College and Villa Maria College.Jayden Scott,a first-year apprentice working in Human Resources,reflects back on his experience with M&T so far:“When I began my role in 2023,my primary goal was to do work that helped people,which Im doing effectively with the Human Resources Direct team.”M&T has done a great job meeting Jaydens expectations for the apprenticeship and there have been some surprises.“What pleasantly surprised me was the opportunity to channel my creativity,Jayden said.Im currently responsible for designing logos,both for the Human Resources support team and the Youth Apprenticeship program.”M&Ts participation in the regional Youth Apprenticeship program allows students to create a career pathway in the financial services industry and beyond directly after completing high school.As a community-focused bank,it is essential that we are investing in local,sustainable talent.The Youth Apprenticeship program in Buffalo is just one way we are building pipelines and leveraging our great community partnerships,while providing an innovative approach to talent development.Contributing to skills development in our communityThe Tech Academy,a learning center dedicated to developing technology talent for employees and community members,opened applications for a Data Foundations course to train Western New York community members interested in data and technology.This“micro-credential”program will be facilitated in 2024 with Pluralsight One,the nonprofit arm of Pluralsight,an online technology training provider.Once admitted to the program,residents of Western New York with a high school diploma or GED receive weekly remote training for 12 weeks from industry experts.At the end of the program,graduating participants will receive a certificate of completion.This course builds on the success of the Data Analytics Bootcamp,hosted by the Tech Academy in 2022.When it comes to cultivating a pipeline of technology talent,we are taking a proactive and holistic approach,combining community outreach and technology skills education to reach talent before they graduate high school.By partnering with local schools,nonprofits,and community groups,we have extended our reach to middle and high school students,exposing them to careers in technology and helping them build foundational technology skills through events,job shadowing,and internships.In 2022,the Tech Academy launched a Youth Tech Talks series,an extension of its popular Tech Talks educational event series for M&T technologists looking to upskill on various tech topics.In 2023,we continued Youth Tech Talks,connecting employees at M&T in roles across Technology,Data,and Innovation with local middle and high school students for panel discussions and interactive sessions.We also bring technology education to youth through M&Ts Coders Club,a five-week program during which students learn the basics of software development by programming a robot.The curriculum is designed and taught by M&T volunteers.The 2023 program was conducted in partnership with Buffalo Prep(see page 56 for other collaborations with Buffalo Prep)and Westminster Community Charter School.Over the summer,we welcomed students from grades six through nine to our technology workspace in Buffalo for the second annual Build-A-Robot Day.This event invited students to participate in a fun and tangible STEM(science,technology,engineering,math)project.Students built remote-controlled robots using software,with the help of M&T technologists.In 2023,1,079 students participated in youth-focused Tech Academy programming in Western New York.Creating job opportunities for our colleaguesIn 2022 and 2023,we focused on improving our internal hiring process to create an environment where colleagues can easily grow their careers and find their next opportunities while staying with M&T.We made incremental improvements and larger innovations to the internal hiring process through changes to our systems and programs that benefit internal job seekers,hiring managers,and recruiters.For example,improvements were made to the internal job application process,supplemented by additional training for managers and recruiters to provide actionable feedback and career support for internal candidates.Our Career Hub and Career Marketplace on our internal Workday system offer opportunities for employees to view open jobs,create a talent profile,and connect with a mentor.In 2023,we enhanced these tools for easier navigation and a better user experience.Responding to feedback from our Annual Engagement Survey that cited career development as a key driver of engagement,we revived a popular initiative called DevelopmentOne.This series of events and resources,hosted by Human Resources teams,is open to all M&T employees and dedicated to helping colleagues invest in their careers.The initiative took place over a two-month period and included 566 sessions featuring one-to-one career consultations,rsum reviews,mock interviews,and career workshops.We are also innovating around career mobility through a series of pilot programs based on concepts created by a cross-functional team of employees from HR and the business lines.These concepts were created in 2023,following extensive employee interviews,focus groups,and surveys.The concepts included ways to deepen career development support for all M&T employees and programs for allowing employees to“try on”a new role or different career path.The pilot programs will launch in early 2024.welcomeprosperitypeopleplanetgovernanceappendix28 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust5661-to-1 coaching sessions for employees conducted through DevelopmentOne40%of roles filled by internal candidatesEngaging Our TalentListening and learning from our colleaguesM&Ts commitment to recruiting top talent and regularly soliciting their feedback helps create an engaged employee base that drives success.Since 2001,we have conducted 18 Annual Engagement Surveys,demonstrating a commitment to fostering candid two-way communication with employees to enhance the workplace.Survey results are reviewed with senior management,shared with individual managers,who identify and implement improvements based on employees feedback,and then presented to M&Ts Board of Directors.In 2023,92 percent of our employees participated in the survey.In 2023,we announced our evolution to a more continuous listening strategy that gathers employee feedback throughout the year(May,September,and January).This new strategy allows us to develop a more holistic understanding of employees experience,act faster on items impacting engagement,and drive better prioritization and decision making.In addition to our three all-employee surveys,M&T solicits employee feedback during other key moments that matter,such as onboarding or exiting the company.These surveys work together to reveal a deeper understanding of our employees experiences and drive the effective action planning needed for any changes.welcomeprosperitypeopleplanetgovernanceappendix29 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust71sqrsuw 112013201520162017201820192020202120222023*Annual Employee Engagement Index from 2011 to 2023I am proud to work for our company:85%I feel the company has created an environment where people with diverse backgrounds can succeed:91%The people I work with model our values:85%I believe our company has an outstanding future:83%I am encouraged to come up with new and better ways of doing things:81 23 Annual Survey highlights*In 2023,we switched to a new survey vendor with some different engagement questions.The lower score can be partially attributed to the change in question base.Connecting colleagues to communityM&T encourages employees to give back to communities through an annual allotment of up to 40 hours of paid volunteer time.For colleague volunteerism numbers,see page 20 in the Prosperity section.welcomeprosperitypeopleplanetgovernanceappendix30 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust249,382Number of volunteer hoursSPOTLIGHT Engaging employees,connecting communityMaria Rose started her career at M&T five years ago and is now a Digital Product Manager.She has always been very active in volunteering in the Western New York community and appreciates how the bank supports employees who want to give back to their community.As a member of the Steering Committee of the Womens Leadership Network,one of M&Ts Employee Resource Groups,Maria often seeks local opportunities for members in Western New York who are interested in volunteering.Maria contacted an organization called Old First Ward Community Center(OFWCC),a nonprofit organization providing much-needed community services for the Old First Ward neighborhood in Buffalo,for volunteer opportunities.She learned about the damage to OFWCCs community garden during the winter storm that rocked Buffalo and the surrounding area in December 2022.OFWCCs community garden is located on a previously abandoned lot adjacent to the community center.The community garden was created to feed households with difficulty accessing fresh produce due to financial and transportation constraints.The garden has grown to include 18 raised beds filled with fruits and vegetables that serve 20-25 households from May to October,supplementing OFWCCs year-round food pantry.Thanks to the connection that Maria made,a team of 20 M&T volunteers spent two afternoons preparing the community garden by cultivating a variety of seasonal fruits and vegetables to kick off the upcoming harvest cycle.Patrick Gormley,Executive Director of OFWCC,was extremely grateful for the M&T volunteer assistance:“What would take one staff member a week or two takes one to two days.In the end,it allows us to have a better product.”In addition to the community garden,OFWCC serves a community in Buffalo that is often overlooked,providing housing repairs for lower-income households,food and transportation services for seniors,and after-school programs for youth.OFWCC appreciates the extra capacity that M&T volunteers provide,and employees like Maria value the opportunity to help with such crucial community efforts.“M&T does an amazing job supporting volunteering by offering resource groups and maintaining connections with local organizations so they can come back to us,and we can provide volunteers when they need,”said Maria Rose.M&T employees volunteer with the Western New York Land Conservancy.Supporting Our Valued Team MembersNurturing through Human ResourcesAt M&T,it is important for us to have a thorough support framework for our employees in order to deliver the best work experience.Our Human Resources(HR)Business Partners have a thorough understanding of our organizational strategy and the talent each department needs to excel.They liaise with leaders across the business to align our human capital strategy with each businesss needs.The Employee Relations team provides staff and managers with guidance and tools to manage performance and behavior.These include the Action Plan for Success,an interactive tool for managers to engage with employees who are struggling to achieve a higher level of performance,and a Corrective Action process to address conduct issues.The Employee Relations team also manages bank-wide policies,helps address issues identified in our confidential 24-hour Employee Complaint Hotline,and plays an important part in ensuring that appropriate employee assistance resources are available.The Employee Experience team proactively maintains a holistic understanding of the employee experience through pulse surveys,our continuous listening engagement surveys throughout the year to all employees,and employee life cycle touch points(such as onboarding and exit),in addition to other feedback channels throughout the enterprise.The team uses employee feedback at a bankwide level to democratize data so that managers can identify and act on opportunities to improve upon M&Ts employee experience.In addition,this team serves as the voice of the employee on HR and bankwide initiatives,ensuring colleague needs are prioritized along with other business objectives.Finally,our HR Direct team is available to all employees for any HR-specific questions and to provide employees with the information and resources needed to be successful,such as how to navigate our employee benefits,access training,and use our HR systems.Supporting our colleagues health and wellnessIn early 2023,as we continued to welcome employees back into the office,we saw an opportunity to support our colleagues individual transitions to a routine that felt manageable.We learned that our colleagues were facing physical,mental/emotional,and financial challenges that had accumulated over the past few years due to constant change and uncertainty.To support our colleagues holistically,we enacted a plan across two pillars with the goal of providing manageable work-life solutions while prioritizing health and wellness:Financial wellness Develop personal savings priorities Utilize retirement plans to maximize saving Identify short-,mid-and long-term strategies for wealth-buildingHealth,physical,emotional,and social wellness Utilize concierge vendors to guide employee care and services Provide alternative solutions for mental health resources Educate and build understanding through on-site workshops To achieve this plan,we used a portfolio of programs,resources,and support services,detailed next.Maintaining physical wellnessM&Ts medical plan helps colleagues receive and pay for treatment,manage their health with no-cost preventive services,and,most importantly,remain healthy to take care of their own families.Our medical plan is supported by concierge vendors who help employees navigate the challenges of health care.A single medical plan allows us to better manage services,resources,and costs throughout our footprint.Colleagues also benefit from the availability of healthy intervention options,including access to the Foodsmart app,a digital nutrition platform,and various in-person and virtual events hosted by the MTBFit Resource Group,including group walks,yoga,cooking classes,and guided meditations.To maintain a healthy work-life balance,it is important that employees take the time to rest and relax.Our annual Paid Time Off(PTO)program is based on years of service and employment grade,ranging from 15 to 30 days.We offer up to 12 weeks of Parental Leave for birthing and non-birthing parents and other caregivers.During Parental Leave,employees receive 100 percent of base salary(or average commissions for commissioned employees).Employees returning to work from Parental Leave have the same job reinstatement protection as employees returning from family and medical leave.Break times are offered to nursing mothers,and private Nursing Mothers Rooms are in buildings with 50 or more employees.In addition,M&Ts benefits package offers programs to support parents and families,including access to Progynys Fertility and Family Building Benefit and Ovia Health,two resources that support planning for fertility,pregnancy,and parenting.We also offer other types of leave,including personal,medical,and military service.welcomeprosperitypeopleplanetgovernanceappendix31 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustSupporting emotional and social wellnessEmotional health affects how we think,feel,and function.It also affects our ability to cope with stress,overcome challenges,and create a strong social support system.Therefore,we offer the following wellness programs:Employee Assistance Program:Free to employees and their dependents,this program provides confidential support on a range of issues,including confidential counseling,financial resources,legal support,and work-life solutions,24 hours a day,seven days a week.Cleveland Clinic:Provides employees with free eCoaching programs such as Stress Free Now and the Clarity Program,which help manage overall well-being.Teladoc:Telemedicine benefits for employees and dependents covered under the M&T Bank medical plan are available 24 hours a day,seven days a week,via phone or video.Virtual behavioral health consultations with a therapist,psychologist,or psychiatrist are also covered at 100 percent with no cost to the member through 2024.Contributing to financial wellnessFinancial security arises from having the resources to meet your needs,being in control of your day-to-day finances,and having the financial freedom to make choices that allow you to enjoy life and plan for the future.To help our staff enjoy that security,we provide the following benefits:Employee Stock Purchase Plan:This provides employees the opportunity to share in our growth and success.Eligible employees can purchase stock with a 10 percent discount through payroll deductions.Retirement Savings Plan(401(k):Available for all employees to begin contributing immediately.M&Ts contributions begin after six months of employment and include:100%matching contributions of the first 5 percent of employee contributions Potential for additional employer contributions for employees based on a percentage of employee pay,date of hire,and length of service or bank profitabilitywelcomeprosperitypeopleplanetgovernanceappendix32 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustSPOTLIGHT RocStrong:Engaging employees through health and wellness At M&T Bank,colleagues are provided with many ways to build a support system that allows them to feel their best and do their best work,in an environment where they feel like they truly belong.One way that employees find this support is through Employee Resource Groups(ERGs).Kesha Washington,Retail Continuous Learning Strategy Manager based in Rochester,New York,knows this better than most.Kesha founded and grew the first health and wellness ERG in our footprint,and the first ERG based in Rochester.RocStrong,as the ERG came to be known,plays a crucial role in engaging employees in the Rochester market,creating brand awareness through community engagement and getting employees involved in healthy activities.This group became an important avenue for education,awareness,and community building,especially during the onset of the Covid-19 pandemic and the racial unrest beginning in 2020.RocStrong collaborated with the Urban League of Rochester in 2020 to educate the community about the effects of racism,including adverse health impacts,and how to combat them.In addition,RocStrong has hosted health fairs,participated in the Corporate Challenge race,and worked intentionally with vendors to ensure that employees have healthy snacks in M&T workplaces.RocStrong is so much more than an ERGtheyre bringing colleagues together to drive positive change through health,wellness,and belonging.For more on Employee Resource Groups at M&T,see page 40.“We are a pillar of the community,”said Kesha Washington.“It was important for us to show up in our community and partner with other community organizations.Our partners would see a sea of green volunteer shirts and know M&T was there to support.”94%participation by M&T employees in M&Ts 401(k)plan*Compared to industry average participation rate of 85.6%,according to T.Rowe Price.Developing Our PeopleAt M&T,career development is an ongoing priority.Giving our colleagues the opportunity to develop their skills and grow their careers is crucial to our success as an organization.We want our employees to grow and succeed as team members,individuals,and community members.We provide learning opportunities to enhance their knowledge,empower their performance,and maximize their positive impact.The programs described in this section are open to all qualifying applicants without regard to race,gender,or other characteristics protected under federal,state,or local laws.Using leadership competencies to strengthen talent effortsOur development,training,career progression,and talent management programs are all built upon a single leadership competency framework.This framework is used in interviewing,providing feedback,giving recognition to colleagues,and creating clearer job descriptions.Our leadership training and development program curricula are also built upon these competencies to provide a consistent path to development and growth across the organization.Our Manager Acceleration Program is a required leadership curriculum designed for all new managers and employees moving into managerial roles.The program teaches managers how to support,motivate,and empower their teams to increase engagement and productivity.It also provides a standardized management framework across the organization,with a curriculum based on our leadership competencies.Training opportunitiesOther options for employee development are cultivated through a variety of learning offerings on topics such as technical skills,job-specific knowledge,and professional development,including courses aligned with the companys enterprise-wide leadership competencies.Training content is made available as synchronous(taught by an instructor live in real time),asynchronous(made available to the employee virtually to access at any time),and blended learning solutions(a combination of live instruction and virtual resources)to promote employee access.M&Ts training and development opportunities are available to every employee.Web-based and in-person training are available through our internal Workday Learning platform.Employees have access to hundreds of web-based training courses and instructor-led classes.Topics cover personal and professional development,leadership development,technical skills,and specialized options for specific roles.We have a suite of talent development programs for those early in their welcomeprosperitypeopleplanetgovernanceappendix33 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington TrustSPOTLIGHT Next Up:Learning side by side with our customers Two of M&Ts values,curiosity and collaboration,shine through in a new program piloted by M&T Learning in 2022 and launched officially in 2023.The Next Up:Community Leadership Accelerator*was created to bring together high potential leaders within M&T and leaders at our customers organizations to learn and grow as leaders,together in the classroom.Next Up is a cohort-based program that brings together M&T employees and non-M&T employees,creating a blended cohort that enhances learning and sparks new collaborative business relationships.In 2023,M&T conducted four programs in Bridgeport,Connecticut;Baltimore,Maryland;Washington,DC;and Philadelphia,Pennsylvania.The programs curriculum was designed by M&T Learning and includes in-classroom learning,discussion,and job-relevant application.Next Up is focused on enhancing managers skills,such as creating development plans,engaging in candid conversations,managing stakeholders,and developing influence skills.Participants should expect improved leadership skills that will help them succeed in their careers.*This program is open to all M&T employees and select M&T clients without regard to applicants race,gender,or other characteristics protected under federal,state,or local laws.M&T Leadership CompetenciesCreates VisionSets priorities and aligns people to themInspires FollowersEnergizes and mobilizes others to take actionBuilds AlliancesCreates opportunities through partnership and inclusionInfluencesGains buy-in without the use of positionDelivers ResultsDrives agility and accountability to elevate performanceDevelops TalentDevelops a diverse workforce for competitive advantageInnovatesEmbraces diverse ideas and fosters a culture of changeGrows ValueUnderstands our customers and the business of bankingcareers and for high-potential colleagues(see page 35 for more details on these programs).For the program instruction and curriculum development associated with portions of select talent development programs,we leverage higher education institutions including Cornell University in New York and Quinnipiac University in Connecticut.In addition,in 2021,we opened the Tech Academy,a facility dedicated entirely to technology training,located within the Tech Hub in downtown Buffalo,New York.This facility offers high-tech flexible training and meeting environments,including classrooms,open collaborative spaces,and a lecture hall.This space is used for in-person and hybrid technology training and events designed to engage our technologists in Western New York and Wilmington,Delaware,as well as some non-technology colleagues who require technology upskilling for their roles.Tech-focused community groups and training programs in Western New York also use the space throughout the year at no cost as part of our commitment to making the space a community asset.To encourage employees to take job-related courses,we offer a Tuition Assistance Program.All employees are eligible to apply for tuition assistance after one or two years of continuous service with M&T,depending on requirements specific to their desired training program.Tuition assistance is offered for degree programs across a number of higher education institutions within our footprint and beyond,as well as for Massive Open Online Courses(MOOCs)and professional designations such as Chartered Financial Analyst(CFA)and Certified Financial Planner(CFP).Early career developmentAt M&T,we take career development seriously by selecting the right talent and providing them with resources to help them establish fulfilling careers.We do this at all levels of the organization but are particularly focused on fostering early career talent.Through a combination of approaches such as workforce development,apprenticeship,internships and fellowships,and talent development programs,we are building a flourishing talent pipeline drawing from schools,nonprofits,and industry associations within our local communities as well as nationwide.welcomeprosperitypeopleplanetgovernanceappendix34 2023 M&T SUSTAINABILITY REPORT M&T Bank|Wilmington Trust1,303unique course offerings through M&T Learning851,896hours of training for M&T colleagues through M&T Learning courses40average hours of training per employee 2023 Employee Training at-a-glance75%of tech employees engaged in learning through the Tech Academy31,175total hours spent in technology training through the Tech Academy across the organization197employees received tuition reimbursement from M&T in 2023$1.6 millionprovided to employees for tuition reimbursement in 20232023 Tech Academy Training at-a-glanceInternships*Since 2019,we have been growing our summer internship program,which is open to all qualified undergraduate college students.This 10-week paid program includes department-specific projects that provide exposure to M&T leadership,training,networking opportunities,and early access to full-time employment.To meet the demand for tale
2024-08-22
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