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2022,2023Environmental,Social,andGovernanceReportTABLEOFCONTENTS3AboutThisReport4AMessageFromOurChai.

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GLOBALCROSSVALUEPLATFORMMarubeniCorporationSUSTAINABLEDEVELOPMENTREPORT2022CONTENTSContents1Editoria.

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ConnectingforaHealthierFuture2022ENVIRONMENTAL,SOCIAL,ANDGOVERNANCEREPORTTableofContentsIntroduction.

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2023 INTEGRATED REPORTACCELERATING THE ENERGY TRANSITION ENGIE RECOGNIZED BY INTERNATIONAL INDICES AND RATING AGENCIES MAIN INDICES CREDIT RATINGS AT FEBRUARY 21,2023AaaAAAAAASome orders of magnitude 1 metric ton of CO2 equals a Paris-New York round trip flight per passenger,or four Paris-Berlin(8,000 km)round trips in a thermal car,or one year of heating a 40 m2 home with average insulation.A French person emits on average 12 metric tons of CO2 per year.EDF,ENEL,Iberdrola,Orsted,SSE,EON,Fortum,Naturgy,EDP( Vattenfall Verbund EnBW for S&P),( Vattenfall Verbund EnBw RWE for Moodys),( RWE for Fitch)ENGIEMoyenne du secteurXXScore maximumMoodysFitchS&PBaa1BBB A-Baa1BBB BBB SOME POWER LEVELS AT FACILITIES ON A(LOGARITHMIC)SCALE Solar panel 300 WTramway 400 kWGas furnace 30 kW1 MWEDF nuclear reactor 900 MWKadapa solar power plant(India)250 MWTihange nuclear power plant(Belgium)3 GWTGV Atlantique 8.8 MWWind turbine 1 to 3 MW1 GW10 kW100 kW10 GW10 MW100 MWCampo Largo wind power plant(Brazil)688 MWMarafiq gas power plant(Saudi Arabia)2.75 GWJirau hydroelectric dam(Brazil)3.75 GW1 kWThis report has been validated by the Executive Committee and the members of the Board of Directors Committee on Ethics,Environment and Sustainable Development(EESDC).The Statutory Auditors have also validated the compliance of certain indicators.Listed in Paris and Brussels(ENGI),the Group is represented in the main financial indices:CAC 40,Euronext 100,FTSE Euro 100,MSCI Europe.ENGIE is listed in the principal non-financial indices:DJSI World,Euronext Vigeo Eiris Europe 120,Euronext Vigeo Eiris Eurozone 120,Euronext Vigeo Eiris France 20,MSCI EMU ESG Screened,MSCI EUROPE ESG Universal Select,Stoxx Europe 600 ESG-X,CAC 40 ESG,Bloomberg Gender-Equality Index.ENGIE has been included in the 2022 CDP Supplier Engagement Leaderboard and is among the top 8%of companies in terms of its suppliers engagement on climate change.ENGIE favors rating agencies with which the Group can maintain and develop constructive relationships to improve its CSR performance and pays particular attention to the evolution of these ratings.2022 CSR RATINGS10081501007845AAAAABBBNegligible riskMedium riskHigh riskENGIESector averageXXMaximum score1007053AA-BABBABBThe information relating to the Task Force for Climate-Related Financial Disclosures,the United Nations Sustainable Development Goals and the European Unions Green Taxonomy can be found in the integrated report on the following pages:ENGIEs climate and biodiversity strategies are detailed in the Climate and Biodiversity notebooks,respectively.Climate Notebook p.64 ENGIEs contribution to the SDGs p.14-15Business model p.26-27Business model p.26Sustainable finance p.46-47SUMMARYINDICATORS AND ANNEXES6164 CLIMATE NOTEBOOK/TCFD REPORT 86 BIODIVERSITY NOTEBOOK 94 RENEWABLE GASES NOTEBOOK 102 JUST TRANSITION NOTEBOOKOUR AMBITION06HOW ARE WE PREPARING FOR THE FUTURE?OUR GOVERNANCE50HOW DO WE DRIVE THE TRANSFORMATION OF THE GROUP?OUR IMPACT24WHAT IS OUR VALUE CREATION?EUROPEAN GREEN TAXONOMYA world leader in low-carbon energy supply and related services,ENGIE with the support of its stakeholders is working to accelerate the transition to a carbon-neutral world and develop a diversified energy mix in which the share of renewable energy is expected to grow significantly.Guided by its purpose,which is enshrined in its bylaws,the Group assists its customers with decarbonization through more energy-efficient,cleaner solutions which it designs and implements.Operating in 31 countries,ENGIE relies on a streamlined business model that seeks to achieve the energy transition with confidence through its four core businesses:renewable energy,local energy networks,centralized networks,thermal generation and energy supply.ENGIE,A CHAMPION OF ZERO-CARBON ENERGY 60 Mt of greenhouse gas emissions(scopes 1&3)from energy production38%renewable energy in electricity production capacity29.9%ofwomen in managementNo.1in wind and solar in France No.1in natural gas distribution in EuropeNo.2in natural gas transmission in EuropeNo.1worldwide in urban cooling networksNo.3worldwide in urban heating networks96,400employees2022 KEY FIGURES 93.9 bnin revenues5.5 bnin growth investments9 bn in EBIT31countries02-OUR AMBITION EUROPE5.1 bn IN EBIT74,900 EMPLOYEES17.4 GW OF DEN CAPACITY(2)ASIA MIDDLE EAST AFRICA OCEANIA0.5 bn EBIT11,300 EMPLOYEES4.6 GW OF DEN CAPACITY(2)SOUTH AMERICA1.5 bn EBIT5,700 EMPLOYEES 255,400 km gas distribution network 39,500 km gas transmission network 4,900 km of electricity transmission networks 9 bn EBIT(1)96,400 EMPLOYEES24.9 GW OF DEN CAPACITY(2)TOTAL ELECTRICITY PRODUCTION CAPACITIES:102.7 GW(at 100%)incl.38 GW of renewables excl.pumped storage and decentralized electric capacities(2,9 GW)GROUPTotal capacities:19.7 GW(at 100%)incl.15.4 GW renewablesTotal capacities:40.3 GW(at 100%)incl.15.8 GW of renewables (excl.pumped storage)Total capacities:37.5 GW(at 100%)incl.2.3 GW renewablesScopeGHG emissions from energy production3.5 Mt CO2 eq.26.9 Mt CO2 eq.13Scope16.3 Mt CO2 eq.3.4 Mt CO2 eq.1332.8 GW1.3 GW1.2 GW1.1 GW1.1 GW1.8 GW0.1 GW1.2 GW12.1 GW1.5 GW1.7 GW1.3 GWScopeGHG emissions from energy production6.8 Mt CO2 eq.0.0 Mt CO2 eq.9.1 GW14.6 GW5.3 GW1.3 GW1.7 GW8.1 GW0.2 GWNORTH AMERICA0.2 bn EBIT4,500 EMPLOYEES2.9 GW OF DEN CAPACITY(2)Total capacities:5.2 GW(at 100%)incl.4.6 GW renewables0.7 GW1.0 GW3.5 GWScopeGHG emissionsfrom energy production1.3 Mt CO2 eq.1.3 Mt CO2 eq.130.3 GW2.5 GW21.2 GW49.9 GW5.3 GW3.7 GW14.4 GW5.4 GWGHG emissions from energy productionGHG emissions from energy productionScope31.6 Mt CO2 eq.327.9 Mt CO2 eq.1Electricity capacitiesElectricity capacitiesElectricity capacitiesElectricity capacitiesElectricity capacities1BREAKDOWN OF ELECTRICITY PRODUCTION CAPACITY BY TECHNOLOGYCoalNuclearNatural gasScope 1Scope 3Other resources non-renewablesSolarBiomass and biogasHydropowerWind PowerData excluding EQUANS(1)Other activities including GEMS:1.7bn(2)Decentralized Energy Network Capacities 32023 INTEGRATED REPORT-03“For the moment,Europe is ahead of the game in terms of energy transition and has set a target of achieving carbon neutrality by 2050.We cannot run the risk of taking a step backward.”Jean-Pierre Clamadieu,Chairman of the Board of DirectorsWHAT CONSEQUENCES WILL THIS CRISIS HAVE ON THE EUROPEAN ENERGY MIX?Jean-Pierre Clamadieu:For the moment,Europe is ahead of the game in terms of energy transition and has set a target of achieving carbon neutrality by 2050.We cannot run the risk of taking a step backward.On the contrary,we must accelerate this transition to build an energy mix that is diversified,carbon-free,and as affordable as possible.To do so,we must develop renewable energies,nuclear power in the countries that so wish,yet also the flexible production and storage facilities required to ensure a balanced and reliable network.In addition,the use of molecules,essential for the decarbonization of heavy industry and transport,will be a key element.Initially,natural gas will be used,but biogas and hydrogen are in line to rapidly replace it.To ensure the acceleration of this transition,further improve the competitiveness of our industry and provide a level of consumer protection,the European electricity market must evolve:ENGIE has made recommendations in this regard.HOW DO YOU SEE THE CONSEQUENCES OF THIS CRISIS FOR ENGIE?Catherine MacGregor:It demonstrates the relevance of our strategy in meeting these challenges.Our vision for a balanced energy mix requires stepping up the development of renewable electricity and gas,while also maximizing the use of existing networks.We have commissioned 3.9 GW of renewable capacity this year,in line with our target of 50 GW by 2025 and 80 GW by 2030.We have also achieved major successes in heating and cooling networks,green mobility and on-site energy production.And we are pursuing our objectives in developing the energies of the future with 4 GW of green hydrogen by 2030 and 10 TWh of biomethane production annually,WHAT IS YOUR VIEW OF THE TRANSFORMATIONS IN THE GLOBAL ENERGY LANDSCAPE?Jean-Pierre Clamadieu:The outbreak of war in Ukraine triggered an unprecedented situation on the energy markets with the gradual isolation of Russia which,as recently as 2021,was the leading energy exporter.Against this backdrop,securing supplies and stepping up the energy transition to boost its strategic independence have become top priorities for Europe.This energy transition is all the more urgent as climate change is becoming increasingly visible,through extreme weather and climate phenomena which underline the pressing need to reduce our greenhouse gas emissions.At the same time,with regard to the commitments made by States,no major progress was achieved during COP27.Notwithstanding its emergency responses,it is vital for Europe to understand that a combination of high energy prices and the implementation in the United States of a highly attractive framework for investors,and in particular those committed to green technologies,could weaken its industrial heritage in the long term.I believe that a European response is essential,by leveraging tools as simple and powerful as those set out in the Inflation Reduction Act.HOW HAS ENGIE ADDRESSED THE CRISIS BROUGHT ABOUT BY THE WAR IN UKRAINE?Catherine MacGregor:ENGIE has been at the forefront.We have successfully diversified and secured our gas supply source to meet our customers needs.We have fulfilled our mission alongside other States,by maximizing the use of our gas networks,in terms of transport,distribution,and import and storage terminals.This allowed us to prepare for the winter with confidence.We have also acted to support both our individual and corporate customers,alongside the public authorities.Our Group has been fully focused and I would like to thank the teams for their unwavering commitment.At the same time,despite the crisis,we have continued to implement our strategic plan.ENGIE is now refocused on its core businesses and key markets and is in an excellent position to generate growth.We are fully committed to stepping up the energy transition,thanks to a more integrated,more digital and more industrial Group.This includes reinforcing our efforts in terms of health and safety at work,which is a top priority for ENGIE this year we have launched a plan to rally the entire Group and its subcontractors around this crucial issue.EDITORIAL04-OUR AMBITION also by 2030.Green molecules,biomethane,hydrogen and hydrogen derivatives are all essential to the mix as they represent the only solution for decarbonizing heavy mobility and heavy industry and providing the necessary flexibility to the system.WAS 2022 ALSO A YEAR IN WHICH THE GROUP CONSOLIDATED ITS ESG COMMITMENTS?Jean-Pierre Clamadieu:Yes,the Group has of course maintained a significant level of ambition around this and the Board of Directors is particularly attentive to it.We confirm our adhesion to the 10 Principles of the United Nations Global Compact and to the 17 United Nations Sustainable Development Goals,as well as our 2030 ESG objectives.Moreover,we continue to progress along the path that will lead us to be Net Zero in 2045.During our last Shareholders Meeting,our shareholders supported the Groups climate strategy with more than 96%of votes in favor of a resolution covering its key points.I would add that the Groups main ESG objectives are part to the criteria upon which the calculation of the variable compensation of the Executive Committee and senior management is based.Finally,the energy transition cannot be a success without ensuring that the benefits and costs of the transition are distributed fairly.We must pay close attention to our stakeholders,employees,territories,customers,and suppliers.This will be one of the objectives which will guide our efforts in 2023.IN ORDER TO MEET THESE CHALLENGES,WHAT IS ENGIES POLICY IN TERMS OF TALENT MANAGEMENT?Catherine MacGregor:To achieve our ambition of becoming the leader in the energy transition,ENGIE relies on all of its talent and expertise.We have continued to strive to strengthen the Groups ability to attract,recruit and retain talent in an increasingly competitive market.As of this year,the Group has already met its target of 40%women on its Executive Committee by 2025.We aim to achieve gender equality among managers by 2030.More generally,diversity,equity and inclusion are priorities for ENGIE.These are the aims of our global policy BeUENGIE that was launched in 2022.“To achieve our ambition of becoming the leader in the energy transition,ENGIE relies on all of its talent and expertise.”Catherine MacGregor,Chief Executive Officer2023 INTEGRATED REPORT-05 OUR PURPOSEENGIEs purpose is to act to accelerate the transition towards a carbon-neutral economy,through reduced energy consumption and more environmentally-friendly solutions.The purpose brings together the company,its employees,its clients and its shareholders,and reconciles economic performance with a positive impact on people and the planet.ENGIEs actions are assessed in their entirety and over time.06-OUR AMBITION HOW ARE WE PREPARING FOR THE FUTURE?08A triple shock:geostrategic,energy and inflationary 10ENGIEs responses12Integrate stakeholder expectations 13Manage risks,seize opportunities 14Contribute to Sustainable Development Goals 16Steering the creation of value by 2030 19Increasing our commitments to make progress 20Manage risks for greater control 21Set up specific governance for climate issues 22Put ethics at the heart of our governance23Steer the vigilance plan via a dedicated governance structureOUR AMBITION2023 INTEGRATED REPORT-07 A TRIPLE SHOCK:GEOSTRATEGIC,ENERGY AND INFLATIONARY A GLOBAL ECONOMY WEAKENED BY THE WAR IN UKRAINE The economic recovery following the gradual end of the Covid-19 pandemic was accompanied by massive stimulus packages.This situation caused a bottleneck in supply chains and a surge in the price of commodities,including energy.Russias invasion of Ukraine in February 2022 exacerbated these price pressures because of the severe supply disruptions it caused,especially for the raw materials produced by these two countries.Stoked by this unprecedented energy crisis,global inflation(8.8%(1)has led to a tightening of monetary policy in most major economies and a slowdown in global growth.EXCEPTIONAL EUROPEAN MEASURES The significant European exposure to Russian gas(40%of consumption in 2021)caused gas prices and therefore electricity prices to soar.This was exacerbated by the reduced availability of the nuclear fleet in France and the unfavorable hydrological conditions.Europe therefore had to find short-term alternatives to maintain security of supply.This resulted in an increase in LNG imports up by 45 billion m3 from 2021(2)and led to more than 90%(2)of gas storage being filled.It has also resulted in many countries temporarily restarting their coal-fired power plants.European governments have taken steps to protect the purchasing power of businesses and consumers,with energy vouchers,price shields,a reduction in VAT,and even a windfall tax.The European Commission has also introduced a temporary electricity price cap of 180/MWh on the revenue of The robust economic recovery linked to the end of the pandemic in 2021,together with Russias invasion of Ukraine,have created an unprecedented global energy and inflationary shock.These crises underscore the need to accelerate the energy transition amid new challenges.ELECTRICITY SPOT PRICE*IN FRANCE IN 2022(/MWh)800600300700Jan.AprilAugustFeb.MaySept.MarchJulyJuneOct.Nov.Dec.5004002001000Average 2021 FranceSpotAverage 2020 France*baseload power price day-ahead(1)Source:IMF(2)World Energy Outlook 2022 International Energy Agency p.91producers of renewable and nuclear energy(so-called“inframarginal”producers)to partially finance these measures.Member States were allowed some freedom in implementing this decision.In Belgium,for example,a cap of 130/MWh was introduced from August 1,2022 until June 30,2023.In France,the 2023 Finance Act provides for the introduction of a cap on all electricity production exposed to market prices over a retroactive and extended period.In Italy,the government has already adopted an“extraordinary solidarity contribution”for companies in the energy sector.Despite this support,some energy-intensive companies have been forced to scale back or even cease their operations.“With the 2022 REPowerEU plan,the European Union aims to reduce its energy dependence on Russia through energy savings,green energy production and diversification of supplies.”08-OUR AMBITION(3)Carbon Capture Utilization and Storage(4)Source:CO2 emissions in 2022 IEA(5)IEA APS Scenario(6)TFF:Title Transfer Facility natural gas price indexTOWARD A CLEANER AND MORE RESILIENT SYSTEM?For the International Energy Agency,the current crisis can be“a historic turning point towards a cleaner and more secure energy system thanks to the unprecedented response from governments around the world.”This response has three main drivers:1)ensuring energy security,2)meeting climate commitments,and 3)developing targeted industrial policies in developed countries.For example,under the Inflation Reduction Act(IRA),the United States has provided$370 billion in funding and tax credits to stimulate investment in energy storage technologies,nuclear power,clean energy vehicles,hydrogen and CCUS(3).Previously,the Infrastructure Investment and Jobs Act passed in 2021 set aside$110 billion to pay for new transmission lines.In Europe,the 2022 REPowerEU plan is designed to reduce energy dependence on Russia via energy savings,green energy production and diversification of supplies.Member States have maintained the target of a 40%share of renewable energy in final consumption by 2030,while confirming their commitment to accelerate the procedure to grant permits by creating“renewables acceleration areas.”The plan also forecasts annual growth of 35%in biomethane production over the period 2022-2030 and raises the target for hydrogen production and imports.In addition,to bolster the EUs industrial policy,and following the example of the IRA,in February 2023 the European Commission proposed a targeted and temporary removal of the ceiling on State aid for companies,the increased use of tax credits,the redirection of European funds,the creation of a sovereign fund and a new law on critical raw materials.A LIMITED RISE IN CO2 EMISSIONS CO2 emissions from energy production increased by 0.9%in 2022(4)due to electricity production and an upturn in air traffic.The unprecedented roll-out of renewable technologies and electric vehicles(14%of global sales)has thus helped to limit the rise in CO2 emissions,with global renewable electricity production up by more than 600 TWh in 2022,the largest increase on record.Nevertheless,according to the Intergovernmental Panel on Climate Change(IPCC),global CO2 emissions should be reduced by 43%by 2030 to limit global warming to 1.5C.NEW CHALLENGES TO BE MET For a successful transition to a carbon-neutral world,it is important to meet the energy systems need for flexibility.Changes in demand and the increased share of renewables in the energy mix will double by 2030 and quadruple by 2050(5).Thus,gas-fired power plants and battery storage could play an essential balancing role,complementing demand-side flexibility.Since the low-carbon energy mix is much more dependent on critical minerals,these will come under pressure.The challenge is thus to reduce costs by other means,such as technological innovation,economies of scale and recycling.This challenge is all the greater because much of the energy value chain is concentrated in China.For this reason,the United States and the European Union must encourage industries to establish operations on their own soil.Lastly,to address the issue of social acceptability,the European Union has put in place a just transition mechanism as a social pillar of the Green Deal.With a budget of 55 billion for the period 2021-2027,it aims to mitigate the socio-economic impact of the transition on the populations most affected.2021 European averageTTF2020 European averageREFERENCE GAS SPOT PRICE IN EUROPE(6)IN 2022(/MWh)300150350Jan.AprilAugustFeb.MaySept.MarchJulyJuneOct.Nov.Dec.2502001005002023 INTEGRATED REPORT-09 ENGIES RESPONSESPLAYING A KEY ROLE IN SECURITY OF SUPPLY ENGIE has successfully navigated the significant disruptions to gas flows from Russia,with no impact on physical supply for customers.For winter 2022-2023,it reduced its exposure to gas volumes previously purchased from Gazprom by combining flexibility measures for its long-term gas contracts,signing new contracts and using liquefied natural gas(LNG).Similarly,for winter 2023-2024,new sources of supply,as well as an expected fall in demand,will replace gas from Russia and enable the required storage levels to be achieved.The new LNG contracts are with US producers that are committed to emissions traceability and environmental monitoring of their activities,such as the current development of RSG(Responsibly Sourced Gas).ENGIEs network activities in France had a high utilization rate in 2022,with a record number of ships unloading at its LNG terminals and a doubling of GRTgazs transmission volumes,notably with a reversal of the volumes transmitted from France to Germany.In Europe,Storengys gas storage facilities were 100%full at the start of winter 2022-2023.This was due to efforts made by customers,including energy suppliers,who went beyond their minimum filling obligation.They were 82%full at December 31,2022 (compared with 53%previously).ACTIVE PARTICIPATION INMANAGING THE CRISIS ENGIE is a stakeholder in European discussions on the regulation of energy markets and the various emergency regulatory measures that need to be taken to tackle the energy crisis.To secure supplies,ENGIE as a member of the EU Energy Platform has contributed to discussions on gas storage filling obligations by promoting the tried-and-tested French regulatory model.ENGIE also participated in talks on the gas demand reduction plan(July 2022)and supported the electricity demand reduction targets(September 2022)proposed by the European Commission.HELPING TO COMBAT HIGH PRICES AND SUPPORTING CUSTOMERS THROUGH THE CRISIS In 2022,ENGIE contributed 1.1 billion to existing profit-sharing mechanisms for nuclear energy in Belgium and for hydropower in France.ENGIE also contributed 0.9 billion in 2022 as a result of inframarginal rent caps imposed by European countries.Furthermore,following the measures taken by the French government in relation to the price shield,the Group has undertaken to finance the difference between the price of its gas purchases on the markets and the frozen resale price.It will be reimbursed for the difference at a later date.The Group is also involved in measures to combat high energy prices by increasing its working capital.In addition,the price shield mechanism now includes SMEs and individual customers supplied by the market.In Belgium and Romania respectively,ENGIE supported the implementation of social tariffs and a price cap mechanism through payment facilities.ENGIE has made various arrangements to help its customers:support measures totaling 90 million for its most vulnerable individual customers;the creation of a 60million fund to help industrial and tertiary customers secure energy contracts;the launch of a platform for monitoring and managing energy consumption;the signing of the Energy Suppliers Charter in October 2022 to provide more information for professional customers,companies and local authorities,reduce their consumption and support the most vulnerable among them.ENGIE is also taking steps to help its tertiary customers improve their energy efficiency,reduce their energy bills and achieve their decarbonization goals.For example,the Vertuoz Control system offered by ENGIE Solutions in France has already yielded annual energy savings of 25%.Similarly,the energy efficiency and performance plan implemented with property management company Foncia is expected to deliver savings of up to 35%.TAKING STEPS TO REDUCE ITS OWN ENERGY CONSUMPTION ENGIE has also set ambitious targets for its own energy consumption:reduce the energy consumption of its buildings by 35%by 2030(-15%for winter 2022),encourage 6%of employees not to drive to work,reduce the carbon footprint of the company car fleet by 5%by encouraging eco-driving.MAINTAINING ITS EMPLOYEE ENGAGEMENT In this challenging environment,various measures have been taken,including:the payment of a special bonus of 1,500 to all employees worldwide,the launch of“Link 2022,”a new global employee shareholding plan,in September 2022.ACCELERATE THE ENERGY TRANSITION The current energy crisis in Europe calls for an acceleration of the energy transition,a subject at the heart of ENGIEs strategy.The Group is targeting a threefold reduction in the carbon intensity of the energy it produces and consumes between 2017 and 2030.It also aims to avoid the emission of 45Mt of CO2 by its customers and achieve carbon neutrality for Scopes 1,2 and 3 by 2045.To illustrate this ambition,ENGIE should have four ENGIE is actively involved in supporting consumers and the economy during the crisis and is continuing to roll out its strategic road map for the energy transition.“ENGIE is helping to make energy accessible to all by contributing to public policy measures and implementing specific actions for its customers.”10-OUR AMBITION Net Zero Carbon countries by 2030,including Brazil.The Group will thus accelerate its growth in renewable energies for both electricity and gas and in decentralized networks to support its customers decarbonization.At the same time,ENGIEs flexible networks and assets will make an essential contribution to security of supply and flexibility.In renewable electricity,the stepped up pace of investments is reflected in a target of commissioning 4 GW on average per year by 2025 and 6 GW on average per year between 2026 and 2030.The development of renewable gas will build on existing networks,thus contributing to security of supply.The Group aims to achieve a target of around 10 TWh of biomethane production per year in Europe by 2030.ENGIE will also concentrate on ramping up the production of low-carbon hydrogen,and will invest approximately 4 billion in 2023-2030 with ambitious targets,including a renewable hydrogen production capacity of around 4 GW by 2030.The Group also anticipates a sharp increase in battery storage to complement its portfolio of flexibility assets(gas-fired electricity production and pumped storage).It is targeting around 10 GW of installed battery capacity by 2030.ENGIE also wants to play a major role in its customers decarbonization using its decentralized networks with a goal of adding 8 GW of decentralized energy networks by 2025(compared to 2020).Lastly,GEMS is at the heart of ENGIEs integrated model.Upstream,the role of GEMS is to make the most of the technological differences,complementarity,flexibility and optionality of the asset portfolio of ENGIE and its partners.Downstream,GEMS provides ENGIEs customers with risk management services and customized energy supply contracts.45 Mt of customer CO2 emissions avoided per year by 2030 4 GW of hydrogen production capacity per year by 2030 10 TWh of biomethane production per year by 203090m in customer support measures 1,500 employee bonusTARGETS2023 INTEGRATED REPORT-11 INTEGRATE STAKEHOLDER EXPECTATIONS Health and safety in the workplace,the safety and resiliency of the facilities,ethics and compliance,as well as diversity and inclusion in the workplace have been identified as fundamental challenges.This means that they should be permanent and structural in the Groups activities.The low-carbon transformation and the capacity to manage sustainable growth are decisive elements.The commitment of employees,leadership and responsible governance and the increased use of sustainable finance tools appear to be levers of value creation to accelerate the transition to a carbon-neutral economy.More generally,the results of the materiality matrix underline the coherence between stakeholder expectations and ENGIEs strategic orientations.VALUE CREATION FOR ENGIE231IMPORTANCE FOR STAKEHOLDERS123Strategic prioritiesLevers of value creation3211 2 3Lab idunt quia volor aut aceptis minimus a sus,FUNDAMENTAL CHALLENGESDiversity&inclusion in the workplaceOccupational health&safetyBusiness ethics&conformitySecurity and resilience of installations Dialogue with our customersDigitalAgility&innovationPreservation of biodiversity,water and the environmentCircular economySustainable supply chain (goods,services,energy)Skill&Employee engagementImpact and development of communities and stakeholdersSustainable financeCentralized and decentralized energy networksGreen gasesResponsible Leadership&GovernanceEnergy efficiency and sufficiencySustainable growthLow carbon transformationRenewable electricity productionMATERIAL ISSUESMAJOR ISSUESDECISIVEISSUESENGIE has a materiality analysis that ranks the various challenges facing the Group.ENGIE maintains an active dialog with all its stakeholders to take their expectations into consideration and feed the Groups strategic directions.The dual materiality to which ENGIE plans to commit itself in the near future will provide a maturity to the global approach.Each material challenge brings risks and opportunities that can impact negatively or positively either the economic value of the Group(financial impact)or its natural or human environment(socio-environmental impact).For example,the challenge of low-carbon transformation impacts the Groups activities:positively,since it ensures its development in the buoyant market of renewable electricity production,but alsonegatively,with lower profitability in the short term and increased risks of additional costs for raw materials and extended development time for new projects;but these same activities impact ENGIEs natural or human environment:positively,since they contribute to the fight against climate change by substituting renewable capacities for capacities that consume fossil fuels,negatively,since they may affect natural habitats because of the implementation of renewable power plants or associated electrical or gas networks.THE DUAL MATERIALITY APPROACHIDENTIFY THE PRINCIPAL CHALLENGES12-OUR AMBITION GROSS OPERATIONAL AND CSR RISKSNET SIGNIFICANT AND SPECIFIC OPERATIONAL,FINANCIAL AND CSR RISKSPRIORITY RISKSOPPORTUNITIESENGIE identifies several gross material risks,the resources to handle them and the monitoring indicators.It publishes them in its Non-financial Statement.In 2022,24 gross risks.ENGIE identifies several significant and specific risks after mitigation measures,notably at the end of its annual ERM exercise.In 2022,17 net risks.The Board of Directors selected priority risks from among the specific net risks to be monitored periodically within its committees (Audit,SITC,EESDC).ENGIE has identified several opportunities associated with these priority risks.MANAGE RISKS,SEIZE OPPORTUNITIESEngies business context exposes it to financial and non-financial risks,but also offers opportunities.This is why the Group continually analyzes their evolution in order to best adapt to changes in its environment.ENGIE identifies the gross material risks to which it is exposed within its environment.These different risks,the resources to handle them and the monitoring indicators are presented in the Non-financial Statement(NFS,Chapter 3 of the 2022 Universal Registration Document).At the end of its annual ERM exercise Enterprise Risk Management and after taking into account mitigation measures,the Group identifies its significant and specific net risks.(Risk factors,Chapter 2 of the 2022 Universal Registration Document).Each year,the Board of Directors selects a limited number of priority risks from among these net risks.The eight risks that the Board has selected are monitored by the permanent Board committees:the Audit Committee,the Strategy,Investment and Technology Committee(SITC)and the Ethics,Environment and Sustainable Development Committee(EESDC).Each of these priority risks also potentially presents strategic opportunities for the Group.They essentially concern the sale of services,industrial development or performance optimization.8priority risks monitored by the Board of Directors in 2022In 2022,the list of risks becomes:1.Climate change (adaptation and transition)Sales of consulting and services to reduce customer GHG emissions Conversion to renewable gases(biomethane and hydrogen)2.Human Resources (retention of expertise and attractiveness)3.Health&safety Industrial safety Improvement in performance,motivation and well-being at work Strengthening the employer brand4.Market risk5.Supply chain6.Position of gas Market transactions Optimized management of supply flows Conversion to renewable gases(biomethane and hydrogen)7.Nuclear safety8.Cybersecurity Sale of services:digitization,robotization,security and surveillance of sensitive sites2023 INTEGRATED REPORT-13 A RIGOROUS METHODOLOGY Study of the contribution of the ENGIE materiality challenges to the SDGs and their related targets.The Groups contribution to an SDG is key when at least one fundamental,decisive,or major issue of the Group contributes to the SDG and its related targets and this contribution is monitored through a Group indicator and target.The Groups contribution to an SDG is significant when at least one material issue of the Group contributes to the SDG and this contribution is driven by a Group commitment.5.1-Fight against discrimination 5.5-Participation and access to leadership positions6.4-Sustainable water resource management3.8-Universal health coverage 3.9-Health and environment7.1-Energy access 7.2-Renewable energy 7.3-Energy efficiency8.2-Economic productivity 8.5-Full employment and decent work 8.8-Rights&safety at work11.3-Sustainable urbanization 11.6-Environmental impact12.5-Waste reduction 12.6-Corporate Social Responsibility13.1-Resilience and adaptation 13.3-Education and empowerment14.1-Prevent and significantly reduce marine pollution 14.2-Manage and protect marine and coastal ecosystems15.1-Conservation of terrestrial ecosystems 16.5-Fight against corruption 16.10-Information and protection of freedoms9.2-Socio-economically sustainable industrialization9.4-Modernization and sustainability of industrial sectors 9.5-Innovation,research and development10.3-Equal opportunity17.17-Multi-stakeholders partnerships6 key contributions8 significant contributionsCONTRIBUTE TO SUSTAINABLEDEVELOPMENT GOALS The actions deployed by ENGIE contributed to the sustainable development goals of the United Nations Agenda 2030.With six key contributions and eight significant contributions,the Group is fully making its CSR commitment a reality in response to the challenges expressed by its stakeholders in line with its strategy of sustainable growth aimed at accelerating the transition to a carbon-neutral world.14-OUR AMBITION 6 SDGS FOR WHICH ENGIES CONTRIBUTION IS KEYENGIE contribution SDGExamples of actions in 2022 ENGIE is committed to equal opportunities for women and men and to women fully participating and accessing managerial positions without discrimination.Be.UENGIE,a new“Diversity,Equity and Inclusion”policy“Fifty-fifty”:29.9%of women in management and 15 EDGE(Excellence in Designing for Greater Efficiency)certified entitiesENGIE contributes to universal access to energy,the development of renewable energy and improved energy efficiency.38%renewable energy in the electricity production capacity mix 38GWENGIE contributes to the economic and social development of regions and prioritizes the health and safety of everyone everywhere in the world.ENGIE“One Safety”transformation plan Deployment of training in seven pilot entities to improve the health and safety leadership of operational managersENGIE mobilizes its R&I to modernize and green its networks,and works to share value with its stakeholders.European H2 Backbone:MosaHYC project to convert gas pipelines to transmit hydrogen.ENGIE contributes to the city of tomorrow through its urban planning tools and its clean energy and services offerings.Two new highway NGV stations under the contract between ENGIESolutions and Certas Energie France Fracheur de Paris(ENGIE 85%,RATP 15%)becomes the operator of the Paris cooling network for 20 yearsDriven by its purpose and strategy,ENGIE promotes energy efficiency and renewable electricity production.Renewables Academy:to increase the expertise of employees in the renewable energy business lines8SDGS FOR WHICH ENGIES CONTRIBUTION IS SIGNIFICANTBy increasing its clean energy production,ENGIE improves living conditions.Its employees all benefit from social protection.Global Agreement ensuring the Group-wide roll-out of ENGIE Care,the foundation for common social rightsAccess to,and preservation and rationalized use of this shared asset are incorporated into the Groups water management strategy.In Brazil,a program to preserve water sources in rural areas with local communitiesENGIE contributes to local economic development by participating in a just transition and providing access to jobs without discrimination.Energy transition academy 140work-study apprentices trained in the new energy business linesOptimized use of its resources and waste and the promotion of sustainable practices in its value chain are part of ENGIEs purpose.55%reduction in the production of hazardous waste in the Group vs 2019Preserving the oceans and their flora and fauna is crucial for the balance of the ecosystems.ENGIE is a signatory of the Sustainable Ocean Principles.Prevent the risks related to offshore wind:studies and monitoring of the sea floor,air surveillanceENGIE is committed to mitigating its impact on life on land by working for the preservation of ecosystems(act4nature biomass).Implementation of a commitment to not use phytosanitary products and to manage green spaces in an environmentally friendly mannerENGIE excludes any form of corruption and deploys forums for dialog to improve the transparency of its communication.Renewal of the Groups ISO37001 certificationENGIE is forging solid relationships with a broad panel of partners and is now a recognized player in the regions.Numerous exchanges Creation of the TED(Transition nergtique Durable Sustainable Energy Transition)label to bring together the regionsENGIE contribution SDGExamples of actions in 2022 2023 INTEGRATED REPORT-15 STEERING THE CREATION OF VALUE BY 2030(1)Les donnes 2021 et 2022 sont hors Equans.The value created by ENGIE in the medium and long term depends on the Groups performance and is intended to benefit all its stakeholders.Thus,the Group has defined objectives and indicators for monitoring its performance in the categories Planet,People and Economic prosperityPLANET20202021(1)2022(1)TARGET 2030Objectives monitored by the governance bodies(EESDC)CO2 Energy productionGHG emissions from energy production(scopes 1 and 3)in Mt CO2 eq.68656043CO2 Energy production and consumptionCarbon intensity of direct energy production(scope 1)and energy consumption(scope 2)in g CO2 eq.per kWh 212181156110(149:SBTi well-below 2C limit)CO2 Energy salesGHG emissions from final gas sales(scope 3)in Mt CO2 eq.62666152 Carbon intensity of energy sales produced(scopes 1 and 3)and purchased(scope 3)in g CO2 eq.per kWh 270252221153(SBTi well-below 2C obj.)CO2 OthersOther GHG emissions,including scope 3 from procurement,capital goods and the upstream of purchased fuels and electricity(scopes 3.1,3.2,3.3)in Mt CO2 eq.1031019085 (SBTi well-below2C obj.)Renewable capacitiesShare of renewable capacities(100%and excluding pumped storage)in electricity production(scopes 1 and 3)3148Xcarbonation of our customersEmissions avoided at the customers sites through Groups products and services in Mt CO2 eq.21272845Decarbonization of our suppliersRate of top 250 SBT-certified or aligned preferred suppliers 15 #0%BiodiversityRate of industrial sites with natural management of green spaces without the use of chemical plant protection products0(40%WaterFresh water consumption per energy produced in m3/MWh 0,2780,3420,3010,1Operational objectives followed by the Group Executive CommitteeRenewable capacitiesRenewable capacities(100%and excluding pumped storage)of electricity production in GW31343880CO2 Energy productionCarbon intensity of energy production(scopes 1 and 3)in g CO2 eq per kWh266240216158Decarbonization of our work practicesGHG emissions linked to our working practices in Mt CO2 eq.0,50,30,30 (after offsetting-maximum of0,2 Mt CO2 eq.)EnvironmentRate of activities with an environmental plan established in consultation with stakeholders217S0%PollutionNOx emissions reduction rate vs 2017 -47%-47%-64%-75%SOx emissions reduction rate vs 2017-25%-34%-95%-98%Total particulate emissions reduction rate vs 2017-14%-23%-54%-60%Non-hazardous waste generation reduction rate vs 2017 3% 3%-47%-80%Hazardous waste generation reduction rate vs 2017-90%-92%-94%-95%Methane emissionsDirect methane emissions on gas networks in Mt CO2 eq.1,521,621,26-30%vs 2017 or 1,45 Mt CO2 eq.Electricity storageElectricity battery capacities(GW)-0,0510 GW16-OUR AMBITION SCOPE 3 INDIRECT GHG EMISSIONS (MT CO2 eq.)The decrease in indirect GHG emissions(scope3)is illustrated below for the upstream and downstream segments of the Groups activities.CHANGE IN COAL-FIRED ELECTRICITY CAPACITIES (GW100%)The planned phase-out of coal in 2025 for continental Europe and in 2027 for the rest of the world is illustrated below.GHG EMISSIONS FROM ENERGY PRODUCTION (MT CO2 eq.)The decrease in GHG emissions from energy production from controlled(scope1)and non-controlled(scope3)assets is detailed below in absolute value and intensity.CHANGE IN RENEWABLE ELECTRICITY CAPACITIES (GW100%)The increase in renewable electricity production capacity is illustrated in the graph below.It is in line with the target of 58%renewable capacity by 2030.Scope 3 emissions(Mt CO2 eq.)Scope 1 emissions(Mt CO2 eq.)Carbon intensity scope 1 2(gCO2 eq./kWh)Carbon intensity scope 1 3(gCO2 eq./kWh)2017202220202025203020457630363128326143343259216158331212156110Net ZeroWind powerHydropowerSolarOthers 201724202031202238202550203080020177.220204.320222.52027Energy production(non-controlled assets)Use of products soldOther Scope 3 items(upstream chain,purchases,fixed assets,etc.)Energy purchase for resale(1)Indicator audited for the first time in 2022WELL-BELOW 2C CERTIFICATION BY SBTiIn February 2023,the Group was granted the well-below 2C certification for its decarbonization trajectory by 2030.In order to achieve this,it has committed to three additional goals:the carbon intensity for energy production(Scope 1)and energy consumption(Scope 2)must be lower than 110g CO2 eq.per kWh,the carbon intensity of energy sales produced(Scopes 1 and 3)and purchased(Scope 3)must be lower than 153 gCO2 eq.per kWh,the other GHG emissions,including scope 3 from procurement,capital goods and the upstream of purchased fuels and electricity(scopes 3.1,3.2,3.3)in Mt CO2 eq.should be less than 85 Mt CO2 eq.2022613226(1)24202062313220178030442045Net Zero20302023 INTEGRATED REPORT-17 PEOPLE20202021(1)2022(1)TARGET 2030Objectives monitored by the governance bodies(EESDC)Health&SafetyLost time injury frequency rate for employees and subcontractors on closed sites with controlled access2,72,52,0 2,3Fatality rate-0,0450,0140 each yearDiversityShare of women in Group management24,1(,9),9-60%EquityGender pay gap-1,73%TrainingRate of employees trained each year700%Responsible purchasingResponsible purchasing index(excluding energy):CSR assessment and inclusive purchasing254038100Fraud and corruption preventionRate of training of staff most exposed to the risk of corruption21IU%Operational objectives followed by the Group Executive CommitteeStakeholder dialogueRate of activities with a societal plan for stakeholder consultation107F0cess to energyNumber of beneficiaries with access to sustainable energy in millions(2)6 M7 M9,5 M30 MECONOMIC PROSPERITY2020(1)2021(1)2022(1)FINANCIAL OUTLOOK FOR2023-2025Indicators(Published data)Growth investments(bn)3,94,35,522-25 bnAsset rotation program(disposals)(bn)4,22,09Performance program(m)N/A85424EBIT(bn)4,5/4,6 excl.nuclear6,1/5,2 excl.nuclear9,0/8,0 excl.nuclear6,6-7,6 bn(excluding nuclear)in 20237,2-8,2 bn(excluding nuclear)in 20247,5-8,5 bn(excluding nuclear)in 2025Economic net debt/EBITDA4,2x3,6x2,8x less than or equal to 4,0 xNet recurring income,Group share(NRIgs)(bn)1,72,95,23,4-4,0 bn in 20233,8-4,4 bn in 20244,1-4,7 bn in 2025Dividend payout rate/Net recurring income,Group share75fee%-75%with floor dividend of 0,65 per shareCredit ratingstrong investment gradestrong investment gradestrong investment gradestrong investment grade(1)2021 and 2022 data are excluding Equans.(2)This target will be replaced in 2024 by another target more in line with the Groups geographical refocusing and taking into account the positive impacts of the Energy Gathering Fund.and incorporating the positive impacts of the Energy Gathering Fund.18-OUR AMBITION INCREASING OUR COMMITMENTSTO MAKE PROGRESS ENGIE is involved in different networks and coalitions that assist it in improving its practices and energizing its value creation for the benefit of its stakeholders.This collective approach allows it in line with its purpose to reconcile economic performance with a positive impact on people and the planet.DIVERSITYYOUTH EMPLOYABILITYTAXATIONCONSUMPTIONSUPPLIERSSOCIETAL COMMITMENTSANTI-DISCRIMINATION AND HARASSMENTGENERAL COMMITMENTSCLIMATEBIODIVERSITYENVIRONMENTAL COMMITMENTSWATERSustainable Ocean Principles2023 INTEGRATED REPORT-19 MANAGE RISKSFOR GREATER CONTROLENGIE is exposed to various risks as a result of its activity and commitments.To protect against such risks and deal with them if they occur,the Group has established a risk governance structure,as well as specific governance structures for two of its key considerations the climate and ethics to enable the Group to take action at the highest level.BOARD OF DIRECTORSAUDIT COMMITTEE Issues an opinion on the effectiveness of the risk management system Reviews the risk mapping and examines the priority risksPREPARES THE DECISIONS OF THE BOARD OF DIRECTORSETHICS,ENVIRONMENT AND SUSTAINABLE DEVELOPMENT COMMITTEE Reviews the priority risks related to its mission(from assessment to overseeing action plans)STRATEGY,INVESTMENT AND TECHNOLOGY COMMITTEE Reviews the priority risks related to its mission (from assessment to overseeing action plans)PREPARES THE DECISIONS OF THE BOARD OF DIRECTORSOperating entities,GLOBAL BUSINESS UNITS(GBU)and REGIONAL hubs(1)Identify and assess their risks Report emerging risks Are responsible for risk management within their region and for overseeing risk mitigation plans Contribute to the annual risk mapping submitted to the GroupDivisions/Corporate Functions Identify and assess their risks Report emerging risks Ensure that management plans are implemented Coordinate the risk review within their division(1)The analysis and management of division-specific risks is carried out in collaboration with the relevant Group division(e.g.:HR risk,cyber risk,etc.).INSURANCE AND RISKS MANAGEMENT DEPARTMENT Assists the Group in its operations by taking measured risks to create greater value Helps the various business lines and support functions with their decision-making Leads the Risk Correspondents group Actively monitors the internal and external risk environment Develops methodology and tools Monitors the management of the Groups risks and optimizes the transfer of insurable risksEXECUTIVE COMMITTEE Reviews the risk mapping and the risk mitigation plans following the annual campaign Coordinates the priority risks(each priority risk is the responsibility of one member of the Executive Committee)Executive Vice President in charge of Finance,Corporate Social Responsibility and PurchasingChief Executive Officer20-OUR AMBITION SET UP SPECIFIC GOVERNANCEFOR CLIMATE ISSUES(1)Reporting to the Legal,Ethics and Compliance Department Sets the climate strategy and the associated objectives Ensures that the climate strategy is at the heart of the Companys overall strategy,in accordance with its corporate purposeBOARD OF DIRECTORSETHICS,ENVIRONMENT AND SUSTAINABLE DEVELOPMENT COMMITTEE Reviews the Groups climate objectives,their configuration(ambition,definition,scope,deadlines and level of certification)and monitors their implementation Examines the risks and opportunities of climate changeSTRATEGY,INVESTMENT AND TECHNOLOGY COMMITTEE Incorporates the Groups climate challenges and objectives into its investment decision-making processAUDIT COMMITTEE Identifies priority risks,including climate risk Examines the assumptions underlying financial guidance,including climate-related ones Examines the accounting impact of exceptional weather events Examines the adequacy of risk insurance coverage(including climate risk)STRATEGY DEPARTMENT Defines carbon price trajectories Examines the outlook for the energy market and demand trendsFINANCE DEPARTMENT Ensures that investment decisions are consistent with the Groups climate commitments through their compliance with CO2 budgets and analyses including carbon pricingETHICS&COMPLIANCE DEPARTMENT(1)Oversees the Groups vigilance plan,including climate issuesEXECUTIVE COMMITTEE Implements the Groups climate strategy Recommends the Groups climate strategy to the Board of Directors Arbitrates the climate trajectory among GBUs Supports each of the 2030 CSR objectives(including six climate objectives)APPOINTMENTS,COMPENSATION AND GOVERNANCE COMMITTEE Makes Remuneration of the CEO and the beneficiaries of performance shares conditional on specific climate objective Leads the annual Board evaluation,in particular on the consideration of climate issuesPREPARES THE DECISIONS OF THE BOARD OF DIRECTORSPREPARES THE DECISIONS OF THE BOARD OF DIRECTORSGBUS/ENTITIES Ensure the operationalization of the climate strategy(investments and divestments,new products,projects,etc.)Deliver projects and performance in line with climate trajectories(annual CO2 budget allocated by the Executive Committee)Executive Vice President in charge of the General Secretariat,Strategy,Research&Innovation and Communication Executive Vice Presidentsin charge of the GBUs(Renewables,Networks,Energy Solutions,Flex Gen&Retail)Executive Vice Presidentin charge of Finance,Corporate Social Responsibility and PurchasingCSR DEPARTMENT Defines climate policy Oversees climate reporting(including TCFD)Coordinates the implementation of the climate strategy and its compliance with the SBT objectives and the climate adaptation planClimate mitigation and adaptation networkEnvironmental performance reporting networkChief Executive Officer2023 INTEGRATED REPORT-21 PUT ETHICS AT THE HEARTOF OUR GOVERNANCECompliance Committee Members:Group General Secretariat(Chair),Group Human Resources Director,Corporate Department Directors:Group Ethics,Compliance and Privacy,Internal Audit,Internal Control,and Legal Monitors compliance in terms of the implementation of ethical commitments Monitors the development of ethics processes Tracks ethical failures and ensures that they are dealt withEthics and Compliance Network Deploys and ensures,under the aegis of the Chief Executive Officer or the manager of the relevant entity,the effective,operational application of all Group ethics policies,procedures and principlesDue Diligence OfficeResponsible for carrying out enhanced due diligence for the Groups entities and departmentsPrivacy NetworkEnsures,under the aegis of the Chief Executive Officer or the manager of the relevant entity,compliance with the personal data protection regulation and the implementation of the Groups data privacy frameworkEXECUTIVE COMMITTEE Supports ENGIEs ethics commitments and ensures that they are defined at all managerial and functional levels Oversees the Groups ethics,compliance and privacy processes through the remit of the Executive Vice President in charge of the Group General SecretariatBOARD OF DIRECTORSETHICS,ENVIRONMENT AND SUSTAINABLE DEVELOPMENT COMMITTEE Oversees the Groups ethics,compliance and privacy processesPREPARES THE DECISIONS OF THE BOARD OF DIRECTORSExecutive Vice President in charge of the General Secretariat,Strategy,Research&Innovation,CommunicationGroup ethical incidents reporting system This system applies to those people in the Group that are specified in the relevant Group procedure Confidential Mandatory reporting Any breach of the Groups ethical principles or the laws and regulations relating to the areas covered by said principles Reports submitted through a digital tool(My Ethics Incident)that has been rolled out within all Group entitiesGroup whistleblowing and alert system This system is open to all(any Group employee any external person)Confidential and anonymous(reports are received by an external service provider and transmitted to the Ethics,Compliance and Privacy Department for handling)Strictly voluntary Any breach of the Groups ethical principles,any violation of laws and regulations or any incident A phone line and one email address for the entire Group:ETHICS,COMPLIANCE AND PRIVACY DEPARTMENT(1)Oversees the incorporation of ethics into the Groups strategy,management and practices Recommends ethics and compliance policies and procedures,and supports their implementation at every level of the Group Ensures that ethical risks are mapped so as to take the specific nature of the Groups activities into account Coordinates the implementation of the Groups vigilance plan and deals with whistleblower reports arising under the Group procedure it manages Leads the network of ethics and compliance officers and ethics correspondents,and the network of data privacy managersChief Executive Officer(1)Reporting to the Legal,Ethics and Compliance Department22-OUR AMBITION Risks related to fundamental workers rights Risks related to the rights of local communities Risks related to the safety of employees and sites Risks related to partner and supplier practices Climate risk Risks related to biodiversity and ecosystem rehabilitation Risks related to the pollution of the air,water and soils Risks related to waste Risks related to the impact of activities on local communities and their social consequences Risks of harm to the health,safety and security of people working for the Group(employees,temporary workers and subcontractors)Risks linked to the Groups industrial facilities or facilities that the Group maintains and/or operates on behalf of customers(to people who work for the Group or residents)Risky purchasing categories Risks related to human rights Risks related to health,safety and security Environmental and societal risksThe Groups human rights policy specifies ENGIEs commitments and provides for regular processes to identify and manage risks.In this way,each entity can ensure compliance with it in the context of its activities and commercial relations.Commercial partners are also the subject of ethical due diligence,which explicitly includes human rights.The Groups CSR policy guides the environmental and social vigilance processes,based on action plans at different levels,to avoid,reduce and,if necessary,offset the impacts of the Groups activities.It is defined at the level of each GBU,subsidiary and site,and is implemented through objectives and action plans that are reviewed every year.In addition,before any decision to launch a project is reached,an analysis of the environmental and societal risks is conducted using a set of CSR criteria.The Groups health-and-safety-at-work policy and rules provide the basis for fulfilling the duty of vigilance.They apply to all Group employees and subcontractors.The risks related to the operation of industrial facilities are controlled by implementing safety management systems based on the principle of continuous improvement.ENGIE has developed control processes to ensure the implementation of actions that help to prevent risks and achieve the Groups objectives.In the area of security,the Group has a policy to protect individuals.Its measures are adapted to the criticality of such risks in the geographic area concerned.Harmonized processes:vigilance monitoring committee due diligence procedures whistleblowing and collection of alerts mechanism monitoring of the plans deployment within the entities management of controversies training ENGIE global framework agreement Evaluation of the Groups organization and health-and-safety culture by a specialized service provider Definition of a Group health-and-safety transformation plan called“ENGIE One Safety”designed to permanently eradicate serious and fatal accidents Improvement of the Group health-and-safety rules Testing a training and coaching program for Group managers to increase the impact they have on the safety behavior of employees and subcontractors Roll-out of an awareness campaign that integrates the ENGIE Life-Saving Rules Update of the Group safety rules applicable to people working internationally Risk matrix for each purchase category Revision of the supplier panels to cover around 50%of the total expense(excluding energy)Implementation of a new Inclusive Purchasing France Policy Supplier qualification criteria Measurement of performance and action plans and of the carbon emissions of suppliers In-depth vigilance action plan(risks of forced labor practices in the Groups supply chains in China)For more information:https:/ Continued roll-out of the CSR objectives for 2030(17 objectives)Training on CO2,biodiversity,stakeholder commitment,CSR matrix Monitoring of the actions taken for each CSR objective Assessment of the effectiveness of action plans during performance reviews Deployment of the new CSR matrix designed to integrate the environmental and societal dimensions into the Groups decision processesFor more information:https:/ Monitoring of the policy via the ethics compliance report and internal control 96.2fective roll-out of the policies by the entities Face-to-face and e-learning training on human rights for the entire Group Due diligence(with regard to human rights risk)on partners in connection with the Groups investment committees:100%Alerts received through the whistleblowing mechanism (78 of these alerts concerned issues related to the duty of vigilance)For more information:https:/ non-energy purchases,the Group Purchasing Charter defines a set of minimum requirements in terms of human rights,health and safety at work,ethics and the environment.The Charters implementation relies on a selection process involving inspections and external evaluations (due diligence,audits,EcoVadis ratings,etc.)For energy purchases,risks relating to the Groups energy supply have been identified as a specific vigilance issue for the Group.Action plans are defined for any risks identified.HUMAN RIGHTSENVIRONMENT AND SOCIETALHEALTH,SAFETY AND SECURITYSUPPLIERSETHICS,COMPLIANCE&PRIVACYCORPORATE SOCIAL RESPONSIBILITYHEALTH,SAFETY AND SECURITYPURCHASINGRISKSRELATED POLICYDEPARTMENT IN CHARGE2022 MONITORINGSTEER THE VIGILANCE PLANVIA A DEDICATED GOVERNANCE STRUCTUREFully integrated into the ethics organization,ENGIE has a vigilance plan designed to identify and prevent human rights abuses,infringements of fundamental freedoms,dangers to human health and safety and environmental damage.It comprises the following elements:2023 INTEGRATED REPORT-23“Because each day counts,ENGIE intends to accelerate the energy transition and become the champion of zero-carbon energy.The collective project in which the Group participates,with and for its stakeholders,aims to achieve Net Zero Carbon by 2045.From its position as a transition maker,ENGIE intends to support its customers in their approach to decarbonization and thus diversify the energy mix within which renewable energy sources will take on greater importance.”24-OUR IMPACT26Accelerate the energy transition with a value-creating business model28Renewables29Energy Solutions30Networks31Flex Gen&Retail32Pursue an aggressive climate strategy34Protect biodiversity and nature36Act for a just transition 38Dialog with local stakeholders 40Share the value created41Responsible taxation aligned with the activity42Conduct an ambitious human resources policy43Ongoing reinforcement of the Groups health and safety culture44Support customers in their low-carbon strategy 45Support suppliers in their decarbonization trajectory 46Promoting sustainable and responsible finance48Facilitate and support the regions zero-carbon transition WHAT IS OUR VALUE CREATION?OUR IMPACT2023 INTEGRATED REPORT-25 Financial capital 39.3billion in shareholders equity 20.9billion in cash and cash equivalents 24.1billion in financial net debt 2.8x economic net debt/EBITDA 6.6billion in financing of nuclear provisionsIndustrial capital 5.5billion in growth Capex 2.4billion in maintenance Capex 22.5 millionin B2C contracts 255,400 km gas distribution networks 102.7GW of installed power generation capacity,including 38GW of renewable energyIntellectual capital 600 researchers 135million allocated to R&D 15 million invested in start-ups in 2022 200million invested in ENGIE New VenturesHuman and societal capital 96,454 employees 16,975 hires 7.7%apprentices in France.38.3million invested by Rassembleurs dEnergies 7.8million annual endowment for the ENGIE FoundationNatural capital 278TWh of primary energy consumption (excluding own consumption)80 million m3 of water consumed 903 million in environment expenditure(investments and recurring expenses related to environmental protection)2.2Mt of biomass in France(2)of 2022 taxonomy-aligned capex(1)Data excluding EquansFlex Gen&RetailOur ways of workingSimplify and refocus the Group on its core activities to seize opportunities in a buoyant energy marketStrengthening for the energy transition with an ambitious “Net Zero Carbon”target by 2045 in all areasAdapting our organization with a consolidated industrial approachAccelerating our growth in Renewables and Local Energy Networks Focus on business Collaborate Commit to deliver Engage Prioritise80 GW of renewable electricity capacities 4GW on averageper year for 2022-2025 6GW on averageper year for 2026-2030RenewablesNetworksProduction 10TWh of biomethane per year by 2030Development of 4 GW of renewable hydrogen production capacity by 20301 TWh of hydrogen stored in salt caverns in 2030700km of hydrogen transmission networks in 2030Adding 8GW of decentralized energy network capacity by 2025 vs.2020 in installed asset baseEnergy SolutionsCoal phase-out by 2027Development of 10GW of battery storage capacity by 2030Development of 4GW of renewable hydrogen production capacity by 2030100%(2)73%(2)20%(2)NET ZERO EMISSIONSBY 2045ACCELERATE THE ENERGY TRANSITION WITH A VALUE-CREATING BUSINESS MODELRESOURCES(1)STRATEGY4 CORE BUSINESSES26-OUR IMPACTPeople 29.9%women in Group management 1.73%:gender pay gap 2.0:frequency rate of occupational accidents for employees and subcontractors on sites with controlled accessPlanet 60 Mt CO2 eq.of GHG emissions (scopes 1 and 3)for energy production 156 g CO2 eq./kWh of carbon intensity of direct energy production(scope 1)and energy consumption(scope 2)61MtCO2eq.of GHG emissions related to gas end sales 221 g CO2 eq./kWh of carbon intensity of energy sales produced(scopes 1 and 3)and purchased(scope 3)38%of renewable electricity production capacity Customer decarbonization:28MtCO2 eq.of emissions avoided by customers through ENGIEs products and services Supplier decarbonization:23%of the top 250suppliers (excluding energy)SBT certified or alignedEconomic performance 5.2billion in Net recurring income/(loss),Group share(NRIgs)1.40 dividend per share to be paid out for fiscal year 2022(65%of 2022 net recurring income,Group share)5.5billion in growth CAPEX 9billion in asset rotation 2.8x:Economic net debt/EBITDA ratio Credit rating:strong investment gradeto 2030 Percentage of women in Group management 40%-60%Pay gap:90%Coal phase-out by 2025 in continental Europe and by 2027 worldwide Renewable hydrogen production capacity of 4GW in 2030Energy supply to individuals Gas and electricity sales Energy services Energy accessRELATED GOALS Portfolio growth,primarily in electricity and services Reduction of CO2 emissions by-34tween 2017 and 2030(inc.BtoB)PROGRESS MADE With the current strong growth in renewable energy,ENGIE benefits from a large portfolio of flexible production and energy storage assets,including gas-fired power plants(50GW)and pumped storage plants(4GW).These are crucial to compensate for the intermittent nature of the renewable energy.BUSINESS CASE FLEX GEN&RETAILWith its GBU Flex Gen&Retail,ENGIE supplies flexible and affordable electricity production that aims to support the development of renewable energy.“MY ENERGY BONUS”:VOLUNTARILY REDUCE CONSUMPTION IN PEAK PERIODSDue to the temporary reduction of its electricity production capacities,France introduced an energy sobriety plan that asked each company or household to reduce its electricity consumption.Building on its purpose,ENGIE set up a new system to reward its customers who,after enrolling in the challenge in their online customer account,manage to reduce their consumption in peak periods.The principle is to ensure that the customer who has enrolled in the challenge reaches the consumption reduction target that was set by ENGIE two days before the challenge.If they achieve the target,the Group will pay the customer a bonus into their online prize account.For Florence Fouquet,Managing Director,Global BtoC,“this approach meets an essential goal:to make everyone aware of how to optimize their electricity consumption and to involve them in stabilizing the French electricity system.”FIRST HYDRO MODERNIZES ITS HYDROELECTRIC POWER PLANTS The two hydroelectric facilities with pumped storage located in Dinorwig and Ffestiniog in North Wales are notable for their ability to respond quickly when the national electric grid is under stress or when renewable electricity production is insufficient.First Hydro decided to invest 50million pounds sterling in the renovation of the Ffestiniog power plant,composed of four production units and representing a total electricity production capacity of 360MW.“The goal of this modernization,”said Kevin Dibble,Managing Director First Hydro,and Country Manager UK,“is two-fold.It is first to replace two 90MW generators and install new control stations that will optimize monitoring of the power plant.More broadly,the goal is to improve the efficiency of this plant,which is now sixty years old.”Florence Fouquet,Managing Director,Global BtoCKevin Dibble,Managing Director First Hydro,and Country Manager UK2023 INTEGRATED REPORT-31 PURSUE AN AGGRESSIVECLIMATE STRATEGYENGIE has an ambitious climate plan as part of its strategy to accelerate the transition to Net Zero Carbon.It should result in the reduction of its greenhouse gas emissions across all scopes,by following a trajectory in line with the Paris Agreement and by developing renewable capacities.ENGIE has set itself the goal of achieving Zero Net Carbon Emissions by 2045 across its three scopes.For this,the Group will follow a decarbonization trajectory compatible with a warming limit well-below 2C,certified by SBTi,between now and 2030,supported by various decarbonization targets.Several levers will be used to achieve these targets:a total coal phase-out,accelerated development of the renewable electricity fleet,battery storage and full conversion of networks to renewable gas.ACHIEVING NET ZERO EMISSIONS BY 2045 With its Net Zero Emissions ambition,the Group is focusing between now and 2045 on reducing its greenhouse gas emissions and offsetting the residual emissions,which should by then be as low as possible.This is an ambitious strategy because:it covers scopes1,2 and 3 defined by the GHG Protocol,i.e.the direct and indirect emissions produced by the company,its subsidiaries and its value chain:suppliers,customers and companies in which ENGIE has a minority interest;the target year of 2045 is an ambitious deadline for a company with a strong gas DNA.While pure electricity companies are encouraged to set NZE targets from now to 2040,companies that still hold fossil assets rarely commit to targets before 2050.By targeting 2045,ENGIE is confirming its desire to act as quickly as possible for clean,safe and affordable energy.Beyond this ambition,ENGIE is contributing to a reduction in its customers emissions with a target of 45MtCO2eq.of avoided emissions targeted each year from 2030,without reducing the Groups carbon footprint.COMMITTED TO A WELL-BELOW 2C TRAJECTORY Among the many objectives for implementing this trajectory,two objectives correspond to the Groups main GHG emissions items energy production and gas sales:Energy production:not to exceed 43Mt CO2 eq.between now and 2030(compared with 106 in 2017 and 60 in 2022)on its scopes1 and 3,with the energy produced including electricity,heating and cooling from centralized units,at customer sites or on urban networks.Gas sales to end customers:not to exceed 52Mt CO2 eq.between now and 2030(compared with 79 in 2017 and 61 in 2022).To comply with the Paris Agreement,the Group asked the SBTi initiative to certify the compatibility of its trajectory,which is no longer only for warming limited to 2C(obtained in 2020)but well below 2C.This certification was obtained in February 2023.This required the Group to set three additional targets to be met by 2030,namely:the carbon intensity for energy production(Scope 1)and energy consumption(Scope 2)must be lower than 110 g CO2 eq.per kWh,the carbon intensity of energy sales produced(Scopes 1 and 3)and purchased(Scope 3)must be lower than 153 g CO2 eq.per kWh,the other GHG emissions,including scope 3 from procurement,capital goods and the upstream of purchased fuels and electricity(scopes 3.1,3.2,3.3)in Mt CO2 eq.should be less than 85 Mt CO2 eq.At this stage,ENGIE has chosen not to follow a trajectory compatible with warming limited to 1.5C.The target for the reduction in the carbon intensity of the Groups energy production is currently 66%for the period 2017-2030.This goes beyond the strict certification requirement of well-below 2C(55%).It should be 78%to comply with 1.5oC.A reduction on this scale could not be achieved without a significant sale of thermal assets,the closure of which would jeopardize the security of the electrical system to which they are connected.They will therefore continue to emit GHG.ENGIE considers it more virtuous to retain these assets while committing to their decarbonization.Several technologies make this possible(biomethane,carbon capture and depending on technological developments hydrogen)and their regulatory framework is in the process of evolving(particularly in the European Union)to enable the associated investments to be triggered.However,it will take about 20years to fully industrialize these technologies and achieve decarbonization by 2040-2045.SEVERAL DRIVERS FOR THE DECARBONIZATION PLANCoal phase-out Having abandoned all new coal projects in 2015,the Group is now targeting a full exit from coal in 2025 for continental Europe and 2027 for the rest of the world.At end-2022,coal represented less than 3%of the Groups centralized electricity production capacity.To optimize the climate impact of this exit,the Group has chosen to first consider closure,then conversion and,as a last resort,disposal to other carefully selected players.Accelerating development of the renewable electricity production fleetENGIE is strongly committed to the development of renewable energy to produce electricity.The Group has set a target of holding 58%of renewable electricity capacity by 2030(compared to 38%in 2022).32-OUR IMPACTTo achieve this,the Group has published milestones:50GW of renewable electricity capacity in 2025 and 80GW in 2030(compared to 27 in 2019 and 38 in 2022,which is in line with this road map).Increasing average annual targets for commissioning additional renewable capacity of approximately 4GW/year for 2022-2025 and 6GW/year for 2026-2030.This development will mobilise between 13 and 14 billion of investment by 2025.Stepping up battery storageThe Group plans to significantly step up battery storage to complement its gas-fired and pumped storage electricity production.It aims to reach around 10 GW of battery capacity by 2030,mainly in Europe and the United States.Industrial development of renewable gasesTo ensure the resilience of the energy system and meet the growing global energy demand,ENGIE is convinced of the key role of renewable gases in the energy transition because of their ability to be stored and distributed on demand.ENGIE has set itself the challenge of achieving 100carbonized gas by 2045 in all its sales through the progressive greening of gas via the use of biomethane,renewable hydrogen and carbon capture,utilization and storage(CCUS)technologies for the residual fossil gas.Biomethane developmentBiomethane represents a future industrial solution for making farms profitable and recycling agricultural or food waste without aggravating global warming,while also promoting local development.ENGIEs target is to produce 10TWh of biomethane per year by 2030 in Europe(including 5 TWh in France)and to inject 50 TWh of biomethane into its networks in 2030 in France.The Group will invest 2.5billion to achieve this target.Industrialization of renewable hydrogenProduction of renewable hydrogen from the electrolysis of water using renewable electricity is a promising technology that is currently being industrialized.It does not emit GHGs and allows for the storage of surplus electricity in the form of hydrogen and possibly methane(after methanation),all of which can be injected into existing networks.The Group is targeting development by 2030 of:4GW of electrolysis capacity,700km hydrogen transmission networks,100 hydrogen vehicle charging stations,1TWh of hydrogen storage capacity.To achieve this,ENGIE will invest approximately 4billion over the period 2023-2030,1billion of which will be dedicated to hydrogen transmission and storage.Although these renewable gases mainly contribute to the achievement Of the 2045 net-zero emissions commitment,their impact on the achievement of the 2030 targets will be limited.Reduction of methane emissionsThe Group aims to reduce methane emissions from its gas networks(transport,distribution,storage and LNG terminals)associated with venting(planned and unplanned),flaring and fugitive emissions.ENGIE has set a target of a 30%reduction in these emissions compared to 2017,a year restated for the E&P business being conducted at the time.Although this target was met in 2022,it remains fragile due to the reliability of these data as regards the Groups international share and to the entry into force of the EU regulation on methane emissions.ACHIEVING THE DECARBONIZATION PLAN WITH THE SUPPORT OF ALL TEAMS ENGIE is convinced that a transformation at this level for a global group of 100,000people will only happen if each person understands their role in this decarbonization journey.Thus,ENGIE has rolled out tools to move from a CO2 reporting mode to a management culture,namely:A medium-term CO2 business plan (CO2 MTP)In 2021 the Group implemented a methodology for CO2 management in coherence with the financial MTP,with annual CO2 budgets for each business line(GBU)through 2030.Quarterly business reviews(QBR)GHG emissions are monitored quarterly during business reviews in the same way as operational and financial performance.CO2 flexibilityENGIE has set up a CO2 flexibility system to continuously monitor the available CO2 budget for any new investment or sales contract.Carbon pricingThe strategic scenarios include region-specific carbon price lists made available to project developers.Incentive compensation The short-and medium-term variable compensation policy for the Executive Committee and senior managers includes annual decarbonization targets for energy production.80GW of total electricity production capacity10TWh of biomethane production per year4GW of total hydrogen production capacity10GW of battery capacityBY 2030“In line with the decarbonization road map,each person is taking action at their level to reduce the Groups greenhouse gas emissions.Establishing annual carbon budgets,implementing a CO2 management culture in all our processes and integrating CSR performance into compensation are all examples that underscore the operational reality of decarbonization at all times.”Julia Maris,Vice President CSRTo learn more,see the Climate Notebook attached to this report or the Say-on-Climate resolution approved at the Shareholders Meeting of April 21,2022.2023 INTEGRATED REPORT-33 PROTECT BIODIVERSITY AND NATUREThe global erosion of biodiversity and the depletion of natural resources are largely due to human activities and challenge all responsible economic players,including ENGIE.Since 2010,the Group has integrated the protection of biodiversity into the running of its activities,particularly its projects,from their design to the end of the facilities life.Its biodiversity policy and the renewal of its commitments are proof of this.THE ENGIE ACTION PLANENGIE has been committed to the French National Strategy for Biodiversity since 2011 and to the act4nature initiative from its launch in 2018.It has renewed and expanded this commitment with a new 2020-2030 roadmap based on the shared commitments,taking into account the pressures defined by the Intergovernmental Science and Policy Platform on Biodiversity and Ecosystem Services(IPBES)and the challenges specific to the Groups activities.The main results of this plan are presented in the appendix in the biodiversity notebook.For more than 10 years,the Groups biodiversity approach has been supported by the French Committee of the IUCN and France Nature Environnement.The Group recently joined the pilot phase for the development of Science Based Targets for Nature(SBTN).The Groups most recent commitments were made in 2021 within the framework of act4nature international(global scope)and Companies Committed to Nature(France scope).ENGIES PLAN TO PROTECT BIODIVERSITY AND NATURE IS ORGANIZED BETWEEN FOUR AREASAwareness The Groups commitments can only be achieved with the active involvement of its employees.ENGIE is therefore developing and widely distributing resources for raising awareness and sharing best practices,making them accessible to all.Footprint and ecological continuity ENGIE contributes to the preservation of biodiversity at its various sites by optimizing the use of its land footprint,contributing to the restoration of ecological corridors and reducing the presence of invasive exotic species.Climate change The preservation of biodiversity and the fight against climate change share strong ties.This is why the reduction of greenhouse gas emissions to combat global warming is one of the key requirements for the preservation of biodiversity.The reverse is also true by preserving the ecological balance and functionalities of ecosystems,climate conditions are regulated naturally.Value chain Impacts on biodiversity are felt throughout the value chain.Thus,the Group integrates in its analyses of risks and opportunities the potential impacts of its own activities,as well as those of its supply chain.In this way,it maintains an ongoing dialog with all its stakeholders.132434-OUR IMPACTENGIES IMPACTS AND DEPENDENCIES ON NATURELike any human activity,the businesses of the ENGIE group constantly interact with biodiversity and nature.This interaction takes two directions:the activities have an impact on biodiversity,mainly habitat disturbance caused by the land footprint of the Groups industrial sites,the soil sealing and the disruption of ecological continuity;the Groups activities are,in turn,partly dependent on nature through the services rendered by the ecosystems,such as biomass resources,water regulation and climate.The main potential impacts identified are the following:The change in land use related to the land footprint of the industrial sites and the extraction of raw materials and also the change in use of the air spaces for birds and bats facing wind turbine blades or marine spaces for the fish disturbed by offshore wind projects;The overexploitation of resources limited to certain forms of biomass,i.e.the forest waste and agricultural waste used in the production of biogas;The contribution to climate change through the greenhouse gas emissions of the coal and gas power plants,primarily CH4,CO2 and N2O;The contribution to air pollution from discharges of NOx,SOx and fine particles from the coal and gas-fired power plants,the discharges of hot water from the plants into aquatic environments,the waste and the light or sound pollution of certain facilities;The spread of invasive species tied to excavation work and the management of the project land for sites under construction.The main areas in which ENGIEs activities depends on nature are the following:Natural raw materials such as uranium,natural gas,biomass,the rare materials used in the manufacture of solar panels and batteries are all services used in the production of energy and the sale of natural gas;Water enables hydro electricity production through its natural cycle(precipitation,evaporation,condensation),contributes to the correct operation of the thermal power plants through its qualities as a cooling fluid,and forms the basic elements for the production of steam for the heating networks;The sun and wind are the sources that enable production of renewable electricity;The soil quality contributed to the protection and stability of the gas,heating and cooling networks and,more generally,to all of the Groups buried networks.Detailed knowledge of these impacts and dependencies can limit the risks involved,better apply the“avoid,reduce,offset”approach,continually improve dialog with stakeholders and provide the reliable information demanded by the market.2023 INTEGRATED REPORT-35 ACT FOR A JUST TRANSITIONThe transition to a Net Zero Carbon economy requires support so that it is as just as possible.ENGIE works within this framework to limit the impacts for its various stakeholders through its just transition plan.How to move from one world to the other?How to support each person in the ecological and energy transition?How to meet the societal and human challenges of a decarbonized world?While the energy transition is a positive trend,it must be implemented with care.If not,it risks not only exacerbating existing societal challenges,but also weakening the most exposed employees,supply chains,communities and consumers,slowing the zero-carbon transition and aggravating environmental problems.ENGIE is convinced that the success of the energy transition is much more than a technological adventure.This idea is echoed in its purpose:“To act to accelerate the transition to a carbon-neutral economy and reconcile economic performance with a positive impact on people and the planet.”It is also based on the preamble of the Paris Agreement(December 2015)and on the reflections of the International Labour Organization on the just transition,defined as a strategy to mitigate the negative consequences to mitigate the negative consequences of the transition to sustainable economic models,while maximizing its positive its positive effects.As such,ENGIE has joined the 35 companies that make up the Collectif dentreprises pour une conomie plus inclusive in France to jointly develop the unified mission carried out by these companies with local stakeholders.“The success of the energy transition is not only a technological adventure,its societal and human dimensions are also crucial and we must be attentive to all our stakeholders:employees,local communities,customers,suppliers.This is the objective of our just transition plan.”Catherine MacGregor,Chief Executive Officer36-OUR IMPACTA JUST AND AMBITIOUS TRANSITION PLANThe just transition plan designed by ENGIE includes ambitious goals for each of the Groups stakeholders.It aims to:ensure that customers,and in particular low-income customers,have access to affordable and sustainable energy thanks to innovative offers;sustainably develop and preserve the communities through the projects with positive benefits that contribute to their resilience;protect and support employees on a social level;develop an inclusive purchasing policy that benefits the most virtuous suppliers.JUST TRANSITION PLAN CustomersProvide affordable energy for ENGIEs customers with financial aid in 2022 in view of the energy crisis,and offer them tools for energy efficiency with offerings such as Mon Pilotage Elec(My Electricity Management),Mon pilotage Gaz(My Gas Management),and Mon programme pour agir(My Program to Act).Fight energy poverty with the contribution to the housing solidarity fund(Fonds de Solidarit pour le Logement,FSL),the energy checks and a special,short-term fund for industrial and tertiary customers.Promote the energy accessibility of ENGIEs B2B customers with renewable long-term energy contracts(PPA)and energy performance contracts.CommunitiesPromote ENGIEs positive socio-economic impacts in the communities with direct and indirect employment,the contribution to GDP and taxes.Develop long-term projects in the communities with the deployment of ENGIEs TED (Sustainable Energy Transition)label guaranteeing the preservation of nature,the involvement of the players and the contribution to the fight against climate change.12SuppliersValidate the work and human rights criteria in all ENGIEs purchasing processes and the evaluations of major and preferential suppliers by the EcoVadis ratings agency.Develop ENGIEs inclusive purchasing policies.EmployeesEnsure common social protection for all ENGIE employees with collective social guarantees through a global agreement with the internal labor federations.Offer training and permanent ongoing professional training to all ENGIE employees.Responsibly manage the restructuring operations with regard to the employees.342023 INTEGRATED REPORT-37 DIALOG PROCEDURES:Marketing/satisfaction studies/Net promoter score Consumer panels Responses to calls for tender Co-construction Access space CUSTOMERSIndividual,professionals,companies and regional authorities DIALOG PROCEDURES:Informal meetings Meetings and consultations Partnerships General public information meeting Dissemination of information on major projects Stakeholders Committee CIVIL SOCIETY NGOs,associations,residents,communities,professional organizations,academic institutions DIALOG PROCEDURES:European Works Council(EWC)French Group Works Council Local representative bodies The World Forum “ENGIE&ME”commitment survey Biannual“Link”employee shareholding plan EMPLOYEES AND THEIR REPRESENTATIVES Employee representative bodies at the European,national and local levels DIALOG PROCEDURES:Roadshows Interviews Capital Market Day Responses to evaluation questionnaires INVESTORS Banks,insurance companies,socially responsible investments,financial analysts,ratings agency DIALOG PROCEDURES:Vigilance plan Submission of tenders CSR assessment by EcoVadis/audits Business reviews by purchasing category Supplier daysSUPPLIERSDIALOG PROCEDURES:Participation in think tanks Consultations Partnerships Corporate patronage REGULATORSInternational,European and national authorities and bodies DIALOG PROCEDURES:Calls for innovative projects Support via the New Ventures investment fund Vigilance plan Submission of tenders INDUSTRIAL PARTNERSDIALOG PROCEDURES:Shareholders Club Events(visits to Group sites)Meetings(face-to-face and online)Annual General Shareholders Meeting Employee shareholding plan SHAREHOLDERS DIALOG WITH LOCAL STAKEHOLDERSENGIE maintains relationships of trust with all its stakeholders.The conditions for dialog that have been put in place provide a lasting structure for discussions and enable the Group to enrich its strategic thinking in order to accelerate the transition to a carbon neutral economy.38-OUR IMPACTCIVIL SOCIETY Stakeholders CommitteeENGIE has an ecosystem of suppliers that are crucial to the success of its strategy.Excluding energy,these suppliers represent annual expenditure of 16billion.On November 24,2022,ENGIE met with approximately 400 of its most important suppliers as part of its first“Supplier Day”on the theme of“Resilience&Sustainability.”Aimed at mobilizing suppliers around its strategic roadmap,the event included discussions,speeches and workshops and highlighted the key issues of resilience of the supply chain,decarbonization,competitiveness,innovation and even growth vectors.It also stressed the importance of the suppliers to collectively meet the challenges related to the acceleration of the energy transition.SUPPLIERS “ENGIE Supplier Day”On October 21,2022,ENGIE held a meeting of its Stakeholders Committee,composed of representatives from civil society,in order to discuss the just transition with them.This annual meeting with the inter-disciplinary,joint,volunteer advisory committee is chaired by Chief Executive Officer Catherine MacGregor and Chairman of the Board of Directors Jean-Pierre Clamadieu.It is intended to organize a dialog on ENGIEs strategic directions and,more particularly,its corporate social responsibility commitments that are an integral part of its performance.The recommendations issued by the Committee during these discussions will be followed up.CUSTOMERS“E4:ENGIE4Decarbonization”Convinced that the challenges of the energy transitions will only be met collectively,on June 14,2022,ENGIE convened some 300 customers for the“ENGIE4Decarbonization”event attended by ENGIE CEO Catherine MacGregor.Organized around discussions,speeches and feedback from experience,this day,organized at Roland-Garros in Paris,was designed to create a decarbonization ecosystem so that each person could make a concrete commitment to the transformations necessary for a zero-carbon trajectory and set the priorities of their road map.On this occasion,customers also learned about the Groups full offering of decarbonization solutions.Following the global labor agreement on fundamental rights signed in January 2022 with three international union federations,a basis of common shared rights and social protection was established for all Group employees.An annual world forum was also established to report on its progress.It was within this framework that Chief Executive Officer Catherine MacGregor met the stakeholders of this labor agreement on September 8,2022.It was an occasion to assess the progress made by the Group on its key labor commitments the rate of employees trained,diversity and salary equity and to report on the different programs or plans,such as“ENGIE Care”,“ENGIE One Safety”,the vigilance plan and ethics whistleblowing.EMPLOYEES AND THEIR REPRESENTATIVES World Forum“This event was a tremendous opportunity to understand your challenges and current needs regarding your suppliers,but also to reflect together on the opportunities and to address them together in order to accelerate the energy transition.In these critical times,be assured of our full commitment to ENGIE and its partners to build the energy landscape of tomorrow.”Bruno Melles,Executive Vice President Managing Director of the Transformers commercial unit,Hitachi Energy2023 INTEGRATED REPORT-39 CUSTOMERS93.9 bnOF REVENUES IN 2022 Financial net debt:24.1 bnFinancial net debt/EBITDA:1.8xNet economic debt:38.8 bnNet economic debt/EBITDA:2.8xNet financial income:3.0 bn 140,000 suppliers of which 250 preferred 75%of non-energy purchases in Europe 45%SME suppliers in FrancePurchases of raw materials and related network costs(67.7bn)and services(6.9bn)SHARE THE VALUE CREATEDThe value generated by ENGIEs various activities is redistributed for the benefit of its diverse stakeholders.This distribution of value is designed to be fair and also aims to accelerate the transition toward a carbon-neutral world.i.e.3.4 bn representing 65%of 2022 NRIgs(Proposal submitted to the Shareholders Meeting of April 26,2023)Dividend for 2022:1.40/ShareIncome tax and operational taxes:3.4 bn 96,400 employees 16,974 recruitments 7.7%apprentices in France 83.8%of employees trainedPersonnel costs:8.1bn including 1.5bn in employer social security contributionsDepreciation,amortization and provisions:5.2 bn Networks Renewables Nuclear Energy Solutions Flex Gen Retail Others7.9 bn in CAPEX in 202242)%3%6%4%4%NET INCOME ENGIE:0.4 bn0.4%SUPPLIERS79%EMPLOYEES AND JOBS SUPPORTED 8.5%INDUSTRIAL PARTNERS5.5%GOVERNMENT AND LOCAL AUTHORITIES3.5%FINANCIAL PARTNERS 3.2-OUR IMPACTAMERICASUnited States 5%of revenues1.5%of ITCSMexico 1.3%of revenues1.1%of ITCSPeru 0.6%of revenues0.5%of ITCSBrazil2.5%of revenues2.6%of ITCSChile1.8%of revenues0.5%of ITCSEUROPEFrance41%of revenues 32.4%of ITCSUnited Kingdom4.1%of revenues 5.5%of ITCSBelgium12.2%of revenues 35.7%of ITCS(1)Spain5.2%of revenues 0.8%of ITCSNetherlands4.3%of revenues 0.7%of ITCSGermany2.8%of revenues 1.3%of ITCSRomania3.4%of revenues 1.0%of ITCSItaly7.0%of revenues 12.8%of ITCS(1)OCEANIAAustralia1.5%of revenues 0.1%of ITCSIn 2022,ENGIE generated revenues of 93.9 billion and recorded income tax,social security contributions and other taxes(“ITCS”)of 6.6 billion,of which 27%was for current income tax,50%for operational taxes (e.g.land,overproduction,environmental,and nuclear taxes),and 23%for employer social security contributions.The reconciliation of the revenue rate and ITCS rate in the following 14 main countries shows alignment between activity and taxation.OPERATIONAL TAXES50%CURRENT INCOME TAX27%SOCIAL SECURITY CONTRIBUTIONS23%INCOME TAX,SOCIAL SECURITY CONTRIBUTIONS AND OTHER TAXES6.6 bn(1)Differences related to sector-based taxes(infra-marginal,nuclear,etc.)RESPONSIBLE TAXATION ALIGNED WITH THE ACTIVITYLaurence Jaton,Vice-Chairman Group Taxation“ENGIE makes a substantial contribution to countries public finances through the taxes and charges generated by its economic activity.In 2020,ENGIE signed up to the B Team Responsible Tax Principle,joining other companies that are pioneers in this area.”2023 INTEGRATED REPORT-41 CONDUCT AN AMBITIOUS HUMAN RESOURCES POLICYHistorically committed to labor rights,ENGIE intends to support its teams in the energy transition by conducting an inclusive transformation.ENSURE HIGH QUALITY MANAGEMENT-EMPLOYEE DIALOGIn line with its purpose,ENGIE intends to reach a level of social excellence commensurate with its environmental requirements.Moreover,to conduct its transformation over time,high quality management-employee dialog is vital.Thus,in the disposal of EQUANS,ENGIEs management established a clear framework and proposed that the candidates for the takeover present their offers to the Groups European Works Council,which was a first.Then,once the buyer had been identified,under ENGIEs aegis,an agreement stipulating employment guarantees was signed between the Bouygues management and ENGIEs European Works Council.In the same way,in January 2022,the Group signed a new agreement with three world union federations that established a basis of rights and social protection common to all Group employees based on the French mandatory minimum.It will be implemented through the“ENGIE Care”program and will be followed up as part of an annual Global Forum (see pages 38-39).TRAIN EMPLOYEES IN A DECARBONIZED WORLDIn coordination with its local stakeholders,ENGIE pays particular attention to the problems of the industrial and professional transition of its sites affected by its decarbonization trajectory.ENGIE is more broadly implementing a strategy of adaptation and better skills to prepare for the future,encourage the development and retention of its employees and ensure their continued employability.In order to plan its medium-term needs,the Group relies on an in-depth inventory of its available skills and on the projection of changes in its business lines(Medium Term Business Plan process).This forward-looking approach gives it better management of technical skills and the resources necessary to its strategy,particularly for the key business lines of hydrogen,batteries,biogas and electric mobility.To do this,ENGIE relies on the ENGIE University training programs.The Group also has its world internal program,the Sustainability Academy,which aims to make the 4,000 or so ambassadors involved in the program key players in the transition to a carbon neutral economy.At the same time,ENGIE invests in apprenticeships as a path to excellence.In 2020,it formed its Energy Transition Academy to train 400 young work-study apprentices in the new energy business lines by 2024.Today,there are close to 140.Other initiatives exist in Brazil,the Middle East and Romania,where the Group financed two classes that allowed 50 young people to enroll in the“Energy For My Job”program.2030 objectives 100%of employees trained annually.10%of apprentices in France.ACT TO PROMOTE DIVERSITYDiversity,equity and inclusion are also priorities for the Group,which in 2022 launched its new“Diversity,Equity and Inclusion”policy called“Be.UENGIE”for“Be Yourself,”“Be United,”“Be Unique.”To support this new culture,ENGIE deployed a new leadership model named“ENGIE Ways Of Leading”(EWOL).The objectives of this program that is structured around five leadership priorities Safety&Integrity,ONE ENGIE,Accountability,Trust and Care are to guide the individual behavior of leaders and to put shared values into practice on a daily basis.As part of its inclusion policy,the Group supports apprenticeships for young people,promotes equality between men and women,fights against discrimination because of sexual orientation and is committed to a proactive disability policy.In 2022,the Group,which has held the Diversity label since 2012,continued its progress with the roll-out of the“Fifty-fifty”program throughout the Group designed to create the conditions necessary to reach professional gender equality.There is also the launch of the“Friends by ENGIE”network to promote the inclusions of LGBT people within the Group.2030 objectives 40-60male managers.Salary equality between men and women(with a difference of less than 2%,in accordance with Egapro index 1)AN AMBITIOUS WORLD AGREEMENTHealth,safety and quality of life in the workplaceSustainable employment and skills developmentRespect for fundamental rights and an active fight against fraud and corruptionGender equality,diversity and inclusion15A common basis of social protection2345 SOCIAL COMPONENTS 42-OUR IMPACTAfter 2021 was marked by several fatal accidents among employees and subcontractors,the Group hired a specialized consultant to assess its organization and its health and safety culture.This consultant issued recommendations that have been added to the Groups internal analysis of the serious and fatal accident prevention system.REACHING A MILESTONE WITH THE“ENGIE ONE SAFETY”PLANAt the end of this process,ENGIE defined an extensive health and safety transformation plan to adapt the Groups prevention policy.Dubbed“ENGIE One Safety,”the plan aims to sustainably eradicate serious and fatal accidents affecting individuals who work for the Group employees,subcontractors and temporary workers.The plan covers seven areas:strengthening the health and safety culture of all people working for the Group;adapting health and safety governance and organization;reviewing the Groups health and sa

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Environmental Social Governance Report 20222Netflix ESG Report 2022Table of contentsIntroductionA Letter From our co-CEOs03About Netflix04Our Approach to ESG05Our Progress06Environment09Sustainability Strategy10Sustainability in Our Operations and Value Chain13 Netting Remaining Emissions to Zero28Sustainability in Storytelling31Climate Risk33Social36Inclusion and Diversity37Responsible Products50Governance54Corporate Governance55Enterprise Risk60IP Protection and Data Piracy60Ethics and Compliance61Appendix62EnvironmentGovernanceSocialIntroductionAppendix3Netflix ESG Report 2022A letter from our co-CEOsAt Netflix,we aspire to entertain the world and to do so sustainably and responsibly.You can read the full details of how in our fourth Environmental,Social and Corporate Governance(ESG)Report published today.But we wanted to highlight three areas upfront:First,the environment:The next decade is critical if were to manage climate change sustainably.Its why Netflix has committed to halving our emissions by 2030.We will do this by optimizing our energy use,then electrifying it and decarbonizing the rest.Second,inclusion:Netflix is becoming more representative of the members we serve.We now have offices in over 25 countries.Almost half of our employees are women and,in the US,50%are from historically excluded ethnic and/or racial backgrounds.Were also seeing increased representation on and off screen with significantly more female directors and showrunners,and more people of color in leading roles.Third,governance:Our business model is well proven and Netflix is a leader in streaming entertainment in terms of engagement,revenue and profit.So were evolving to a more standard large-cap governance structure,including the phased declassification of our board,the elimination of supermajority voting provisions and changes to our executive compensation program from 2023 onwards.Over the last 25 years,weve worked hard to create long term value for our stakeholders in particular members,shareholders and the creative community.While weve made good progress,theres still more to do.For example,most of our carbon emissions come from our productions,which require a lot of power often in remote locations and are still heavily fossil fuel dependent.But were investing in the technology innovations today that can optimize and electrify this energy use tomorrow.We are excited about the great entertainment coming this year from returning favorites like our Emmy award winning series The Crown and recently released hit action sequel Extraction 2,starring Chris Hemsworth,to must-watch new films and TV shows such as Heart of Stone,Rebel Moon,Griselda and 3 Body Problem.Our north stars remain the variety and quality of our entertainment and,as always,we welcome your feedback.Ted Sarandosco-Chief Executive Officer and President of the Company and DirectorGreg Petersco-Chief Executive Officer and President of the Company and DirectorEnvironmentGovernanceSocialIntroductionAppendix4Netflix ESG Report 2022At Netflix,we aspire to entertain the world so whatever your taste,and wherever you live,well have something great to watch or play,all in one subscription.About Netflix As of December 31,2022,2022 Annual Report(Form 10-K)EnvironmentGovernanceSocialIntroductionAppendixOur Approach to ESGOur Environmental,Social and Governance(ESG)framework is informed by relevant reporting frameworks including Sustainability Accounting Standard Board(SASB),Global Reporting Initiative(GRI)and Task Force on Climate-Related Financial Disclosures(TCFD).The Netflix Board of Directors oversees the Companys ESG efforts and receives regular updates from management in these areas.For this report,we focus on the following topics:Environment,Social and Governance.EnvironmentSocialInclusion and DiversitySupporting our PeopleResponsible ProductsGovernanceCorporate GovernanceEnterprise Risk ManagementEthics and ComplianceIntellectual Property ProtectionSustainability StrategyClimate Risk Sustainability On and Off Screen5Netflix ESG Report 2022EnvironmentGovernanceSocialIntroductionAppendix6Netflix ESG Report 20222 All data points are for the 2022 calendar year unless otherwise noted.3“Value Added”is a term used by SBTi.For Netflix,this is synonymous with“Gross Profit,”derived from subtracting“Cost of Revenues”from“Total Revenue”for the business,per our public financial statements.EnvironmentWe are on track to meet our public sustainability commitments including to:(1)halve our emissions by 2030 from a 2019 baseline;and(2)bring our remaining net emissions from 2022 onwards to zero.We upgraded our Scope 3 target to reduce these emissions 55%per million USD of value added3 by 2030.Starting in 2022,weve brought net Scope 1,2 and 3 emissions to zero by investing in nature-based solutions that retain and capture carbon.We continue to focus on decarbonizing film and series production.Over the course of 2022:Weve used clean technologies on over 60%of the productions Netflix manages directly;andWeve committed to use at least one electric vehicle(EV)on screen in all of our directly managed productions,and our“Everybody In”partnership with GM will also help promote their use.We support creators who choose to incorporate sustainability into their storytelling.165 million households around the world over 70%of our members have chosen to watch one or more stories highlighting climate and/or sustainability.And we spotlight these stories during moments like Earth Month.Our ProgressSee below for a glimpse,or“highlights reel”,of our continued progress in 2022 on environmental,social and governance topics.2EnvironmentGovernanceSocialIntroductionAppendix7Netflix ESG Report 20224 More information about how the USC Annenberg Inclusion Initiative defines this term is available in their full report about the study.Our ProgressSee below for a glimpse,or“highlights reel”,of our continued progress in 2022 on environmental,social and governance topics.SocialAs our third Inclusion Report showed:In addition,we continue to invest in the Netflix Fund for Creative Equity,which helps increase opportunities within the entertainment industry.Our employee giving program provides a 2:1 match on employee donations.In 2022,Netflix and our employees donated$34 million to over 5,000 charities worldwide.We have now added disclosures about product accessibility to our ESG Report given the importance of ensuring that all of our members regardless of language,device,connectivity or ability can enjoy our entertainment.Women have the highest gender representation at Netflix;and Over 50%of our US employees are from one or more historically excluded ethnic and/or racial backgrounds.In April 2023,the USC Annenberg Inclusion Initiative published their latest study into representation behind and in front of the camera for Netflixs US films and series.It showed notable improvements for women and people from historically underrepresented racial and ethnic groups4 between 2020 and 2021.EnvironmentGovernanceSocialIntroductionAppendix8Netflix ESG Report 2022GovernanceOur ProgressSee below for a glimpse,or“highlights reel”,of our continued progress in 2022 on environmental,social and governance topics.At our 2022 annual meeting,stockholders approved a board proposal to make significant changes to our corporate governance,including:Weve also adopted a majority voting standard in uncontested director elections and evolved our co-CEO compensation program for 2023.This includes:a CEO salary cap;performance-based annual cash bonus;and a minimum 50%of compensation allocated to stock options with one year vesting.In the last year,Netflix executives have met shareholders representing around 51%of our outstanding shares to solicit their feedback.Independent directors participated in a majority of these meetings.A phased declassification of our board beginning in 2023.From 2025,our entire board will stand for annual elections;The elimination of supermajority voting provisions in our articles of incorporation and bylaws;andThe ability for shareholders to call special meetings.EnvironmentGovernanceSocialIntroductionAppendix9Netflix ESG Report 2022To entertain the world,we need a habitable planet to entertain.Were working to make our operations more sustainable,including behind the camera,and to support creators who want to highlight sustainability on screen.EnvironmentEnvironmentGovernanceSocialIntroductionAppendix10Netflix ESG Report 2022Sustainability StrategyKey is decarbonizing our operations and value chain,which includes the making of our films and series.To help us meet this challenge,we created an advisory group,including scientists and other experts.This group is unpaid and entirely independent(full list available at ).Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingThe science is clear the next decade is critical if we are to manage climate change sustainably.In March of 2021,we set two near-term climate targets aligned with consensus climate science that can be measured in years,not decades:Our Public Climate TargetsReduce our emissions by roughly half by 2030;and Bring our remaining net emissions from 2022 onwards to zero,in support of global net zero goals,by investing in nature-based solutions that retain and capture carbon.When we first set our emissions targets,we aligned to the Science Based Targets Initiative(SBTi)standard for Scope 3“supplier engagement”targets5.After working to improve our Scope 3 data,we submitted an upgraded quantitative“intensity”target6 aligned to current SBTi standards for validation in 2022.The new target,which has now been approved by the SBTi,is to reduce Scope 3 emissions 55%per million USD of value added7 by 2030.5 Netflix previously had a science-based target to engage 70%of suppliers to set their own science-based targets.6 Netflixs Intensity Scope 3 target was approved by SBTi on Feb 27,2023(see“Companies Taking Action”on the SBTi website).Our validated Scope 1 and 2 target remains unchanged from 2021.7“Value Added”is a term used by SBTi.For Netflix,this is synonymous with“Gross Profit,”derived from subtracting“Cost of Revenues”from“Total Revenue”for the business,per our public financial statements.Climate RiskEnvironmentGovernanceSocialIntroductionAppendix11Netflix ESG Report 2022Scope 1“Fuel”8Scope 2“Electricity”9 Scope 3“Value Chain”10Energy EfficiencyElectric VehiclesClean Mobile PowerEnergy EfficiencyRenewable EnergySupplier IncentivesDemand SignalingTechnology AcceleratorsEducational OfferingsNETFLIX EMISSION REDUCTION ACTIONSTARGETTERMINOLOGY46%by 2030absolute reduction55%by 2030Intensity reduction(million$value added)Our“Sphere of Control”Absolute Reduction GoalOur“Sphere of Influence”Intensity Reduction GoalDecarbonization Target8 Scope 1:fuel consumed for our self managed productions,company-owned transportation and building heating9 Scope 2:electricity we purchase for our Open Connect systems and in our facilities and self-managed productions10 Scope 3:emissions related to value chain activities such as purchased goods&services,capital goods,business travel and othersSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix12Netflix ESG Report 2022Our sustainability strategy is aligned with the ISO Net Zero Guidelines(IWA 42:2022)developed by the International Organization for Standardization,which recently published a testimonial about Netflix.These guidelines,which are designed to be universally applicable,were developed with input from over 1,200 global experts from 100 countries11,and among other criteria,require:Alignment with ISO NetZero GuidelinesEmissions Reduction:Taking immediate action to maintain the climate at 1.5 degree celsius i.e.,approximately halving global emissions by the end of the decade and achieving global net zero by 2050 at the latest.Counterbalancing Residual Emissions:Investing in nature-based solutions that retain and capture carbon12 from the atmosphere,proportional to a companys“residual”emissions13.Learn more about how we are aligned in our carbon credit investments here.Wider Impact:Engage value chain stakeholders,collaborate and share knowledge,and participate in relevant advocacy on behalf of bringing global emissions to zero and promoting a just transition.Learn more about how we are aligned on the broader societal impact here.Netflixs Sustainability Strategy is music to our ears.We are delighted to see Netflix apply the same positive disruption to sustainability that theyve applied to their business,upping the ambition for achieving near-term net zero targets and harnessing the power of storytelling to educate and entertain citizens.Christiana Figueres,Diplomat and Architect of the U.N.Paris AgreementThe Carbon Trust,a respected think tank,found these ISO Net Zero Guidelines to be the most comprehensively aligned to to the goals of COP27.11 Including participants from the Greenhouse Gas Protocol,SBTi,UN Framework Convention on Climate Change,and UN Race to Zero teams.12 We are working with ISO to ensure understanding this element of their guidelines because of the limited volume of high quality carbon removal credits available today,and the IPCCs latest report shows that the mitigation options with the greatest potential global contribution to net emission reduction by 2030 are“avoidance”projects.13 The ISO Net Zero Guidelines define residual emissions as:Emissions that remain on an annual basis after all efforts to reduce along a 1.5 C pathway within value-chain or boundary emissions have been implemented.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix13Netflix ESG Report 2022To meet these objectives we are focused on four key levers:Climate Transition PlanEnergy Efficiency:Identifying cost-effective efficiency improvements for energy used in our offices and studios;Vehicle Electrification:Transitioning from vehicles that use fossil fuels to fully electric and/or hydrogen powered alternatives;Clean Mobile Power:Using alternatives to diesel generators on productions;andRenewable Energy:Using renewable electricity and fuels.We approach these four levers using an OED framework i.e.,first optimizing energy use,then electrifying it and decarbonizing the rest.Optimize(O):We are conducting energy efficiency audits,including for our stages,studios and offices,so we can optimize vehicle fleet operations,right-size vehicles and mobile power and give preference to more efficient equipment.Electrify(E):We are working to electrify the equipment that uses the most fuel,like vehicles,buildings and generators.Where available,we use electric motors,which are more efficient and because electricity is more easily decarbonized.Weve successfully piloted the use of mobile batteries and hydrogen-battery powered generators in lieu of fossil-fuel powered generators in our productions.And we are also replacing fossil-fuel vehicles with electric,plug-in hybrid and hybrid vehicles.Decarbonize(D):When optimization and electrification arent possible,we decarbonize the remaining emissions by installing and purchasing renewable energy.This means matching renewable electricity to any grid-connected power that isnt carbon-free and shifting to lower-carbon or zero-carbon fuel options when that isnt possible.Last year,we procured renewable electricity to match our global electricity demand and were exploring more direct investments.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingSustainability in Our Operations and Value ChainClimate RiskEnvironmentGovernanceSocialIntroductionAppendix14Netflix ESG Report 2022Maximizing the solutions available today,while accelerating the market for tomorrows solutions,is also imperative.While energy efficiency and renewable energy solutions are cost-effective and can be deployed at scale now,clean mobile power and EVs are more nascent technologies.As a result they will deliver most of their respective emissions reductions for Netflix in the latter half of this decade.Refer to the Energy Efficiency,Renewable Energy and Clean Mobile Power sections below.Each year,we continually develop and further refine our 2030 Science-Based Target transition strategy.The following chart illustrates our current planned path to our Scope 1 and 2 target,and the decarbonization levers that will get us there.Renewable energy:electricity and fuelElectric vehiclesClean mobile powerEnergy efficiency and behavior changeScience-based target:42,000Forecasted78,000Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix15Netflix ESG Report 2022We measured our 2022 greenhouse gas emissions(i.e.,carbon footprint)using the Greenhouse Gas Protocol14.This helps us understand our largest sources of emissions and the biggest opportunities we have to reduce them.Our independent accountants,Ernst&Young(EY),reviewed our 2022 Scope 1,2 and 3 greenhouse gas emissions(location-and market-based).Their report and assurance letter is here.Our Carbon Footprint14 Refer to the appendix for details about our greenhouse gas emissions inventory methodology,footprint boundaries and data management process.Our footprint,reductions and related data are represented in four separate tables throughout the environment section of this report:Greenhouse Gas Inventory including our corporate greenhouse gas data from 2019 through 2022.2022 Emission Reductions Summary Table shows our quantified reductions from the range of measures we have put in place to track progress towards our science-based target.2022 Carbon Credit Portfolio shows the carbon credits we purchased and retired for 2022.2022 Electricity Consumption Summary shows our electricity consumption and renewable electricity.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix16Netflix ESG Report 2022GREENHOUSE GAS INVENTORYSCOPE 1SCOPE 2(market-based)SCOPE 2(location-based)SCOPE 2(target-based)SCOPE 1 2(market-based)SCOPE 1 2(target-based)SCOPE 3(market-based)TOTAL(market-based)CARBON CREDITS51,48756526,59426,31752,05277,8041,192,6591,244,711(35,506)30,88314128,58529,35631,02460,2391,020,5411,051,564(54,107)62,815042,29131,93762,81594,7521,466,4971,529,312(1,529,312)59,388041,41123,62259,38883,0101,086,8331,146,221(1,146,221)2019 MTCO2e2020 MTCO2e2021 MTCO2e2022 MTCO2eBIOGENIC EMISSIONSRenewable Fuels(e.g.,renewable diesel,sustainable aviation fuel)2019 MTCO2e:02020 MTCO2e:02021 MTCO2e:1,0072022 MTCO2e:2,033Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix17Netflix ESG Report 2022Over half of our emissions(all scopes)are related to the production and licensing of films,series and games(“production”).The second largest source of emissions is in our corporate operations(“corporate”),followed by our data center providers(“streaming”).CARBON FOOTPRINT COMPONENTSNetflixs 2022 Carbon Footprint by Business Activity38Y%3%StreamingProductionCorporateEmissions ReductionsWe track progress against our Scope 1 and 2 emissions target using target-based emissions figures noted in the carbon footprint table above.Target-based emissions only account for emissions reductions resulting from specific decarbonization actions and those related to direct renewable energy supply(e.g.,onsite generation,utility and landlord supply,power purchase agreements or direct investments),but not for emissions reductions resulting from our annual purchase of renewable energy certificates(or environmental attribute certificates).TRACKING PROGRESS AGAINST OUR 2030 SCIENCE-BASED TARGET2022 Scope 1 and 2 emissions are 12%lower15 year-over-year,though they remain slightly higher than our 2019 baseline year due to growth in the business.The combined impact of our emissions reductions initiatives across our four priority levers in 2022 resulted in a 30%lower Scope 1 and 2 footprint value than would have otherwise been reported.The vast majority of our emission reductions still come from renewable energy and renewable fuels.Transitioning from diesel to electric will take time to scale to a level that will have a measurable impact on emissions reductions.15 In addition to emissions reductions from our decarbonization efforts,external factors also influence the calculated emissions total,including data improvements(e.g.,improved data quality,updated emissions factors)and changes in core business activities from year to year(e.g.,number of self-managed vs.partner-managed productions which can shift the emissions representation between Scopes).Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix18Netflix ESG Report 20222022 SCOPE 1 AND 2 EMISSIONS REDUCTIONS TABLE162021003,8693,6125,7021747171071200852214,2102022162519,4525,7056,7642951,73875523149671278125,504Sub-LeverEquipment&Controls ImprovementsRight-Sizing Diesel GeneratorsUtility-Supplied Renewable EnergyLandlord-Supplied Renewable EnergyStreaming Partners Renewable EnergySustainable Aviation FuelRenewable DieselElectric VehiclesPlug-in HybridHybrid VehiclesHybrid SystemsGrid Tie-InBatteriesHydrogen SystemsTotalActionEnergy EfficiencyRenewable Energy(electricity and fuel)Electric(and other low-carbon)VehiclesClean Mobile Power16 There is no reporting guidance from the SBTi on tracking progress towards science-based targets on an annual basis,so we use standard greenhouse gas accounting methodologies per the Corporate Accounting and Reporting Standard by The Greenhouse Gas Protocol.Our Internal Audit team validates our greenhouse gas accounting methodologies and we engage EY to perform limited assurance over our greenhouse gas emissions.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingEmission Reduction LeversEmissions Reduced and Avoided(MT C02e)Climate RiskEnvironmentGovernanceSocialIntroductionAppendix19Netflix ESG Report 2022Reducing Emissions in the WorkplaceIn 2022,we completed energy efficiency audits at our major facilities across North America.Except for Albuquerque Studios in New Mexico and the Egyptian Theater in Los Angeles,Netflix does not own the facilities in which we operate.This makes the immediate implementation of the audit recommendations more challenging.So we engaged with our landlords in the US and have begun to implement projects within our control at several of our offices and studios including:window replacements,temperature setbacks,lighting improvements and controls,heat pump installs,plug load controls,daylight sensor installs and equipment upgrades.We will replicate this approach across priority facilities in EMEA in 2023.ENERGY EFFICIENCYIn 2022,as in previous years,we have matched our global operations with 100%renewable electricity,covering all electricity consumption in our offices and for productions we directly manage.This was achieved through a range of approaches that include utility-supplied clean electricity,landlord-supplied clean electricity,and renewable energy certificates(RECs).RENEWABLE ENERGY(ELECTRICITY AND FUELS)2022 Electricity Consumption Summary TableMETRICElectricity consumed(MWh)Percentage grid electricityPercentage renewableElectricity consumed(MWh)Percentage grid electricityPercentage renewableTotal electricity consumed(MWh)202026,1961000h,0891000,285202133,40710003,14810006,555202236,11010000,85710006,967SCOPEHardware Infrastructure ElectricityRemaining Electricity Total Electricity We recognize that not all renewable energy supply is the same in terms of its positive impact.So were working to increase the proportion of onsite generation,utility and landlord-supplied clean electricity and direct sourcing from offsite projects.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix20Netflix ESG Report 2022This year we partnered with Powertrust to bring high-impact distributed renewable energy projects to rural areas of India for the first time.This work is funded through distributed renewable energy certificates(D-RECs),a market instrument aligned to the International REC(I-REC)standard.These investments bring renewable energy to regions where it is needed most,thereby delivering maximal social and environmental benefits.Many of the projects we have invested in are bringing electricity to communities,and enabling others to rely less on small-scale fossil fuel generators.POWERTRUST PARTNERSHIPMon,Nagaland:This project has connected three villages in the state of Nagaland to solar mini-grids.These villages are the first demonstration sites of a larger plan to connect 40 villages across the province over the next three years.Dr.Shroffs Charity Eye Hospital,Uttar Pradesh:This organization operates multiple centers for high-quality,low-cost eye care serving the rural poor and low-income communities across India.The combined network sees more than 250,000 patients and performs nearly 30,000 surgeries every year.This branch in Uttar Pradesh experienced daily power cuts lasting multiple hours,and relied on diesel generators to provide backup power.Now,a photovoltaic system reduces diesel consumption by up to 70%.Vellore Institute of Technology,Andhra Pradesh:The institute is a higher educational facility in Andhra Pradesh.A 700kWp rooftop system now spreads across several buildings on the institutes campus,including several student accommodation and service buildings.Solar Irrigation Pumps,Uttar Pradesh:“Irrigation-as-a-Service”enables farmers to transition from diesel-based pumping to solar irrigation.The tariffs are set to be 20-40%cheaper than the running cost of diesel groundwater pumping(including fuel,maintenance,and rental),and users only pay for the volume of water consumed for irrigation.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingBelow are some of the highlights of our partnership with Powertrust in 2022:Climate RiskEnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 2022RENEWABLE FUELSWe strive to implement zero-emissions solutions where we can.But we can also achieve meaningful reductions in the near-term through the adoption of renewable fuels that have significantly Reducing Emissions in the Workplace(continued)Production-related emissions account for 60%of our overall footprint,so we are focusing our efforts on:(1)using clean mobile power equipment versus diesel generators;and(2)using EVs and other low emissions vehicles.Over the course of 2022 we implemented these clean technologies on over 60%of the productions Netflix manages.We employ sustainability experts who regularly visit production sites to identify opportunities to reduce emissions and we maintain a production resources website that contains tools and resources to introduce our productions to the latest clean technologies.This video showcases some of these technologies operating on multiple Netflix sets and partner locations,together with testimonials from crew and producers about their experience:Reducing Emissions in ProductionsSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in Storytelling21lower emissions than conventional fuels such as diesel and Jet-A.In select markets,we fueled both production vehicles and mobile generators with over 185,000 gallons of renewable diesel,an important bridge fuel as we work towards longer-term decarbonization of these activities.Similarly,we have secured over 100,000 gallons of Sustainable Aviation Fuel(a Jet-A fuel replacement blended fuel with lower emissions)to help fuel Netflix aircraft.Climate RiskEnvironmentGovernanceSocialIntroductionAppendix22Netflix ESG Report 2022Using diesel generators has been an entertainment industry standard for a long time and effective cleaner alternatives have not been available at scale.Cleantech solutions are starting to emerge and they can replace some generators,or at least reduce the number of hours they need to run each day saving fuel and reducing air and noise pollution on set.In the past year,over 50%of the productions Netflix manages incorporated clean mobile power solutions including grid tie-ins,mobile batteries,battery-hybrid generators,and hydrogen power units,resulting in fuel reductions that lowered emissions by 1,179 MTCO2e.This included the deployment of over 100 pieces of clean mobile power equipment and battery-hybrid generators deployed for the first time.Netflix also expanded the geographic reach of these solutions,deploying solutions in and around Atlanta,Austin,Dublin,Lisbon,London,Los Angeles,New York,Paris,Toronto and Vancouver.Here are a few examples of clean mobile power in our 2022 productions.CLEAN MOBILE POWERBatteries:Virgin River Season 5 built on their experience from Season 4 to expand their use of batteries to power set and ancillary power needs,reducing the seasons diesel generator fuel use by 44%.The Union,filmed around London,leveraged batteries to power the set and lighting,resulting in generators only being needed for 5%of filming hours,saving over 1,800 gallons of fuel.Hydrogen Power Units(HPUs):Hydrogen Power Units using green hydrogen were deployed on UK productions that required supplemental power at studios or long term locations.For the filming of Damsel,two large hydrogen power units were used to provide supplemental power at a studio,replacing diesel generators,saving over 4,200 gallons of fuel and reducing emissions by 44 MTCO2e.The Diplomat Season 1 employed equipment to bring clean power to a rural location in the English countryside.We partnered with a local production equipment supplier to conduct the first mobile hydrogen pilot in France on Lupin Part 3,while filming on location outside of Paris.Hybrid Generators:Bodkin Season 1 was the first ever production in Ireland to use a hybrid generator and to use renewable diesel.We also piloted hybrid generators for the production of the films Irish Wish,Unfrosted and Rebel Moon,the latter using a hybrid generator plus solar technology to provide remote power to construction crews and wardrobe trailers.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClean Mobile Power Spotlights:Climate RiskEnvironmentGovernanceSocialIntroductionAppendix23Netflix ESG Report 2022Film and series productions take thousands of vehicles that until recently have been universally fossil-fuel powered.In the past year,over 30%of the productions Netflix manages incorporated electric,plug-in hybrid,and hybrid vehicles,totaling more than 120 vehicles piloted in 2022(a 3X increase in vehicles from 2021),resulting in fuel reductions that lowered emissions by 158 MTCO2e(a 5X increase in reductions from 2021).These vehicles were deployed on productions in Los Angeles,London,New York,Toronto and Vancouver.From our pilots,we have learned that EV passenger vehicles can save productions money and fuel when provided to crew that have high daily mileage,and that plug-in hybrids and regular hybrids are good transition vehicles that reduce emissions without range anxiety.As we prepare to pilot larger vehicles,including electric trucks,we know that charging infrastructure,including mobile charging,is key to the successful integration of EVs into production operations.Therefore we have begun to build out charging infrastructure at studios where we frequently produce series and films.We are installing faster level 2 stations(dispensing 16-19 kW vs the standard 6-7 kW)and have purchased DC fast chargers that will be installed in Los Angeles and at our owned studio in Albuquerque in 2023.VEHICLE ELECTRIFICATIONSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix24Netflix ESG Report 2022The film and television industry is over a century old and has been traditionally powered by fossil fuels.While we have set Netflix-specific climate targets,we cant transition entertainment to a cleaner,low carbon industry alone.This is why we partner with other studios to ensure progress made by one benefits everyone and because we believe collective actions will yield positive outcomes,faster.We do this through:INDUSTRY COLLABORATIONSustainable production industry groups:Netflix is a member of several industry groups globally(e.g.,Sustainable Production Alliance(global),BAFTAs Albert(UK and global),Reel Green/On Tourne Vert/Ontario Green Screen(Canada),Green Motion(Germany),Sustainable Screens Australia,etc.)to help bring transparency(e.g.,Close Up:Carbon Emissions of Film&Television Production)and public advocacy for sector transformation(e.g.,hydrogen hub).Clean Mobile Power Initiative:By co-founding the Clean Mobile Power Initiative(CMPI)with support from non-profit Rocky Mountain Institute and its climate accelerator,we aim to identify and deliver cost-competitive zero emissions mobile power at scale for the entertainment industry.The long term goal is to eliminate diesel generators in top production markets.Sustainable Aviation Buyers Alliance:Making a film or series requires air travel.To accelerate progress towards lowering the greenhouse gas emissions associated with burning jet fuel,Netflix co-founded the Sustainable Aviation Buyers Alliance(SABA).SABA sends market signals to producers of Sustainable Aviation Fuel(SAF)to grow supply,facilitates coordinated procurement activity,and ensures the environmental integrity of their claims.We also actively partner with other key business and non profit consortia to:(1)further our understanding of climate representation on screen,including through BAFTAs Albert,SPA and the Climate Entertainment Stakeholders Roll Call,a group organized by the Television Academy,Academy of Motion Picture Arts&Sciences,Creative Artists Agency,and PGA to connect the companies and organizations working in climate entertainment;and(2)advocate for more sustainable policy solutions,including CERES,C2ES,the Business Roundtable and Motion Picture Association.24Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix25Netflix ESG Report 2022Sustainability Across the Value ChainPurchased goods&services17(PG&S)emissions,i.e.,goods and services we buy from others,made up the majority of our 2022 Scope 3 footprint,primarily related to film and series production.The next biggest Scope 3 Category in 2022 was business travel emissions18,which includes air travel,hotel stays and travel-related transportation,and accounts for 10%of our total Scope 3 emissions.Compared to last year,our overall Scope 3 emissions decreased by about 25%.These emissions reductions can be attributed in part to a smaller volume of productions in 2022 compared to 2021,which experienced a jump as COVID shutdowns eased.The reductions were also driven by significant renewable energy consumption and procurement by AWS(refer to Data Centers and Content Distribution Network),and(to some degree)by EPA emissions factor changes19.Since a big part of these emissions are driven by the productions that other studios make on our behalf,as noted above,we partner closely with our peers and industry partners to engage our suppliers and shift the entertainment industry towards a more sustainable filmmaking approach.As we begin to track against our new Scope 3 targets,we will share our progress along the way.SCOPE 3 EMISSIONSThis is what industry leadership looks like.Netflix is raising the bar by aligning operations with science,pioneering approaches to protect nature,and sending new demand signals to suppliers that sustainability is a measurable priority.Not only do we see progress against ambitious near-term goals,Netflix is also leveraging their platform for positive change.Its clear that Netflix is taking climate action seriously.Elizabeth Sturcken,Managing Director,Environmental Defense Fund17 Scope 3 Category 1,per the Greenhouse Gas Protocol18 Scope 3 Category 6,per the Greenhouse Gas Protocol19 Dataset and description of changes.Updates to these Scope 3 emissions factors reflect ongoing improvements by the EPA,to use updated methodologies and data where possible.Netflix tracks materiality of any methodological updates to the footprint,and follows established guidelines for re-baselining as needed.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix26Netflix ESG Report 2022Carbon Trusts white paper on the Carbon Impacts of Video Streaming determined that the use-phase emissions associated with data center and CDN operations are small(1%)compared to the rest of the video streaming value chain.Netflix partners with Amazon Web Services(AWS)for our data storage and cloud computation needs.AWS has a goal of using 100%renewable energy by 2025.In 2022,AWS reported via their customer carbon footprint tool that our carbon footprint was reduced by approximately 98%compared to last year.This is due to AWSs renewable energy usage and purchasing,and energy efficiency initiatives.This trend is consistent with research findings,which show that the energy intensity of global data centers has decreased by 20%annually since 2010.This is a notable improvement compared with recent annual efficiency gains in other major demand sectors(e.g.,aviation and industry),which are an order of magnitude lower20.DATA CENTERS AND CONTENT DISTRIBUTION NETWORK(CDN)When it comes to distributing our content to our members,Netflix invests heavily in making this process as efficient as possible with our Open Connect program.We make 18,000 servers available for free to Internet Service Providers who operate them in their data centers across 6,000 locations in over 175 countries21.So when our members press play,instead of the film or series being streamed from halfway around the world,its streamed from around the corner increasing efficiency for operators while also ensuring a high-quality,no-lag experience for consumers.On top of that,weve developed encoding technology to reduce file sizes and optimize bandwidth use while maintaining high video quality for consumers.Over the past five years,we have been able to cut our bit rates by roughly 50%.This is in addition to the significant efficiency gains the telecom industry has achieved within their own networks21.We are encouraged by the strong energy efficiency and renewable energy usage trends of both AWS and our own Open Connect program,and are committed to continually decarbonizing these processes over time.Refer to our recent blog post Energy Efficiency in Streaming:Innovation Reaping Rewards to learn more.20 E.Masanet,A.Shehabi,N.Lei,S.Smith,J.Koomey,“Recalibrating global data center energy-use estimates,”Science Magazine,202021 Co-CEO Greg Peters Keynote Address to the 2023 Mobile World CongressSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix27Netflix ESG Report 2022Because internet infrastructure(including data centers)are so widely shared by so many consumers across so many services,the energy consumption of this infrastructure for individual video streams is relatively efficient(i.e.,10%of total use-phase streaming emissions).By contrast,the physical devices used by our members(wifi routers,streaming sticks,set top boxes,and displays)drive the most energy consumption and emissions(89%).Even so,the total carbon footprint of streaming one hour of video is approximately 55 gCO2e(grams of carbon dioxide equivalents).This equates roughly22 to the emissions associated with microwaving four bags of popcorn,or three boils in an electric kettle23.INTERNET TRANSMISSION AND USER DEVICE ENERGY USEBased on globally accepted greenhouse gas accounting standards24,internet-and device-related emissions fall outside of the formal carbon footprint boundary for Netflix.Even so,we still think it is important for us to contribute to industry-wide decarbonization efforts.Through our participation in DIMPACT,we collaborate with Internet Service Providers(ISPs),device manufacturers,and academic and industry experts to stay up-to-date on the latest research about digital service emissions and contribute to cross-sector policy suggestions that will help decarbonize video streaming globally.Weve summarized the main takeaways here.Additionally,we are part of the DIMPACT Device Manufacturers working group,where we support research related to device energy efficiency.We are also encouraged by work with the Carbon Trust,in collaboration with companies like Amazon,Meta,Microsoft,Samsung and Sky,to tackle the emissions of connected devices.22 Based on UK emissions factors,because these comparisons vary by country depending on the carbon intensity of the users national grid.23 The True Climate Impact of Streaming 24 Per the Greenhouse Gas Protocol and also validated by our auditors,indirect use-phase emissions are optional to include.The Science Based Target Initiative(SBTi)also specifies that internet-and device-related emissions are indirect use phase emissions for software and telecommunication services,therefore optional to include in our footprint and target(Target Validation Protocol for Near-term Targets,Version 3.1,pg.51).Data Center Operators1%Internet Service Providers10vice Manufacturers89%Electric Utilities100%of this value chain relies on electricity Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix28Netflix ESG Report 2022Netting Remaining Emissions to ZeroTo supplement our decarbonization work,we delivered on our promise to net all remaining emissions to zero,across all three scopes,in 2022.We did this by investing in nature to retain and remove carbon(nature-based carbon credits)and match remaining electricity use to like-for-like renewable energy credits.We align with the latest guidance from nine research,NGO and multilateral government institutions who conclude that,“in addition to cutting greenhouse gas emissions in company operations and across value chains,to help get the world on track for halving global emissions by 2030,all companies need to invest in protecting,managing and restoring nature,for example by buying high-quality nature-based carbon credits.”Relative to our work to decarbonize,purchasing carbon credits comes only after we have made efforts to reduce emissions at the speed prescribed Nature-Based Carbon Creditsby climate science.But per the science(Intergovernmental Panel on Climate Change25,Nature),this needs to be done in parallel and cannot come later26.Our 2022 carbon credit portfolio spans four continents,six countries,and 25 on-the-ground partners,with 100%third-party certification for carbon measurement.Netflix does extensive due diligence before including a project in our portfolio,using a rigorous five step evaluation process to select the highest quality credits,all of which need to demonstrate their value beyond the carbon,including social impact,community and biodiversity benefits.We review transparency and integrity work from groups like VCMI and ICV-CM,and stay abreast of methodologies from third party credit standards bodies to continually refine our vetting process.Nature-based projects make up 64%of our portfolio because of their ecosystem benefits and potential to bring economic value to the region,including indigenous people or those disproportionately affected by climate change.Short film by the makers of Our Great National Parks on how carbon credits work,illustrated using Netflixs contribution to a Kenyan forest conservation project next to Tsavo National Park(episode 3)25 All scenarios developed by the IPCC that limit climate change to 1.5C rely on increasing the ghg sequestration potential of nature coupled with the avoidance of further damage to soils,forests,peatlands,wetlands,oceans and other critical biodiverse sinks-IPCC(2022)Climate Change 2022:Mitigation of Climate Change.26A We Mean Business coalition study showed that if the worlds 1,700 biggest emitters compensated each year for just 10%of the emissions they have not yet cut,through investments in nature,it would mitigate nearly 30 gigatons of emissions and mobilize up to$1 trillion in climate finance by 2030.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix29Netflix ESG Report 20222022 CARBON PORTFOLIOProject NameMycorrhizal Inoculation Accelerated Reforestation Carbon RemovalChyulu Hills REDD ProjectSalvador da Bahia Landfill Gas ProjectBangladesh Gas Leak ReductionScott River Improved Forest ManagementCountryChileKenyaBrazilBangladeshUSAProject TypeRemoval:ReforestationRetention:REDD Methane MitigationMethane MitigationRemoval:IFMProject BenefitsAdvances biotechnology,biodiversity,local skilled jobs,soil rehabilitationBiodiversity,drought prevention,education resources,local jobs and alternative livelihoods,strong local community governanceReduced pollution,local skilled jobsReduced pollution,local skilled jobsFire prevention,biochar production,watershed restorationVendorMikro-Tek&Climate Impact PartnersConservation InternationalClimate PartnersClimate Impact PartnersEcotrust Forest ManagementTonnes331,600338,569266,300113,87231,248Mycorrhizal Inoculation Accelerated Reforestation Carbon RemovalScott River Improved Forest ManagementSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix30Netflix ESG Report 20222022 CARBON PORTFOLIO(CONTINUED)CountryBrazilMexicoMexicoUSAProject TypeMethane MitigationRemoval:IFMRemoval:IFMRemoval:Soil CarbonProject BenefitsReduced pollution,local skilled jobsBiodiversity,local skilled jobsBiodiversity,local skilled jobs,fire prevention and other forest health benefitsBiodiversity,local skilled jobs,soil health,fire prevention and other forest health benefitsVendorClimate Impact PartnersCool EffectCool EffectIndigo AG/Cool EffectTotalTonnes26,83219,53017,1701,1001,146,221ICOCO Community Based ReforestationProject NameCentral de Resduos do Recreio Landfill Gas Project(CRRLGP)Los Bancos Community Based Improved Forest Management ICICO Community Based ReforestationIndigo Ag Soil Carbon ProjectChyulu Hills REDD ProjectFor any electricity we werent able to decarbonize in 2022,we used like-for-like credits by retiring Energy Attribute Certificates(e.g.,Renewable Energy Certificates(RECs)in the US,Guarantees of Origin(GOs)in Europe)to cover all non-renewable electricity use in over 150 countries.RENEWABLE ELECTRICITY CREDITSSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix31Netflix ESG Report 2022Sustainability in StorytellingIn 2022,165 million,or more than 70%of our members,chose to watch at least one story on Netflix that highlighted sustainability.Weve curated over 200 of these series,films and specials into a Netflix collection:Sustainability Stories.The collection includes comedies like Dont Look Up,documentaries like the Academy Award winning The Elephant Whisperers and Our Great National Parks,to the mystery film Glass Onion:A Knives Out Mystery,fantasy sci-fi Sweet Tooth and political drama Borgen-Power and Glory,inspiring solutions in Down to Earth with Zac Efron,and family fare like The Sea Beast and Spirit Rangers.Visit the Netflix sustainability webpage for more.The Sea BeastOur Great National ParksDown to Earth with Zac EfronSpirit RangersDont Look UpSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix32Netflix ESG Report 2022Netflix has committed to expanding the use of EVs in shows and films we produce ourselves and announced this in a 2023 Super Bowl ad with GM starring Will Ferrell.These titles will start to hit the service in 2023,including Murder Mystery 2,Virgin River Season 5 and more that will prominently feature EVs.EVs ON SCREENYoung people like myself view Netflix as a cherished form of entertainment but also as a source of education and inspiration.As more and more of our generation recognizes the implications of the climate crisis on our daily lives we feel hopeful when shows like The Crown tackle coal pollution,or when Zac Efrons Down to Earth highlights new green technologies.Im proud of Netflix for being serious about tackling the climate crisis both in-house and on-screen.Xiye Bastida,Indigenous youth climate activist and winner of the Spirit of the UN AwardSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix33Netflix ESG Report 2022Refer also to the TCFD index in the appendix to this reportBoard:The Netflix Board oversees the Companys ESG efforts,which includes sustainability,with the assistance of the Nominating and Governance Committee.They regularly receive updates on sustainability and enterprise risk management at Board meetings.Management:Our Chief Financial Officer(CFO)oversees management decisions related to our sustainability programs,which are led by our Netflix Sustainability Officer.Our Internal Audit team performs an annual company-wide enterprise risk assessment,in which climate risks are considered,and the findings of this assessment are shared with the Board annually.GOVERNANCEClimate RiskWe conducted an initial climate risk assessment at the end of 2021.This evaluation looked at a range of climate risks as defined by the Task Force on Climate-Related Disclosures,including physical,regulatory,reputational,market,legal,and transitional risks.We also referenced the ESG-Specific Committee of Sponsoring Organizations(COSO)framework and Intergovernmental Panel on Climate Change(IPCC)research to build a climate risk framework to assess Netflix risk.STRATEGY AND RISK MANAGEMENTSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix34Netflix ESG Report 2022RISKSDescriptionAcute physical risks caused by disruption from wildfires,flooding and sea level rise could pose a threat to business continuity and an impact to productions in areas impacted by natural disasters.Regulatory impacts could impose additional costs and limitations on how we produce content and operate our service.Regulatory impacts on traditional energy sources could pose a risk on our license to operate and produce content(e.g.,bans on diesel generators in desirable shooting locations)if new comparable technologies arent introduced in sufficient supply in time.Time HorizonShort TermMedium TermMitigation StrategyWe produce content all around the world and can be somewhat resilient to issues related to a particular studio or filming location.As part of our planning for productions,we conduct risk assessments and develop detailed emergency response plans for each different potential scenario.During production,we regularly track adverse weather events and other situations that may impact the continuity of our productions and implement plans as needed(e.g.,halting production,moving locations,etc.).We will also continue to monitor global physical risks as a part of our enterprise wide risk management and business continuity programs,which will inform additional mitigation strategies.We partner closely with players across the industry to evaluate,develop and deploy new sustainable technologies as well as seek to operate as efficiently as possible with traditional energy sources.Along with other companies,we have partnered with DIMPACT to help better understand and assess the impact of emerging trends in our industry.Read more about these efforts in the Sustainability in Our Operations and Value Chain sectionRisk TypeAcute PhysicalEmerging RegulationWe identified the following risks and opportunities,and mapped them against current strategies:Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix35Netflix ESG Report 2022OPPORTUNITIESDescriptionEnergy efficiency in our operations.Optimization and electrification of our vehicle fleet across our operations,productions and in our supply chain.Supporting entertaining and scientifically-informed content that raises environmental awareness.Time HorizonShort TermShort TermMedium TermBusiness StrategyNetflix conducts energy efficiency audits across our operations and long term lease facilities in order to reduce energy costs and emissions from inefficiencies in our built environment.Learn more in our Sustainability in Our Operations and Value Chain section.Netflix is exploring various ways to optimize fleet use with our suppliers and switching from fossil fueled transportation to EVs.EVs are more efficient and many models have lower total cost of ownership versus gas-powered vehicles.We anticipate that this integration of these practices and technologies will result in net cost and operational savings over the next decade.Learn more in our Sustainability in Our Operations and Value Chain section.Learn more in our Sustainability in Storytelling section.Opportunity TypeResource Efficiency Energy SourceProducts and ServicesWhile the assessment was a useful exercise,the climate risks we identified were all mapped to risk mitigation strategies already in place or underway.The output of this climate risk assessment was also used as an input into our enterprise risk management(ERM)assessment.When evaluated using our ERM methodology,no standalone climate-related risks were identified as significant for the company.Refer to our public climate targets and Scope 1,2 and 3 greenhouse gas emissions data above.Measuring our performance against these targets over time helps to inform our climate risk assessment process,in particular our transition risks.METRICS AND TARGETSSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix36Netflix ESG Report 2022SocialWe are focused on a number of areas,including diversity and inclusion within Netflix,representation both behind and in front of the camera and the accessibility of our service.EnvironmentGovernanceSocialIntroductionAppendix37Netflix ESG Report 2022Inclusion&DiversityIf we are to serve audiences globally,we want an employee base that reflects our membership and a culture that enables those employees to do the best work of their lives.Our first inclusion report,published in 2021,looked at“representation within the company,how we plan to increase it and how we cultivate a community of belonging and allyship”and weve been working to build on that over the last two years.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix0.3%0.2%1.38Netflix ESG Report 2022GENDER(GLOBAL)27Across gender identities,women make up 49.6%of our workforce and have the highest representation at Netflix,compared to 51.7%in 2021.Women leadership(Directors and above)remained steady at 51.4%(vs.51.2%in 2021).Men and additional gender identities28 remained flat at 45%and 1.3%respectively,compared to 2021.Representation Today500 %0%WomenMenAdditional Gender Identities51.7I.6E.7E.0P0 %0%WomenMenAdditional Gender Identities51.2Q.4G.8E.6%Global Gender IdentityAll Job LevelsDirector 2021202227 This data is based on a subset of our streaming employee population,representing approximately 9,500 streaming employees.Due to regional laws,we are not able to collect gender data in every region.4%of the 9,500 employees represented in the data collection process chose not to disclose a gender identity.28 Netflix acknowledges and honors that gender is non-binary,so employees can self-identify from categories outside of man or woman.SENIOR LEADERSHIPOf the 23 leaders in our senior leadership team in 2022,43.5%(10)are women.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix39Netflix ESG Report 2022RACE/ETHNICITY(US)29Over half of our US workforce(52.9%)is made up of people from one or more historically excluded ethnic and/or racial backgrounds,including Asian,Black,Hispanic or Latino/a/x,Middle Eastern or North African,Native American,and Pacific Islander30.Representation Today29 In the US where we collect and report race and ethnicity data we had approximately 7,000 employees.Previously published results will differ due to changes in data collection methods that allow employees to share multiple self-identities(e.g.,Black and Asian compared to only“multi-race”);with this change,percentages can add up to more than 100%.30 The Race&Ethnicity self-identification categories that Netflix uses are largely informed by US federal reporting requirements.The number of US employees who identify as Asian accounts for 27%of our workforce,an increase from 25.8%in 2021 and 18.4%of our leadership(directors and above),compared to 18.6%in 2021.The number of US Black employees accounts for 10.7%of our workforce,a decrease from 11.7%in 2021 and 12.9%of our leadership(directors and above),a decrease from 13.6%in 2021.The number of US Hispanic or Latino/a/x employees accounts for 11.3%of our workforce,relatively flat from last year(11.2%)and 7.3%of our leadership(directors and above),an increase from 6.8%in 2021.SENIOR LEADERSHIPOf the 23 leaders in our senior leadership team in 2022,34.8%(8)self-identify as belonging to one or more historically excluded ethnic and/or racial backgrounds.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendixNative American/Alaskan NativeAsianBlackHispanic/Latino/a/xMiddle Eastern/North AfricanNative Hawaiian/Other Pacific IslanderWhite0.4.6%0.6.4.6.9%6.8%7.3%2.0%2.1%0.8%0.9Y.0X.5%0.8%0.9F.6F.6%0.6%0.7%Middle Eastern/North African2.2Netflix ESG Report 2022500 %0%Native American/Alaskan Native25.8%US Race/EthnicityAll Job Levels20212022AsianBlackHispanic/Latino/a/xNative Hawaiian/Other Pacific IslanderWhite27.0.7.7.2.3%2.3P0 %0%US Race/EthnicityDirector 20212022Refer also to our EEO-1 reports from 2014-2021 here.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix41Netflix ESG Report 2022Increased representation is only part of the journey.People need to feel included and valued within an organization if they are to stay long term and while weve made steady progress,we have much more to do.Key is building an inclusion lens so that employees at every level can move from awareness about diversity,equity and inclusion to action and impact more quickly.In the last year,over 600 of our leaders globally have participated in small group workshops on Leading Inclusively.We also have groups of inclusion advisors in all regions and functions helping to develop best practices in hiring,compensation,onboarding,feedback,growth and development.We conduct pay equity analyses at least annually.These are designed to help ensure that employees from historically underrepresented groups are not being underpaid based on gender(globally)and race(US)relative to others doing the same or similar work under comparable circumstances.We aim to rectify pay gaps that we find.In addition,we will increase transparency around employee retention and pay equity in our inclusion updates and ESG reporting starting in 2024.Deepening our Culture of Inclusion and BelongingOn recruiting and development,we have expanded the number of Hispanic Serving Institutions(HSI),Historically Black Colleges and Universities(HBCU),and Minority Serving Institutions(MSI)represented in our Pathways Bootcamp.This immersive 12-week program provides technical skills development to students from historically underrepresented groups.Since the programs inception in 2020,276 students have participated in the Pathways Bootcamp.On building a more inclusive working environment,we now have 18 Employee Resource Groups(ERGs)with over 8,000 employees in 84 chapters globally.These ERGS help to:create a positive and welcoming environment for employees from historically underrepresented communities at Netflix;raise our collective consciousness around diversity and inclusion issues;and support recruitment,retention and employee engagement.80 276ERG chapters across the globeStudents have participated in Pathways BootcampInclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix42Netflix ESG Report 2022At Netflix,we seek excellence in everything we do our product,our entertainment and our culture.To help us succeed,weve created an employee culture thats focused on continuous improvement so we can better serve our members and build our business.Our publicly available Culture Memo outlines our approach,which we update as needed to ensure we remain flexible in our approach.And we focus on employee engagement and feedback,including through regular town halls,business reviews and memos(which we often share broadly,including comments).Culture and EngagementWe offer benefits through four pillars:physical health,mental health,family and financial.On the right are a few highlights of our offerings:Benefits and WellbeingPhysical Health:Medical benefits work differently by country.No matter what the case is in each location,we make sure our employees and their families are covered.Additionally,we focus on accommodations and workplace adjustments to enable employees with one or more disabilities to be productive and successful.Mental Health:Mental health is important to overall health so we offer various programs to support employees and their dependents.Globally,we provide access to mindfulness resources,as well as free therapy and coaching sessions.In 2022,we introduced a formal Wellbeing Resilience strategy to manage issues related to anxiety and workplace stress.Our primary goal is to enhance productivity by focusing on integrating wellbeing into our operations.Family Benefits:Netflix offers a global family forming and fertility health benefit to support employees during their fertility health,surrogacy,adoption and family forming journey.This benefit is available to employees and their spouse/domestic partner,regardless of marital status,gender identity or sexual orientation.We also recognize that one of the most important events in many of our employees lives is the birth or adoption of a child,and our parental leave policy is“take care of your baby and yourself.”Financial Benefits:We provide employees the opportunity to prepare for their futures through our retirement-savings benefits,which vary by country.Inclusion and DiversityResponsible ProductsBenefits Highlights:EnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 2022Employee Giving ProgramPhilanthropy at Netflix is driven by employees through our Employee Giving Program.Consistent with our culture of freedom and responsibility,we enable employees to donate to causes that are meaningful to them through a 2:1 employee match.When an employee donates to a charitable organization(from over 2 million eligible charitable organizations in 200 countries),Netflix matches that with 2X the donation amount,with an upper limit of$20,000 per employee per year for all donations and matches.This democratizes giving decisions,and incentivizes employees to support causes theyre passionate about.In 2022,we expanded our giving options and ways to get involved.We added a new volunteer match program in which Netflix employees can donate time by volunteering.For every hour an employee volunteers with an eligible cause,Netflix donates$50 to the same cause as part of each employees annual match maximum.Total giving as part of the Netflix Employee Giving Program in 2022 was approximately$34 million supporting over 5,000 charities worldwide.Nearly 30%of our employees participated in the Employee Giving Program in 2022.43Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix55%Netflix ESG Report 2022Better representation on-screen starts with representation behind the camera and in the office.But we know that driving real change in film and TV,not only at Netflix but industry-wide,means continuing to think about whose voices are still missing and discovering the next generation of storytellers.Progress in Film/Series and ProductionsUSC ANNENBERG INCLUSION REPORT We partner with Dr.Stacy L.Smith and the USC Annenberg Inclusion Initiative to examine several inclusion metrics(e.g.,gender,race/ethnicity,LGBTQ ,disability)in our US-commissioned films and series.In 2021,we released our first-ever study and committed to publicly releasing our progress every two years through 2026 to help keep us accountable and effect lasting change in our industry.This April we shared the latest round of research looking at Netflix US films and series from 2020 to 2021.The new findings showed notable gains year-over-year for women and people from underrepresented racial/ethnic groups.More than half of all Netflix films or series from 2018-2021 featured a girl or woman as the lead or co-lead.Gender Equality in Leading Roles47%In 2020 to 2021,nearly half of Netflix films and series featured a lead or co-lead from an underrepresented racial/ethnic group.More People of Color in Leading RolesIn 2021,26.9%of directors on Netflix films were women,compared to 12.7ross top-grossing films across the industry that same year.And 38%of show creators in 2021 were women,substantially higher than 26.9%in 2018.More Women Behind the Camera26.9%Women of color increased significantly as series directors from 5.6%in 2018 to 11.8%in 2021,with similar growth for writer and creator roles.Nearly a third of films(27.7%)and more than half of series(54.75%)in 2021 had women of color as leads/co-leads.Women of Color Behind and In Front of the Camera11.8%However,the results also reveal that gaps persist for some specific racial/ethnic groups,including Latinx,Middle Eastern/North African,Indigenous and Native Hawaiian/Pacific Islander communities,as well as characters with disabilities.Read the executive summary here and the full report here.Inclusion and DiversityResponsible Products44EnvironmentGovernanceSocialIntroductionAppendix45Netflix ESG Report 2022FUND FOR CREATIVE EQUITY From our work with USC,we have learned that more inclusion behind the camera leads to better representation on screen.So in 2021,we established the Netflix Fund for Creative Equity,a commitment of$100 million over five years towards building new opportunities for underrepresented communities within entertainment.Through the fund,Netflix supports external organizations that are committed to creating more equitable opportunities in the TV and film industries,as well as bespoke Netflix programs that help us to identify,train and provide job placement for up-and-coming talent globally.In just two years,we have committed$29 million towards these initiatives,supporting over 4,500 up-and-coming creatives and partnering with more than 80 organizations around the world.Weve also placed 395 creatives from our programs on Netflix productions in a variety of roles,ranging from line producers and associate editors to casting assistants and grips.Read the latest update on the Fund for Creative Equity here.Invested more than$29 million in programs over the past 2 yearsPartnered with over 80 organizations across the globeEstablished more than 100 programs in over 35 countries from the United Kingdom to Brazil and Spain to IndiaSupported more than 4,500 creatives including directors,producers,writers,visual effects artists and moreInclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix46Netflix ESG Report 2022PROGRAM AND CREATOR SPOTLIGHTS Paula GarcasGraduate from the Netflix Series Directors Development Program in the US“The Netflix Series Directors Development Program helped me pivot my career-the team looked beyond my career as an actor,and saw the potential in me to grow as an artist.The program gave us access to major talent and a front row seat to the inner workings of directing.Thanks to Lauren Iungerich,I directed an episode on two Netflix shows as part of this.Training with Lauren has been invaluable to my career.She gave me all the time,tools and encouragement to truly succeed,while testing me and challenging me to grow along the way.Because of her,Im prepared to tackle any opportunity that comes my way.”Mirwais SarwaryParticipant in the New Producers Academy Fellowship in the NetherlandsThrough the NPA masterclasses and networking events,Ive had the opportunity to meet and discuss ideas with key players in the film industry.Above all,I have had the time,space,and tools to develop my vision as a producer.In a short period of only six months,the New Producers Academy has allowed me to position myself in the Dutch film industry on my terms.What has been most rewarding is to be in a position where I can work together with emerging creators that find my fresh approach as a producer valuable and essential.Korede AzeezWinner of the African Folktales,Reimagined Short Film Competition,Nigeria“I learned so much from day one.It was the most tasking project I have ever worked on,but it was also the most rewarding.I got to work with some of the best talent in my country,which was an amazing experience.They treated me with so much respect and I am grateful for the immense support I got from Netflix and my mentor.I also learned a lot about how a world class production is managed,and this is definitely something Ill be taking into future work.I have grown tremendously as a filmmaker and I feel more ready to take on the world.”Here are a few highlights of programs and creators we supported in 2022.Aditi SharmaGraduate of the Netflix x Film Companion Take Ten Initiative,India“Through the Take Ten program,I got to learn about writing a screenplay,creating characters,directing actors,along with many other filmmaking lessons.We had the opportunity to do this under the guidance of Film Companion,and being mentored by professionals who are not only good at what they do,but also truly invested in the process of teaching,was extremely helpful.There arent any grant opportunities in India to speak of,and to have a platform like Netflix to showcase your film was a huge deal for a first time filmmaker like me.For the first time,me and my team believed that we had a real shot at this.”Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix47Netflix ESG Report 2022SUPPORTING BLACK BANKS AND FINANCIAL INSTITUTIONSIn 2020,we announced that we would plan to allocate 2%of our cash holdings initially up to$100 million into Black banks and similar financial institutions to help create economic opportunities for Black communities in the US.In 2021,we fulfilled our initial pledge and in 2022,we continued to expand that investment to 2%of our cash and short-term investment holdings($106 million has been committed as of December 31,2022).Progress in PartnershipsSUPPLIER DIVERSITYWere working to ensure that our suppliers and vendors come from a diversity of backgrounds.This helps create jobs and opportunities in communities where we do business for people whove often been marginalized historically.In 2022,we spent$700 million with underrepresented suppliers,a 9%year-over-year increase.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix48Netflix ESG Report 2022With a catalytic seed investment of$25 million,Netflix collaborated with LISC Fund Management(LFM)to create the Black Economic Development Fund(BEDF).The Fund launched in 2020 to address economic challenges in the Black community and to help close the racial wealth gap.Since then,BEDF has grown into a$250 million mission-driven fund investing in Black-led developers,financial institutions,anchor organizations and businesses,with the goal of growing these organizations and strengthening their contributions to the Black community.From inception to the end of 2022,Netflix contributions supported BEDFs investment of$158 million in black-led transactions:$12 million in deposits to Black-owned banks;$18 million to Black-owned businesses;and$128 million in Black-led real estate developers.Netflixs anchor investment of$25 million has been instrumental in the creation of the Black Economic Development Fund,enabling us to invest in the Black community in a bold way.Without the support of visionary partners like Netflix,this transformative initiative may have never come to fruition.We are deeply grateful for their partnership and look forward to continuing to drive positive change together.Michelle Spivak,Senior Director,LISC Fund ManagementInclusion and DiversityResponsible ProductsPARTNER SPOTLIGHTSHope Credit Union was one of the first investments in the Netflix commitment to build economic opportunity in Black communities.The investment in HOPE is supporting the financing of more than 2,500 entrepreneurs,homebuyers and consumers of color.To learn more about these investments and their impact,check out the YouTube web series“Banking On Us.”Episode 1Episode 2Episode 3EnvironmentGovernanceSocialIntroductionAppendix49Netflix ESG Report 2022As a women-led B-Corp,were delighted to collaborate with Netflix,a leader in promoting racial justice,in our shared goal of reimagining how corporations invest in Communities of Color.Hand in hand,were charting a new course for corporate responsibility.Cash Deposits:Netflix has committed$6 million to CNote Impact Cash funds to be deposited with mission-driven depository institutions(DIs).Investments from Netflix have supported collective lending for over$1.9 billion in auto loans,over$4.2 billion in commercial loans and over$1.5 billion in housing loans.Catherine Berman,CEO of CNoteInclusion and DiversityResponsible ProductsNetflix leverages CNotes technology solution to support cash management into diversified deposits targeting social impact.Deposits are deployed with a network of impact-driven depository institutions that support Black,Indigenous,People of Color(BIPOC)and low-to-moderate income communities and individuals,as well as women entrepreneurs.Racial Equity and Disability Loans:A Netflix fixed income commitment of$16 million focused on racial equity and disability has supported loans to 7 community development financial institutions(CDFIs)as of the end of 2022.These CDFIs provide funds to support individuals with physical disabilities,those suffering from mental illness,those recently released from incarceration or recovering from substance abuse issues and members of BIPOC communities that have been denied access to capital or services.PARTNER SPOTLIGHTSEnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 202250Responsible ProductsEmpowering people to easily choose and experience films,series and games they love is critical to a members joy every time they go to Netflix.We design our products to protect the privacy and security of our members,and to be inclusive and accessible to everyone.Privacy Our service has always been subscription-based,and when members sign up for any plan,we ask for very little information:email,name and method of payment.Our Personal Information Handling Principles ensure our engineering and business teams are aligned on our approach to privacy.Our Privacy Statement provides a detailed explanation of our privacy practices to our members,including:the information Netflix collects or receives from each member;information from our partners;how we use and disclose it(including advertising that we conduct off Netflix to promote our service);and the controls each member has in relation to this information.In November of 2022,Netflix introduced an ad-supported plan which allows members to enjoy our service at a lower price with limited ads.For those signing up for our ad-supported plan,we also ask for date of birth and gender.Members have the ability to opt-out of the selection of ads based on third party behavioral advertising(i.e.,ads selected based on use and/or interactions with unaffiliated third party websites and apps over time).We offer members the ability to exercise such opt-outs through a simple in-service control and we do not share what individual members watch with advertisers.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 202251Government Requests Related to ContentWe offer creators the ability to reach audiences all around the world.However,our catalog varies from country to country,including for rights reasons(i.e.,we dont have the rights to every title in every country where we operate).In a few cases,weve had to remove specific titles or episodes of titles in specific countries to comply with government demands.Below are the titles we removed in 2022 three in total.We report these takedowns annually.Information and Cybersecurity We strive to protect sensitive information through various means,including:technical safeguards;procedural requirements and policies;a program of monitoring to detect and address unauthorized modification or misuse;continuous testing of aspects of our security internally and with outside experts;and a robust incident response program.We regularly assess what areas of vulnerability there are,how we detect issues,how we respond and then how we let people know.We also have a Responsible Vulnerability Disclosure program,launched in 2018,that allows security researchers around the world to find and report security vulnerabilities in Netflix products and systems in exchange for compensation.The Vice President(VP)of Security,Privacy,Assurance and Corporate Engineering oversees a team of employees dedicated to information security.Cybersecurity is discussed at every audit committee meeting and is also a board-level issue.Our VP regularly attends audit committee meetings and provides updates on cybersecurity matters.In August 2022,we complied with a written demand from the Radio and Television Supreme Council(RTUK)in Turkey by removing one episode-episode 9 of Season 5-of the series Jurassic World Camp Cretaceous in Turkey.In September 2022,we complied with a written demand from the Singapore Infocomm Media Development Authority(IMDA)to remove the series How to Change Your Mind in Singapore.In October 2022,we complied with a written demand from the Ministry of Information and Communication(MIC)in Vietnam and removed the series Little Women in Vietnam.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 202252Product Accessibility We believe incredible stories and games should be enjoyed by all of our members,regardless of language,device,connectivity,or ability and that accessibility is just as important as the aesthetics,speed and stability of our service.MAKING OUR SERVICE MORE ACCESSIBLE We have designed features like assistive listening systems,brightness controls,keyboard shortcuts,screen readers,larger font size and voice commands into our products.We also conduct research with current and prospective members aimed at identifying barriers to perceiving,navigating,and interacting with Netflix,and design solutions to remove those barriers.We take advantage of device-specific assistive technologies(e.g.,native features on Apple iOS and Android platforms)as much as possible.We also create our own accessibility options,such as the ability to change the font,size,shadow,and background color of closed captions and subtitles on TV,and adjust playback speed on mobile.Our catalog of titles with subtitles for the Deaf and Hard of Hearing(SDH),and audio descriptions(AD)for our members with vision needs is continually expanding.All Netflix-owned films and series support SDH for the language in which they were originally produced.We have also started expanding SDH and AD to nearly 20 languages,including Spanish,Portuguese,and French.Netflix members can browse titles with English audio descriptions in the gallery on our website,and by selecting“Audio Description”under the Categories menu in our mobile apps.We also introduced new badge icons for our shows and films that have AD and SDH on web,TV,iOS and Android so members can more easily discover stories suited to their needs,eliminating the inconvenient need to play a title first.We partner with vendors across the globe who are dedicated to working with the blind and low vision community in many different capacities,from hiring blind or low vision narrators,quality controllers and co-author/editors to working with the community and local organizations to gather feedback through focus groups.Guidelines for the creation of AD,timed text style guides,gaming accessibility and minimizing photosensitivity issues flashes or patterns that could cause ill-effects in our audiences,are also publicly available to share best practices amongst industry peers.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 202253MAKING OUR SERVICE MORE ACCESSIBLE Over the past year,we kicked off our first tour of barrier free accessible screenings in New Orleans,Los Angeles,London,New York City,and Seoul.Audiences came together to experience the thrill of The Gray Man,Stranger Things S4,and Jung_E in theaters with open AD and SDH.There is more to be done.Thats why Netflix is committed to working with the industry,community and policymakers to deliver more inclusive and accessible entertainment to the world.Inclusion and DiversityResponsible Products53EnvironmentGovernanceSocialIntroductionAppendix54Netflix ESG Report 2022GovernanceFrom our earliest innovation of DVD-by-mail to becoming one of the worlds leading entertainment services,weve managed our business for the long term and focused on pleasing our members.This approach has served our members,employees and shareholders well over the past 25 years.EnvironmentGovernanceSocialIntroductionAppendix55Netflix ESG Report 2022Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyCorporate GovernanceOur corporate governance structure31 was built to find the right balance of rights and responsibilities among shareholders,the board and management,and ensure that there are appropriate checks and balances in place.With the rapid evolution of technology and the changing media landscape,we are continually adjusting our service to meet the needs and desires of our consumers.Our governance structure has been deliberately constructed to help us to do that.Board Composition and StructureOur board is composed of 12 highly experienced,talented and qualified directors with experience as board members and executives at some of the worlds most successful companies.We believe that the board is well situated to navigate the changing competitive terrain that Netflix operates within.The board has led Netflix through its evolution from a US-only DVD business to a leading global streaming service and from a licensor of second run content to one of the biggest producers of films and series in theworld,while effectively managing risk and overseeing management performance.We believe that a diverse mix of skills,experience,perspectives and backgrounds contribute to an effective board.The composition of our board has evolved over the past several years,and when looking to fill board positions,we will continue to evaluate potential candidates who we believe complement and augment our current board.The Nominating and Governance Committee considers a number of factors,including those depicted below,as well as characteristics such as gender,ethnic or racial background,and national origin when evaluating potential board candidates.InnovationKnowledge of how to anticipate consumer and technological trendsContentExperience with the entertainment and media industryInternationalExpertise in global business cultures and consumer preferencesSTRATEGY ALIGNMENTOur board has the experience and expertise that aligns with these important facets of our long-term strategy31Netflix Approach to Governance EnvironmentGovernanceSocialIntroductionAppendix56Netflix ESG Report 2022Executive DirectorsReed HastingsExecutive Chairman of the BoardTed Sarandosco-Chief Executive Officer and President of the Company and DirectorIndependent DirectorsGreg Petersco-Chief Executive Officer and President of the Company and DirectorJay C.HoagLead Independent Director,Nominating and Governance Committee(Chair)Brad SmithIndependent Director,Nominating and Governance CommitteeTimothy Haley Independent Director,Compensation Committee(Chair)Ann MatherIndependent Director,Audit Committee(Chair)Anne SweeneyIndependent Director,Compensation CommitteeRichard BartonIndependent Director,Audit CommitteeStrive MasiyiwaIndependent Director,Nominating and Governance CommitteeMathias DpfnerIndependent Director,Compensation CommitteeLeslie KilgoreIndependent Director,Audit CommitteeAs of the end of 2022,women made up 33%of our independent directors and 27%of our overall board.One independent director comes from a historically excluded ethnic and/or racial background.We maintain our current board diversity matrix on our investor relations website32.32 Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyEnvironmentGovernanceSocialIntroductionAppendix57Netflix ESG Report 2022Board Oversight The boards role in our risk oversight process includes reviewing and discussing with members of management areas of material risk to the company,including overall enterprise,strategic,operational,financial and legal risks.The board oversees the companys ESG efforts,which includes human capital management,inclusion,diversity,sustainability and other matters.The board also oversees succession planning.The board receives regular updates from management typically in the form of an interactive memo,where directors ask questions to management,and further discuss matters at meetings.Each of the committees oversee various ESG matters,depending on the specific issues.Committees report to the full board regarding their respective considerations and actions.THE BOARDThe board as a whole oversees matters related to enterprise,strategic,operational,financial and legal risk and the companys ESG efforts.NOMINATING AND GOVERNANCE COMMITTEEPrimary committee responsible for board structure,governance and director independence,as well as assisting the board in overseeing ESG mattersAUDIT COMMITTEEOversees matters of financial and legal risk,including cybersecurity riskCOMPENSATION COMMITTEEOversees risks related to compensation issuesCOMPANY MANAGEMENTThe executive team,led by our co-Chief Executive Officers,supervises day-to-day risk management processes,including identifying,assessing,monitoring,managing and mitigating significant business risks.Company management reports to the board on an annual basis,or more frequently if needed,top areas of risk.Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyEnvironmentGovernanceSocialIntroductionAppendix58Netflix ESG Report 2022Governance Structure Streaming is now an established business,Netflix is self-funding and expects sustained positive free cash flow,and weve substantially scaled our revenues,operating profit and margins.As such,we have recently evolved to a more standard large-cap governance structure.At our 2022 annual meeting,the Netflix Board proposed and stockholders approved significant changes to our corporate governance structure.We implemented a phased-in declassification of our board,with directors elected at this years annual meeting serving one-year terms and the entire board standing for annual elections beginning in 2025 and beyond.We also eliminated supermajority voting provisions in our Amended and Restated Articles of Incorporation(the“Charter”)and our Amended and Restated Bylaws(the“Bylaws”),provided shareholders with the ability to call special meetings,and adopted a majority voting standard in uncontested director elections.We also adopted a market standard director resignation policy.Here is a summary of our corporate governance best practices and stockholder rights:One share,one vote:We have a single class of shares with each share entitled to one vote.Majority voting standard:We have a majority voting standard in uncontested director elections.Any incumbent director who fails to receive a majority of votes cast in an uncontested election must tender their resignation to the board.The Nominating and Governance Committee would then make a recommendation to the board about whether to accept or reject the resignation or take other action.Annual director elections(fully declassified by 2025):We have phased-in the declassification of our board with directors elected at this years annual meeting serving one-year terms and the entire board standing for annual elections beginning in 2025 and beyond.Elimination of supermajority voting:We eliminated supermajority voting provisions in our Charter and Bylaws.Proxy Access:A group of up to 20 stockholders,owning at least 3%of shares continuously for at least three years may nominate up to two directors or 20%of the Board(whichever is greater)for inclusion in our proxy statement.Stockholder right to call a special meeting:Stockholders holding a not less than 20%net-long position in the Company continuously for at least one year may call a special meeting.Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyEnvironmentGovernanceSocialIntroductionAppendix59Netflix ESG Report 2022Shareholder EngagementWe strive to stay in tune with our ownership base.Our board and our management team engage directly and regularly with our shareholders,and our board and its committees consider shareholders feedback in assessing our governance structure,including our compensation program.Since our 2022 annual meeting,we have invited 26 shareholders,representing approximately 57%of our shares outstanding to participate in calls to discuss our executive compensation program and other matters that are top of mind33.We conducted two rounds of investor outreach one in the summer of 2022 and one in early 2023,to ensure we fully understood shareholder feedback,concerns and perspectives.Members of the Netflix legal and investor relations teams met with 19 shareholders,representing approximately 51%of our shares outstanding.Independent directors of the board participated in a majority of these engagements,meeting with shareholders representing approximately 45%of our shares outstanding.We also engaged with the proxy advisory firms,Glass Lewis and Institutional Shareholder Services(ISS).These engagements provide a direct opportunity to exchange information and perspectives,and the input from our shareholders will continue to inform our ongoing ESG programs as we evolve and grow.33 Percentages are based on shares outstanding as of December 31,2022.Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyEnvironmentGovernanceSocialIntroductionAppendix60Netflix ESG Report 2022IP Protection&Data PiracyWe regard our trademarks,service marks,copyrights,patents,domain names,trade dress,trade secrets,proprietary technologies and similar intellectual property as important to our success.We use a combination of patent,trademark,copyright,trade secret laws and confidentiality agreements to protect our proprietary intellectual property.We employ a variety of methods to monitor potential infringement of our intellectual property,including searches conducted internally and by external vendors.A particular focus is preventing uses of our intellectual property that may lead to consumer fraud.Enterprise Risk We review enterprise risks on an ongoing basis and seek ways of managing risk to help create,preserve and realize value for our members and shareholders.Our approach to enterprise risk management(ERM)is consistent with the COSO framework which defines ERM as“the culture,capabilities,and practices,integrated with strategy-setting and performance,that organizations rely on to manage risk in creating,preserving,and realizing value”.On an annual basis,our Internal Audit team facilitates an enterprise risk assessment.We gather insights from a number of internal and external sources,including discussions with executives for their views on enterprise risks that the company is facing and compile an inventory of risks across the business.The findings of this assessment,including mitigation approaches,are presented to the board for their input and oversight.We also report these risks in our annual report.34Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data Piracy34 Netflix,Inc.Annual Report on Form 10-K for the year ended December 31,2022 EnvironmentGovernanceSocialIntroductionAppendix61Netflix ESG Report 2022Ethics and Compliance We are committed to managing our business ethically and with integrity.Our Code of Ethics sets out our expectations for conduct among our employees and board members.We encourage reporting of breaches of our code or any unethical or inappropriate conduct to our Chief Legal Officer or,in the case of misconduct by a senior financial officer,to the Chair of our Audit Committee.We also provide access to a third-party operated service where reports of misconduct can be made confidentially and,if desired,anonymously,24 hours a day,seven days a week,365 days a year in local languages.Reports made through this service are elevated and investigated until they are resolved,and updates are provided annually to the Audit Committee.As part of our commitment to managing our business ethically and with integrity,we seek to identify and mitigate risks that could lead to potential legal and/or regulatory violations through an annual compliance risk assessment process.Our Global Anti-Corruption Policy requires our employees and contractors to abide by global anti-corruption and anti-bribery laws.We provide regular training on compliance with this policy,in addition to conducting regular and ongoing risk assessments.A copy of our practices and policies,which includes the Global Anti-Corruption Policy and Code of Ethics,has been translated into numerous languages and remains available to all employees throughout their employment with us.Other areas of focus include commitments to compliance with applicable government mandated sanctions regimes(with leadership provided by a designated Sanctions Compliance Officer)as well as compliance with human rights legislation(e.g.,the UK Modern Slavery Act35).35 UK Modern Slavery Act Statement Available on our IR WebsiteCorporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyEnvironmentGovernanceSocialIntroductionAppendixAppendix62EnvironmentGovernanceSocialIntroductionAppendix1Netflix ESG Report 2022About This ReportThis report covers the calendar year 2022 and all data included in the report is from that time period unless otherwise noted.Refer to data tables in this appendix for a summary of ESG data for 2022 as well as published data from previous years.This report is also reflective of global Netflix operations unless otherwise noted.This report is informed by external ESG reporting frameworks including the Sustainability Accounting and Standard Board(SASB)“Internet Media&Services”and“Media&Entertainment”standards,as well as the Task Force on Climate-related Financial Disclosures(TCFD).SASB and TCFD indices are provided in this appendix.FORWARD-LOOKING STATEMENTSThe information covered by the report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including,but not limited to,statements regarding our ESG programs,activities,plans,policies,goals,targets,objectives,commitments,projections,expectations and strategies that are not historical in nature.These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ,including any failure to meet stated ESG goals and commitments,and execute our strategies in the time frame expected or at all,as a result of many factors,including changing government regulations or stakeholder expectations,and our expansion into new products,services,technologies,and geographic regions.More information on risks,uncertainties,and other potential factors that could affect our business and performance is included in our filings with the SEC,including in Item 1A:“Risk Factors”section of the companys most recently filed periodic reports on Form 10-K,Form 10-Q and subsequent filings.All forward-looking statements included in this document are based on information available to us on the date hereof,and we assume no obligation to revise or publicly release any revision to any such forward-looking statement,except as may otherwise be required by law.About This ReportESG Data TablesSASB IndexTCFD IndexResourcesGHG Inventory MethodologyCarbon Credit Project Screening CriteriaEnvironmentGovernanceSocialIntroductionAppendixData PointPaid MembershipsEmployeesRevenue(USD Millions)2019167 million8,60020,156ESG DATA TABLE2020204 million9,40024,9962021222 million11,30026,6982022231 million12,80031,616Data PointElectricity(MWH)Global Renewable Electricity(%)Scope 1 Emissions(Metric Tons C02-e)Scope 2 Emissions,Market-Based(Metrics Tons C02-e)Scope 2 Emissions,Location-Based(Metric Tons C02-e)Scope 2 Emissions,Target-Based(Metric Tons C02-e)Scope 1 Scope 2(Market-Based)Emissions(Metric Tons C02-e)Scope 1 Scope 2(Target-Based)Emissions(Metric Tons C02-e)Scope 3 Emissions(Metric Tons C02-e)Total GHG Emissions:Scope 1 Scope 2(Market-Based) Scope 3(Metric Tons C02-e)Carbon Credits201981,13610051,48756526,59426,31752,05277,8041,192,6591,244,711(36,506)202094,28510030,88314128,58529,35631,02460,2391,020,5411,0

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Scaling Impact2022 Corporate Sustainability ReportContents3CEO Statement5About ADM5About the Report6Awards7Goals and Key Performance Indicators13Our Core Business14Food Quality and Safety15Innovation16Reducing Food Waste17Concern Worldwide20Land27Climate32Freshwater 38Community Engagement39Human Rights41Diversity,Equity,and Inclusion43Health and Safety45Strategy and Oversight46Risk and Opportunity Management47Key Topic Assessment and Stakeholder Engagement48Commitments and Policies49Compliance and Ethics52Data Tables53Verification Statements56GRI Content Index60SASB Standards61TCFD IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices24Introduction11Feed the World18Protect Nature36Enrich Lives44Governance51Data Tables and IndicesCEO StatementDear Stakeholders,IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices3ADM is committed to sustainability as a foundation of our purpose and a pillar of our growth strategy.With global scale and a value chain that stretches from more than 200,000 farmers to customers ranging from multinational CPGs to startups,we have a unique opportunity to lead,supporting the production of more sustainable solutions in categories encompassing food,fuel,and industrial and consumer products.And our efforts to advance this critical work were central to our priorities and accomplishments in 2022.As much of the world emerged from COVID restrictions,the global food supply system came under pressure once again last year,threatened by severe weather events and Russias invasion of Ukraine.We believe that everyone has the right to the food they need to sustain their lives and we demonstrated our commitment to that belief throughout 2022 as we continued to FeedtheWorld.Our team used our irreplaceable global asset base,as well as our unparalleled product portfolio and expertise,to respond to global events,remaining agile as we procured and delivered products to meet global nutritional needs.We advanced production expansions across our footprint,from Illinois,to Serbia,to Germany;began work on our Decatur Nutrition Protein Solutions Center;and continued to advance construction of our North Dakota soybean processing facility.We did all of this while continuing to ProtectNature and the value chains in which we operate.We firmly believe that we can meet the worlds needs both for food security and sustainability and were doing that in multiple ways.First,were continuing to set ambitious goals for ourselves:In 2022,we announced our aspiration to reach net-zero by 2050,and committed to working with the Science-Based Targets Initiative to align our sustainability targets with ambitious goals to limit the average rise of global temperatures to 1.5 degrees Celsius.And as we drive the use of low-carbon energy globally across ADM,weve set a Strive 35 goal of 25%of our total energy usage coming from low-carbon sources by 2035.We also continued to advance a comprehensive set of initiatives such as our growing regenerative agriculture program,our unique carbon capture and storage capabilities,and energy and efficiency improvements across our operational footprint,to achieve significant carbon-intensity reductions across a broad array of feedstocks.Our sustainable agriculture program,branded as re:generations,enrolled 1.2 million unique regenerative agriculture acres in 2022,and continued to connect partners across the value chain,including our groundbreaking multi-year agreement with PepsiCo.Were expanding the use of our first-of-its-kind commercial carbon capture and storage facility,increasing capacity and working with partners to expand carbon capture to additional U.S.facilities.From enhancing efficiency and biofuels use in our transportation fleet,to our work to replace coal-fired boilers at key facilities,to expanding procurement of renewable energy,were exploring every viable option to decarbonize our operations and value chain and empower the industries we serve to usher in a bold new era.Everything we do comes back to our purpose and our work to EnrichLives of our colleagues,the people in our supply chains and the communities in which we operate,and the countless consumers around the globe who depend on our products every day.We use our capabilities for the greater good paving the way through practices that make a positive impact on the world.Nothing demonstrated that more in 2022 than our actions to support the people of Ukraine,ranging from millions of dollars in financial support,to colleagues who packed food and even made their homes available to team members who were forced to leave Ukraine.Those actions truly demonstrate the best of ADM,and they werent the only demonstrations of our culture in 2022.We were proud to be recognized as a Financial Times Diversity Leader,featured on Newsweeks Most Loved Workplaces list,and named for the fourth straight year in Ethispheres Worlds Most Ethical Companies list.This report details many more ways in which we advanced our work to Feed the World,Protect Nature,and Enrich Lives in 2022.But what is most exciting to me is our future,as we continue to scale up our efforts.This is who ADM is,and Ive never been more proud of our company and our team.Sincerely,JuanR.LucianoCHAIRMANANDCEO“We firmly believe that we can meet the worlds needs for both food security and sustainability.”Introduction5About ADM5About the Report6Awards7Goals and Key Performance Indicators IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices4IntroductionAbout ADMAt ADM,we unlock the power of nature to enrich the quality of life.Were a premier global human and animal nutrition company,delivering solutions today with an eye to the future.Were blazing new trails in health and well-being as our scientists develop groundbreaking products to support healthier living.Were a cutting-edge innovator,leading the way to a new future of plant-based consumer and industrial solutions to replace petroleum-based products.Were an unmatched agricultural supply chain manager and processor,providing food security by connecting local needs with global capabilities.And were a leader in sustainability,scaling across entire value chains to help decarbonize our industry and safeguard our planet.From the seed of the idea to the outcome of the solution,we give customers an edge in solving the nutritional and sustainability challenges of today and tomorrow.Learn more at .About the ReportWe are committed to reporting on our Environmental,Social,and Governance(ESG)activities on an annual basis.This report highlights our activities and progress toward addressing key ESG topics from January 1,2022,to December 31,2022,as well as the opportunities and challenges in our journey to help create a more resilient and sustainable global food system.Our purpose as a company is to unlock the power of nature to enrich the quality of life;therefore,our report is organized into three main sections:Feed the World,Protect Nature,and Enrich Lives.We have aligned our disclosures with three key sustainability reporting standards:the Global Reporting Initiative(GRI)Standards,the Task Force on Climate-Related Financial Disclosures(TCFD),and the Sustainability Accounting Standards Board(SASB).The content indices for these standards are included at the end of the report.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices5AwardsSEAL Business Sustainability awardField to Market Collaboration oftheYear awardEnvironment Energy Leader carboncapture recognitionEthisphere Worlds MostEthicalCompanyMost Sustainable Trading Company Award IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices6Goals and Key Performance IndicatorsStrive 35KEYTOPICGOALPROGRESSTARGETDATESDGALIGNMENT25solute reduction in Scope 1 2 GHG emissions over 2019 baseline by 2035In progress7.8%reduction12/31/2035GHG Emissions25solute reduction in Scope 3 GHG emissions over 2021 baseline by 2035In progress0%reduction12/31/2035Energy15%reduction in energy intensity over 2019 baseline by 2035In progress0%reduction12/31/2035Increase low-carbon energy usage to 25%of total energy use0%increase12/31/2035Water10%reduction in water intensity over 2019 baseline by 2035In progress0%reduction12/31/203510solute reduction in water withdrawal over 2019 baseline by 20351.0%reduction12/31/2035Waste90%diverted from landfillIn progress82.4%diverted12/31/2035 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices7BiodiversityKEYTOPICGOALPROGRESSTARGETDATESDGALIGNMENT100forestation-free across all supply chains12/31/2025No-Deforestation100forestation-free soyIn progress86/31/2025100forestation-free palmIn progress62/31/2025Traceability100%direct and indirect soybean suppliers in Argentina,Brazil,and Paraguay Achieved100/31/2022Maintain at least 98%traceability to palm oil mill Achieved99.9%OngoingIncrease traceability to palm plantationIn progress54.5%OngoingSupplier Engagement100%of palm volumes sourced from direct supplierswho have a publicly available NDPE policy,implementation plan,grievance management system,grievance log,deforestation monitoring,and publicly report progress against their time-bound implementation plan.In progress99.9/31/2022100%of palm oil volumes in the IRF“Delivering”categoryIn progress53.9/31/2025100%of palm kernel oil volumes in the IRF“Delivering”categoryIn progress43.8/31/2025 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices8BiodiversityKEYTOPICGOALPROGRESSTARGETDATESDGALIGNMENTLand Use ChangeDisclose emissions from land use change Achieved100%7/1/2024Land Conversion Risk AssessmentComplete soy sector global assessment of the risk of conversion of natural ecosystems to soy productionIn progress12/31/2023Regenerative AgricultureEnroll 4,000,000 acres in regenerative agriculture programs globallyIn progress30/31/2025Tree PlantingEngage with local organizations to plant native tree speciesIn progress93,500treesOngoingReduction TargetsSubmit emissions reduction targets to SBTi or publish third-party validated LUC emissions reduction targetsIn progress7/1/2024Biodiversity MappingDevelop a global biodiversity mapping strategyIn progress7/1/2024Priority WatershedsDevelop a global water strategy focused on improving community well-being in priority watersheds,including water-stressed areasIn progress12/31/2025 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices9Enrich LivesKEYTOPICGOALPROGRESSTARGETDATESDGALIGNMENTWorkplace Safety50%reduction in Total Recordable Incident Rate(TRIR)from 2020 resultsIn progress0%reduction12/31/202550%reduction in Lost Workday Incident Rate(LWIR)from 2020 resultsIn progress4.5%reduction12/31/2025Gender ParityAchieve 50%gender parity among ADMs senior leadership structureIn progress28/31/2030Human RightsAssess and disclose salient human rightsIn progress12/31/2023100%of palm volumes sourced from direct suppliers with ahuman rights policy that is fully aligned with ADM HumanRights PolicyIn progress98.65%Ongoing100%of palm volumes sourced from direct suppliers conducting human rights due diligenceIn progress99.48%Ongoing IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices10Feed the World13Our Core Business14Food Quality and Safety15Innovation16Reducing Food Waste17Concern Worldwide IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices11Feed the WorldFood is fundamental.It sustains us,fulfills us,and fuels our well-being.Its the most basic need with the most critical impact.ADM is devoted to that impact every single day.We believe everyone has the right to the food they need to sustain their lives.In addition to our core business of providing access to nutrition worldwide,weve identified the following key levers that allow us to contribute to the global goal of zero hunger by 2030:Land use efficiencyInnovating products like biostimulants that can increase yields allowing farmers to produce more crops on the same footprintAlternative proteinsDeveloping and mainstreaming new and innovative ways to increase availability of proteinPost-harvest lossSupporting initiatives that reduce the amount of crops that are lost before reaching consumersStrategic partnershipsWorking with NGOs to combat chronic malnutrition and hungerFood safety and qualityEnsuring the products and ingredients we create meet our strict standards IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices12Our Core BusinessEvery day,our 42,000 employees work to transform agricultural commodities into ingredients and products for food,feed,fuel,and industrial and consumer products.We purchase millions of metric tons of agricultural commodities and transport them whole or processed to customers in more than 200 countries.We operate around 300 processing facilities,440 procurement centers,and 64 innovation centers in 47 countries.Operating our own transportation fleet of 30,000 rail cars,2,500 barges,620 trucks,1,700 trailers,144 boats,and 27 oceangoing vessels allows us to move grain as needed in the event of weather or political disasters that may jeopardize food security.In 2022,we processed 18.6 million metric tons of corn and 33.0 million metric tons of oilseeds.Origination Of CropsProcessingSpecialtiesAg ServicesOilseedsNutritionCarbohydrate SolutionsTransportationCustomerFood Feed Fuel Industrial IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices13Procure/Store GrainLocal SalesExportsDestination MarketingMealVegetable OilOther ProductsStarches&SweetenersFlourBioSolutionsOther ProductsFlavorsSpecialty IngredientsAnimal Nutrition IngredientsHealth&Wellness IngredientsFood Quality and SafetyWe believe food is fundamental to quality of life,and expanding access to nutrition is a foundational piece of how we fulfill our purpose.The safety and security of our worlds food and feed supply chain is of critical importance to that work.Thats why at ADM,we continually review and improve our food safety systems and procedures,including good manufacturing practices for human and animal food and the development and implementation of risk-based preventive controls or critical control points for human food based on hazard analysis.Our facilities,processes,and procedures undergo regular evaluation to assess the risk of product contamination,and we implement a variety of safeguards and security concepts to reduce those risks.Weve built our Food Safety and Quality program around three pillars:achieving best in class food safety,maintaining a culture of quality,and leveraging innovation and technology.BestinClassFoodSafetyUtilizing our customized“Integrated Risk Metric”(IRM)assessment application,we are able to proactively monitor and provide focused support across the organization through subject matter expertise,resources,and global verification procedures to ensure conformity to strict food safety standards.CultureofQualityEvery year,food safety and quality training is performed with plans to expand this program in 2023.In September 2022,we held our third annual Global Food Safety Week for our colleagues around the globe to provide a dedicated time to refresh and refocus.We completed trainings and other activities to reinforce and educate our team on the critical roles we all play and how to improve our Quality&Food Safety culture.InnovationandTechnologyBecause food safety has always been a critical priority,we are constantly looking for improvement opportunities to move from safe to safer.We leverage new technologies and process innovations to improve food safety through:Increased ability to detect food safety risks Improved identification of food safety concerns Innovative safety controls Technology enhancements to drive predictive qualityFood Safety Conference in NigeriaOur Quality and Food Safety Center of Excellence,in collaboration with Human Nutrition colleagues in Nigeria,hosted our first food safety conference in Nigeria.The conference theme was”Unlocking Nature and Enriching Lives Through Food Safety”.The event hosted participants from the government,regulatory agencies,and academia,as well as key players in the food and beverage industry in Nigeria.The conference provided the opportunity to showcase the ADM product portfolio introducing our new and changing product offerings available to the Nigerian market.We also had the opportunity to collaborate with influencers in the Nigerian food sphere and showcase the best-in-class food safety culture of ADM to the Nigerian market.Overall,the conference helped our enterprise vision of building meaningful relationships with the food and beverage sector of Nigeria.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices142022HIGHLIGHTSREDUCTION227GFSI Certified Sites 6.96KReduction in Liters of Lab Waste43%Reduction in Number of High-Risk Sites per IRMInnovationBiostimulantsImproving crop yields is vital to enhancing food security and improving agricultural sustainability.As the global population and resulting demand for food continue to grow,increasing yield defined as the amount of food or grain produced from a given amount of land continues to be a vital tool.Biostimulants are a new and promising innovation,with some focusing on crop yield improvements.According to The Fertilizer Institute and U.S.Department of Agriculture,“a plant biostimulant is a substance(s),microorganism(s),or mixture(s)thereof,that,when applied to seeds,plants,the rhizosphere,soil or other growth media,act(s)to support a plants natural nutrition processes independently of the plant biostimulants nutrient content.The plant biostimulant thereby improves nutrient availability,uptake or use efficiency,tolerance to abiotic stress,and consequent growth,development,quality or yield.”ADM has introduced a new agricultural biostimulant,NeoVita 43TM,that boosts corn yields by improving nutrient use efficiency.We collaborated with the University of Illinois to design,implement,and analyze research trials to evaluate the performance of NeoVita 43.In most trials across multiple years and locations,NeoVita 43 boosted yields over the control when used alone or with starter fertilizer.Following this consistently positive performance,ADM expanded testing efforts to precommercial on-farm trials with ADM fertilizer customers in 2022.NeoVita 43 is formulated to closely mimic the plant root exudate that supports soil microbial activity to promote nutrient availability and uptake by the plant.By increasing the availability of these key nutrients to the soil microbiome early in the growing season,developing plants can increase nutrient uptake and get off to a stronger start,which can lead to higher yields.Alternative ProteinsAt ADM,we believe alternative proteins have a fundamental role to play in the wider protein ecosystem,helping to build a sustainable food future for our growing population.If we can augment and diversify the worlds existing protein sources with a range of alternative options,we will have more nutritious food options available and more solutions for tackling challenges like hunger,food security,and sustainability.This is why ADM continues to expand and evolve our robust array of traditional plant-based protein offerings,while also investing and partnering with startups that are pioneering leading-edge protein technology innovations.In 2022,we announced several significant projects planned to increase our capabilities to deliver alternative proteins to our customers.First,a significant enhancement of our Decatur,Illinois,alternative protein production facility will increase our soy protein concentrate capacity and extrusion capacity of the site.Also in Decatur,we are creating a new,state-of-the-art Protein Innovation Center,which will bring together labs,test kitchens,and pilot-scale production capabilities to power new innovation,from novel and diversified ingredients,to more sustainable and efficient processing,to unique and differentiated texture,taste,appearance,and nutrition solutions.We also opened a new facility in Serbia that extends our production of non-GMO textured soy to include origination and extrusion capabilities in Europe.Radical collaboration will be vital to our ability to sustainably feed our growing population.At ADM,were investing in and partnering with food technology companies creating new and expanding existing alternative protein sources such as insects,cultured meat,fermentation,legumes,and more.These companies and their technologies are important pieces of the puzzle in building pioneering protein sources that can help with food security and sustainably feed a growing population and bring more and better choices for consumers.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices15Reducing Food WasteAs a leader in meeting global food demand for an ever-growing population and advancing the cutting edge of health and nutrition,ADM is playing a pivotal role in not only powering nature to enrich the quality of life but delivering solutions,especially on the issue of post-harvest loss.Post-harvest loss is food that does not get eaten for reasons that occur between the field and the consumer.Those reasons include environmental conditions,such as spoilage due to temperature or humidity;mechanical issues,such as leaving grain behind in the field or improper storage;and microbial action,such as bacteria/fungi contamination.For over 10 years,the ADM Institute for the Prevention of Post-Harvest Loss(ADMI),in collaboration with the University of Illinois,has been working to improve post-harvest management of grains and oilseeds to reduce poverty and food insecurity by generating knowledge,scaling improved technologies,and building institutional capacity.The organization has worked with a wide variety of public and private sector partners on post-harvest reduction initiatives,including non-profit organizations,private industry,NGOs,governments,research institutes,and international universities.In 2022,ADM Cares contributed$120,000 in additional grant funding to ADMI to support three different projects in Bangladesh and Indonesia.The first project addresses the post-harvest losses with farmer producer organizations in India by providing access to storage solutions.The second supports a partnership between ADMI and Bangladesh Agricultural University to train rural youth entrepreneurs to start service provision businesses with BAU-STR grain dryers and provide entrepreneurial training for rural youth who can become service providers during harvest seasons.The third project supports a public-private partnership in Indonesias agricultural sector that will support the development of programs to help farmers gain better access to markets.Implementing important projects like these,as well as the Institutes efforts,from improving efficiencies and increasing production,to converting byproduct streams into value-added products,and aligning on strategic partnerships,demonstrate that ADMI is an important leader in alleviating food waste and extending its capabilities to improve hunger for communities around the globe.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices16Concern WorldwideIn 2019,ADM Cares announced a$1 million contribution to Concern Worldwide to create the Lifesaving Education and Assistance to Farmers program,or LEAF,a comprehensive,dual-phased initiative to address malnutrition in Kenya and Ethiopia.Concern Worldwide believes that no human potential should go unfulfilled due to poverty,disaster,or crisis.Its programs are designed to address the specific causes of extreme poverty in each community.LEAF prevents malnutrition through the promotion of sustainable agricultural techniques for poor and vulnerable people to generate long-term income.Also,the program increases the adoption of nutrition-sensitive and climate-smart agricultural production to promote longevity.Through the LEAF program,Concern specifically implemented activities to alleviate high malnutrition levels by working with 60 community health volunteers on early detection and referral for malnutrition cases.In addition,Concern provided further programmatic support to the community through farmingAcommunitymemberandmother,Aisha,explains,“Hunger has now reduced,and we are able to eat at least three times a day withmy family.My child is healthy tooand out of the nutrition program sinceSeptember.We no longer relyonone type of food.”inputs,such as tractor subsidies,certified seeds,fuels subsidies,and water pumping sets,and facilitated irrigation canal access for 300 farmers to increase crop production.Outreach to smallholder farmers to provide training and access to financing and equitable business opportunities has enhanced overall community livelihoods.Farmers enrolled in LEAF have increased production capacities through programs,reducing produce losses from 60%to 20%,and through enhanced irrigation,which helped farmers move from the river basins to higher ground,providing better opportunities for crops to thrive.Whats more,roughly two-thirds of the total seeds planted in Tana River,Kenya,were drought-resistant,increasing yields and incomes to the community.Farmer training,access to financial services,and implementation of vegetable planting in home gardens all provided additional support for local farmers to enhance well-being.In the first 18 months(Phase I)of our partnership,LEAF directly impacted almost 50,000 individuals through lifesaving treatment of acutely malnourished children,and developed sustainable livelihoods for poor and vulnerable people to generate long-term income.Building on the success of Phase I,ADM Cares approved an additional$400,000 contribution to build LEAF Phase II in Kenya in 2021 and 2022.The contribution reached close to 10,000 farmers and impacted over 60,000 individuals.The LEAF Phase II program has significantly contributed to the communities ability to maintain a basic level of food security,seeing approximately half of the farmers reach self-sustainability without inputs from Concern,a massive achievement.Target communities can be completely self-sufficient through irrigation systems,crop rotations,and nutritional education.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices17Protect Nature20Land27Climate32Freshwater IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices18Protect NatureNature sustains us,and we must protect it.Nature provides us with many essential services,including the air we breathe,the food we eat,and the water we drink,as well as medicines and recreational opportunities.Biodiversity is a critical element of our nature.Around the world,the soil microbiome supports plant growth while insects,birds,and bats pollinate those plants.Scientists continue to discover new species,but alarmingly,biodiversity loss is greatly outpacing those discoveries.At ADM,we have an unwavering commitment to global sustainability to create positive impact on the world and contribute to the greater good.With our vast supply chains,direct connections with growers,and ambitious environmental goals,we are in a position to make meaningful change to support global biodiversity through our efforts in land,climate,and fresh water.We have identified the following key levers:Biodiversity managementWorking with local organizations to restore and reforest ecosystems and monitor animal activityNo-DeforestationImproving traceability and supplier engagement to ensure our supply chains are deforestation freeRegenerative agricultureCollaborating across the supply chain to increase the use of practices that improve soil health,biodiversity,water quality,and GHG emissionsGHG emissions reductionImplementing projects that reduce our carbon footprint,improve our energy intensity,and increase our low-carbon energy usageInnovationDeveloping and improving products and processes to lower our environmental footprint,including plant-based alternatives to traditional petroleum-derived productsWater reductionReducing water withdrawals at our facilities IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices19 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices20LandOur global food system feeds eight billion people,employs almost a third of the global workforce,and supports the livelihoods of more than 600 million farmers.As the global population has expanded,so too has agricultural production,with significant expansion in the past two decades making it possible for more people to have access to affordable and safe food.However,this expansion came at the cost of natural ecosystems.Our sector is at high risk from the impacts of climate change,but it is also the largest emitting sector after energy,responsible for 23%of global greenhouse gas(GHG)emissions,with much of this resulting from the conversion of forests and other ecosystems to agricultural use.To keep the 1.5C target in the Paris Agreement within reach,tackle food crisis risks,and enable the transformation to a global net-zero future,we must focus on limiting impacts from land use change,reducing emissions at the field level,leveraging the lands ability to sequester carbon,and improving productivity of existing agricultural land.26.744.95943.354.512.725.940Q3-Q42019Q1-Q22020Q3-Q42020Q1-Q22021Q3-Q42021No-DeforestationADM has set a goal to be deforestation-free in all of our supply chains by 2025.Improving traceability allows us to monitor our supply chain for deforestation.In palm,we have consistently maintained high traceability to the mill level(over 98%for palm oil and palm kernel oil),and we are working with our direct suppliers to increase traceability to plantation of origin.VOLUMETRACEABLETOPLANTATION(%)In 2021,we started reporting traceability for palm oil and palm kernel oil combined.Moving forward,we are working with our direct suppliers to implement satellite monitoring in our palm supply chain.Additional information about our no-deforestation efforts in our palm supply chain can be found here.For soy in South America,we achieved 100%traceability in 2022.We have mapped the field boundaries(polygons)of our direct suppliers to the farm.Indirect suppliers are traced to the first aggregation point.We then assess the location of the aggregation point for deforestation within a 50 km radius.Satellite monitoring of the polygons and engagement with growers in our supply chains enable identification of deforestation incidences as well as opportunities for reforestation efforts.Additional information about our no-deforestation efforts in our South American soy supply chains can be found here.Using our map of direct suppliers farms and satellite imaging,we measured our deforestation-free volumes in Brazil and priority regions of the Cerrado at 99%using a 2015 baseline,the year we launched our No-Deforestation Policy.To increase transparency and credibility,the results were verified by a third party.By the end of 2023,we will complete this exercise for our indirect suppliers in Brazil and all suppliers in Argentina and Paraguay.SOYBEANSOURCINGDEFORESTATIONRISKMITIGATION65!hv2$%LowRiskVerifiedDeforestation-FreeInProgressGlobal43.75MMTBrazil13.37MMTPriorityRegionsoftheCerrado6.02MMTIn the U.S.,as part of our regenerative agriculture program,we map field boundaries of participating growers in our corn,soy,wheat,and peanut supply chains and use satellite monitoring to screen for deforestation.In 2022,our program engaged over 1 million acres.Using 2015 as a cut-off date to match our South America soy methodology and align with the publication of our policy,we identified 1,617 acres of deforestation in the seven year look-back period,with none of it occurring in the most recent year.This analysis shows our sourcing from these acres is 99.99forestation-free.To meet our 2025 deforestation-free goal,we identified four key actions:Conduct a comprehensive deforestation risk assessment for all commodity and ingredient supply chains.For high-risk supply chains,identify direct and indirect volumes and determine a method for traceability.Develop monitoring protocols and supplier engagement plans to measure deforestation-free volumes.Engage a third party to verify results.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices21PalmOilPalmKernelOilCombined1.5 RoadmapIn 2022,ADM and 11 other agricultural trading and processing companies signed a joint statement at COP26 committing to“lay out a shared roadmap for enhanced supply chain action consistent with a 1.5 degrees Celsius pathway,that supports achievement of our goals,and increases collaboration and implementation in areas including:enabling policy environments,transparency on scope 3 emissions and indirect supply chains,and improving livelihoods for farmers.”Throughout the rest of the year,the Tropical Forest Alliance(TFA)and World Business Council for Sustainable Development(WBCSD),along with 14 of the worlds largest agricultural trading and processing companies,worked diligently to complete the Agriculture Sector Roadmap to 1.5C.We are working collaboratively to transform the agriculture sector.As a signatory of the Roadmap,we are developing company-specific implementation plans for our sourcing of palm oil and soy,which will include time-bound targets,a detailed scope,supply chain mapping and traceability,monitoring and response,and verification.Specifically,the Roadmap requires disclosure of land use change emissions and submission of emissions reduction targets to the Science-based Targets initiative(SBTi)or another credible third-party for validation by July 1,2024.Last year,ADM committed to submit targets to SBTi,and began the process of completing a full Scope 3 GHG emissions screening and inventory,including land use change,enabling our disclosure of land use change more than a year in advance of the deadline.Land use change emissions can be found in the Scope 3 section of this report.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices22Regenerative AgricultureRegenerative agriculture is a system of farming that helps to rebuild the health of our soils while producing food to feed the world.The principles of regenerative agriculture system are based in Indigenous ways of land management and are adaptive to local physical conditions and culture and include:Maintaining living roots in soil Maximizing diversity crops,soil,pollinators Minimizing soil disturbance Continuously covering soil Responsibly managing inputs fertilizers,pesticides For several years,ADM has partnered with farmers to implement sustainable and regenerative agriculture programs.These ranged from educational events to pay-for-practice to helping farmers achieve certifications and purchasing certified volumes.We gained valuable experience through these pilot projects,and in 2022,we launched our re:generations program with a goal of engaging over 1,000,000 acres in North America in regenerative agriculture projects,and exceeded that goal,engaging 1,900 farmers and 1.2 million acres in our inaugural year.Our regenerative agriculture program works to identify and implement customized and targeted projects focusing on outreach,education,and continuous improvement to drive adoption of practices.We have identified five key advanced agricultural practices that have multiple positive outcomes such as reducing GHG emissions,improving soil health,and protecting water quality.These practices include cover crops,reduced or no-tillage,nitrogen reduction and efficiency programs,integrated pest management,and diverse crop rotations.Our program involves partnering with local conservation agronomy groups,including American Farmland Trust,Ducks Unlimited,Flint River Soil and Water Conservation Districts,Kansas Association of Conservation Districts,Minnesota Soil Health Coalition,and Practical Farmers of Iowa.These groups work with growers to select the practices that are fit for purpose for their specific farms,taking into account variances in soil types and weather.In addition to covering the cost of education and technical support,we also provide financial incentives to participating growers.By partnering with Farmers Business Network(FBN)to expand availability of their Gradable platform to our network of farmers,we are able to collect and aggregate data with a focus on security and privacy while expediting calculation and analysis of results through a linkage to Field to Markets Fieldprint Calculator.Our customers are excited about this program,too.Last year,we entered into collaborations with several customers to increase the funding pool,allowing us to reach more farmers with the program.Leveraging Scope 3 inventory accounting principles,we allocate emissions,reductions,and removals to those customers,as well as use Field to Market metrics to measure additional impacts including biodiversity,water quality,soil conservation,irrigation water use efficiency,and land use efficiency.For example,ADM and PepsiCo signed a groundbreaking,7.5 year agreement to support regenerative agriculture practices on up to 2 million acres of farmland.In 2022,across 19 different projects we saw positive results in GHG metrics:Our regenerative agriculture acres emitted253,000MTlessCO2e than the benchmark.According to the U.S.Department of Agricultures COMET-Planner,participating acres sequestered115,500MTofCO2.When looking at individual projects,additional metrics provided valuable insight:Using the Field to Market BiodiversityIndex a metric designed to measure the capacity of a farm to support a diverse community of plants and animals our corn project acres in Nebraska scored 86%,which is better than the local non-cover crop benchmark of 76%.Another project(multi-state and multi-crop)had a similar result with a BiodiversityIndex score of84%.A soy project in Iowa used the Iowa Soybean Associations tile monitoring program to monitor WaterQuality,whichshoweda26%improvementthroughreducednitratepollutionthanfieldswithoutcovercrops.Using the Illinois Nutrient Loss Reduction Strategy county-based load numbers,our Illinois project acres planting cover crops showed20,200lbslessnitrogen and1,400lbslessphosphorusrun-off to waterways.Encouraged by our learnings and success in North America,we have expanded the program to Europe and South America and set a goal to increase enrollment to 4,000,000 acres globally by 2025.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices23Responsible Pesticide ManagementIn addition to our regenerative agriculture efforts,we also participate in several certification and rating programs,including ADM Responsible Soy,2BSvs,Round Table for Responsible Soy(RTRS),International Sustainability and Carbon Certification(ISCC),Roundtable on Sustainable Palm Oil(RSPO),Sustainable Agriculture Initiative Farm Sustainability Assessment(SAI-FSA),Red Tractor,Food Alliance,and Fair Trade.These programs allow us to provide certified products to our customers based on their goals and program focus areas.We recognize that pesticide use in the agricultural sector has led to concerns regarding the potential for unintended environmental and health impacts.We also recognize that an estimated 45%of crop production worldwide is lost to pests annually.While we do not own farms and cannot mandate practices,we do strive to work with growers across our diverse global supply chains to support sustainable practices that substitute natural controls for some agrochemicals,foster ecosystem balance,reduce GHG emissions,and mitigate crop losses.We engage with growers around the world on implementing sustainable and regenerative agricultural practices,including integrated pest management(IPM)and cover crops.IPM is designed to reduce risks to health and the environment through the design and implementation of a plan to prevent and manage pest damage by the most economical means with the least possible hazard to people,property,and the environment.Cover crops improve soil health,improving natural pest control mechanisms.Some species,such as cover rye,can even control some diseases.We source commodities from several programs with components that specifically impact pesticide usage.Through Field to Market,we are incentivizing adoption of cover crops,in addition to other regenerative agriculture practices.The ADM Responsible Soy,Doing It Right,Food Alliance,ISCC,RSPO,and RTRS programs all require the development,implementation,and monitoring of IPM plans.Organic farming prohibits the use of synthetic pesticides.In 2022,we sourced volumes from programs that specifically focus on pesticide management techniques and practices as follows:MetricTonsWheat 177,200 Peanuts 86,200 Fruits,Flavors,Colors,etc.23,400 Sunflower 69,900 Corn 1,922,900 Soybeans4,153,000Canola 3,646,000 Palm 196,100 Other Crops 11,300 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices24TransformationSpotlight:BiodiversityBiodiversity is a hot topic globally,and especially in South America where,according to the International Union for Conservation of Nature(IUCN),40%of the planets biodiversity,25%of forests,and 26%of freshwater resources are concentrated.We have two important and exciting programs in the region dedicated to preserving and enhancing biodiversity.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices25Tree PlantingA critical part of environmental conservation,planting trees helps to rehabilitate degraded areas,create corridors to reconnect isolated pockets of forests,and support plant and animal biodiversity.Specifically,planting native saplings trees that are a few years old and have already developed a root system allows local biodiversity to recover by improving water quality,providing habitat for wildlife,preventing soil erosion,and sequestering CO2 from the atmosphere.In 2022,our colleagues in Paraguay partnered with A Todo Pulmn to plant native tree saplings.Through an ADM Cares grant,the group was able to plant an additional 8,500 trees,bringing their annual total to 203,000.In Brazil,we work with Parque Vida e Cerrado,a local NGO focusing on reforestation,scientific ideation,and environmental education.Their efforts have resulted in the planting of over 75,000 native seedlings,helping to restore natural corridors along streams and other degraded land within farms in our supply chain.Check out a video of our colleagues in action.Animal TrackingAs part of the second phase of our efforts with Parque Vida e Cerrado,ADM Cares sponsored a study to monitor and track large animal movement through soybean farms in our supply chain to see the impact on apex species.Two maned wolves were fitted with radio collars to observe their movement patterns.The red line shows the male wolf,and the yellow line shows the female.In addition,trail cameras have been set up to monitor for other species.So far,the cameras have identified 31 different species of mammal,including five species listed as threatened by the IUCN:marsh deer,oncilla,giant anteater,South American tapir,and the Brazilian three-banded armadillo.WasteAs a part of our Strive 35 goals,we have a target to reach a landfill diversion rate of 90%by 2035.In 2022,we continued to implement initiatives with the aim of reducing our waste generation and increasing the amount that is diverted to beneficial reuse.Our efforts in this space have a multitude of environmental benefits from improving resource efficiency through recycling to generating soil amending compost.We also view waste-related issues through the lens of land preservation.Waste that is not diverted will ultimately require space within an existing landfill or the establishment of new land solely dedicated to retaining trash.By addressing our waste generation and expanding diversion strategies,we can not only conserve resources but also mitigate the footprint associated with landfills.Our efforts in 2022 include the following:Our wet mill in Clinton,Iowa,worked with a third-party waste management vendor to find a beneficial reuse option for previously landfilled organics,including biomass from our wastewater treatment operation.In August 2022,the site began shipping the organic materials for land application,returning important nutrients to agricultural fields in our supply shed.We estimate this project will divert over 11,000 metric tons per year from landfill.In June 2022,we broke ground on our new soybean processing facility in Spiritwood,North Dakota.Green Bison Soy Processing,a joint venture between ADM and Marathon Petroleum,is a brownfield development building a new facility on an existing footprint.Repurposing an existing industrial site has benefits,but it also generates a lot of construction debris.Rather than demolishing and landfilling the existing infrastructure,the ADM team recycled and reused approximately 73,000 metric tons of concrete,preventing that material from being sent to a landfill.Much of the material has been used to grade the site and become part of the new plants foundation.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices26TARGETWaste90%diverted from landfill81.2.4 19(Baseline)20220%Pu0%LANDFILLDIVERSION1.2%Increase IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices27ClimateRecently,the Intergovernmental Panel on Climate Change(IPCC)released their sixth synthesis report with straightforward statements and dire warnings.The evidence is clear:if we do not act now,the planet will experience irreversible and catastrophic changes to ecosystems around the world,jeopardizing the people and wildlife depending on them.But there is also hope promising low-carbon technologies,carbon removal through photosynthesis,ambitious national commitments,and support for community adaptations,as well as increased funding,can impact the degree to which the Earth experiences warming and climate change impacts.“Climate change is a threat to human well-being and planetary health.There is a rapidly closing window of opportunity to secure a livable and sustainable future for allThe choices and actions implemented in this decade will have impacts now and for thousands of years.”IPCC AR6 SYRScope 1 2 Carbon ReductionIn 2022,ADM committed to working with the Science-based Targets Initiative(SBTi)to align our sustainability targets with ambitious goals to limit the average rise of global temperatures to 1.5 degrees Celsius.We also announced our aspiration to reach net-zero by 2050,and published a roadmap of current and future technologies that may help us to achieve our short-,medium-,and long-term carbon reduction targets.Potential projects being evaluated include:Purchasing and developing renewable energy through renewable energy certificates,power purchase agreements,and ADM projects.An example is our first wind project,which is expected to be operational mid-2023,and should provide our Brazilian operations with renewable power and reduce our Scope 2 footprint by more than 19,000 metric tons of CO2e per year.Discontinuing coal usage at our Mankato,Minnesota;Lincoln,Nebraska;and Des Moines,Iowa oilseeds facilities,with an estimated reduction of around 180,000 metric tons of CO2e per year.Exploring innovative technologies for reducing point source GHG emissions at three of our largest cogeneration facilities,which could provide ADM a method to reduce Scope 1 and Scope 2 emissions by approximately 3,000,000 metric tons when fully implemented.Expanding our carbon capture and sequestration capabilities.Following development of technologies and infrastructure to support next generation thermal energy generation,including hydrogen,renewable natural gas,small modular reactors,and post-combustion carbon capture and sequestration.While we continue to assess our pathway to achieve net zero,were diligently working to ensure we meet our Strive 35 targets.In 2022,39 projects were completed that are expected to reduce our Scope 1 2 footprint by around 135,000 MT per year.Two examples of projects completed include:Combustion controls improvements in Cedar Rapids,Iowa expected to reduce CO2e by 62,000 MT per year.Reverse Steam Tube Germ Dryer Airflow in Decatur,Illinois expected to reduce CO2e by 45,000 MT per year.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices28TARGETGHG Emissions25solutereductionin scope 1 2 GHG emissions over 2019 baseline by 2035SCOPE1 2EMISSIONS7.8%Reduction2019(Baseline)2022Total16.4MTotal15.2MScope22.86MScope22.13MScope114.1MScope113.5MCCS429kCCS520kScope 3The past year saw the release of enhanced GHG accounting guidance,the most substantive for ADM being the GHG Protocols Land Sector and Removals Guidance.In accordance with these proposed best practices,we have recalculated our Scope 3 inventory and have incorporated the emissions associated with land use change.While this methodology change resulted in a higher emissions total for 2022 when compared to our previous disclosures,it paints a clearer picture and is aligned with global accounting protocols.It also allows us to meet the disclosure requirements of the 1.5C Roadmap more than a year ahead of the target.We remain committed to and confident in achieving our Strive 35 reduction target.When implemented across our sector,we believe this new guidance will provide stakeholders greater insight into the climate impact of agricultural supply chains and will demonstrate the carbon removal and sequestration potential of regenerative farming practices.Stakeholder collaboration is crucial when addressing Scope 3 emissions,especially as GHG accounting guidance continues to evolve.ADM is actively engaging NGOs,suppliers,customers,and third-party experts to continuously improve the accuracy and transparency of our Scope 3 inventory and uncover opportunities for emissions reductions.As part of our commitment to pursue an SBTi approved target,we began evaluating and calculating all categories of Scope 3,and expect to have the full inventory complete in the second quarter of 2023.Last year,we established a new baseline using 2021 data because it was the most recent year and the highest quality of data available under the new GHG accounting protocols.Also aligning with SBTi,we are disclosing our Scope 3 footprint in two pieces FLAG and non-FLAG.Emissions from Forests,Land,and Agriculture(FLAG)are relevant to our sector and will require specific mitigation and sequestration activities that differ from other types of Scope 3 emissions.Emissions from purchased goods and services make up the largest portion of our Scope 3 inventory.This category includes farm-level emissions from fertilizers,fuels,and other direct emissions sources,as well as emissions from land use change,which we currently calculate using statistical land use change(sLUC)methodology.Our Scope 3 inventory currently includes categories 1-5 and 10:Purchased Goods and Services;Capital Goods;Fuel and Energy Related Activities;Upstream Transportation;Waste from Operations;and Processing of Sold Products.As we work to reduce our Scope 3 footprint,key objectives include:Increasing traceability and satellite monitoring to calculate actual land use change emissions.Working with farmers in our supply chains to implement regenerative agriculture practices to reduce on-farm emissions and sequester carbon in the soil.Collaborating with transportation providers to reduce emissions through initiatives such as Sea Cargo Charter,Green Shipping Corridors,and increased biofuel usage.Engaging with downstream customers to gain insight to emissions from the processing of ADM ingredients into their products.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices29TARGETGHG Emissions25solutereductionin Scope 3 GHG emissions over 2021 baseline by 2035SCOPE3EMISSIONS(in millions)FLAGEmissionsFLAGLandUseChangeEmissionsNon-FLAGEmissions2021(Baseline)20220501001501.3%Increase25.939.251.424.343.949.9116.6118.1EnergyIn 2020 when we announced our Strive 35 targets,we included a goal on energy intensity to ensure we continue to drive energy efficiency within our facilities as a way to support our GHG reduction goals.We have discovered that the diversity of our operations and energy portfolio across our global footprint does not allow for a meaningful roll-up of energy intensity on a per unit of production basis.The variation between a corn wet mill and an oilseeds processing facility is significant,and even the difference in energy needs between two different oilseeds can affect progress toward the goal.In addition,the lack of distinction between energy types(fossil,renewable,etc.)means that we lack insight into the true impact on the environment.Taking this into consideration,we will continue to track energy intensity to drive efficiencies and will report our progress against our existing goal,and we are adding a new goal to increase the use of low-carbon energy sources.Because of our use of onsite cogeneration,our overall energy purchase is less than 10%of our total energy usage,so we have set a more ambitious goal that includes onsite energy generation,as well.After review and vetting by the Utilities Center of Excellence(CoE),Strive 35 committee,and Sustainability and Corporate Responsibility Committee of the Board,we have added a renewable energy use goal.By 2035,we will increase our usage of low-carbon energy to 25%of our total energy use.Low-carbon energy includes renewable energy sources such as wind,hydro,and solar,as well as zero or extremely low emission energy sources such as biofuels,nuclear,natural gas with carbon capture and storage,and low-carbon hydrogen and ammonia.To achieve the goal of 25%low-carbon energy,we will explore new and existing technologies,increase the use of biofuels in our mobile and stationary equipment,and increase our procurement of renewable energy purchases through renewable energy certificates(RECs)and power purchase agreements(PPAs).IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices30In 2022,ADM implemented 64projects with energy savings benefits that are estimated to save over 488,000 MWh.TARGETEnergy increase low-carbonenergyuseto25%of total energy usage by 2035ENERGYINTENSITY(MWh/ton of product produced)1.061.082019(baseline)20220.00.30.60.91.21.6%Increase7.6%5.7 19(Baseline)20220%3%5%8%1.9%ReductionLOW-CARBONENERGY(%of total energy usage)InnovationOur eyes are always toward the future to new ways,new formulas,and new possibilities.Were at our best when were on the cusp.And we thrive as partners,co-creators,and instigators,using technical ingenuity to spark game-changing ideas and ground-breaking solutions.We have developed a broad portfolio of solutions in polymers,packaging,and home and personal care.Plant-based Insulation BindingThe buildings where we live and work every day make up a large segment of GHG emissions.According to the International Energy Agency(IEA)September 2022 tracking report,these structures accounted for over 30%of global energy consumption in 2021.As the global population continues to grow,energy consumption in buildings continues to increase.As governments,companies,and people across the world work toward a 1.5C future,improving the energy usage in buildings globally is critical to meet the goal.One of the most impactful ways to improve building performance is by increasing insulation in both new and existing structures.The most common insulating materials today are mineral wool and fiberglass wool.Producers of insulating wool batts create thin fibers that are held together with a formulated binder.Historically,these binder systems used a petrochemical-based phenol-formaldehyde resin that was highly effective in bonding the fibers together.Many producers who are actively working to reduce formaldehyde in their insulation are discovering the power of biobased materials.ADM has partnered with major insulation producers to implement new binder formulations derived from corn materials.These plant-based binders help provide the same insulating performance while eliminating the usage of formaldehyde resins.This solution not only improves the health aspects of the insulation,but a key producer reported needing less energy to produce the binder.LG ChemADM and LG Chem,a leading global diversified chemical company,launched two new joint ventures in 2022 that will leverage our fermentation expertise to meet the growing demand for lactic and polylactic acid(PLA).The two joint ventures,GreenWise Lactic and LG Chem Illinois Biochem,are slated to have production facilities built in Decatur,Illinois,with a projected annual capacity of 150,000 tons of high-purity corn-based lactic acid and 75,000 tons of PLA,respectively.Lactic acid has applications across many industries,ranging from food and feed to cosmetics,and will also be used as a precursor for the production of PLA,a bioplastic.PLA is a proven solution that allows us to transform a renewable resource into an alternative to the petroleum-derived plastics dominating the market.Unlike typical plastics,the feedstock for PLA are crops that can be grown each year which also means that the bioplastic has the potential to be compostable under industrial conditions.This project follows the previous announcement of our companies collaboration,currently in the development stage,to use lactic acid to produce acrylic acid,another common component of consumer products that traditionally relies on petrochemical raw materials.The announcement of these joint ventures marks another step forward in ADMs partnership with LG Chem and further demonstrates how we see sustainability as both a key principle in how we operate as well as an opportunity for growth.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices31 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices32FreshwaterWater has become an increasingly scarce commodity in many regions of the world,and lack of water threatens to become one of the leading challenges we all face globally.Water is critical to biodiversity,healthy communities,and to our operations,and we must do our part to protect it,which is why ADM included a two-part water goal in its Strive 35 plan.The first goal is designed to maximize water use efficiency and minimize water consumption across our global operations.The second goal is to develop a strategy to improve community well-being in priority watersheds,including water-stressed areas.Operational Water Efficiency and ReductionIn 2022,although we continued our work to reduce our water intensity,we faced significant headwinds.Specifically,a promising new recapture technology that was scheduled to be piloted was put on hold due to supply chain interruptions.In addition,our production value,which we use as the normalizing factor in our intensity calculation,was down by 10%this year at our Major Water Users Group(MWUG)facilities.These two factors combined for a disappointing result in our 2022 water intensity number even though our water withdrawal was lower than the baseline.This discrepancy between absolute reductions and increased water intensity,as well as a lack of alignment with how we disclose our water data via CDP,led us to re-evaluate our water goal.After review and vetting by the Utilities CoE,Strive 35 committee,and Sustainability and Corporate Responsibility Committee of the Board,we have decided to refocus our water goal as an absolute reduction of water withdrawal.By 2035,we will reduce our absolute water consumption 10%over a 2019 baseline.Water withdrawal consists of municipal water,surface water,well water,rain water,and wastewater purchased from third parties.For our reduction goal,focusing on reuse,recycle,and reclaim within our operations will allow us to make progress toward our goals and reduce our freshwater intake needs.In 2022 we implemented several projects that resulted in reduced water withdrawal.In Decatur,Illinois,we implemented steam condensate system improvements expected to result in a water savings of nearly 180,000 m3,energy reduction of around 16,000 MWh,and operating cost savings of over$440,000 annually.At our biodiesel facility in Rondonpolis,Mato Grosso,Brazil,we focused on process optimization with a resulting water savings of around 40,000 m3 per year.At our oilseeds facility in Spyck,Germany,we installed an additional gravel filter for our cooling water,which allows us to save approximately 138,000m3 of water per year.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices33TARGETWater 10solutereductionin water withdrawal over 2019 baseline by 20352019(baseline)20220.00.61.21.82.43.02.332.56WATERINTENSITY(m3/ton of product produced)9.9%Increase2019(Baseline)20220306090120WATERWITHDRAWAL(million cubic meters)112.8114.01.0%ReductionWater ReplenishmentAs part of our Strive 35 water goals,we committed to develop a global strategy focused on improving community well-being in priority watersheds,including water-stressed areas,by 2025.Over the past two years,with the support of a knowledgeablethird party,we organized a broad group of internal stakeholders to work toward developing the strategic vision and framework for a Water Scarcity Program.The team includes representatives from sustainability,Utilities CoE,operations,and EHS from North America,South America,Europe,and APAC.The overall strategic goals within the framework include:Maximize water use efficiency across global operations.Practice the three Rs(reduce,reuse,and reclaim)at all of our facilities and consistently adopt the best management practices for minimizing use,maximizing returns,and maximizing the reuse potential of fresh water.Track and report consumptive water loss.Develop a consistent methodology for measuring water withdrawal and return and water lost through evaporation or into final products.Additionally,measure water-related risk at each of our facilities.Establish community focused partnerships.Develop relationships with partners performing water replenishment projects that benefit communities in the locations in which we operate.The use of community-based partnerships increases the local relevance of future projects while giving the community a voice in the decision-making process.Develop a Global Water Replenishment Program.Develop a global water replenishment program within the overall Water Scarcity Program to balance ADMs consumptive water use with a portfolio of community-based water replenish projects implemented with partner organizations.Integrate program into existing operations and processes.Integrate the new water stewardship strategies into ADMs existing operations to ensure the programs efficiency,credibility,and longevity.In the coming year,the team will work to define our water replenishment goal,lay out project requirements,prioritize implementation locations,and begin to identify projects and partnerships.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices34 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices35TransformationSpotlight:ARTCO Supports Living Lands&Waters with Tugboat Donation|ADMThe American River Transportation Company(ARTCO),an ADM subsidiary,is helping support Living Lands&Waters(LL&W)efforts to protect,preserve,and restore the nations inland waterways by donating a used tugboat through ADM Cares.The donation of a 750-horsepower vessel dubbed“Nancy S.”will serve as an upgrade to LL&Ws equipment and help the organization allocate funds to other projects that meet their mission.The LL&W crew spends up to nine months of the year living and traveling on their barge,hosting river cleanups,watershed conservation initiatives,workshops,tree plantings,and other impactful restoration work.Our relationship with LL&W dates back to 2004 and throughout our partnership,ADM teams have volunteered their time to support programs including environmental restoration projects,invasive species removal,and free educational programming in communities along the Mississippi,Illinois,Tennessee,and Ohio Rivers.Through these efforts,we hope to strengthen and sustain these communities and support initiatives that drive meaningful social,economic,and environmental progress.Enrich Lives38Community Engagement39Human Rights41Diversity,Equity,and Inclusion43Health and Safety IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices36Enrich LivesWe believe that a skilled workforce and strong relationships with communities are core to our success and growth,and we can make a lasting impact on the world.We offer our people the opportunity to contribute to something greater than themselves,and we support the well-being of the communities in which we serve and operate.Weve identified the following key levers that allow us to enrich the lives of our colleagues and the communities where we operate:ADM CaresUsing philanthropic spending to support our communitiesHuman RightsIdentifying and mitigating risks related to our supply chain and operationsSafetyEnsuring a safe working environment for our colleagues and contractorsCulturePromoting a diverse,equitable,and inclusive work place IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices37Community EngagementADM Cares At ADM,we believe in the concept of shared value creation.Our corporate social investment program,ADM Cares,aligns corporate giving with our business strategies and sustainability objectives.Through the program,we work to sustain and strengthen our commitment to communities where we work,live,and operate by directing funding to initiatives and organizations driving meaningful social,economic,and environmental progress.In 2022,ADM Cares grants targeted three focus areas aligned with our purpose of unlocking nature to enrich lives:education,food security,and sustainable agriculture.Moving into 2023,we have refined our focus areas to complement ADMs growth strategy and business priorities to be:sustainability,food security,and health and well-being.The ADM Cares team evaluates potential projects to ensure they meet eligibility criteria and further our work toward our goals in these focus areas.The impacts from projects receiving ADM Cares support are measured through annual outcome reports to allow for ongoing community needs assessments and to ensure critical issues are addressed.By focusing on these areas,ADM Cares programs advance our sustainability goals,with special attention to partnerships that advance the United Nations Sustainable Development Goals(SDGs)aligned with our sustainability and business objectives.Specifically,we work to support Goal 2:Zero Hunger;Goal 6:Clean Water and Sanitation;Goal 8:Decent Work and Economic Growth;Goal 13:Climate Action,and Goal 15:Life on Land.We strive to sustain and strengthen communities where ADM colleagues work,live,and operate by directing funding,volunteerism,and industry knowledge to initiatives and organizations that drive meaningful social,economic,and environmental progress worldwide.ADM Cares optimizes our social impacts around the world,and through these partnerships,we are able to exponentially leverage our philanthropy to make a meaningful impact in the lives of many around the world.UkraineWith a number of operations based in Ukraine and surrounding areas,ADM understands its responsibility to aid those impacted by the war there.Currently,ADM has contributed$13 million to support Ukrainian colleagues and those affected by the war.The contributions come from a mix of ADM Cares funding,corporate support,and colleague contributions.ADM has donated to various NGOs,including the World Food Programme,Doctors without Borders,and the Red Cross.We have also donated directly to hospitals and medical centers in Ukraine,with colleagues taking action to hand deliver medical equipment and meet with hospital representatives.ADM also supported individual colleagues through emergency support such as lodging and relocation aid.Portable power stations for Ukrainian colleagues,donated by ADM,provided critical electricity to colleagues in need.With attacks on Ukraines energy infrastructure,many people in the country have experienced power outages,making the devices much needed sources of emergency power.Through ADM Cares,we have a program that matches colleagues personal donations.The generous outpouring of support from our colleagues resulted in a matching fund contribution of over$3.3M to ADMs Rebuilding Lives Fund,which helps Ukrainian colleagues and their families with future rebuilding opportunities,illustrating the giving spirit of the ADM family in supporting our colleagues in need.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices382022ADMCaresspending$17.0millionlEducationlFoodSecuritylSustainableAgriculturelColleagueGivinglOtherHuman RightsAt ADM,we are committed to doing business with integrity.We believe in paving the way with good business practices,progressive solutions,and mindful actions that make a positive impact.We actively work to protect human rights in our operations and supply chains,taking actions that make a measurable,sustainable difference for communities and ecosystems around the world.While governments have the primary duty to protect and ensure the fulfillment of human rights,we have a role to play in protecting human rights in our operations,our supply chains,and the communities where we operate.We have the opportunity to enact change globally,and our 2022 efforts demonstrate our commitment to protect human rights throughout our supply chains.Supply Chain Due DiligenceWorking with our suppliers to assess and address risks increases transparency and enables collaboration to protect human rights throughout our supply chain.Supply chain due diligence is a critical component of our Human Rights program,and strategically engaging with our supply chain takes three steps:mapping,risk assessment,and mitigation strategies.For more detailed information,please view our most recent Human Rights Report.Supply Chain MappingADM has vast and varied supply chains.Our origination team procures raw commodities,such as corn,soybeans,wheat,and softseeds from all over the world.Our procurement team sources ingredients and indirect supplies needed to run our operations.We have been working for several years to assess our origination footprint and the risks associated with those commodities and geographies.Our dashboard contains KPIs related to traceability.In 2022,we began mapping our ingredient supply chains to country of origin,successfully mapping over 90%of our Human Nutrition business ingredient procurement.That number continues to grow as we work diligently to assess our supply chains and continue engaging with our suppliers.Risk AssessmentWe use many tools to assess the risks in our supply chains.Using knowledge of origin of supply,we can calculate commodity-geography specific risk ratings to identify our highest risk sourcing.Using industry-leading tools and platforms,we are able to standardize risk ranking and scoring mechanisms,evaluate specific risks within different supply chains,monitor news and press,and ensure proper focus on salient human rights risks.A combination of internal and third-party tools allows us to comprehensively assess risk across business units.Risk MitigationA successful supply chain due diligence program requires effective risk mitigation strategies.We are working to engage with our strategic suppliers on their sustainability programs,as well as ensure compliance with our policies and future due diligence regulatory requirements.Our mitigation strategies are based on a suppliers risk rating and can include the use of sustainability self-assessment questionnaires,contractual assurances,and social compliance auditing.We have developed sourcing protocols for some high-risk goods and materials.For example,we require all of our direct palm suppliers to have a human rights policy aligned with ours and to implement a human rights due diligence program to ensure compliance with the policy.In addition,over the past year,we have been working with our legal team to include language in supply contracts that suppliers must abide by our Supplier Expectations,including our Human Rights Policy.These suppliers have the understanding that business relationships can be terminated upon discovery of human rights violations.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices39SEDEXIn addition to working with suppliers and other key stakeholders to ensure we are sourcing in ways that protect human rights,we participate in an auditing program to verify to ourselves and interested customers that we are upholding our core beliefs within our operations.ADM is a member of Sedex,the worlds largest online platform for supply chain assessment,and we use the organizations audit program to assess,improve,and report on sustainability practices.Each year,selected facilities host responsible sourcing audits conducted by third-party auditors.In addition to noting potential risks and opportunities for improvement,the audits also allow us to monitor for egregious violations of rights.When findings are identified,our sustainability,legal,operations,and compliance teams work with the location to identify and implement corrective actions.In 2022,ADM hosted 28 Sedex audits across all business units and in nine countries.At the ADM facilities visited in 2022,there were no fees charged to job-seekers in exchange for employment,and no collateral was taken in the form of money,identification,or other personal belongings without workers consent as a condition of employment by ADM or contracted companies.No human trafficking or forced labor of any kind was observed.We continue to explore ways to leverage Sedex risk tools and audits in our supply chains to gain this level of insight and work with suppliers to mitigate risks.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices40Diversity,Equity,and InclusionStrategic Pillars:How We Will Achieve Our Vision LEADERSHIPENGAGEMENT,TRAINING,&COMMUNICATIONRECRUITINGADVANCEMENT&RETENTIONNETWORKS&SPONSORSHIPHaving an inclusive culture allows us to cultivate innovation.We believe that true innovation arises from having many different perspectives and backgrounds at the highest levels of an organization,and we have a comprehensive plan in place to promote inclusion and equity at ADM.Each region has a Diversity,Equity,&Inclusion(DE&I)Council with leaders who manage the strategic pillars that will help us achieve our vision.In 2022,to hold ourselves accountable to our DE&I commitments and monitor our progress as we work to create a more equitable,inclusive environment for our colleagues,we chose to publicly disclose our annual U.S.Equal Employment Opportunity(EEO-1)report data.Globally,we support Employee Resource Groups(ERGs).These voluntary,employee-led groups allow colleagues with shared experiences,interests,or goals to come together in a safe space to offer support,build a sense of community,and promote personal and professional development.Our ERGs have continued to grow both in the number of active members in our Womens ERGs and with the introduction of four new groups:ERG de Afrodescendentes(Brazil),LGBTQIA ERG(Mexico),Multi-cultural ERG(EMEA),and Black Colleague Alliance(North America).“I would say one of the best things I have seen from the ERG in 2022 is the ability to have open conversations and support from each other regarding challenges women experience in the workplace.Whether dealing with work life balance,imposter syndrome,or selecting the right mentor.it has become evident that we are all in this together and regardless of your role in the organization many of us have this in common and are willing to support each other to overcome our challenges.The Womens ERG has become a community within ADM,and I am looking forward to the continued outreach in 2023.”MollyStraderFruit,LeaderoftheNAWomensERGParadigm for ParityParadigm for Parity is a coalition of business leaders dedicated to addressing the corporate leadership gender gap.Our commitment through Paradigm for Parity focuses on improving gender balance in global leadership by 2030.In 2018,we made a pledge to reach gender parity in our senior leadership by 2030 and have been working diligently toward that goal.Senior LeadershipSalaried Colleagues20182019202020212022 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices4121y7c6d5e4f&ts9a&t(r%MALEFEMALEFEMALEMALESupplier DiversityWe have a Supplier Diversity program that encourages the use of diverse suppliers,defined as businesses that are 51% owned by women,veterans,Hub-zoned,people with disabilities,LGBTQIA ,and minorities.Our initiative provides the opportunity for us to access diverse talent in some of the most dynamic emerging market segments in our global footprint.Supplier diversity promotes supplier participation that reflects our diverse customer base and business community.ADM has expanded its Supplier Diversity program globally.This initiative has enabled us to have internal global champions to oversee the program in their regions,including EMEA,LATAM,and APAC.To identify potential diverse suppliers,we work with third-party organizations such as the National Minority Supplier Development Council(NMSDC),Womens Business Enterprise National Council(WBENC),and WeConnect International to assist in finding the best diverse talent for our sourcing opportunities.In addition to fulfilling customer requirements,diverse suppliers bring a variety of advantages to the table,including innovation,customer service,and competitive edge.One of our internal platforms,Power BI,allows us to track our KPIs for diverse spend reporting to our external customers and internal stakeholders.As ADMs Supplier Diversity program grows and seeks to become best in class,we are continuing to add new initiatives in the near future,such as the implementation of our Tier 2 Diverse Spend Reporting and Diverse Supplier Development/Mentor Protg Program.We continue to work with our global teams to identify what supplier diversity looks like in each of our regions where we have a presence.As the worlds leader in agriculture processing,we continue to serve the vital needs of the world by creating opportunities to feed it better and bring awareness to supplier diversity being good business at ADM.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices42Health and SafetyOur people are our lifeblood they innovate,create,and deliver.They are the ones who make our company great,and they are our future.We invest in our people and strive to create a workplace where they can thrive.This includes building a safety culture so everyone goes home safely to their families and the things that are most important to them.And this also includes investing in our people to maximize their potential.SafetyOccupational health and safety is paramount at ADM,and we are committed to fostering a safe working environment for all of our employees and contractors.Our team has embraced the vision of SafeorWeDontDoit.Our safety and health management system is built on a robust list of policies,standards,and supporting documentation including life-critical standards that govern our high-risk work.We have improved our investigation work processes with a goal to prevent repeat incidents.Our internal audit program for Environmental,Health and Safety,and Process Safety has completely transformed over the last three years to provide essential governance and identify opportunities for improvement,reduce risk,support our compliance commitments,and share lessons learned.In 2022,approximately 80%of our sites completed the year without recordable injuries and about 90%without lost workday injuries.Sadly,we mourn two fatalities,one ADM colleague in Germany and one contractor in Brazil.We remain committed to our ambitious goal of reducing our Total Recordable Incident Rate and Lost Workday Incident rate by 50%in 2025 compared to a 2020 baseline.We have taken additional steps to meet these goals by launching or enhancing efforts to improve occupational safety,including:Cut Resistant Gloves Clock-to-Clock Safe Work Permit program for all maintenance activities Working Safely for Supervisors Program Contractors remain a crucial aspect of our safety system and since 2021,they have been fully integrated into our KPIs and the incident rates published in this report.Employee Health ProgramsIn 2022,ADM launched a pilot program with Medcor/Work Right at its site in Decatur,Illinois,that can not only assess and treat minor injuries onsite,but also provide injury prevention resources to colleagues.The program includes ergonomic assessments and recommendations for our colleagues workspaces,suggested stretching and rehabilitation exercises to prevent injuries related to repetitive movements or poor posture,and even massages.Employees can make appointments with the Medcor/Work Right team for advice and treatment at no cost.We provide access to several virtual health support programs for our colleagues.For example,access to Hinge Health can help employees suffering from muscle or joint pain to work with a virtual care team to assess and develop a personalized exercise plan,reduce pain,find physical therapists,and more.We also provide weight management support through Wondr Health,diabetes and blood pressure management through Livongo,and a smoking cessation program in partnership with the American Cancer Society Quit for Life program.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices430.730.732020(baseline)20220.00.20.40.60.81.00.220.212020(baseline)20220.00.20.40.60.81.0TOTALRECORDABLEINCIDENTRATE(TRIR)LOSTWORKDAYINCIDENTRATE(LWIR)Governance45Strategy and Oversight46Risk and Opportunity Management47Key Topic Assessment and Stakeholder Engagement48Commitments and Policies49Compliance and Ethics IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices44Strategy and OversightOur commitment to change and growth goes beyond our products and services.At ADM,sustainable practices and a focus on environmental responsibility are not separate from our primary business:they are integral to the work we do every day to serve customers and create value for shareholders.We are committed to being a force for change in developing innovative,sustainable solutions in agriculture,food and nutrition,energy,and packaging materials while pursuing ways to continually improve our efforts in both protecting the environment and enhancing environmental and social sustainability.That is why our current strategic plan is called“Sustainable Growth”.We believe sustainability is critical to our future growth strategy.Our strategic plan of sustainable growth leverages the trends and technologies in sustainability to help us grow and create value for our stakeholders.Our Ag Services and Oilseeds business unit is focused on traceability of sourcing and differentiation and engaging growers in our re:generations program.Carbohydrate Solutions is focused on decarbonizing its footprint,so as to become the partner of choice for lower-carbon intensity BioSolutions and biomaterials,including fuel solutions from agricultural products,to replace petroleum-based products.Nutrition is focused on developing alternative proteins,from sources such as fermentation,plants,fungi,and insects,increasing protein options for human and animal nutrition.The growth of these projects and businesses will be integral to supporting the objective of helping the planet limit total global warming to the 1.5C threshold indicated by the IPCC.Our sustainability efforts are overseen by our Board of Directors,including a dedicated Sustainability and Corporate Responsibility Committee,and led by our Chief Sustainability Officer(CSO),who is supported by regional sustainability teams.The Sustainability and Corporate Responsibility Committee actively oversees our objectives,goals,strategies,and activities relating to sustainability and corporate responsibility matters,including safety and DE&I,and assists the Board in ensuring that we operate as a sustainable organization and responsible corporate citizen.The Executive Council of ADM,our highest strategic and operational body,provides close supervision of our ESG efforts and in-depth review of sustainability issues.Because we consider sustainability critical to our strategic planning and growth efforts,the CSO reports to the Chief Strategy Officer and is an important part of the strategy team.Furthermore,regional sustainability teams,along with the corporate sustainability team,support the CSO to drive sustainability efforts in our facilities and supply chains around the world.Our sustainability efforts are also supported by our Centers of Excellence,which drive efficiency programs in areas of focus such as Procurement;Supply Chain;Utilities;Diversity,Equity,and Inclusion;and Environmental,Health,and Safety.Sustainability and Corporate Responsibility Committee of theBoard Has direct oversight responsibility of objectives,goals,strategies,risks,and activities related to sustainabilityExecutive Council ofADM Highest strategic and operational body Provides close supervision of our ESG efforts and an in-depth review of sustainability issuesVice President,Chief Sustainability Officer(CSO)Leads ADMs sustainability efforts Reports metrics quarterly to ADM Board of Directors Meets quarterly with ADM Sustainability and Corporate Social Responsibility Committee of the Board Reports regularly to ADM leadershipRegional and Corporate Sustainability Teams Support business units to drive transformation and help create value across the supply chain Support sustainability initiatives and implementation on the ground Engage and interact with stakeholders Located in North America,South America,and EMEA IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices45Transition Risks Emerging regulation and carbon pricing mechanisms could result in increased operational costs in the short to medium term.Changes in policy or introduction of new policies could introduce additional tax requirements at our facilities.For example,in South America,introduction of the national legislation on biomass-based power generation units,which requires additional certification and taxes,could limit our ability to operate our assets and increase our operating costs.Market demand has a direct effect on production,as well as demand for certified sustainable commodities.Changes in consumer demand could result in additional cost of implementation that may not be overcome by product sales.ADM uses coal-fired cogeneration technology to meet a portion of its energy demand.We are working to reduce the carbon footprint of our operations,but transitions can be time intensive and costly.Physical Risks Increased severity and frequency of extreme weather events such as cyclones and floods could lead to increased direct costs from the disruption of supply chains and impair our ability to deliver products to customers in a timely manner.Increased severity and frequency of extreme weather events such as cyclones and floods could lead to increased sourcing costs due to limited availability of agricultural commodities and impact ADMs ability to produce goods,which would directly affect sales and revenue.Increased calls for preserving and enhancing biodiversity by taking acres out of productionat a time when the worlds supply of raw materials is in great demandmay challenge ADMs sourcing of raw materials.As the global population grows,and producers in many areas of the world must plant more to feed more people,a balance must be appropriately struck,or raw material shortages may result.Opportunities Developing enhanced transportation and warehousing scheduling,routing,and tracking technologies can reduce carbon footprint and costs while improving customer delivery satisfaction.Development and expansion of low-emission goods and services could lead to increased revenues resulting from increased demand.As various renewable fuel standards are implemented around the world,ADM has an opportunity to capitalize through the production and sale of ethanol,biodiesel,and renewable diesel.As demand for renewable products grows,development of new products or services from R&D and innovation could lead to increased revenues through access to new and emerging markets.Risk and Opportunity ManagementSustainability risk management,including climate change and deforestation,is integrated into our multi-disciplinary,company-wide enterprise risk management(ERM)process.Each quarter,the ERM Sustainability subgroup reviews and reports sustainability risks and the related mitigation actions with the ERM team.The review includes previously identified risks to ensure proper focus of our initiatives,as well as the identification and assessment of emerging risks.The team uses a risk matrix which includes a quantitative assessment of impact,mitigation,and residual risk as well as qualitative information about risk categories,warning periods,mitigation strategies,and effectiveness.Scenario Analysis In 2021,we began the process of conducting a Scenario Analysis following the TCFD guidelines.The analysis looked at the potential impact of three warming scenarios:1.5C(latest recommendation from IPCC to prevent the worst effects of global warming),2C(aligned with the Paris Climate Accords),and 2.6C(status quo).The first scenario assumes a rapid transition to a low carbon world in the next decade,limiting temperature increase to 1.5C.This involves a high degree of transformation across the economy.Under this scenario,the worst anticipated physical impacts of climate change are avoided.The second scenario involves ambitious actions to mitigate climate change,limiting temperature increase to 2C.This scenario requires greater policy action;however,there is still an increase in physical climate-related impacts.The third scenario is based on the current status quo with no changes to policies or actions and an anticipated increase in global temperature by 2.6C resulting in increased physical impacts of climate change.ADM used these scenarios as written by the sources,except in the case of the third,status quo scenario,where transition risks were evaluated based on our existing Strive 35 commitments and implementation plan.In each of the scenarios,we identified potential sourcing shifts and limitations,operational changes,physical impacts,and opportunities.The primary risks identified fall into two categories:physical risks and transition risks.Key opportunities are related to products and services offerings.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices46Key Topic Assessment and Stakeholder EngagementFollowing the guidelines from the Global Reporting Initiative(GRI),we use a third party to conduct a formal assessment to identify and prioritize key sustainability topics that reflect our most significant impacts to the economy,environment,and people,including human rights.Because these impacts may change over time as our activities,business relationships,and assets evolve,we update this assessment on a regular basis.During our most recent assessment,the firm interviewed,surveyed,and researched publicly available information from a variety of internal and external stakeholders,including ADM leadership,investors,customers,employees,and NGOs.The assessment indicated several key topics that are consistent across all stakeholder groups as critically important:“GHG Emissions,”“Deforestation&Conversion,”“Governance,”and“Water Management.”Although these are critical to manage,the other topics on the matrix are also important to ADM and our stakeholders.Ongoing Stakeholder EngagementWe have established direct and easy-to-access channels for engagement with different types of stakeholders.These engagements provide valuable insights on stakeholder concerns and topics that they consider important.In 2022,we engaged with stakeholders via customer feedback,NGO inquiries,and dialogue with shareholders.We also met with several customers and entered into partnerships on regenerative agriculture and environmental topics.As part of our supply chain efforts in palm and soy,specifically on the 1.5C Roadmap,additional emphasis was placed on engaging with key stakeholders.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices47Commitments and PoliciesADM has set forth several key social and environmental commitments and policies that collectively outline our expectations for our colleagues,business partners and contractors,and our organization as a whole,with respect to our sourcing operations.They establish clear standards that govern our approach to raw material sourcing,environmental stewardship,and employee conduct,among other areas,and they state our positions on issues of widespread public interest.These standards were developed with input from our operations,law,compliance,and EHS teams,and were approved by Chairman and CEO Juan Luciano:Policy to Protect Forests,Biodiversity,and Communities Code of Conduct Environmental,Health,&Safety(EHS)Policy Human Rights Policy Statement on Genetically Modified Organisms Statement on Animal Testing Commitment to Anti-Corruption Compliance ADM Supplier Expectations ADM Tax Policy Managing Supplier Non-Compliance ProcedureIn a world that is becoming increasingly interconnected and transparent,we strive to match that clarity and provide means to facilitate conversation and feedback.We invite all stakeholders who have concerns related to the implementation of our policies to email us at or use The ADM Way Helpline.Our Human Rights Policy protects human rights defenders,whistleblowers,complainants,and community spokespersons from any form of retaliation.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices48Compliance and EthicsAt ADM,we believe in leading by example,setting a global standard for“good business”that other companies in our industry will follow.In March 2023,we were recognized by Ethisphere,a global leader in advancing the standards of ethical business practices,as one of the Worlds Most Ethical Companies and one of only nine honorees in the Food,Beverage,&Agriculture category.This honor marks the fourth consecutive year we have received this recognition for our deep commitment to ethical business practices,transparency,and corporate citizenship.We maintain high ethical standards across our global workforce.We expect employees to take responsibility for their actions and adhere to our values of honesty and integrity,consistent with our commitment to always conduct business fairly and ethically.Our Code of Conduct guides us on how to make sound decisions and illustrates proper actions for conducting our businesses.Our Code promotes a shared understanding of what achieving the right results the right way means.By knowing and following our Code,each of us does our part to maintain and further build trust with our various stakeholdersincluding our colleagues,customers,business partners,shareholders,and communities.We prohibit all forms of corruption,including bribery,and we abide by all anti-corruption laws in every country we do business.We have a robust anti-corruption program that includes a global Anti-Corruption Policy and other compliance procedures and controls designed to minimize the potential for corruption in ADMs global business dealings,such as enhanced due diligence,screening,monitoring of high-risk third parties,and pre-approvals before hosting or entertaining government officials.We train employees and third parties to raise awareness of corruption risks and applicable anti-corruption laws in order to both avoid inadvertent violations of the law and enable early recognition and handling of potential issues.Our Anti-Corruption Program and Policy are updated periodically to address new risks and incorporate continuous enhancements.In 2022 we published an Anti-Fraud Policy to increase awareness of ADMs anti-fraud procedures and expectations for colleagues to speak up when they see something suspicious.We have a strong“Speak Up”culture at ADM,which helps us handle issues and address problems in a timely manner,building trust with one another and with our customers,suppliers,and business partners and protecting the company from legal,financial,and reputational risks.We encourage employees to voice concerns or ask questions through multiple channels,including by talking with their supervisors,Human Resources,or Compliance,or at any time through additional reporting channels such as The ADM Way Helpline,which is available by phone or web in more than 30 languages and accessible using a QR Code.Reporting via the Helpline can be done anonymously,where permitted by law.We do not tolerate any form of retaliation for making a good-faith report of actual or potential misconduct.The ADM Way Helpline may also be used by stakeholders outside of ADM to raise questions or voice concerns.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices49Our helpline is available by phone or web in more than 30languages.We feel a deep and genuine regard for the safety and well-being of all people,communities,and resources,and we treat them with care and consideration.We demonstrate trust and openness.And we are good stewards of the environment.Our Human Rights Policy protects human rights defenders,whistleblowers,complainants,and community spokespersons from any form of retaliation.In 2022,we received a total of 1,181 reports concerning topics such as employee relations,EHS,diversity,equal opportunity,and respect in the workplace,and misuse or misappropriation of assets or information.We log and track all reports we receive.Each is classified by type and then assigned to an investigator to conduct an independent and objective review into the concerns raised.If an allegation is substantiated,we implement corrective and disciplinary actions which can include coaching and counseling,process or control improvement,verbal or written warnings,financial penalties,or termination.Training is a key component of our compliance program.In 2022,employees completed required training on topics such as conflicts of interest,trade sanctions,and antiboycott regulations.Above and beyond our global annual required training,Compliance also led more than 100 trainings sessions for targeted employee populations.We published over 90 global and regional compliance communications in 2022 to improve employee understanding of ethics and compliance expectations,enhance awareness of compliance risks,provide guidance on courses of action,and increase transparency into how ADM investigates and remediates issues of concern.The communications covered topics such as anti-corruption,data privacy and records retention,conflicts of interest,trade sanctions,speaking up,and more.Compliance Compass is our internal bi-monthly awareness campaign that features case stu

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2022 Global Impact ReportTransforming digital payments to create economic opportunityTable of ContentsMessage from Our President&CEO Linking Our Business&ESG StrategyAssessing&Prioritizing Our ESG TopicsMaintaining Strong Corporate Governance&ESG OversightAbout PayPal 05 06 072022 Highlights Promoting Economic Opportunity for SMBs&EntrepreneursAdvancing Financial Health&Consumer ConvenienceMaintaining a Safe Platform for CustomersCreating More Ways to GiveSocial Innovation 18 20 21 22Mitigating Our Climate-Related RisksManaging Our Natural ResourcesEnvironmental Sustainability 34 36Supporting the U.N.Sustainable Development GoalsTask Force on Climate-Related Financial Disclosure(TCFD)SummaryESG Performance Metrics TableIndependent Limited Assurance StatementAdditional ResourcesAppendix38 39 40 50 52Employees&Culture 25 28 31Managing Our Global WorkforceLeading With Diversity,Inclusion,Equity&BelongingEmpowering Employee Community ImpactManaging Risk&ComplianceEnabling Effective Cybersecurity Management Enriching Our Global Data Management&Privacy PracticesUpholding Business EthicsResponsible Business Practices 1112 14 16Forward-Looking Statements This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,including statements that involve expectations,plans or intentions(such as those relating to future business,future results of operations or financial condition,new or planned features or services,mergers or acquisitions,or management strategies).These forward-looking statements can be identified by words such as“may,”“will,”“would,”“should,”“could,”“expect,”“anticipate,”“believe,”“estimate,”“intend,”“continue,”“strategy,”“future,”“opportunity,”“plan,”“project,”“strive,”“aim,”“forecast,”and other similar expressions.These forward-looking statements involve risks and uncertainties that could cause our actual results and financial condition to differ materially from those expressed or implied in our forward-looking statements.Such risks and uncertainties include,among others,those discussed in the“Risk Factors,”“Quantitative and Qualitative Disclosures about Market Risk”and“Managements Discussion and Analysis of Financial Condition and Results of Operations”sections of our Annual Report on Form 10-K for the year ended December 31,2022 and our subsequent filings with the U.S.Securities and Exchange Commission(SEC).We do not intend,and undertake no obligation except as required by law,to update any of our forward-looking statements after the date of this document to reflect actual results,new information or future events or circumstances.Given these risks and uncertainties,readers are cautioned not to place undue reliance on such forward-looking statements.The standards of measurement and performance contained in this report are developing and may be based on assumptions,estimates or information collected on a delayed or incomplete basis.The inclusion of information in this report is not an indication that we deem such information to be material or important to an understanding of our business or an investment decision with respect to our securities.Incorporation by ReferenceAll website addresses contained in this report are intended to provide inactive,textual references only.The content on,or accessible through,any website identified in this report is not a part of,and is not incorporated by reference into,this report or in any other report or document that we file with the SEC.Please visit our Global Impact website and Additional Resources section of this report for further public information on our ESG-related strategies,practices and policies.We are committed to transparent communication with our stakeholders and welcome feedback on this report and other ESG matters.Questions or requests for additional information can be directed to ESG.Message from Our President&CEO3Our PayPal community is committed to democratizing financial services and empowering millions of consumers and merchants to join and thrive in the global economy.This purpose is the foundation on which our business and strategy are built,and it guides our efforts today.We believe operating with a strong sense of purpose helps drive long-term,sustainable growth by inspiring our employees and creating value for our shareholders,customers and other stakeholders.In our 2022 Global Impact Report,we share some of our efforts to help customers and communities thrive,provide innovative solutions to unlock greater opportunity for all and forge a path towards having a sustainable impact for our stakeholders in line with our commitments.Some highlights include:Creating Economic Opportunity for Our CustomersIn an increasingly digital economy,our products and services have never been more critical.For our merchants,we offered new tools to create efficient and flexible checkout experiences,including the launch of the Zettle Terminal in the U.S.and Tap to Pay in new markets.For consumers,our digital wallet continued to provide a secure and easy way to manage their daily financial lives.Last year,we introduced PayPal Rewards and interest-bearing savings accounts in the U.S.to help consumers achieve their financial goals faster.We continue to focus on enabling equitable access to capital for entrepreneurs from underserved communities,including facilitating more than$4 billion to small-and medium-sized businesses globally in 2022.In addition,our Economic Opportunity Fund investments in 19 minority-led venture capital funds deployed nearly$300 million in capital to over 250 portfolio companies globally,and for the second year in a row,we honored the legacy of Maggie Lena Walker by recognizing women who are creating opportunities for economic advancement in underserved communities.Prioritizing Our Employees Total Wellness Fostering an engaged,diverse and resilient workforce is critical to achieving our mission.Through our Employee Financial Wellness Initiative,launched in 2019,we continued to provide tools and resources for our employees to build their financial wellness.We are proud to have exceeded our goal for our employees globally to have at least 20%of their discretionary income remaining after taxes and typical expenses are paid.This is an ongoing focus for PayPal and will continue to be an essential part of our approach to total wellness.We continue to work towards having a workforce that reflects the communities and customers we serve.Over the past year,we have expanded our talent pipeline,once again achieved global gender and U.S.ethnic pay equity and continued to support the development of diverse leaders across the company.Our ongoing efforts have led to an 11%increase in diversity in leadership roles since we became an independent company in 2015.Our employees are passionate about their communities and actively seek out opportunities to make a positive impact.In 2022,PayPal employees volunteered nearly 100,000 hours to nonprofits around the world.Community impact is an essential part of our culture that not only helps advance our mission but also engages and empowers our employees.Enabling Customers and Employees to Give More EasilyWe are continually inspired by the generosity of our broader PayPal community.For the first time in our history,our customers donated more than$20 billion in a single calendar year to nonprofits and charitable causes through our platform.Recognizing the essential role PayPal plays in times of need,we have further integrated giving opportunities through Give at Checkout and Venmo Charity Profiles product solutions.In response to the devastating violence in Ukraine,we helped to facilitate more than$1.2 billion to support those impacted,including through donations made to nonprofits,person-to-person payments and money transfers.We continue to mobilize our platform and customers to respond to global crises,including after destructive natural disasters such as the earthquakes in Turkey and Syria,flooding in Pakistan and Hurricane Ian in Florida.Responsibly Managing Our Environmental FootprintWe continue to concentrate our efforts on managing our environmental impacts and exploring sustainable innovations across our products and services.To reach our goal of achieving net-zero greenhouse gas emissions across our value chain by 2040,we are focusing on efficient and renewable energy use,partnering with our largest vendors(by spend)to manage emissions across our supply chain and considering ways to make digital commerce more convenient and sustainable.We are proud to increase our total renewable energy use to 90%in 2022,while maintaining 100%renewable energy for our global data centers.Dan SchulmanPresident and CEO,PayPal Holdings,Inc.In my final year as president and CEO,I am proud of the enormous impact PayPals global community has created and I am grateful to all our investors,customers,employees and partners who have championed this work.Over the past eight years,I have seen first-hand how our mission,vision and values reinforce the strength of the business and help create value for all of the stakeholders we serve.Significant work remains to upgrade the financial system and democratize financial services so that more people and businesses can improve their financial health and pursue economic opportunity.I am confident that PayPal will continue to play a central role in this effort and,in turn,will drive long-term impact and sustainable growth going forward.Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 4About PayPalPayPal Holdings,Inc.1 is a leading technology platform that enables digital payments and simplifies commerce experiences on behalf of merchants and consumers worldwide.PayPal is committed to democratizing financial services to help improve the financial health of individuals and to increase economic opportunity for entrepreneurs and businesses of all sizes around the world.Our goal is to enable our merchants and consumers to manage and move their money anywhere in the world in the markets we serve,anytime,on any platform and using any device when sending payments or getting paid.We believe that effective management of non-financial risks and opportunities,including environmental,social and governance(ESG)topics,helps to create value for our stakeholders and deliver on our strategy and mission.We operate a global,two-sided network at scale that connects merchants and consumers with 435 million active accounts consisting of 400 million consumer active accounts and 35 million merchant active accounts across more than 200 markets as of December 31,2022.For more than 20 years,we have remained focused on our mission to make financial services and commerce more affordable,convenient and secure for all.Our goal is that PayPal continues to be a trusted,everyday app for consumers and an essential tool to help merchants,including small-and medium-sized businesses(SMBs),marketplaces and large enterprises,manage and grow their business.PayPals Payment Solutions2CheckoutProcessingDigital WalletsMerchant ServicesConsumer Financial ServicesP2PSavings GivingCryptoShopping and RewardsRewards DealsRisk Management&Fraud ProtectionPayoutsBill PayCredit&Debit CardsMerchants integrate with PayPal to manage their businessConsumers use PayPal for financial products and services and shopping toolsLoyaltyPutting Our Values into PracticeOur core values of Inclusion,Innovation,Collaboration and Wellness are driving forces for our Company and are part of our operating philosophy.They are an integral part of the decisions we make and the way we lead,inside and outside of the PayPal community.We believe they help stimulate the creativity and engagement of our global workforce to deliver products and services designed to meet the diverse needs of our customers.Building on Our Values through Leadership PrinciplesIn 2022,resulting from more than 2,000 conversations across our business,we developed 12 Leadership Principles based on our core values that establish a common set of expectations for all employees.We aim to continue integrating these principles across our business,talent and operations strategies.See Employees&Culture for more details.“In 2022,we worked to optimize PayPals cost structure while continuing to invest in our high-conviction initiatives and deliver on our mission.Our commitment to serve our customers and support their financial health ties directly into our business performance.We believe PayPals combination of scale,profitability and stability is a strategic advantage as we navigate this dynamic environment.”Gabrielle RabinovitchActing Chief Financial Officer and SVP,Investor Relations and TreasurerSan Jose,CA,U.S.1 Unless otherwise expressly stated or the context otherwise requires,references to“we,”“our,”“us,”“the Company,”or“PayPal”refer to PayPal Holdings,Inc.and its consolidated subsidiaries.Do the right thingChoose inclusionTrust each otherBe a customer championNever stand stillCreate simplicity&efficiencyGenerate enduring impactWork as one teamBe transparentKnow yourself&each otherLearn every dayBuild the next generationCollaboration We DeliverInclusion We PartnerInnovation We DareWellness We CareOur Leadership Principles2 Our combined payment solutions comprise our proprietary payment platform.Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 5Linking Our Business&ESG Strategy Studies have shown that key non-financial risks and opportunities can impact the long-term value and growth of businesses.3 Our ESG strategy reflects how PayPal considers these topics across the organization and categorizes them across four core dimensions Responsible Business Practices,Social Innovation,Employees&Culture and Environmental Sustainability.We remain focused on making progress to address financial and non-financial risks,including ESG priorities,in support of our business.Our 2022 Global Impact Report highlights not only the progress we have made on our focus areas and key metrics,but also the many ways in which we have unlocked new opportunities for our stakeholders.We believe that profit and purpose go hand in hand and that aligning our business with our mission and values is important to creating shared value and maintaining trust.This trust is critical to delivering innovation and impact at scale during times of change.This years report demonstrates the ways in which we bolstered our foundation to make our platform more secure,supported the economic resiliency of our customers,invested in the wellness of our employees and strove to reduce our impact on the planet.Our employees worked together to improve their communities,deliver innovative solutions for our customers and instill our mission to democratize financial services into everything we do.While we are proud of the progress we have made,we also recognize how much work remains to ensure that every individual can participate fully and fairly in the global economy.We are committed to delivering long-term,sustainable impact for all stakeholders and invite you to join us in this effort.”Franz PaascheSVP,Chief Corporate Affairs Officer New York,NY,U.S.Our Business PrioritiesSeeking new areas of growth and innovationGrowing our core businessEnhancing our consumer and merchant value propositionsForming and expanding strategic partnershipsOur Stakeholder Value CreationCreating value for PayPal and our stockholders by prioritizing and investing in growth opportunities and managing risk.Driving and protecting brand value through strong governance,ethics and compliance across our value chain,including with suppliers and partners.Demonstrating competitive advantage by providing customers with superior products that make financial services and commerce more affordable,convenient and secure.Positioning PayPal as an employer of choice by fostering a diverse workforce and collaborative,inclusive culture where employees can engage with each other and their communities.Engaging with,and positively contributing to,the local communities in which we live and work around the world.Mitigating environmental impacts to our business,and meeting regulatory requirements and investor and other stakeholder expectations.Our ESG Focus Areas3 E.g.,NYU Stern,ESG and Financial Performance:Uncovering the Relationship by Aggregating Evidence from 1,000 Plus Studies Published between 2015-2020,2021.“Social InnovationOur work to realize our mission and build a more inclusive global economyResponsible Business PracticesOur commitment and approach to operating ethically and responsiblyEmployees&Culture Our embodiment of our core values from the inside outEnvironmental SustainabilityOur efforts to manage our footprint and advance sustainabilityMessage from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 6Assessing&Prioritizing Our ESG TopicsOur ESG strategy is based on the periodic significance4 assessment and prioritization of non-financial risks and opportunities identified by our business and our stakeholders as important for PayPals long-term success.Building on our ESG significance assessment conducted in 2020,we annually review our ESG significance map.In 2022,we reaffirmed our 18 key ESG topics,including eight designated as priorities5 for PayPal to drive long-term business performance and impact based on stakeholder feedback.The findings from our ESG significance assessment serve as an important input to inform how we strategically deploy resources across the enterprise and refine our ESG-related programs.2022 ESG Significance MapClimate change mitigationCorporate governanceDiversity,inclusion,equity&belongingData privacyCybersecurity&secure transactionsSocial product innovationClimate change adaptationFinancial health&inclusionEmpowering entrepreneurs,small businesses&nonprofitsEmployee wellness,health&safetyBusiness ethicsHuman rightsCommunity engagementSustainable supply chain managementCompliant,ethical&humane use of productsEnvironmental product innovationExternal Stakeholder Perspective (Degree of stakeholder concern)PayPal Perspective (Impact on business)INCREASING IMPORTANCEINCREASING IMPORTANCENatural resources managementEmployee recruitment&developmentCATEGORIES:Responsible Business Practices Social Innovation Employees&Culture Environmental Sustainability Engaging Our StakeholdersAn essential aspect of effectively managing our key ESG topics,as well as informing our significance assessment,is our strategic approach to stakeholder engagement.We value the regular input we receive from our global workforce,customers,investors,regulators,partners,suppliers and other stakeholders in seeking to continuously refine our ESG program.In late 2022,we completed our second investor-focused perception study to understand how investors view PayPals ESG strategy,investment case and communication efforts.We observed notable improvements since our inaugural study in 2019.The feedback helped inform our latest ESG significance assessment and reinforced the importance of aligning our financial and non-financial disclosures.4 As used throughout this report,the term“significance”and variations thereof refer to significance within the context of our ESG strategies,activities,progress,metrics and performance.Such term is distinct from,and does not refer to,concepts of materiality used in securities or other applicable law,and use of such term is not an indication that PayPal deems related information to be material or important to an understanding of the business or an investment decision with respect to PayPal securities.5 As designated by those topics in the shaded upper right-hand quadrant of our ESG significance map.6 Study participants provided an overall rating of 4.38(5=excellent)for PayPals ESG engagement approach,representing significant improvement from the 3.56 rating in 2019.Reporting on Our ProgressThis Report covers ESG strategies,activities,progress,metrics and performance from calendar year 2022,unless otherwise noted.In addition to findings from our latest ESG significance review and ongoing stakeholder engagement,we also conducted an annual benchmarking and review of industry peers and leading issuers to enhance and refine our disclosures based on best practices and emerging regulatory requirements.This report is aligned with the Global Reporting Initiative standards,relevant SASB industry standards,the Ten Principles of the United Nations(U.N.)Global Compact,the Stakeholder Capitalism Metrics and U.N.Sustainable Development Goals(SDGs).See the Appendix for specific reporting to these frameworks and a Task Force on Climate-Related Financial Disclosures(TCFD)summary.Key ESG-Related Engagement Topics Investors:Succession planning,executive compensation,intersection of ESG and business strategies,data privacy,cybersecurity,Board and risk oversightCustomers:ESG approach,product education,business ethics,climate change,supplier diversityEmployees:Business strategy,product innovation,sustainability,workplace inclusion,community engagementRegulators:Cybersecurity,risk oversight,ESG strategy,climate changePartners:Civic engagement,small business support,employee wellness,climate changeSuppliers:Business ethics,climate change,diversity2022 ESG engagement rating from investors ( 23%from 2019)64.38 out of 5Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 7Board of Directors DiversityMaintaining Strong Corporate Governance&ESG Oversight Robust corporate governance practices are critical to executing our business strategy and driving long-term,sustainable value creation.Our overall governance framework is designed to drive strong oversight,create Board and management accountability and demonstrate PayPals commitment to transparency,independence and diversity.We seek to apply the same approach to the oversight,management and implementation of our ESG strategy.Our commitment to strong corporate governance is detailed in our Proxy Statement,which provides extensive disclosure on our Board structure and composition,strategy and risk oversight,stockholder engagement,executive compensation and other key governance topics.2022 Corporate Governance Highlights Independent Board Chair with significant responsibilities 11 of 12 directors are independent and all directors stand for annual election Director service limited to no more than four public company boards,including the PayPal BoardDiverse characteristics considered in assessing Board composition including sexual orientation,ethnicity,nationality and cultural background Committed to actively seeking highly qualified women and individuals from underrepresented communities to include in the initial pool from which director nominees are chosen Annual performance self-evaluations by the full Board and each committee Majority vote standard for uncontested director electionsStockholder right to call a special meeting Proxy access for qualifying stockholders Strong stockholder engagement practicesRobust stock ownership requirements for our executives and directorsIncorporating ESG-Related Performance into Our Executive Compensation ProgramBuilding on the long-standing risk and compliance ratings for each executive and the incorporation of diversity,inclusion,equity and belonging(DIE&B)considerations as part of our executive compensation program beginning in 2021,we continued to incorporate DIE&B actions and outcomes in our 2022 Annual Incentive Plan.Prioritizing Diverse Perspectives in Our Board&LeadershipWe seek to ensure our Board is composed of directors who have highly relevant skills,professional experiences and backgrounds,bring diverse viewpoints and perspectives and effectively represent the long-term interests of our stockholders.The Board conducts in-depth reviews on business strategy and engages with leaders on key topics of interest,including business objectives,the competitive landscape,capital allocation and ESG matters.The Board values succession and refreshment as critical components of promoting and supporting the Companys long-term strategy.The Corporate Governance and Nominating Committee (Governance Committee)regularly oversees and plans for director succession and Board refreshment,in addition to reviewing executive succession planning at least annually.WOMEN ETHNICALLY DIVERSE WOMEN ETHNICALLY DIVERSE MEN MEN“At PayPal,we believe that sound ESG governance and oversight is integral to our business and our ability to drive company performance,deliver on our mission and uphold our values.Our enterprise-wide approach to responsible business management helps us drive and protect brand value,manage risk,demonstrate competitive differentiation,position PayPal as an employer of choice and support future opportunities for growth and innovation.”Brian YamasakiVP,Legal&Corporate SecretarySan Jose,CA,U.S.7 Ethnically diverse includes U.S.EEO-1 defined categories American Indian or Alaska Native,Asian,Black or African American,Hispanic or Latino,Native Hawaiian or Other Pacific Islander or Two or More Races.8 As of December 31,2022.2022 Corporate Governance Highlights50%of the Board are women and/or ethnically diverse764%of the of Executive Leadership Team are women and/or ethnically diverse7,8Executive Leadership Diversity WOMEN ETHNICALLY DIVERSE MEN MENPayPal ranked on Fortunes Modern Board 25 list of the most innovative boards of directorsMessage from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 8Adopting Sound ESG GovernanceWe believe our approach to ESG management is linked to long-term value creation for our stakeholders,including stockholders,employees,customers and the communities and markets where we operate.The Governance Committee,comprising entirely independent directors,oversees PayPals ESG program and regularly reports out to the Board.In addition,the Compensation Committee and Audit,Risk and Compliance Committee(ARC Committee)are responsible for oversight of ESG issues associated with their respective areas of responsibility.Our cross-functional ESG program is directed and managed in collaboration with executives,including our Chief Financial Officer and Chief Corporate Affairs Officer,and implemented by cross-functional working groups with guidance and direction from the ESG steering committee.Representatives from the ESG steering committee brief Board committees and executive leadership on ESG issues quarterly and meet with a subcommittee of the Enterprise Risk Management Committee at least annually to review current and emerging ESG-related risk topics.OversightManagementImplementationExecutive ManagementESG Steering Committee&Working GroupPayPal Board of DirectorsOversightOur Board of Directors is actively engaged on ESG matters that impact business strategy.Governance Committee:Oversight of PayPals management of ESG topics,including overall ESG strategy,risks and opportunities,stakeholder engagement and programs and initiatives in social innovation and environmental sustainability ARC Committee:Oversight of the Companys risk framework and enterprise-wide compliance program,including cybersecurity and privacy matters Compensation Committee:Oversight of the Companys strategies and responsibilities related to human capital(global talent)management,including diversity and inclusion,pay equity efforts and corporate culture ManagementOur executive management directs and manages the execution of our enterprise-wide ESG strategy to help ensure non-financial risks and opportunities are appropriately integrated across the enterprise,including through the Enterprise Risk and Compliance Management Program(ERCM Program)ImplementationAn ESG steering committee and cross-functional working groups with representatives from more than 20 functions are responsible for overall program implementation GovernanceARCCompensation“Our mission to create a more inclusive global economy is central to all that we do,including in defining our global ESG strategy.Guided by our Values and Leadership Principles,we continue to demonstrate how our ESG strategy is a reflection of the work we do through our business,partnerships and programs to support operational priorities,drive impact and create value for our stakeholders.”Kristina FriedmanHead of Global ESG Strategy New York,NY,U.S.9Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 9 As of December 31,2022.10 Foreign exchange rate neutral.11 Through PayPal Business Loans and PayPal Working Capital in the U.S.,U.K.,Australia and Germany.12 The PayPal-defined estimated net disposable income is the percent of discretionary income remaining for our employees after taxes and typical living expenses are paid.This metric is calculated through a third-party model that utilizes independent data on market-based costs across selected geographies.The model was enhanced from prior periods to incorporate best practices and methodological improvements.14 Ethnically diverse includes U.S.EEO-1 defined categories American Indian or Alaska Native,Asian,Black or African American,Hispanic or Latino,Native Hawaiian or Other Pacific Islander or Two or More Races.13 Global women and U.S.ethnically diverse men.2022 Highlights$27.5Bin revenue( 8%spot basis and 10%FXN10 from 2021)435Mactive accounts ( 2%from 2021)$1.36T total payment volume ( 9%spot basis and 13%FXN10 from 2021)22.3Bpayment transactions ( 16%from 2021)Select Awards&RecognitionsIntroduced enhanced passwordless authentication for our customers and employeesparticipated in Data Week,double the engagement from last yearby all employees in 2022 annual training cycle4K employees facilitated for small-and medium-sized businesses11 maintaining an average international remittance rate below 3%,aligned with the U.N.SDG 2030 targetdonated by 55M customers through the PayPal Giving Platform$4.2B in access to capital2.9%average international remittance rate$20B to nonprofits and causes26%minimum eNDI globally100KhoursKey ESG Metrics9 Key Financial&Operational Metrics9 RESPONSIBLE BUSINESS PRACTICES EMPLOYEES&CULTURE SOCIAL INNOVATION ENVIRONMENTAL SUSTAINABILITYJUST Capital Americas JUST 100Newsweek Americas Most Trusted BrandsForbes Worlds Best EmployersFortune Worlds Most Admired CompaniesCDP Climate Rating A-achieving our goal to reach at least 20%PayPal-defined eNDI for our employees globally12 reaching 44%global gender diversity and 54%U.S.ethnic diversity14volunteered by employees across our workforce56%diverse workforce representation13demonstrating progress toward our science-based targetshave set or committed to science-based climate targets16including 100%renewable energy sourcing for our data centers globally80%operational emissions reduction15 39%vendors by spend Americas Europe&Middle East Asia-Pacific29.9Kglobal employees 44C From 2019 baseline.Operational greenhouse gas emissions include those emission sources covered by Scope 1 and Scope 2 market-based method(MBM)as defined by the Greenhouse Gas Protocol and the Science-Based Targets initiative.While we observed operational GHG reductions exceeding our 2025 goal,we recognize that in future years this may change as employees continue to return to the office and the Company continues to grow.16 We continue to refine our assessment methodology to include vendors within relevant Scope 3 categories,including purchased goods and services,capital goods,business travel and upstream transportation and distribution.90%total renewable energy use100%training completionMessage from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 10SDGs Reflected in This SectionResponsible Business Practices Safeguarding customer trust and operating in a consistent and ethical manner are vital to achieving the Companys long-term business strategy.These efforts are underpinned by our approach to risk management and oversight,including policies and standards to protect our customers and platform.Across our enterprise,we are committed to the goal of responsibly managing our infrastructure,protecting customer data,efficiently managing our supply chain and advocating for policies that promote the interests of our customers,employees and communities.In This Section Managing Risk&Compliance Enabling Effective Cybersecurity Management Enriching Global Data Management&Privacy Oversight Upholding Business Ethics2022 Summary Highlightsduring our third annual Data Week 100%training completionby all employees in 2022 annual training cycle4K employees attended50 sessions Introduced enhanced passwordless authentication for our customers and employees.Revised our enterprise risk categories to reflect our latest risk assessment.Established five principles for Responsible Artificial Intelligence(AI).“The industry faces pressure to prioritize speed and efficiency over effectiveness and safety.At PayPal,we know that our biggest currency is trust with customers,regulators,employees and other stakeholders and now is the time to focus on continuing to invest in our risk management practices and prioritize safe and secure products for all.”Andrea DonkorSVP,Global Regulatory Relations and Consumer Practices,PPI Chief Compliance Officer New York,NY,U.S.Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 11Managing Risk&ComplianceWe apply the Three Lines of Defense model for risk management,which consists of management,oversight and independent assurance.Our executives are responsible for assessing and managing risk with independent guidance and oversight from our company-wide Risk and Compliance Oversight function.Our Board of Directors is responsible for overall risk assessment and management oversight,with the ARC Committee overseeing and reviewing our overall risk management framework.Our Internal Audit program seeks to provide independent assurance and is externally assessed by the Institute of Internal Auditors(IIA)to conform with the IIA Code of Ethics and Standards.Our Enterprise Risk and Compliance Management Program(ERCM Program)reflects PayPals programmatic approach to identifying,measuring,managing,monitoring and reporting key risks facing our Company.In 2022,we revised our enterprise risk categories to reflect our latest assessment.Our risk management committees oversee the implementation and execution of the ERCM Program,including the Enterprise Risk Management Committee(ERMC).The ERMC is the highest-level risk management committee and is co-chaired by PayPals Chief Risk and Compliance Officer and Chief Enterprise Services Officer,which regularly review and discuss the overall effectiveness of the ERCM Program with the ARC Committee and the full Board.To further reinforce the link between our governance of ESG matters and our risk management programs,we regularly report on emerging ESG trends to a subcommittee of the ERMC.Setting Strong Business Resiliency Practices&PoliciesWe take an enterprise-wide approach to business resiliency in order to manage and minimize the impacts of a disaster or other incidents that may disrupt PayPal business functions,IT systems,customers and the broader financial sector.Our PayPal Resiliency Program is designed to reduce continuity of operations risk,enable mitigation of potential impacts,prepare teams to respond effectively,maintain operations during periods of disruption and safeguard employee welfare.This program applies across PayPal and its subsidiaries,as well as to third parties acting on our behalf.Aligned with the ISO 22301 standard,the Federal Financial Institutions Examination Council and other governmental regulatory standards,our Enterprise Resiliency Policy outlines scenario planning procedures,functional roles and responsibilities,reporting expectations and documentation management for business continuity and disaster recovery at PayPal.This includes:Regular training for identified Incident Response Team members across business functions.Requirements for at least annual tabletop exercises and testing to provide ongoing readiness.Recovery and restoration protocols following an incident.Protecting the Health&Safety of Our PeoplePayPal Global Safety and Security teams are tasked with monitoring,evaluating and responding to acute and chronic physical risks to our operations,including extreme weather and other events,as part of our incident response procedures.We also develop and implement risk management procedures and programs related to the personal safety of employees,including accident and injury prevention,wellness promotion and compliance with applicable environmental and health and safety laws and regulations.PayPals Environmental Health&Safety(EHS)Policy&Procedures align with the ISO 45001 standard,apply to all PayPal facilities and functional areas and detail the requirements,roles and responsibilities related to environmental health and safety risks,controls,monitoring,reporting and escalation.We are committed to continuing to improve our EHS program and regularly conduct reviews to facilitate compliance with relevant national and local EHS regulatory requirements.In addition,we formally mapped and integrated key ESG topics and programs into our enterprise risk taxonomy and strive to continually enhance our risk management approach globally.For example,in 2022,in collaboration with our teams across Europe,we identified an initial set of risk metrics to evaluate environmental risk management in the region,in accordance with legal requirements.Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 12Prioritizing External Validation&Engagement on Our Information Security ProgramOur commitment to security is evident in our efforts to adhere to industry best practices and alignment with top frameworks such as the NIST Cybersecurity Framework and ISO 27001 certification.Reinforcing our dedication to maintaining high standards,we have proudly served on the Board of Advisors for the Payment Card Industry(PCI)Security Standards Council since 2015.PayPals internal audit and oversight testing functions regularly review our information security programs.In addition,our information security program is externally validated,including annual audits conducted by independent third parties covering ISO 27001,PCI-DSS,PCI-P2PE,PCI PIN,SOC-1 and SOC-2.We also actively contribute to security standards through PCI and remain engaged with governments worldwide to stay abreast of evolving threats and manage risk.Enabling Effective Cybersecurity ManagementThe security of our customers and platform is one of our top priorities.We continue to implement a proactive security philosophy intended to provide strong oversight structures to achieve our security goals.Our Chief Information Security Officer(CISO)oversees our cybersecurity management function across our global enterprise,with Board oversight from the ARC Committee.As part of our ERCM Program,our Information Security Program is designed to support the Company in identifying,protecting,detecting,responding to and recovering from cybersecurity threats.PayPals Collaborative Approach to Further Customer ProtectionPayPals unique two-sided network gives us the opportunity to enhance customer protection through a combination of sophisticated risk models,fraud detection and data security controls.PayPals cybersecurity teams,in coordination with the Cyber Defense Center,defend against and mitigate risks to the availability of our systems,as well as protect the data we process and store.PayPals anti-fraud teams,in coordination with the Fraud Defense Cyber Center,focus on operationalizing fraud intelligence to proactively prevent fraud and abuse and mitigate risk to our products,services and customer data.Protecting our customers and platform is a joint effort of these crucial functions.Our security and fraud teams work alongside customer support to collaborate and share insights to empower internal and external partners to enhance PayPals customer and data protection capabilities.We perform 24/7 monitoring and measurement to promote system reliability and maintain the integrity of PayPals production and corporate environments.Securing Our Customers&Platform We continue to invest our time and resources in strengthening the security of our products and services to remain one of the worlds most trusted payment platforms.In 2022,PayPal implemented enhanced passwordless authentication for our customers through the introduction of passkeys and for employees accessing devices and applications that leverage corporate-managed identities.See our Social Innovation section for more information.PayPals Incident Management process provides a coordinated approach to promote effective and timely risk response and management of highly impactful events.Our program aims to prepare us for a range of incidents we may encounter,including those pertaining to technology,fraud,cybersecurity,security and our brand.We focus on quick and effective mitigation of incidents,restoration of services,recovery of impacts,as well as communications and root cause and corrective feedback mechanisms.PayPal helps protect customers from phishing through security awareness initiatives,proactive phishing site takedowns and improved phishing detection across the ecosystem.For example,last year we published a new consumer awareness video tutorial on how to detect and report phishing to PayPal.In 2022,we also released findings from our two-year research project on new techniques to defend against advancements in phishing websites at the ACM Computer and Communications Security Conference.Maintaining PayPals Thorough Cyber Attack Risk Response ProcessIn addition to cyber threat monitoring and quarterly cybersecurity risk assessments,we review and conduct exercises on our disaster recovery and business continuity plans at least annually.We have an established breach response process to protect the integrity of PayPals platform.Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 13Promoting Awareness&Education for Employees Our Information Security Training and Awareness program focuses on employee development and education,the needs of the enterprise and the shifting cyber-threat landscape.In addition to required annual information security compliance training for all employees and contractors,we offer ongoing learning opportunities to increase security awareness across PayPal,with specific educational programs for our engineers.Our 2022 Cybersecurity Awareness Month included various activities,including our third annual internal Security Conference.We engaged with our employees globally throughout the month,providing a broad range of opportunities to expand their security knowledge and awareness.Partnering to Advance Security&Protection Capabilities PayPal is actively involved with organizations to support the advancement of the security ecosystem and improve customer protection.Current memberships and sponsorships include the Anti-Phishing Working Group(APWG),Financial Services Information Sharing and Analysis Center,FIDO Alliance,Women in Cybersecurity,World Economic Forums Centre for Cybersecurity and National Cyber-Forensics Training Alliance.In 2022,we contributed to continued research with leading research groups,peer companies and universities to support a more secure digital economy for all,including:Finalizing research with Georgia Institute of Technology,resulting in the development of risk signals to help prevent fraud in a passwordless authentication environment.Partnering with the Official Monetary and Financial Institutions Forum to publish The Role of Data Science in Maintaining Trust and Responsible Innovation,underscoring how data can be used effectively to protect consumers from fraud and improve the quality of the user experience.Continuing our work with the APWG and presenting findings on pervasiveness of scam websites and the protections that can be implemented to help prevent these sites from reaching users at the 2022 eCrime Conference.Collaborating with North Carolina State University to improve customer protection by measuring and supporting the prevention of abuse of telecommunication infrastructure in phishing attacks and scams.Safeguarding Our Platform&Customers from Illegal ActivityWe continuously work to combat and prevent the illicit use of our services and strive to make our platform safe and secure for all to use.We devote significant resources globally to financial crime compliance and refer cases to assist law enforcement officials in their efforts to identify,investigate and stop illegal activity.We also seek to amplify our capabilities beyond PayPal through multisector partnerships and initiatives and look for new opportunities to utilize our data,relationships and investigation teams to further protect our customers and communities.We employ our expertise to identify,interrupt and enable prosecutions for those who traffic fentanyl,opioids and other drugs,launder money,defraud customers,engage in human trafficking and child exploitation and enable terrorist activities.For example,as a member of the Tech Coalition and ICMECs Financial Coalitions,we work collaboratively to protect children from online sexual exploitation and abuse.This partnership model will continue to be an important lever in contributing to the work of stopping global financial crimes.Delivering a Wide-Ranging Bug Bounty Program PayPal partners with HackerOnes global community of independent security researchers,who help to make our products and services more secure.We hosted our third annual LiveHack Event in 2022,to bring together PayPal security engineers,external researchers and the HackerOne triage team to find and remediate vulnerabilities in real time within PayPals internal applications.We also held an internal Bugfest event,where PayPal engineers from across the globe collaborated in person and virtually to improve the security,functionality and user experience of our products.“As a founding member of ICMECs U.S.and APAC Financial Coalitions against Child Sexual Exploitation and a long standing partner of more than 15 years,PayPal continues to graciously share knowledge,time and expertise with financial industry peers to help counter child sexual exploitation and abuse online.The companys generous financial and in-kind support is vital to furthering our global efforts to make the world a safer place for all children.”Bindu SharmaVice President,Global Policy&Industry AlliancesManaging Director,Asia PacificInternational Centre for Missing&Exploited ChildrenMessage from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 14Fortifying Our Approach to Data HygieneThe EDG Program aims to proactively drive consistent and standardized internal data management practices and processes to strengthen trust and confidence in PayPals data,support future business growth and achieve Company objectives.We deploy data quality measurements and monitoring to protect critical data identified across the Company.PayPals EDG Program supports end-to-end data management,from collection to disposal.The team collaborates with functions across the business and helps establish practices in accordance with our industry-aligned enterprise data management framework,which includes data quality,accountability,stewardship and risk management.Our Enterprise Data Governance Policy and associated documents align with this overarching framework.Also in 2022,the Data Management Oversight function developed additional internal policies to enhance our data management risk oversight and regulatory compliance controls,including formalizing policies on open banking and data localization.The team also developed risk statements to identify,establish and document accountability,controls and risk mitigation practices on relevant data management risks.Enriching Our Global Data Management&Privacy PracticesWe work to embody a data-and privacy-aware culture that prioritizes responsible use of data through transparency,education,enterprise standards and innovation.PayPal has established a tiered governance structure to drive data management best practices and accountability across the Company.For information on how we empower and educate our customers on data privacy see Social Innovation.Our Enterprise Data Governance(EDG)Program,included in the office of the Chief Information Officer,advances our enterprise data management and governance activities.Our EDG Program partners with the Global Privacy and Data Management Oversight function,led by our Chief Privacy Officer,which is independent from the business,provides oversight as part of the ERCM Program,and is ultimately overseen by the Board through its ARC Committee.PayPals internal audit function conducts independent reviews of the data management and privacy programs and assesses the effectiveness of governance,risk management and controls.Additionally,all PayPal employees and contractors are required to complete annual training on privacy and data management,and,in 2022,PayPal held its first annual data stewardship training.Strengthening Our Global Privacy Program&Policy InfrastructureOur Global Privacy Program guides and supports the business based on our Data Management Principles and Privacy by Design practices and helps to ensure that our privacy program is in compliance with the evolving global privacy landscape and regulatory guidance.The Global Privacy Program includes the execution of the privacy risk assessment process,preparation of the Annual Privacy Plan,privacy monitoring and testing,issue management and training.Based on our Data Management Principles,PayPal strives to maintain strong oversight and standards on central tenets of data privacy,including notice and transparency,choice and consent and data lifecycle management.17 Our program is focused on driving awareness and enabling our teams to consider these principles in strategies and decision-making processes related to the collection,use,minimization and sharing of data.18 All employees,contractors and third parties are required to follow the Enterprise Record Retention policy that defines our practices on the storage and retention of data.See our Legal Hub and Privacy Statement for additional information.“Establishing trust in technology requires maintaining data responsibly,and with the utmost integrity.At PayPal,our Enterprise Data Governance Program does this through the implementation of robust systems,oversight and controls that promote accountability,transparency and risk management.By incorporating privacy into our design process,and maintaining a strong culture of compliance,our program seeks to uphold the highest standards of data management.”Archie DeskusEVP,Chief Information OfficerSpring,TX,U.S.Our Board and senior management review the Annual Privacy Plan and management provides periodic reporting to the ARC Committee,the ERMC and others as appropriate on the strategy,implementation and effectiveness of privacy risk management,including reports on emerging trends and topics,privacy-related audits and examination highlights and privacy impact assessment results and escalations.Data Management Principles66Standardization StewardshipData QualityData LifecycleManagement17 SecurityChoice&Consent Notice&Transparency Management17 Data lifecycle management includes collection,use,retention,disposal,sharing,transfer,access and quality.18 As noted in our Privacy Statement,we will only share customer information with third parties if the information is necessary for the business and the customer is properly informed.Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 15Partnering to Advance Privacy by DesignPayPals Global Privacy team is collaborating with the Center for Financial Inclusion at Accion,an independent global think tank that uses research and advocacy to advance inclusive financial systems for low-income people around the world.Through this partnership,we are exploring the intersection of digital finance and data privacy and working to create a free,implementable toolkit for fintech companies to embed privacy principles into the design of their financial products and services.Executing Data Privacy Due Diligence on Third PartiesPayPal seeks to conduct due diligence on third parties privacy policies and data protection safeguards,including for potential acquisitions and strategic investments,to help ensure the controls are consistent with PayPal policies and applicable laws.The process involves review of internal and public-facing policies and practices,internal systems that access or store data,data security reports,data processing registrations and submissions to relevant governmental bodies to understand past and current data practices.Committing to Responsible AI PracticesAs industry moves toward adopting more Artificial Intelligence(AI)systems,PayPal is committed to promoting the responsible use of this technology across our business.Weve established a Responsible AI Steering Committee consisting of cross-functional representatives who oversee AI-related developments and provide regular updates to our Chief Risk and Compliance Officer for appropriate escalation to our ERMC and Board.We have established five principles of Responsible AI,which are aligned with global regulators guidance.We have taken a risk-based approach to adopt these principles by prioritizing potentially high-risk AI applications.Five Principles of Responsible AI:Driving a Data-Responsible CultureIn 2022,PayPal employees hosted and attended our third annual Data Week,which helps build employee awareness of the latest advances in data topics and continues our culture of data responsibility,privacy and strong data governance.Over 4,000 employees participated live across 52 sessions around the world,double the engagement from 2021.Fifty-five teams composed of 175 participants submitted their ideas to the Data Week hackathon showcasing their dedication to effective data management across the Company and to our core values of Innovation and Collaboration.“To innovate responsibly means we must think deeply about the impacts of technology on our customers lives,so that more people reap the benefits of innovation,while providing governance and mitigating unintended risks and potential harm.At PayPal,we take an intentional and rigorous approach to deploying technology to ensure the protection and trust of our customers.”Jean ChongVP,Financial and Model Risk OversightNew York,NY,U.S.ExplainabilityTransparencyFairnessPrivacySecurityPayPal ranked#38 on Newsweeks Americas Most Responsible Companies listMessage from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 16appropriate next steps,which may range from control environment enhancements to termination.In 2022,we continued to build awareness of ESG considerations with internal stakeholders across the vendor lifecycle.We also conducted one-on-one engagements with high-impact suppliers on climate change and continued our efforts to support supplier diversity.Read more about how we engage our vendors on diversity and climate change in Employees&Culture and Environmental Sustainability,respectively.Committing to Political TransparencyPayPals commitment to pursuing transparent disclosure and strong governance extends to our lobbying and political transparency policies and practices.We adopted many of the best practices put forth by the Center for Political Accountability in their Zicklin Index and in 2022,we maintained our“Trendsetter”categorization.20 The Governance Committee oversees our political contributions,lobbying expenditures and interactions with government officials.To provide consistency with the Companys business objectives and public policy priorities,at least annually the committee reviews and discusses with management our political activities and expenditures,including those of the PayPal Political Action Committee,as well as Company-related guidelines and policies.To find out more about PayPals lobbying disclosures and political transparency practices,please visit our Government Relations website.Upholding Business EthicsOur Speak Up culture is espoused by our leadership and actively promoted by the Ombuds/Ethics team through outreach and awareness sessions.Our Chief Risk and Compliance Officer provides periodic updates to the ARC Committee on significant program metrics and investigations.We require every employee and contractor to complete our annual training,which covers areas such as our Code of Conduct,anti-money laundering,information security awareness,data privacy,anti-bribery and corruption,safety and security and sexual harassment awareness and prevention.In addition,upon joining PayPal and annually thereafter,our employees must certify that they understand and will comply with the Code of Conduct.Beyond our Code of Conduct,we require all employees,third parties and other stakeholders such as contingent workers to abide by our enterprise policies,including our Conflict of Interest,Ethics Reporting and Whistleblower and Anti-Bribery and Corruption policies.Our Code of Conduct reinforces that we are all empowered to speak up or seek advice without fear of retaliation.Employees have multiple avenues to share their concerns or ask questions anonymously.WHEN to speak up:CultureWorkplace SafetyMisconductHOW to speak up:Call the confidential Integrity Helpline available 24/7 in multiple languagesEscalate concerns or questionswith their manager or HR business partnerEmail the Ombuds/Ethics teamdirectly using the dedicated Speak Up email aliasEngage a Business Ethics Officerin their local officeManaging Our Supply Chain ResponsiblyDue to the digital nature of our business,our supply chain consists primarily of the procurement of various direct and indirect goods and services(such as IT infrastructure,marketing,real estate,consulting and labor)and corporate partnerships.We work with a small number of third parties to manufacture goods(e.g.,Zettle card readers)and do not manufacture anything directly.Across our value chain,we seek to partner with third parties who share our commitment to business ethics.All third parties and subcontractors are expected to comply with our Third Party Code of Conduct&Ethics,which sets forth our expectations regarding human and labor rights,environmental responsibility,anti-bribery and improper payments,occupational health and safety,consumer protection,financial crimes compliance and other requirements.Our third-party risk management program works to establish appropriate risk-based due diligence for new and existing suppliers based on the potential risks and impacts of their product or service to our business.We aim to hold our third-party partners to high standards of risk management and ethical behavior,and review and investigate potential noncompliance to determine 100%employee completion of 2022 annual training1919 Does not include exempt employees that are on leave during the due date of trainings.All training is tracked internally through PayPals Learning Management System.20 Companies that receive a score of 90 or above indicating robust disclosure and oversight are identified as“Trendsetters”in the CPA Zicklin Index.Our Code of Business Conduct&Ethics(Code of Conduct),available in 14 languages,provides guidance for our employees,directors and everyone working for PayPal and its subsidiaries on ethical and responsible behavior.We refresh the Code of Conduct at least annually to reflect our latest programs,policies and expectations.Our most recent update incorporated our new Leadership Principles.Respecting Human RightsOur Code of Conduct outlines our commitment to managing potential human rights risks and opportunities across the Company,which is informed by our initial human rights impact assessment completed in 2021.Additionally,our Joint U.K.and Australia Modern Slavery Statement highlights the steps we have taken to mitigate and prevent modern slavery and human trafficking practices across our Company and value chain.Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 17SDGs Reflected in This SectionSocial InnovationEconomic opportunity is core to our mission at PayPal it influences the products we create and the partnerships we form and enables us to create stakeholder value by expanding our services to meet our customers needs.We are committed to transforming the digital payments ecosystem to advance the success of businesses and individuals around the world,driving opportunity for the underserved and underbanked to support our communities and leveraging our platform to promote global generosity.This year,we introduced and enhanced our product offerings to continue to provide merchants,entrepreneurs,consumers and nonprofits the tools they need to thrive in the digital economy.In This Section Promoting Economic Opportunity for SMBs&Entrepreneurs Advancing Financial Health&Consumer Convenience Maintaining a Safe Platform for Customers Creating More Ways to Give21 Deletion is available in select markets for accounts in good standing that meet applicable record retention timeline requirements.22 Through PayPal Business Loans and PayPal Working Capital in the U.S.,U.K.,Australia and Germany.2022 Summary Highlights Offered new products and services to help consumers save on everyday purchases and advance long-term financial goals through PayPal Rewards,PayPal Savings and responsible Pay Later solutions.Through our Economic Opportunity Funds investments in 19 venture capital funds,we supported over 250 early-stage companies,many with diverse founders.Over 1 million accounts enrolled in passkeys since launch in October 2022.Expanded our automated self-service portal globally to customers in over 200 markets to help them exercise their individual right to manage their personal data and marketing choices,as applicable.21 Enabled more than$600 million in humanitarian aid and refugee support in Ukraine through PayPal and our partner platforms.Facilitated over 1.2 million loans to small-and medium-sized businesses(SMBs)since 2013,resulting in access to more than$25 billion in capital,including$4.2 billion in 2022.22Assisted 55 million customers in donating over$20 billion in funds to nonprofits and causes globally.1.2Mloans$20B customer donationsMessage from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 18Delivering Efficient Payments to FreelancersWith Mastercard,we introduced the Hyperwallet Original Credit Transaction,which supports large businesses and marketplaces in delivering quick and secure payments to contract workers,freelancers and others,helping payees receive earned money almost instantly.The service launched in select markets in Europe in 2022.This year,we added to our credit offerings with the PayPal Business Cashback Mastercard,23 which enables small business owners to get unlimited 3sh back on all PayPal purchases and 2sh back on everything else with no annual fee,so they can earn rewards on purchases to reinvest in their business.24We launched the Venmo Business Grant Program,an initiative designed to support emerging and small business owners using Venmo Business Profiles.Twenty finalists each received a$10,000 grant to use toward business expenses,as well as technical advice and mentorship from PayPal and Venmo employees and our partners Start Small,Think Big and Taproot Foundation.We enhanced PayPals complete payments solution for SMBs,providing simplified checkout options and more payment choices to improve customer experience and help drive checkout completions.Happy Returns partnered with Shopify to launch Return Shopping,a free feature allowing Shopify merchants,many of whom are SMBs,to re-engage customers during the return process.Merchants can waive processing fees on returns and offer customers discounts to incentivize the purchase of new items from their websites.It also helps merchants simplify their accounting and financial reporting by keeping the transactions separate.Promoting Economic Opportunity for SMBs&EntrepreneursWe believe our platform,products and services can help to support the operations and growth of entrepreneurs and SMBs.Beyond providing SMBs with a suite of business-critical products and services,we also establish partnerships,conduct research and advocate to enhance opportunities for businesses globally,particularly those businesses from historically underserved and underbanked communities.Supporting SMBs With New Products&Partnerships We expanded the global availability of select products to help deliver a flexible in-store checkout experience by:Extending the availability of the Zettle Terminal mobile point-of-sale device to merchants in the U.S.Launching Tap to Pay with Zettle by PayPal for SMBs in the Netherlands,Sweden,the U.K.and additional markets across Europe,enabling individual sellers and small businesses to accept contactless payments in person on their Android mobile devices with no additional fees.Facilitating Small Business LendingIn 2022,we reached a new milestone of facilitating access to over$25 billion in capital for SMBs since 2013 through more than 1.2 million loans as part of our merchant financing solutions,including PayPal Working Capital and PayPal Business Loans.26 To expand our reach and support SMBs in new markets,this year we launched PayPal Working Capital in France and the Netherlands.1.2M loans to SMBs since 2013$25B in access to capital for SMBs since 2013$4.2B in access to capital for SMBs in 2022Learn more about SMBs that have found success with the help of PayPal products by visiting our Small Business Spotlight series.2 million Venmo Business Profiles25Investing for Fintech InnovationThrough PayPal Ventures,our corporate venture capital arm,we strategically invest in promising financial technology,commerce,infrastructure and blockchain startups to help bring transformative solutions to market.Since its inception in 2017,PayPal Ventures has made more than 65 investments totaling$1.35 billion.New investments in 2022 included the following:Forage builds payments infrastructure that processes government benefits,starting with SNAP EBT(food stamps)online,enabling 42 million Americans to spend their food benefits on the internet.Northstar makes it easier for employees to access affordable,personalized financial advice by working with leading companies to provide financial wellness tools.Paymob develops financial technology solutions that power millions of transactions and fuel the growth of businesses of all sizes across the Middle East,Africa and Pakistan.Xepelin created a financial services platform to help provide fair and efficient access to resources and capital for SMBs in Latin America.“While one in eight Americans receives government assistance to buy groceries,until recently,recipients were unable to use their benefits online.At Forage,our mission is to democratize access to government benefits,and PayPal Ventures funding will help us to expand the acceptance of SNAP EBT payments online for low-income Americans.”Ofek Lavian Co-Founder&CEO,Forage25 Since launch through December 31,2022.23 PayPal Business Credit Card is offered in collaboration with Concerto Card Company and WebBank.24 Purchases and other transactions subject to credit approval.See the Business Cash Rewards Terms and Conditions for details.To earn Business Cash Rewards on eligible purchases,you must have an open Business account with PayPal to which your Business Card is linked.If your Business account with PayPal is closed for any reason,you will no longer be able to earn Business Cash Rewards and will forfeit any remaining Business Cash Rewards balance.26 The lender for PayPal Working Capital,PayPal Business Loan and PayPal Loan Builder is WebBank.Supporting Sun Market Through a Venmo Business GrantSun Market provides access to organic,locally grown and affordable produce for food-insecure communities.As a Venmo Small Business Grant recipient,founder Gabbie Atsepoyi will now be able to sell produce at half price to families,build another storage facility and create an online marketplace to extend access to fresh produce.Gabbie Atsepoyi Founder,Sun MarketVenmo Business Grant RecipientMessage from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 19Enabling Opportunity for Underserved BusinessesWe continue to build on our work to support small businesses,particularly those from underserved and underrepresented communities,including Indigenous,Black,Latinx and women-owned businesses globally.Working to Expand Access to Capital Through the Economic Opportunity FundWe continue to make targeted investments through our Economic Opportunity Fund(EOF),a$500 million commitment to leverage treasury deposits and fund investments to increase access to capital for underserved communities.We have created a sustainable investment strategy focused on meeting our treasury requirements of preserving capital and generating returns,while supporting an enhanced flow of institutional capital toward traditionally underinvested communities and businesses.For example,in 2022,we:Renewed$90 million in deposits to OneUnited Bank and Optus Bank,two Black-owned banks and Community Development Financial Institutions.Invested in two new funds,including the BlackRock Impact Opportunities Fund.To read more,see Values in Action.Partnering to Drive ImpactIn 2022,we began new partnerships and extended existing relationships to support underserved communities in the U.S.,including:Continuing to support The Southern Communities Initiative(SCI)in the deployment of corporate resources into communities across the southern U.S.,home to over 50%of all African Americans.Joining the Corporate Advisory Council of the National Center for American Indian Enterprise Development,which is focused on supporting Indigenous-owned businesses and tribes through access to economic opportunity.Participating as founding members of the Small Business Digital Alliance,a public-private co-sponsorship between the U.S.Small Business Administration(SBA)and the nonprofit Business Forward Inc.aimed at promoting Americas economic competitiveness by connecting entrepreneurs with critical digital tools and resources.Celebrating the 5th Annual PayPal Small Business Month by providing educational resources to entrepreneurs,including by leading discussions with SMB thought leaders and policymakers,and providing SMBs dedicated support through our Business Resource Center.Collaborating with Reimagine Mainstreet and several Chambers of Commerce,conducting a survey of more than 2,500 SMBs and hosting a virtual panel discussion with the SBA on small business trust in financial institutions and expanding access to capital.Championing Womens Economic Equity We believe we have a responsibility to promote the role of women in the financial system and advance economic equity through our resources,platforms and tools.As the private sector lead for the Economic Justice and Rights Action Coalition of the U.N.Womens Generation Equality Forum,we made a commitment of$108 million to advance financial inclusion and economic empowerment for women and girls by 2026.In 2022,we made progress by:Funding technical assistance and research with Womens World Banking on topics such as identifying gender biases in credit scoring.Signing on to the U.S.Department of Commerce and the Office of the U.S.Trade Representatives Indo-Pacific Economic Framework for Prosperity(IPEF)Upskilling Initiative and pledging to provide women and girls in the IPEF emerging economies with 500,000 or more upskilling opportunities in 10 years.Providing 11,000 employee volunteer hours in support of women and girls globally,surpassing our goal of 10,000 hours in the first year.27 Utilizing the 2X Criteria in our treasury portfolio to identify investment funds and financial intermediaries that support womens economic interests.Celebrating the Legacy of Maggie Lena Walker For the second year,PayPal honored the legacy of Maggie Lena Walker,the first Black woman and first woman to charter and lead a U.S.bank,with the Maggie Lena Walker Awards,which acknowledge the achievements of women who work to provide economic opportunity in underserved communities.Achievement Award recipient Connie Evans was the founding president of the Womens Self-Employment Project,the first and largest urban microbusiness development organization in the U.S.,and the first Black woman elected to serve on the Board of the Federal Reserve Bank of Chicago.Under her leadership,the Association for Enterprise Opportunity expanded to represent more than 2,600 microbusiness development practitioners and advocates for economic opportunity for underserved entrepreneurs.28 Survey looked at jobs created,diverse employees,consultants and service providers among other aspects of the funds.29 Based on 2021 EOF investments.Ethnically diverse includes Black,Latinx,Native American and Pacific Islander.30 Based on 2021 EOF investments.Compared to 2%in traditional investment funds,per Bloomberg,Female Founders Raised Just 2%of Venture Capital Money in 2021,2022.Supporting Underrepresented Minority Founders&InvestorsThe 19 minority-led and geographically diverse venture capital funds we invested in through our EOF deployed nearly$300 million in capital to over 250 portfolio companies globally,often benefiting minority and female-led businesses.Our fund-of-funds investment approach helps expand the reach of PayPal Ventures by geography,industry and market segments.We also launched a diversity survey with our general partners of EOF venture capital funds to understand how our investments help to advance a more diverse venture capital ecosystem.2827 Hours of capacity-building and skill-based volunteer activities,such as mentorship and career readiness training,contributed to charities that advance gender equity and economically empower women.Connie EvansAchievement Award RecipientThrough the EOF,PayPal is an anchor investor in Zeal Capital Partners,a venture capital firm that invests in diverse management teams at early-stage businesses in the fintech and future of work verticals.Learn more about how the fund is expanding opportunities for entrepreneurs of color.250 EOF portfolio companies globally through our investments in venture capital funds55%of portfolio companies with at least one ethnically diverse founder2950%of portfolio companies with at least one woman founder30Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 20Enabling Easier CheckoutConsumers value secure options at checkout and we continue to build partnerships with some of the largest digital payments and ecommerce platforms to expand our network of in-person and online payment options.We provided Amazon U.S.customers the ability to pay with Venmo,offering another checkout option and delivering the added benefit of the Venmo Purchase Protection Program.We extended our partnership with Live Nation so customers can continue to check out with PayPal or Venmo when purchasing tickets for sporting events,music festivals and more.Advancing Financial Health&Consumer ConveniencePayPal digital wallet is accepted by 79%of largest retailers in North America and Europe.3279%“PayPal is really about giving people the power to manage their money,stretch their dollar further and make life simple by giving them a single destination to access their finances.”Derek FrancomSenior Director,PayPal Debit Cards Scottsdale,AZ,U.S.31 We rely on third parties in many aspects of our business,including networks,banks,payment processors,and payment gateways that link us to the payment card and bank clearing networks to process transactions;unaffiliated third-party lenders to originate our U.S.credit products to consumers,U.S.merchant financing,and branded credit card products;branded debit card and savings products issued by unaffiliated banks.32 Digital Commerce 360 2022 North America Top 1000 and Europe Top 500 databases.33 Available on Safari iOS 15 .34 Analysis of internal PayPal data,January through September 2022.35 As of April 12,2023,the annual percentage yield(APY)for PayPal Savings is 4.15%.This is a variable rate and can change at any time,including after the account is opened.National average source:FDIC National Rates and Rate Caps as of April 17,2023.PayPal is a financial technology company,not a bank.Banking services provided by Synchrony Bank,Member FDIC.36 Continued to remain below the 2030 target of 3%set in the U.N.Sustainable Development Goals.37 Ready funds are considered those connected to a bank withdrawal or debit card and help customers maintain healthy spending habits without depending on credit to repay their installment loans.Helping Consumers SaveConsumers faced a challenging economic environment in 2022.At PayPal,were working to help them save on everyday purchases and advance long-term financial goals through:PayPal Rewards and PayPal Honey mobile Safari extension,33 which enable consumers to earn points that they can apply at checkout,convert to cash,donate or transfer to their bank.Building on the success of the cash back features of the Venmo Credit Card,we launched the PayPal Cashback Mastercard to provide more flexibility for consumers to make smarter purchases and maximize rewards when shopping on PayPal.PayPal Savings Account allows U.S.customers to earn significantly higher interest on savings than a traditional savings account,35 helping customers reach their financial goals faster.We expanded Xooms Debit Card Deposit feature,now available in 27 markets across Europe,Latin America,the Middle East and Asia,enabling more customers to make low-cost international money transfers to friends and family to use however they need,including paying bills or buying groceries.2.9%average international remittance cost in 202236Honey users saved over$200 million in 202234Offering Responsible Global Pay Later SolutionsTo help consumers more easily purchase the larger items they need and want,PayPal offers a suite of Pay Later products that allow customers to extend payments over weeks or months with no late fees.Through Paidy,our Buy Now,Pay Later offering in Japan,weve expanded flexible spending options for consumers,including:Partnering with Amazon to launch 6-Pay,allowing consumers to split the cost of purchases into six interest-free monthly installments,and introducing Paidy as a payment method when checking out with Amazon Pay.Introduced the Paidy Real Card,which allows shoppers to pay in-store with Paidy,choosing the number of payments and settlement terms best for their financial needs.Launched a new feature,Pay Now,where customers can pay their next installment at a convenience store at any time.Nearly 90%of PayPal Pay Later users selected ready funds37 for repayment.4.4M Paidy users in 2022 ( 25%from 2021)Democratizing financial services means creating an inclusive digital economy where everyone can thrive,especially those traditionally underserved by the financial system.Were using our platform and products to support financial flexibility so that consumers around the world can easily and efficiently save money and manage their finances.31 In 2022,we enhanced our platform with new and updated services that support individuals ability to save,make flexible payments and more conveniently make purchases.Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 21Facilitating Transparent Consumer Protection With online scams up 87%since 2015,41 we believe it is critical to protect our customers from bad actors across our platforms.According to the BBB Institute for Marketplace Trusts 2022 BBB Online Scams Report,consumers who reported paying with PayPal were more likely to get their money back than other online payment systems.Protecting Against Elder Financial AbuseThrough the AARP BankSafe Initiative,were helping the financial industry better safeguard elderly consumers assets by preventing financial exploitation,educating individuals and caregivers and enabling easier access to banking tools.According to a Virginia Tech Center for Gerontology study,the financial institution employees that received BankSafe training prevented 16 times more in monetary losses from financial exploitation than the control group that was not trained.We also partnered with AARP in support of the Stop Senior Scams Act by joining the Scams Against Older Adults Advisory Group,an alliance created to educate consumers,improve industry training on scam identification and prevention,and develop research on consumer and employee engagement to reduce fraud.Helping Our Partners Advance Fraud Targeting AccuracyThe Enhanced Decisioning Data platform launched by Capital One,in partnership with PayPal,helps fight online fraud by combining transaction information with Capital Ones internal data models,increasing the accuracy of fraud targeting as well as approval of legitimate transactions.Protecting Consumers Against Bad ActorsConsumers must navigate a growing digital landscape,with increasingly difficult-to-detect fraud threats.Our risk detection organization strives to continuously enhance the safety of our platform for our customers,protect against fraud attempts and manage transaction losses.We are also focused on educating consumers and,where possible,recovering funds when fraudulent events occur.Our fraud risk management capabilities focused on preventing bad actors from entering our ecosystem aim to continuously evolve,including through continued enhancement of our Fraud Defense Cyber Center and protection of customer identity.Our buyer and seller protection programs protect merchants and consumers from fraud and counterparty nonperformance.These combined efforts helped us maintain our low transaction loss rate39 of 0.09%in 2022.Enabling Passwordless AuthenticationWe enable secure,passwordless login to PayPal accounts across platforms and devices with passkeys,a new industry standard to replace passwords with cryptographic key pairs.Based on technology that is designed to be resistant to phishing and not permit any sharing of data between platforms,passkeys address one of the biggest security problems on the web:the weakness of password authentication from recycled passwords across online services.PayPal,as a founding member of the FIDO Alliance,is helping to champion this new authentication method and is one of the first in the industry to make it available to its customers.Maintaining a Safe Platform for CustomersWe strive to promote good habits to safeguard customer data through education and resources.With new threats emerging daily,we are focused on empowering consumers to manage their data and protect themselves from fraudulent activity.Strengthening Customer Control of DataWe introduced new ways for consumers to take control of their data,including managing how people find them on PayPal,accessing what theyve shared with other sites and more.We continue to update our Privacy Hub and Security Center to reflect best practices and help build customer awareness.We also continued to expand our automated self-service portal globally,which is designed to enable our customers in over 200 markets to exercise their individual right to access,correct,modify,manage and delete their personal data and marketing choices,as applicable.38 In 2022,through our Risk-as-a-Service suite of products to help protect our merchants from fraud and reduce their financial losses of chargebacks,we helped save our customers more than$35 million across countries,including Australia,Brazil and the U.S.40 In addition,we are continuing to explore ways to help our merchants improve efficiencies and reduce costs through dispute-automation products.38 Deletion is available in select markets for accounts in good standing that meet applicable record retention timeline requirements.39 Transaction loss rate represents transaction losses(including expensing associated with buyer and seller protection programs,fraud and chargebacks)divided by our total payment volume.40 Customer savings estimate based on reduction in chargebacks for merchants using our Fraud Protection Advanced solution in 2022.Lexis Nexis,The True Cost of Fraud estimates that for every$1 of fraud cost U.S.retail and ecommerce merchants$3.75 in 2022.41 BBB Foundation,2022 BBB Online Scams Report.1M accounts enrolled in passkeys since launch in October 2022Annual Transaction Loss Rate39(%of Total Payment Volume)0.00%0.04%0.08%0.12 220.09 210.09 200.12%0.16%Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 2242 As of March 31,2023.44 Our giving methodology presents a comprehensive view of our Powering Giving impact.The data consist of funds processed by PayPal and Braintree to all nonprofits,which include organizations identified as charities,other nonprofits and elementary/secondary schools and universities,as well as donations to individuals and businesses from personal fundraising campaigns.We continue to revise prior period metrics based on improvements in data quality and calculation methodology.45 Represents the total number of nonprofit accounts supported each year.46 Does not include personal fundraising.Extending Digital Solutions for Giving&FundraisingIn 2022,we continued to enhance giving solutions for our customers across our products.For example,we facilitated over 23 million donations through our Give at Checkout solution,which provides customers the option to give a microdonation when they check out with PayPal.In addition,we supported donations to personal fundraising campaigns from more than 1.1 million people through PayPal Fundraisers,representing a 124%increase from 2021.We launched several new giving tools in 2022,including the following:We recently introduced Donate with Rewards in the U.S.to allow customers to donate the cash equivalent of their PayPal Rewards points to the cause of their choice.The addition of Donate with Rewards expanded donation options within the PayPal app is one of the many ways we helped customers raise over$255 million through the digital wallet in 2022,a 40%increase from 2021.To make it easier for customers to see the impact of their donations across PayPal,we also introduced an impact summary feature in the digital wallet to U.S.customers with plans to add it on the web platform in 2023.We launched Venmo charity profiles,allowing charities to create their own Venmo profile to raise funds directly through the Venmo app,giving them access to the platforms community of 90 million active customer accounts.43Creating More Ways to GiveAt PayPal,we aim to promote generosity through the power of our technology.In 2022,we enhanced our platform and embarked on new partnerships to provide customers with more ways to support the causes they care about.Offering Multiple Channels to Make Giving EasierWe continued to leverage our technology and scale to provide organizations and customers with new ways to give.In 2022,we enabled more than 270 million donations through the PayPal Giving Platform,directly supporting nearly 1.4 million nonprofits and other causes,and surpassing$20 billion in funds donated for the first time in PayPal history.Our Four Giving ChannelsNonprofit-Owned:Donations made directly on the nonprofits site.Platform-Owned:Donations made indirectly to support causes on giving platforms or third-party sites.PayPal-Owned:Donations made on PayPal-owned properties supporting charities and fundraisers.Charity Payouts:Payouts from charities to individuals or from grant makers to other charities.Generosity by the Numbers44 1.0M 1.1M1.1M202220212020Number of Nonprofits Supported YoY45,460 200 400 600 800 1000 1200$19.2B$18.4B$16.6B202220212020Funds Raised for Nonprofits YoY460 5 10 15 20 55.1M56.1M52.3M202220212020Number of Donors0 10 20 30 40 50 60 71%in first-time donors through the digital wallet in 202210K Venmo charity profiles created since launch in October 2022421234Optimizing Grant AccessibilityIn 2022,we partnered with National Philanthropic Trust and Vanguard Charitable to launch Grant Payments,a new tool that enables donor-advised funds sponsors,community foundations and others to deliver grants to charities electronically for faster and easier grantmaking.“Grant Payments helps nonprofits focus on their charitable mission without the hassles of lost time and resources associated with legacy checks.This year,we were proud to help pilot this new solution from PayPal and found that the majority of NPTs grants completed through Grant Payments were received in a charitys account within 24hours.”Eileen HeismanPresident and CEO,National Philanthropic Trust$1,239.1M$773.5M202220212020Funds Raised for Causes Through Personal or Business Fundraising0 300 600 900 1200 1500$393.7M270M donations enabled$20B in funds donated through PayPal1,400 charities supported$25M in grants distributed43 As of December 31,2022.Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 23Using Our Scale to Facilitate Global Relief PayPals platform and scale uniquely position us to quickly assist during global crises.In 2022,we facilitated aid for extraordinary events globally,including the humanitarian crisis in Ukraine,flooding in Pakistan and Hurricane Ian in U.S.,enabling$624 million in donations from corporate,customer and employee contributions.Our rapid-response funding helped enable new proactive and timely partnerships including:Over 20 global humanitarian organizations supporting the relief efforts in Ukraine,including UNHCR,the International Rescue Committee,Save the Children,Doctors Without Borders and UNICEF,among others.The National Compassion Fund to support the families of victims in the Buffalo,NY and Uvalde,TX shootings.World Central Kitchen and Peoples Advocacy Institute to enable relief related to the flooding in Jackson,MS.The Governors Office and the First Lady of Florida to support Hurricane Ian relief by waiving all fees on donations to the Florida Disaster Fund.Together,PayPal and our employees and customers supported rapid-response and relief efforts throughout 2022:Enabling Holiday Season GenerosityThe PayPal Giving Platform continues to facilitate generosity around the holidays.Each year,we are inspired by our customers generous donations and 2022 was no different,with PayPal customers donating$2.6 billion during the season.47 On Giving Tuesday alone,more than 1million customers donated$149 million across 194markets.$620M to help communities487 global eventsFacilitating Generosity on TwitchWe partnered with Twitch to enable their 9 million monthly content creators to raise money for the charity of their choice through our Platform Fundraising product and PayPal Giving Fund in over 30 countries.Coming Together to Provide Aid to UkraineWhen the Ukraine conflict created a humanitarian crisis overnight,PayPal customers,employees and partners rapidly mobilized to help.In addition to quickly expanding our peer-to-peer payment and money transfer solutions for Ukrainians,we launched fundraising campaigns through the PayPal Giving Fund that enabled customers in 14 different markets to donate to support humanitarian aid in Ukraine and refugee support.In one of our largest and swiftest community responses,PayPal and our partners helped raise over$600 million for organizations providing relief efforts,including more than$18million for Razom for Ukraine,which supported the delivery of tactical medicine,hospital supplies and tech-enabled emergency response materials.We also worked with merchant partners to create campaigns to facilitate support for impacted Ukrainian civilians.For example,we partnered with Uber to enable donations through the Uber app in support of the International Rescue Committee,which provided assistance to families displaced by the conflict.47 The holiday season is defined as the Tuesday before U.S.Thanksgiving through New Years Eve,or November 22,2022 to December 31,2022.48 Includes corporate,employee and customer contributions.PayPal ranked#1 on the 2022 Fortune Change the World list in recognition of facilitating support to Ukrainian civilians and refugees.Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 24SDGs Reflected in This SectionEmployees&CultureFor PayPal,our employees are one of our greatest assets and we believe effectively managing and investing in our global workforce is an important aspect of the long-term success of our business.We work to create a positive,supportive and collaborative workplace where all employees are encouraged to thrive and innovate.Through frequent engagement,a robust talent management strategy,a strong focus on employee total wellness and an ongoing commitment to championing DIE&B,we strive to foster a dynamic workplace designed to attract and retain talent.We also provide opportunities for employees to apply their skills and experience to support and strengthen their local communities.2022 Summary HighlightsIn This Section Managing Our Global Workforce Leading With Diversity,Inclusion,Equity&Belonging Empowering Employee Community Impact49 Global women and U.S.ethnically diverse men.50 Ethnically diverse includes U.S.EEO-1 defined categories American Indian or Alaska Native,Asian,Black or African American,Hispanic or Latino,Native Hawaiian or Other Pacific Islander or Two or More Races.51 The ease with which PayPal employees can work remotely.52 Access to programs and flexibility that support PayPal employee well-being.53 Includes PayPal instructor-led courses and self-directed learning.54 The PayPal-defined estimated net disposable income is the percent of discretionary income remaining for our employees after taxes and typical living expenses are paid.This metric is calculated through a third-party model that utilizes independent data on market-based costs across selected geographies.The model was enhanced from prior periods to incorporate best practices and methodological improvements.Achieved global gender and U.S.ethnic pay equity.Designed,built and implemented our new candidate-centric and inclusive Global Talent Acquisition strategy.Reached overall workforce diversity of 56%,49 including 44%global gender diversity and 54%U.S.ethnic diversity.50 Achieved a 93 Remote Work51 score and 84 Work-Life Balance52 score on our annual global employee survey.Empowered employees to volunteer nearly 100,000 hours and support roughly 4,000 nonprofits worldwide.Encouraged learning and development with 1.4 million hours of learning courses accessed by employees.53Exceeded our goal to have at least 20%PayPal-defined estimated net disposable income(eNDI)for hourly and entry-level employees globally through our employee financial wellness initiative.5426%minimum estimated net disposable income1.4Mtotal learning hours“Innovating how we recruit,retain and develop talent fuels PayPals growth and our employees development and is essential for attracting and retaining talent in this competitive landscape.One example is our new Leadership Principles,which provide a common foundation of what we value in our people and how we work,distinguishing our culture and making clear that each of us is in a position to lead,no matter what our role is.”Ana MendyVP,Talent Management and DIE&BLos Angeles,CA,U.S.Message from Our President&CEO l About PayPal l 2022 Highlights l Responsible Business Practices l Social Innovation l Employees&Culture l Environmental Sustainability l Appendix 25EngagementTransforming our managers through people leader development opportunities proven to enhance employee engagement.Setting our employees up for success on Day 1 through a consistent onboarding experience.Reimagining performancemanagement to help our people thrive and reach their potential.Ensuring we continue to support our employees,even through the exiting process.Growing and developing our employees through an end-to-end career developmentframework.Investing in our effectivenessthrough differentiatedleadership development.Annual Global Employee Survey57 Highlights Up four percentage points from 2021 and eight points above benchmark58Reflecting modest declines from our 2021 scores,in part due to the Companys refocused efforts on organizational transformation and efficiencies and the macroeconomic environmentIndicating our hybrid model is giving employees the resources and flexibility they want and needThe survey results help us understand how to improve our business,revealing opportunities we have to continue enhancing our employee efforts related to topics such as career development and linking day-to-day work to our mission.In 2022,we also launched a new DIE&B inclusion index consisting of 11 scores on topics such as mentorship,allyship,peer support and inclusive decision-making,which will provide helpful input to measure employee views on our multi-year DIE&B journey.Managing Our Global Workforce Attracting,recruiting,developing and retaining diverse talent is crucial to delivering new products and services,and advances our mission to help customers access and thrive in the global economy.We are focused on creating a talent strategy that actively engages employees at every phase of their career at PayPal from recruitment to offboarding.Engaging with&Listening to Our EmployeesEmployee feedback plays an important role in the ongoing development of our employee programs and resou

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People&Planet 2022Contents1Environment 22Bridging the digital divide46Corporate governance89About this report2Highlights23Highlights47Managing sustainability 90Letter from the President and CEO3Climate24Connecting people and things 48Our economic impact 92Nokia today5Decarbonizing our value chain27Digital skills building solutions50Cooperation in standardization94Circularity33Our social responsibility programs51Our approach7Biodiversity38University collaborations55Security and privacy95Sustainability highlights andHighlights96challenges in 20228Industrial digitalization39Responsible business56Security 97Our ESG strategy9Highlights40Highlights57Data privacy98Our materiality assessment10Green digital proposition41Ethics and compliance58Key ESG targets and performance 13Sustainable innovation44Human rights64Key data and reporting principles99The UN SDGs and our business18Responsible sourcing68Data reporting principles100Engaging with our stakeholders19Health and safety performance76Independent assurance report115Key ESG frameworks117Our people77Highlights78Our culture 79People development 80Fair workplace and our policies82Inclusion and diversity84Health and wellbeing88ContentsINTRODUCTIONENVIRONMENTALSOCIAL GOVERNANCE1EnvironmentKey dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022About this reportNokias People and Planet sustainability report is published annually.The scope of the 2022 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.This report was published in March 2023 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.Sustainability and ESG(Environmental,Social and Governance)topics are also discussed in our corporate annual reports,including the Annual report on Form 20-F that is filed with the USA Securities and Exchange Commission.The Board Review of Nokias 2022 Annual Accounts includes non-financial information as required by the Finnish Accounting Act implementing the EU Non-Financial Reporting Directive and the 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.2EnvironmentOur approachOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022Key dataSecurity and privacyCorporate governanceLetter from the President and CEOThe big picture or the bottom line?At Nokia,we believe you can have both purpose and profit.And there can be no green without digital.The technology we create can help in the fight against climate change while enabling our customers to improve their productivity,as well as their energy and resource efficiency.We aim to continually improve our environmental,social and governance(ESG)practices and embed sustainability into every part of our business.In early 2023,we made it clear that our ambition is to make ESG a competitive advantage for Nokia.The importance of ESG to our company is affirmed in our purpose:“At Nokia,we create technology that helps the world act together.”This has helped create a virtuous cycle where our purpose drives our long-term technology and business strategy,and vice versa.ESG drives how we innovate,manufacture,deliver and maintain our products,and how we conduct ourselves as an organization.In 2022,we took another step forward to make ESG a driver of value creation,with the launch of the new ESG strategy,with five focus areas and accompanying goals.Environment:Become the leader in energy efficiency and circular practices.We have set an ambitious science-based target to reduce our Scope 1,2 and 3 greenhouse gas emissions by 50tween 2019 and 2030.We have also set a target of 100%renewable electricity in our facilities by 2025.Both of these are stepping stones on our path to net zero.Industrial digitalization:Transform physical industries to make them more productive,efficient,sustainable and safer through the connectivity and digital solutions we provide.This ambition is at the heart of our increasing work with non-service provider customers,such as manufacturers,energy producers and public sector organizations.Security and privacy:Design products so security and privacy are built into their life cycle at every stage.Our networks underpin critical infrastructure so partners,customers and regulators must be able to trust them.Bridging the digital divide:Build a bridge for digital inclusion and more equal access to healthcare,education and employment.We will achieve this ambition through connectivity and digital skillbuilding.Responsible business:Be a trusted,ethical company that our employees,customers,partners and investors are proud to work for and with.3EnvironmentKey dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022used by more than 30 customers.And our sixth-generation Photonic Service Engine(PSE-6s)for optical networking offers customers more capacity while reducing power consumption by up to 60%.There are many other examples of Nokia products and services increasing performance while reducing power consumption throughout this report.Embedding sustainability into our company Our reputation as an ESG-committed company,with the highest ethical standards,is dependent on continually delivering what we promise and taking action where we need to do better.We were pleased to surpass our annual target for renewable energy use across our facilities,reaching 63%in 2022 on track to achieve our target of 100%renewable electricity in our own facilities by 2025.We were pleased to be ranked in the Clean200 list of global companies leading the way on sustainability by placing it at the heart of their products,services and business models.To further support our climate commitments,we introduced a Sustainable Finance Framework in early 2023 with the intention of strengthening the connection between our ESG and financing strategies.The leading independent ESG ratings firm,Sustainalytics,considered our sustainability targets to be highly ambitious and rated the KPIs of our framework as very strong.Based on our target of a 50%emissions reduction in greenhouse gases across our value chain by 2030,Nokia successfully completed an inaugural EUR 500 million sustainability-linked bond issuance over eight years,with positive feedback from the investor community.In 2022,we also launched a new Nokia People Strategy with the aim of creating a working environment in which all our people can perform at their best and fulfill their potential.Continuing to make progress in our inclusion and diversity efforts is a key component.I was pleased that Nokia was named in Bloombergs Gender-Equality Index for the third time in a row in 2022.And I was happy to see industry recognition for our OUTLeaders program which supports and develops LGBT leaders at Nokia.Maximizing our positive impactThis years report includes many examples of how Nokia is maximizing its positive impact on the world.We are working with UNICEF to increase digital skills in Senegal,with the John Nurminen Foundation to protect biodiversity in the Baltic Sea,and with many other partners to achieve results where they are needed most.Two of my favorites are our work on bringing broadband connectivity to underserved students in California and the expansion of our Smartpur project to bring connectivity to remote villages in India.Two countries,two completely different contexts,but both demonstrating the power and potential of technology when we act together.Our purpose will continue to act as our guiding star as we strive to do good by and for people and our planet.Pekka Lundmark,President and CEOEmbedding energy efficiency into our technologyImproved performance with lower power consumption is at the heart of our product design and development.In 2022,around 95%of Nokias greenhouse gas emissions came from use of our products by customers,rather than through our own operations.Our focus on upgrading customer networks and deploying our latest solutions means we can reduce our Scope 3 emissions and make concrete progress towards decoupling data growth from energy consumption.For example,in Mobile Networks,we are on target for a 50%reduction in average power consumption of 5G mMIMO base stations by 2023(from the 2019 baseline).The radio networks we modernized in 2022 used on average 44%less energy than those that were not modernized.In Network Infrastructure,we have now reached 150 customers for our Quillion-based chipset for fixed broadband which uses about half the power of previous generations.We have more than 100 customers for PSE-V,our advanced coherent optical solution,which uses up to 50%less power.Our latest FP5-based routing silicon,which reduces power consumption by up to 75%per bit,is now being 4EnvironmentKey dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022Nokia 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 support and improve 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.At Nokia,we create technology that helps the world act together.The world is facing fundamental challenges.Pressure on the planet is increasing,productivity is stalling and access to opportunity remains stubbornly unequal.Net sales by business 2022Mobile NetworksEUR 10 671M( 10%)Network InfrastructureEUR 9 047M( 18%)Cloud and Network Services EUR 3 351M( 8%)Nokia TechnologiesEUR 1 595M( 6%)Group Common andOtherEUR 295M( 15%)Total EUR 24 911M( 12%)The figures are derived from our consolidated financial statements prepared in accordance with IFRS.Year-on-year change is in parentheses.Net sales by region 2022Asia-PacificEUR 2 648M( 7%)Europe1EUR 6 662M( 6%)Greater ChinaEUR 1 581M( 5%)IndiaEUR 1 290M( 25%)Latin AmericaEUR 1 223M( 24%)Middle East&AfricaEUR 1 969M( 11%)North AmericaEUR 8 388M( 17%)Submarine NetworksEUR 1 150M( 24%)Total EUR 24 911M( 12%)1 All Nokia Technologies IPR and Licensing net sales are allocated to Finland.In 2022,Nokia changed the way it presents net sales information on a regional basis.Nokia believes that providing net sales for the Submarine Networks business separately from the rest of the Group improves the usefulness of disclosed information by removing volatility caused by the specific nature of the Submarine Networks business.The comparative information for net sales by region has been recast accordingly.This change did not otherwise affect the managements discussion of the year ended 31 December 2021 compared to the year ended 31 December 2020 included in the“Operating and financial review”section of the Annual report on Form 20-F for the year ended 31 December 2021.The figures are derived from our consolidated financial statements prepared in accordance with IFRS.Year-on-year change is in parenthesis.In 2022,we delivered net sales of EUR 24 911 million and invested EUR 4 550 million in research and development.We have four core business groups:Network Infrastructure,Mobile Networks,Cloud and Network Services,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 5EnvironmentKey dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202287 005Total number of employees42was the average age of our employees163different nationalities worked at Nokia23%of our employees were womenreductions in emissions and use of resources.It supports improved worker safety and more secure,inclusive and safer communities.At the end of 2022,we employed 87 005 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.Our employees at the end of 2022Of the 87 005 employees worldwide,23%were women,and we had 163 different nationalities working at the company.The average age of our employees was 42.The top ten countries by employee number were(in alphabetical order)Canada,China,Finland,France,Germany,Hungary,India,Poland,Portugal and the United States.Our regional structure is Asia Pacific(21 793),China(11 146),Finland(6 939),Latin America(2 918),Middle East and Africa(3 167),North America(10 359),Other European countries(30 683).We outsource certain non-core activities and use subcontractors to meet customer needs or volume demands.At the end of 2022,the number of temporary workers(external temporary labor,ETL)used was around 3 590 people.Activities performed by externals,be they ETL or subcontractors,include for example,consultants supporting different tasks in our business groups and support functions,facility service providers,security guards and IT support.6EnvironmentKey dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022Our approachOur approach to ESG centers around our companys purpose-to create technology that helps the world act together.It is an integral part of our corporate narrative and embedded in how we operate,and the decisions we make in our business.We adhere to high standards of integrity and security that build trust and help create the capabilities needed for a more productive,sustainable and inclusive world.Nokia Bell Labs,our renowned research arm,looks to help solve the future needs of humanity through technological innovation.7Nokia People&Planet Report 2022EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalization7Our approachNokia People&Planet Report 2022Sustainability highlights and challenges in 2022What we did well.What we need to do better.Laid the foundations for our Sustainable Finance Framework,to be set up in 2023,that underscores the importance of ESG to our business and financing structure.Surpassed our annual target for renewable energy across our facilities globally,reaching 63%of our purchased electricity.Introduced our liquid cooling solution across our AirScale baseband portfolio.New ESG strategy introduced in late 2022,emphasizing five focus areas and built with contribution from all business groups and functions.Were honored by Ethisphere once again as one of the Worlds Most Ethical Companies.Nokia is one of two companies in the telecommunications sector to be recognized in 2023.Successfully completed our second independent human rights assessment by the Global Network Initiative.Although our total emissions remained level compared to 2021,we were in 2022 13ove the linear trajectory between 2019 and 2030.However,we do not expect the reduction of emissions in our value chain to be linear and we aim to achieve our target of 50%reduction in emissions by 2030,as the impact of new energy efficiency solutions take effect and the decarbonization of the electricity grid continues globally.Recorded eight fatal incidents and 4 critical incidents with suppliers carrying out work on Nokias behalf.This is not acceptable.We are taking steps to drive greater emphasis on life-saving rules and supplier capability.Our logistics emissions saw a 9%increase compared to 2019.We continue to work with innovative solutions such as Sustainable Aviation Fuel and in collaboration with our customers.Our company purposeAt Nokia,we create technology that helps the world act together.Through our technology we help realize the full potential of digital in every industry for a more productive,sustainable and accessible world.Our purpose provides a foundation for our future,and defines how we see our role in the world.A full listing of recognitions can be found on ourwebsite.8EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 20228Our approachOur ESG strategy In the environment arena,we focus on two areas:climate and circularity.Our greatest source of emissions comes from the use of our products in our customers networks.To address this,we aim for leadership in energy efficiency,building on work in silicon,software,and systems and opportunities to optimize across the network with energy orchestration and green operations.In circularity we focus on opportunities to promote hardware circularity and manage the sourcing and reuse of key source materials.Industrial digitalization provides the opportunity to sustainably transform physical industries and cities through digitalization and connectivity.We concentrate our efforts through our Enterprise business,providing solutions for industries that enable decarbonization,resource efficiency,and safety.This has a much greater impact on the worlds carbon footprint than reducing our own footprint,though we understand the importance of taking action across both domains.Security and privacy are positioned as a cornerstone of our reputation and product proposition.Product development follows the Design for Security methodology,building security into the life cycle from the very start,with a standards-compliant,secure network architecture that also incorporates further proven security concepts providing inbuilt defense against security threats.Nokias customer security team consists of security experts who partner with our customers to build and maintain secure networks,compliant with national regulations for critical telecom infrastructure.We aim to bridge the digital divide using our broad product portfolio and focused partnering with non-terrestrial operations to address different demographics.We are also building digital skills which,combined with greater connectivity,allow more equal access to healthcare,education and employment for individuals and the opportunity to participate in the digital economy for smallbusinesses.Nokias new ESG(Environment,Social and Governance)strategy aims to ensure we maximize our impact in the areas most material to our company and is embedded in our business and technology strategies.It impacts how we make business decisions and develop our products and solutions.The ESG strategy builds on five focus areas where Nokia looks to differentiate and create tangible environmental and social benefits:Environment(climate and circularity),Industrial digitalization,Security and privacy,Bridging the digital divide,and Responsible business.Key strategic ESG areasBe the leader in energy efficiency and circular practicesWe provide connectivity and digital solutions that sustainably transform physical industriesSecurity and privacy become a cornerstone ofour reputation and product propositionWe are a bridge for digitalinclusion through our connectivity and digital skill building solutionsWe take a proactive and values-driven role in driving responsible business practices internally and in our value chainEnvironmentIndustrial digitalizationSecurity&PrivacyBridging the digital divideResponsible businessIn responsible business we work to ensure our business practices are aligned to our values.We apply this approach internally and across our value chain,collaborating to improve systemic issues related to the environment,mitigating the risk of technology misuse(and advocating for responsible AI principles),enhancing human rights,inclusion and diversity and working conditions and contributing to the responsible development of new standards.We strive to create value and,where possible,exceed stakeholder requirements and expectations while complying with increased regulatory demands and meeting transparency expectations.In 2022,along with our refreshed ESG strategy,we also launched a new mandatory ESG training course for all employees and Board members.9EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 20229Our approachOur materiality assessmentThe diagram on the following page shows the top right quadrant of our new materiality matrix.The magnified quadrant shows the topics that are all currently considered most relevant to our business and to stakeholders,the economy and the environment.The top five most material topics for Nokia are:Climate impact through products and enabling transformation in other industries Ethical business practices and ethical use of new technologies Privacy and security Responsible sourcing Health and safetyAs part of our strategy refresh and in line with good practice,we completed a materiality assessment in spring 2022 with an external consultancy.The results of this assessment are based on desktop research,interviews and a survey conducted with internal and external stakeholders(including employees,customers,investors,suppliers,partners,NGOs(non-governmental organizations)and academics),as well as insights from sustainability experts.The new materiality matrix was reviewed by the Group Leadership Team and the Board of Directors.10Key dataSecurity and privacy10Bridging the digital divideNokia People&Planet Report 2022Corporate governanceOur peopleResponsible businessIndustrial digitalizationEnvironmentOur approachRelevance to Nokias businessEthical business practicesPrivacy and securityEnablement of industry transformationHuman rightsEmployees skillsCircularity Ethical use of new technologiesTransparency Climate impact through productsDigital inclusionHealth&safety of employeesHow products can enable diversity&inclusionDiversity&inclusionCommunity participationNokias own environmental impact BiodiversityImpact innovationResponsible sourcingRelevance to stakeholders,economy and the environmentOur key material topicsOpportunity Risk mitigationSources of input for the materiality work included:Global macro trends with an impact on sustainabledevelopment Regular engagement with various stakeholders.Read Engagement with our stakeholders for more Requirements and information requests especially from our customers and investors Benchmarking of industry peers and leaders in sustainability Corporate strategy and Code of Conduct Assessments of risks and opportunities through the Nokia Enterprise Risk Management system Analysis of the economic,environmental and social value we can create throughout our value chain Analysis of UN Sustainable Development Goals and Targets and their relevance to Nokia.More on ourwebsite International sustainability frameworks such as SASB,the GRI Standards and the UN Global Compact(see Key ESG frameworks)Long history and experience in sustainability.The most significant growth in importance can be seen in privacy and security,responsible sourcing and circularity.Biodiversity also appeared for the first time in the top quadrant of the matrix,while economic impact dropped out of the top quadrant.11EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202211Our approachMaximizing our positive impact -our handprintMinimizing any negative impact-our footprintOur ESG approach Decarbonizing other industriesandsociety Enabling the transition of theenergy sector Providing the critical networksforlife Connecting the unconnected through building digital skills Continually improving product energy efficiency Driving circularity to reduce waste De-risking the potential misuse oftechnology Building sustainable operations&supply chainOur handprint and footprintWe believe the technology we provide enables environmental and social benefits to individuals,industries and communities that outweigh negative impact.These benefits represent the handprint of digitalization and connectivity.We have both a social and an environmental handprint.We work hard to maximize this handprint.At the same time,we know we must 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.These two aspects of our approach are underpinned by responsible and ethical business practices.We strive to be a trusted,ethical company that our employees,customers,partners and investors are proud to work for and with.As part of our responsible approach,we aim for:Robust practices,procedures and policies that minimize risk Management accountability for ESG 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 2022,with the launch of our refreshed ESG strategy and key messaging,we also increased emphasis on employee engagement,targeted training,customer and stakeholder engagement and knowledge sharing.We initiated the first ever Nokia mandatory training for all employees on ESG in order to enable a basic understanding of sustainability,Nokias messaging and position across the organization.The online training was available in 13 languages and by the end of 2022 over 97%of employees had completed the training.We also introduced a new support model across our geographies with the establishment of a network of ESG principals who volunteer a portion of their working time,in agreement with their line manager,to work as initial points of contact for ESG topics for the customer interface and regional organizations.These volunteers come from a variety of functions within the company and have a strong passion and belief in the critical role of sustainability to the business.The principals also receive targeted in-depth training on ESG topics.By the end of 2022 we had built a network of 56 ESG principals across our global footprint.Finally,we have engaged through workshops and virtual meetings with our customers and other stakeholders to share our strategy and approach.We have explored the potential areas of collaboration in order to drive sustainable development within and beyond our industry.During 2022,we also launched our first ESG Customer Advisory Council in Europe to explore collaboration and how we can further support customers in reaching their sustainability goals.We also aim to launch other regional ESG Customer AdvisoryCouncils.12EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202212Our approachKey ESG targets and performanceWe have set short-,mid-and long-term targets and provide a list of these and the status at the end of 2022 on the following pages.In 2022,we had 26 external targets,of which 22 were either achieved or on track.1 target was not achieved,1 target was cancelled,and 2 were not on track.Our targets for 2023 and onward are presented after the table summarizing the 2022 targets.Key targets by strategic focus area are also discussed in the relevant chapters of this report.Progress of ESG targets in 2022 Focus areaTarget yearBase yearTarget2022 resultsTarget statusEnvironmentClimate20302019Our Science-based target(SBT):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 37 627 000 tons CO2e1 which,as anticipated,are 13ove our cumulative carbon budget for 2020 2022 if a linear reduction from 2019 is expected annually.Total emissions however remained at the same level as in 2021.However,we do not expect the reduction of emissions in our value chain to be a linear process.We aim to achieve our target of 50%reduction in emissions by 2030 as we expect to see greater impact as more energy efficient products and features of our portfolio are adopted and decarbonization of the electricity grid continues globally.Not on track20302019Our final assembly suppliers reach net zero emissions by 2030.Our final assembly supplier emissions were 46 000 tons CO2e which is a 39%reduction from 2019.On track20302019Our suppliers reduce GHG emissions by 50%by 20302.Our suppliers emissions were 683 700 tons CO2e which is a 78%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 reduce by 73%by 2030.Our logistics emissions were 329 800 tons CO2e which is a 9%increase from 2019.Not on track20252019GHG emission reduction of 65%from Scope 1 and 2,including 85%reduction from facilities,compared to 2019.GHG reduction of 43%from Scope 1 and 2(facilities,car fleet,marine fleet),including 54%reduction from facilities,compared to 2019.On track13EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202213Our approachProgress of ESG targets in 2022 Focus areaTarget yearBase yearTarget2022 resultsTarget status2025N/AUse 100%renewable electricity in our own facilities.63%of electricity was renewable in our facilities.On track2023201950%reduction of average power consumption of 5G mMIMO Base Station by 2023 from 2019 baseline.Target on track,2022 intermediate steps achieved through the delivery of new Compact Baseband Unit and Micro DTx enhancement features.On track2022N/AReach 60%renewable electricity in our own facilities.Reached 63%renewable electricity in our own facilities.Achieved2022201945%reduction of facility GHG emissions.Reduced 54%of facility GHG emissions.AchievedCircularity2030N/A95%circularity rate for waste from our offices,labs,manufacturing,installation and product takeback by 2030.Data collection undertaken with recognition that some areas still require greater data coverage.Having the target helps accelerate this process and we have reached 89%circularity based on the current data collected.On track2022N/ADivert 75%of facility waste from landfill.80%of facility waste was diverted from landfill.AchievedBridging the digital divideConnecting the unconnected and under-served20302021Helping our customers to connect the next 2 billion measured by number of 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 2021 to end of 2022 by 400M3.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 20254.We reached 560 702 direct beneficiaries through social digitalization projects,building digital skills,connecting the unconnected or underserved,and improving inclusion,equity and diversity.On track2023N/AInvest in proven research technology on non-traditional ways of 5G access,like FWA using mmWave technology and Nokia Digital Automation Cloud 2,to bridge the digital divide in rural and urban poor areas focused on access to education and healthcare.During 2022 we announced 5G collaboration with a non-terrestrial service provider,expanded campus networks in the educational and medical arenas,ramped up our offerings to the education sector and further explored the use of Nokia DAC.However,the target as written does not require a quantifiable data point.Therefore,the target will be cancelled and replaced with a more quantifiable and measurable target.See 2023 targets roadmap.Cancelled14EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202214Our approachProgress of ESG targets in 2022Focus areaTarget yearBase yearTarget2022 resultsTarget statusResponsible 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.21%of relevant suppliers met H&S preferred supplier status.On track2024N/A95%of projects compliant with the strengthened requirements of our High-Risk Project Implementation Assessments(HRPIA)process.97%of High risk projects were found to meet our minimum non-negotiable requirements.On track2023N/A100%of suppliers performing high risk activities pledge their commitment to Nokias life-saving rules.73%of suppliers delivering high risk activities pledged their commitment to Nokias life-saving rules.On track2022N/AZero critical or fatal incidents for employees and suppliers.There were no critical or fatal incidents affecting Nokia employees.There were,however,eight fatal and four critical incidents affecting suppliers.These all occurred in our supply chain.Any such serious incidents while carrying out work on behalf of Nokia are unacceptable and corrective actions are implemented to reduce the likelihood of future occurrences.Not achievedInclusion&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.However the percentage of women was around the same at 23%at the end of 2021 and 2022.On track2022N/AReach a minimum of 26male hires in all global external recruits.27%of external recruits were women.We achieved the 2022 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.Progress against the target was measured as favorable responses to the following question in our employee survey:“My line manager sets a positive example by acting with integrity.”88%of the responses were favorable.Achieved2022N/AEthical Business Training(EBT)completed by 95%of employees.98%of employees completed the training.AchievedHuman Rights 2022N/AComplete our second Global Network Initiative(GNI)assessment and,as a result,Nokia is deemed to have shown good faith efforts to implement the GNI principles in freedom of expression and privacy.We completed our second Global Network Initiative independent assessment early and are proud to report that the GNI board found we have made good faith efforts to implement the GNI Principles on freedom of expression and privacy with improvement over time.Achieved15EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202215Our approachProgress of ESG targets in 2022Focus areaTarget yearBase yearTarget2022 resultsTarget statusResponsible 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 additional minerals.As of 2022 we have achieved 98%3TG traceability and conflict-free status to the smelters in our supply chain and their conflict-free status.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 track2025N/A80%of suppliers achieve satisfactory sustainability score(based onaggregated weighted share)from supplier performance evaluation(based on CR onsite audit programs,EcoVadis,CDP,Conflict minerals).78%of suppliers,on average,received a satisfactory sustainability score in our assessment programs.On track2022N/A98%tin,tantalum,tungsten and gold traceability and conflict-free status achieved and extended due diligence implemented for cobalt and mica.As of 2022 we have achieved 98%3TG traceability and conflict-free status to smelter level in our supply chain and also the conflict free status of the smelter.We have also extended and conducted due diligence for cobalt and mica.AchievedNotes1 CO2e=carbon dioxide equivalents2 Refers to our material suppliers3 Reference Source:GSMA Intelligence4 Improving lives refers to increased digital connectivity and inclusion for 1 500 000 people16EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202216Our approachEnvironment100%renewable electricity in our own facilities65%reduction of Scope 1 and 2 GHG emissions,including 85%reduction from facilitiesIndustrial digitalizationIndustry verticals adopting private wireless customers(number of customers,in line with business plan)Our ESG targets in 2023Bridging the digital divideHarness 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 underservedResponsible business98%tin,tantalum,tungsten and gold traceability and conflict-free status and extended due diligence to cobalt,mica and two additional minerals 80%of suppliers receive satisfactory sustainability score from supplier performance evaluationTRIFR and LTIFR at industry benchmark202420252050Environment75%renewable electricity in our own facilities65%reduction of facilities emissions50%reduction of average power consumption of 5G mMIMO Base StationEnvironment50%reduction of our total GHG emissions(Scope 1,2 and 3)Final assembly suppliers reach zero emissions 50%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 source materials:Cast aluminum used in mechanical parts:to 90%Wrought aluminum,steel and copper alloys,as well as polycarbonate plastics used inmechanical parts:to 50%EnvironmentNet zero emissions in our value chainResponsible businessA minimum of 27male hires in global external recruitsZero critical or fatal incidents for employees andsuppliers100%of suppliers performing high risk activities pledge their commitment to Nokias life-saving rulesCohort of 40 senior leaders conduct safety tours to sites to increase monitoring visibility98%tin,tantalum,tungsten and gold traceability and conflict-free status and extended due diligence to cobalt and micaEthical Business Training(EBT)completed by 95%ofemployeesResponsible business95%of projects to be compliant with HRPIA standardsReduction in Total Recordable Incident Frequency Rate(TRIFR)and Lost Time Incident Frequency Rate(LTIFR)for Nokia employees andsuppliersBridging the digital divideNokias fixed and broadband technologies connecting 400 million additional residential subscribers covering unconnected and underserved Bridging the digital divideProvide broadband based digital services with 2billion more subscriptionsSecurity and privacy95%mandatory training completion related to privacy 20232030Responsible businessMaintain at least 85vorability of employee/line manager engagement on the importance of ethics and compliance100%of suppliers delivering high risk activity to meet or exceed“H&S preferred supplier”statusIncrease the proportion of Nokias employees who are women25EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202217Our approachThe UN Sustainable Development Goals and our businessThe 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.Goals 8,9 and 13 are the most relevant for our business and reflect the areas in which we believe we can have the greatest positive impact.We believe digitalization and connectivity will continue to play a critical role in accelerating and achieving all 17 SDGs.More examples of how the work we do actively contributes to all 17 SDGs can be found in this report and on our website.Climate change remains the most significant sustainability challenge for our business and the planet and requires that we put in place the processes and concrete actions to do our part.Through the technology we provide we help customers,other industries and individuals decarbonize through the digitalization of industrial processes and society so that they become more predictive and productive,with reduced emissions.Nokia was the first telecoms equipment vendor to set a science-based target(SBT).We,in line with the 1.5C warming scenario,commit to reduce our Scope 1,2 and 3 GHG emissions by 50%by 2030 from a 2019 base year.To halve our GHG emissions by 2030 is our first target in order to reach net-zero emissions by no later than 2050.Read more in the Environment and Industrial digitalization chapters.To address 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 2022,we again received a score of A-from CDP(Carbon Disclosure Project)for our work and disclosures on carbon emissions.Responsible business and our peopleWe were again acknowledged as one of the Worlds Most Ethical companies by the Ethisphere Institute in early 2023.In 2022,we also successfully completed our second external independent human rights assessment for the Global Network Initiative(GNI).We took up membership in 2022 of BSR,the Business for Social Responsibility organization,to help drive the sustainability narrative and ESG collaboration forward throughout the value chain.We also shared our approach to Responsible Artificial Intelligence.In 2022,we also launched and implemented our People strategy and related Nokia essentials where we place our people at the heart of our business.In early 2023,we were also proud to be recognized for our work in inclusion and diversity being included for the fifth time on the Bloomberg Gender Equality Index,again recognized for our Board and Group Leadership diversity by the Nordic Business Diversity Index,and being awarded Ambassador status by the 2022 Workplace Pride Global Benchmark.Digital inclusionWe connect the unconnected through a variety of solutions that enable 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.We work to extend such reach through our collaboration with non-terrestrial companies such as AST SpaceMobile to help reach areas of the world still notconnected.Beyond these examples,the work we do,through digitalization and enhanced connectivity we are able to positively contribute to achieving all 17 SDGs.Engaging with our stakeholdersWe work with a range of stakeholders and look for where we can increase collaboration and also respond to requirements in building sustainable solutions.The table below summarizes those key stakeholders and our interaction.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 18EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202218Our approachEngaging with our stakeholdersSupporting our customers sustainability goalsWe work with our customers,both communications service providers and enterprises,in many important areas of sustainability,including energy and resource efficiency,circular practices,materials,critical communications,efficient manufacturing and operations,supply chain transparency,modern slavery,human rights and community involvement.We further emphasized this collaboration in 2022 with the launch of the inaugural ESG Customer Advisory Council,facilitated by BSR(Business for Social Responsibility).Sustainability is an integral part of most sales requests where we provide data and information on a variety of topics.We share best practices and provide information about our sustainability performance and our operations to our customers on a regular basis.In 2022,we held a series of in-person customer and stakeholder workshops,sharing strategies,commitments,requirements and targets to understand how we can better collaborate.The workshops will continue in 2023.We also engage with customers through regular virtual and,where possible,face to face meetings at different levels of the company where ESG issues are discussed.Customers may request their allocated share of our GHG emissions.This data is primarily provided through our CDP climate change questionnaire responses and in-depth environmental data is provided in the Environmental Product Declaration(EPD)available for products.We work with a range of stakeholders and look for where we can increase collaboration and also respond to requirements in building sustainable solutions.The table on the right summarizes those key stakeholders and our interaction.Collaboration is key to moving the needle on many sustainability topics from protecting the environment to bridging the digital divide.We must embrace greater collaboration if we are to resolve many of the global problems facing humanity and build a more sustainable,inclusive and equitable society and world.We call on all stakeholders to join forces in solving the critical issues faced by the planet and society.Our stakeholdersStakeholder groupOur approachKey topics raised in 2022CustomersWe 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 emissions reduction,energy and materials efficiency,climate actions,circular products and services,recycled materials,value chain,responsible operations,inclusion and diversity.EmployeesOur people are our greatest asset and we aim to build a culture of trust,respect,diversity and opportunity for all.Read moreNew people strategy,Nokia essentials,wellbeing,health and safety,future ways of working and flexibility policies,inclusion and diversity,learning and career development.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,governance and energy efficiency of our products,responsible sourcing,labor and human rights,ESG reporting and social achievements.Suppliers and PartnersWe work with suppliers to drive transparency,sustainability and good ethical and 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 have broad and deep interaction and collaboration with many key industry bodies that are striving for economic and societal development on the national,regional and global levels,such as World Economic Forum(WEF),GSMA,and Digital Europe.Read moreMeasurement methodology standards for 5G radio and circularity related standards for telecommunications products and networks in ETSI and ITU-T.Responsible use of Artificial Intelligence standards in ISO,CEN/CENELEC,and various national committees.Energy saving features in 3GPP.AcademiaWe work with a broad range of academic institutions in areas such as collaborative research,training programs,innovation events and talent development.Read more6G,ethical use of AI and data,industrial IoT,quantum computing.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 entrepreneurship.CitiesWe work with cities and communities to drive digitalization and smart development.Read moreConnectivity and digitalization,5G use cases,responsible AI,public safety and health,data security and privacy,green economy transition.GovernmentsWe contribute to policy debates fostering a connected society and the adoption of new technologies around the world.Read moreDigital and broadband policies,ESG topics,emerging technologies and business models.19EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202219Our approachSupporting informed public policies for digitalization and sustainable developmentWe believe that if we couple technological innovation with international cooperation and inclusive policies,we can make our planet healthier and our societies fairer.The United Nations SDGs establish a clear framework for us all.The next generation of connectivity technology and its applications are critical tools to enable a sustainable transformation towards digital societies that can enhance productivity,improve quality of life and reduce inequalities on a global scale.At Nokia,we collaborate with governments,regulators,trade associations,international organizations,industry peers,influencers and academia to drive policies that encourage investment in digital and broadband technologies and contribute to a green transition.The rollout of 5G and leading-edge fiber networks is the foundation upon which decarbonization can thrive.Through robust connectivity,society can accelerate the rollout of sensors,Augmented Reality(AR)and Virtual Reality(VR),cloud,and analytics to maximize the sustainable benefits of technology.Policies that encourage broadband adoption and the digital transformation of industry,that maximize available spectrum for connectivity,and that enable rapid deployment of digital infrastructure will help meet climate change goals.We were shocked by Russias invasion,in 2022,of Ukraine,in contravention of international law.Russias illegal invasion continues to bring into sharp focus the importance of communications infrastructure as the critical backbone of society.We have worked together with our customers and partners in Ukraine to help those in need and ensure Ukrainians remain connected.We continue to explore ways in which we can be a trusted partner to Ukraine and participate in the countrys reconstruction.Our Chief Corporate Affairs Officer,Melissa Schoeb,serves as a member of the Center for Strategic and International Studies Ukraine Economic Commission.We are also working towards our responsible,swift and compliant exit from Russia as announced on April 12th,2022.Russias invasion of Ukraine has also brought increased pressure on the global economy,already weakened by the coronavirus pandemic,and affecting livelihoods especially in developing countries.In other regions,there have been concerns especially around inflation and energy supply.The invasion and its impacts have yet again highlighted that sustainability is increasingly a dimension of societal resilience and that we must accelerate our progress towards a greener world.Technology has a key role to play as a enabler,unlocking economic opportunity and growth,facilitate access to work,education,health and other public services.Governments should further engage with industry to develop the best policy framework for sustainable and inclusive digitalization.Across the globe,Nokia engages with policymakers and regulators transparently and constructively to advise on spectrum for broadband,the security of digital infrastructures,a regulatory regime that facilitates network roll out and other digital policy endeavors.In 2022,we contributed to evidence-based discussion by engaging and leading discussions in organizations developing best practices for the industry and advising 20EnvironmentOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202220Our approachKey dataCorporate governanceSecurity and privacypolicymakers.These included the European Round Table for Industry(ERT),the Global System for Mobile Communications Association(GSMA),DIGITALEUROPE and national associations such as BITKOM.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.Ethical engagementWe do not participate in the political or electoral process through direct donations to political groups.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.Acting together for sustainable development We strongly believe that by acting together,we can achieve greater results.Nokia engages in several multilateral processes in support of sustainable development at the global,regional and nationallevels.We continued to participate in discussions on global connectivity and were an active partner of the UN,especially the International Telecommunications Union(ITU).In 2022,Nokia participated in the World Telecommunication Development Conference in Kigali,Rwanda,where we joined the ITU Partner2Connect Digital Coalition to foster meaningful connectivity and digital transformation globally,with a focus on hardest-to-connect communities.We also participated in the ITU Plenipotentiary Conference organized in Bucharest,Romania.As a UN Broadband Commissioner,our President and CEO Pekka Lundmark engages in public-private discourse on digital inclusion.In 2022,he led the work of the Working Group on AI Capacity together with UNESCO Director-General Audrey Azoulay.Together with stakeholders representing governments,non-governmental organizations and companies,the Working Group published its report in September 2022 on how civil servants can best take up transformative technologies and improve the delivery of public services.Our CEO also contributed to the State of Broadband Report,calling for international progress towards making the 2025 Broadband Advocacy Targets a reality.Nokia is a partner of the World Economic Forum(WEF),contributing our expertise to deliver on the WEFs promise to improve the state of the world.In 2022,we continued to shape the work towards digital inclusion at the WEF Edison Alliance.Nokia has set a target of improving the lives of 1 500 000 people by 2025 through socially driven digitalization projects,digital skills building,and connecting the unconnected and the underserved.This is also our pledge to WEF Edison Alliance.Our actions will count towards the 1 Billion Lives Challenge to improve lives through affordable and accessible digital solutions across health,finance and education by 2025,as well as ITUs Partner2Connect initiative.We continued to shape the path towards net zero as a founding member of the First Movers Coalition,a public-private partnership with the U.S.State Department,and we actively contributed to discussions around digital for climate and metaverse.In 2022,Nokia joined the Global Parity Alliance,and our OUTLeaders program,supporting and developing LGBT leaders at Nokia,was chosen as a highlight of diversity,equity and inclusion efforts in the industry.As a founding member of the Digital for Development(D4D)Coalition with other European companies,Nokia contributes to the efforts of the D4D Hub,a strategic multi-stakeholder platform that promotes new international partnerships and impact initiatives for digital transformation,led by the European Union and partner countries in Africa,Asia,Latin America,the Caribbean and the EU Eastern Neighborhood.Nokia continues to explore best practices for creating partnerships for skills and capacity development,facilitating the establishment of local innovation environments.Although we did not have a physical presence at COP27 in Egypt we did release some information on our work around circularity in the region.See Circularity sub-chapter.See the list of external initiatives we support and our memberships in associations,GRI 228.In 2022,we reached 560 702 direct beneficiaries through social digitalization projects,building digital skills,connecting the unconnected,and improving inclusion,equity and diversity.21EnvironmentKey dataSecurity and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202221Our approachEnvironmentOur greatest environmental impact is from our products and solutions,which can help to decarbonize and dematerialize other industries and cities.This is our environmental handprint and is achieved through the green transition of industries and society.In the environment arena,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 also improve product circularity with more recycled content in new products and expanding circular product offerings to customers.22Key dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalization22Security and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationEnvironmentNokia People&Planet Report 2022 EnvironmentalKey dataOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationEnvironmentHighlightsWe began shipping our FP5 new network processor silicon which is up to 75%more energy efficient than previous generationsWe joined the RE100 initiative and were awarded with the Best Newcomer recognition during climate week in New York in September 2022In 2022,we introduced a new circularity metric to guide our operational circularity journey and to close the material loop.Our new target is to be 95%circular related to operational waste by 2030We announced commercial availability of liquid cooling technology for our latest AirScale base station portfolio We launched Intelligent RAN operations which use machine learning to reduce 5G base station energy consumption Our final assembly suppliers achieved a We reduced our facility GHG emissions by 54%compared to 2019 and surpassed our annual target for renewable electricity in our facilities,reaching reduction in GHG emissions compared to the baseline year of 2019globallycustomer deploying our Quillion-based chipset in fixed broadband solutions bringing related energy efficiency benefits23Key dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202223Corporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022 EnvironmentalEnvironmentClimateIn 2022,95%of our greenhouse gas emissions came from our products in use by our customers in their networks.To help minimize emissions we constantly increase the energy efficiency of our products,improve software and services,reduce power consumption,and drive innovation across the portfolio.Examples of the innovations in silicon,cooling,product design and AI based energy management in 2022 can be found under the Our portfolio section.We also drive energy efficiency in our own operations and our value chain.Our own operations only account for a minor part of our footprint(around 1%)and are less prone to the impact of natural catastrophes and severe weather.However,we still strive to minimize our own operational footprint.We continue to drive reductions in our energy consumption across our facilities through targeted programs and actions.These are detailed in Our own operations and climate section.This is further supported by our target to purchase 100%renewable electricity by 2025 across our facilities.We also apply this same minimization first step to our value chain from our suppliers to customers.We set clear targets.We engage with our stakeholders,supply chain and industry to drive improvements in the broader ecosystem.While we expect that digitalization will drive more energy-and material-efficient industries,cities and communities,the ICT industry must continue to decarbonize its own operations and products,decoupling energy use from increased capacity and data traffic demands.Our climate targets and outcomes in 2022We have set our key greenhouse gas(GHG)emissions reduction target through the Science Based Targets(SBT)initiative.Our target is to reduce our GHG emissions by 50%by 2030 from 2019 across our value chain(Scope 1,2 and 3).The reported emissions for the baseline year were 34 961 000 metric tons CO2e.Our SBT is aligned with the goal of limiting global warming to 1.5C.We were the first telecoms equipment vendor to have a science-based target accepted by the SBT initiative in 2017.Climate 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.This chapter presents our approach,actions and achievements in 2022 concerning our carbon footprint,circularity and biodiversity.Our climate targets from 2023 onwards 202375%renewable electricity in facilities65%reduction of facilities emissions50%reduction of average power consumption of 5G mMIMO Base Station2025 100%renewable electricity in own facilities65%reduction of Scope 1 and 2 GHG emissions,including 85%reduction from facilities203050%reduction of our total GHG emissions(Scope 1,2 and 3)Final assembly suppliers reach zero emissions50%reduction of suppliers GHG emissions73%reduction of logistics GHG emissions95%circularity rate for waste from our offices,labs,manufacturing,installation and product takeback Increase recyclate use in products2050Net zero emissions in our value chain24Security and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202224Corporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022 EnvironmentalEnvironmentKey dataWe also set other short-,medium-and long-term targets in specific areas of our operations and value chain to drive concrete actions that support and accelerate the achievement of the main SBT target.We have our own 100%renewable electricity target across our facilities,aligned with the RE100 initiative which we joined in 2022.We have also agreed to a target with our main final assembly suppliers to reduce the GHG emissions by 100%by 2030 for the portion of their manufacturing attributed to Nokia.Furthermore,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 also focus on reducing the embodied 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 decarbonize their energy sources.Read more in our key climate related targets for 2022 and see a full 2023 roadmap of all our ESG targets.Understanding and tracking our emissionsAs shown in the graph,Nokias total CO2e emissions from Scope 1,2 and 3 were 39 713 600(40 983 500 in 2021)metric tons CO2e.From this total amount,Scope 1 emissions were 124 000(124 300 in 2021)metric tons CO2e,Scope 2 market-based emissions were 135 300(224 500 in 2021)metric tons CO2e,and Scope 3 emissions totaled 39 454 200(40 634 700 in 2021)metric tons CO2e.The scope of our Science Based Target(SBT)covers 37 627 000(37 598 000 in 2021)metric tons CO2e which is 95%(92%in 2021)of our total 2022 emissions.Read more about the SBT initiative and the criteria for science-based targets here.In 2022,our SBT was not on track and emissions covered by our SBT were 13ove the linear trajectory between 2019 and 2030.Total emissions remained at the same level as in 2021.However,we do not expect the reduction of emissions in our value Reported data is rounded to hundreds.We ensure the total Scope 1,2 and 3 rounds correctly.Percentages calculated out of accurate GHG emissions.Our carbon footprint(Scope 1,2 and 3)Emission sourceMetric tons CO2e%of totalEnergy use in facilities and by fleet259 4000.7%Our Scope 1 and 2emissionsUse of sold products37 919 20095%Our Scope 3 emissionsPurchased goods and services683 7002pital goods444 8001%Upstream transportation and distribution329 8000.8%Employee commuting50 1000.1%Business air travel26 7000.1%Total Scope 1,2 and 3 emissions39 713 600100%Use of sold products95%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 24 3009%Our Scope 1 emissionsCar fleet 22 4009%Marine fleet77 30030cilities,indirect emissions from purchased energy,market-based135 30052%Our Scope 2 emissionsTotal Scope 1 and 2 emissions259 400100%*Embodied emissions-Combines the GHG emissions from the following life cycle stages:raw material acquisition and prepro-cessing,production,distribution and transport,installation(by which is meant service deployment and build),and end-of-life treatment(i.e.,all life cycle stages other than the use stage).This categorization is for simplicity of reporting,because for many ICT products the use stage is responsible for the majority of the emissions,thus the term“embodied emissions”is often used to refer to all the emissions other than those from the use stage.GHG Protocol ICT Sector guidance.The SBT target covers the following activities:Scope 1:emissions from our facilities,car fleet and marine fleet 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 the logistics and the final assembly factories in our supply chain25Key dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202225Corporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022 EnvironmentalEnvironmentchain to be a linear process.We aim to achieve our target of 50%reduction in emissions by 2030 as we expect to see greater impact as more energy efficient products and features of our portfolio are adopted and decarbonization of the grid continues globally.Managing our climate actionsOur global Environmental Management System(EMS)provides the tools to analyze our most significant environmental impacts on an annual basis and to systematically track progress on selected focus areas.We select the focus areas based on current,upcoming,and potential new regulation and requirements,stakeholder interest and needs,the severity of the environmental impact,related risks and opportunities,and current and potential changes in our business.Our own operations are certified under the ISO 14001:2015 Environmental Management System standard to verify compliance with regulations,and Nokias own environmental requirements.In 2022,we got re-certified with ISO 14001:2015 and the coverage of employees within the scope of that certification was 86%(88%in 2021).Climate-related risks and opportunities The 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 provide products and services globally that have an impact on the*CDP is a global organization that runs a bespoke global disclosure system for investors,companies,cities,states,and regions to manage their environmental impacts.environment,as manufacturing,distributing,and operating these products require energy and other resources.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,and 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 chapter.Our own operations are not very sensitive to changes in energy pricing or natural catastrophes.However,climate change can impact our customers and supply chain,as well as the global economy and political and social stability.We have aligned our climate-related disclosures in our CDP*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 the Annual report,Nokia in 2022.We also reported in line with the EU taxonomy regulation(2020/852).The telecom sector is not yet included within the EU taxonomy sectors and,therefore,the positive impact(handprint)of connectivity and digitalization are not currently recognized under the EU taxonomy.The majority of our achievements in reducing GHG emissions for our customers,industry and society at large go unrecognized by the EU taxonomy in its current form.Thus,without recognition of sector relevant economic activities,the taxonomy eligibility is low for Nokia.More can be read in our Annual report,Nokia in 2022.26Key dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202226Corporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022 EnvironmentalEnvironmentDecarbonizing our value chainOur portfolioAccording to our life cycle assessment,the use phase of our products remains by far the greatest part of our carbon footprint.In 2022,the use phase based on GHG reporting accounted for 95%of our total emissions.Therefore,our greatest impact from a portfolio perspective is to continually drive down the power consumption of our products,thus improving the energy efficiency of the products when in use by our customers.In 2022,we ramped up energy efficiency solutions in silicon,hardware,software and services.We work with our customers to look at the energy used across their networks,not just individual elements.We assess the opportunities to optimize network performance and minimize,minimize energy use and therefore lower emissions.We also look at the use of intelligent software to dynamically manage the network,maximizing energy efficiency.In 2022,the GHG emissions from the customer use of sold products decreased by 1%compared to 2021.This small decrease is mainly coming from a reduction in emissions of fixed networks products due to better energy efficiency.Examples of energy efficiency improvements across our product and services portfolio are provided in the following paragraphs.As data grows rapidly,we must continually manage our industrys own footprint.We have to ensure that the network infrastructure we design and deliver to our customers is as energy and material efficient as possible.Our operations,including our supply chain,must also show improvements in efficiency.We must minimize any potential negative impacts of technology.27Security and privacyCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalization27Responsible businessBridging the digital divideIndustrial digitalizationEnvironmentNokia People&Planet Report 2022 EnvironmentalOur peopleKey dataSecurity and privacyCorporate governanceOur approachEnvironmentIndustrial digitalizationBridging the digital divideResponsible businessMobile Networks and energy efficiency5G is a natively greener technology than its predecessor 4G and can potentially provide 100 times more traffic with less energy per bit.Beyond its own footprint,5G is expected to reduce energy use in other sectors of society and industry as it enables new,robust use cases.Nokia AirScale Radio Access is a complete radio access solution that helps telecom operators to address the increasing demands for mobile broadband.Innovations such as liquid-cooled base stations,new chipset designs and power saving software features based on artificial intelligence,all provide an impetus to improve the energy efficiency of 4G and 5G networks and thus minimize related CO2e emissions.The energy efficiency of mobile networks can be improved by using power-saving features,small cell deployments and new 5G architecture,and protocols.5G has energy-saving features such as advanced sleep modes which help reduce power consumption particularly in low traffic.Our AirScale radio base station(BTS)products provide powerful energy-saving software features when network traffic is medium or high.Close to 150 customers have installed energy efficiency software features on our products,including over 50 customers with 5G energy efficient features.Over 60%of our radio products in the field have one or more energy efficiency features activated.In 2022,we continued to expand our zero emissions radio network solutions,including new energy-saving software features for both 4G and 5G Radio Access technologies.We introduced an updated Radio Access Network(RAN)hardware portfolio using our latest System on Chip(SoC)generation ReefShark,doubling the capacity of the mMIMO(massive multiple input and multiple output)antenna solution.We have enriched our liquid-cooled BTS offering with the latest generation of ReefShark based high-capacity Plug-In Units.We also introduced Intelligent Radio Access Network(RAN)operations that use machine learning to reduce 4G and 5G base station power consumption by up to 15%.Modernization is also another key approach to minimizing the expected rise in energy use as 5G is deployed and data grows.Initial deployments of 5G can potentially lead to increased energy use if 5G is simply added on top of an existing network without modernization of the legacy network.The customer base station sites we modernized in 2022 used on average 44%less energy than those that were not modernized.The number of modernized products is based on the number of older generation radio network products replaced at customer sites for which the data is available in a global product deployment database for the reportable year.Beyond reductions in energy use and related emissions,base station modernization also brings economic benefits through a typical payback time of two to three years.Read more about 5G here.Network InfrastructureIn IP Networks in 2022,we launched the FP5 Nokia chipset which sets a new benchmark for power efficiency in IP routing with a 75%reduction in power consumption per bit over the previous generation.It reduces power consumption even more if only a fraction of the potential capacity is used.An intelligent aggregation mode enables a 33%throughput capacity increase using the same power modules and inputs.With FP5,power efficiency is always optimized,no matter the load conditions.FP5 maintains consistently high performance,even as it takes on multiple concurrent roles with all features and capabilities enabled and running at line rate.This allows service providers to do more with fewer routers and line cards,minimizing their overall power consumption.Highly efficient cooling also offers other options for service providers and lowers total power consumption even further.FP5 based products are 800GE routing-enabled,offering a reduction in power consumption between 20%and 40%when compared with 100GE and 400GE devices,and provide the same reach with higher capacity.In Optical Networks,the PSE-V our Photonic Service Engine solution in commercial delivery in 2022 provided the most advanced family of coherent digital signal processors(DSP).The PSE-V powers Nokias next generation high-performance,high-capacity optical transport hardware.The PSE-V supports higher capacity over longer distances including support for 400G over any distance-while further reducing network costs and power consumption per bit.The PSE-V allows a reduction of power consumption per bit of at least 50%in respect to the PSE previous generation.In 2022,Nokias Fixed Networks hit a milestone of reaching its 150th customer deploying our Quillion-based chipset in fixed broadband solutions.Quillion-based solutions consume about 50%less power in the Optical Line Terminal(OLT)than previous generations and are two years ahead of the European Union Code of Conduct for Broadband Communication Equipment targets helping operators to meet their emissions goals.This allows operators to deploy power-optimized line cards with next-gen processors,power-saving features and optimal airflow guidance,resulting in more compact efficient nodes with less power and coolingprovisioning.The Quillion Multi-PON solutions can co-exist with previous generation technologies.This means there is no need to replace the existing deployed fiber.Consequently,no new digging is needed to lay fiber,which results in the avoidance of potential environmental impact from laying new fiber.Read more about Quillion here.28Key dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202228Corporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022 EnvironmentalEnvironmentCloud and Network ServiceAVA Energy Efficiency(formerly iCES Energy)helps customers meet their energy efficiency and carbon reduction goals.The product uses AI to assess where active and passive power usage can be reduced without impacting the customer experience.Some customers see an up to 20%reduction in energy consumption.The AI-based AVA Energy Efficiency predicts low traffic periods and shuts down resources like frequency carriers or even whole sites in case of overlapping coverage.It can be deployed on multivendor active RAN site 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 AC control,and shuts down unused hardware resources that are critically important levers for energy reduction.AVA Energy Efficiency offers an as-a-service solution,combining Nokias deep telco knowledge and data science capabilities.Tailored insights reduce energy consumption of active RAN and passive of auxiliary components at the base station site.In 2023,CNS expects to launch an extension to AVA Energy covering data centers,which are huge powerconsumers.The IMPACT software platform allows customers to implement smart metering on energy,waste,gas,water,humidity,and more to conserve scarce resources.The horizontal architectural approach allows automatic data collection from many different types of sensors and multiple options of wired and wireless connectivity.IMPACT IoT can be used by customers to manage energy and feed data into the ESG system for sustainability reporting.The Cloud Native Communication Suite(CNCS)gathers all IMS voice core components in a single CNF(Cloud Native Network Function)reducing the carbon footprint of the solution by 15%and operating costs by about 35%due to simplified life cycle management.CNS will evolve this solution in 2023 to serve up to 4 million subscribers with a rich set of services.With industrial digitalization,particularly through campus private wireless networks,CNS provides connectivity and digital solutions that can transform physical and asset-intensive industries to decarbonize,making them more sustainable,safer,and more productive.In campus edge,more than 90%of early adopters report energy reductions.The on-demand nature of Software-as-a-Service(SaaS)delivers more efficient use of resources and sustainability benefits.Customers consume the energy they need,and cloud hosting reduces emissions from hardware shipments.In 2022,Nokia signed a technology collaboration agreement with Intel to create market-differentiating improvements in power savings(30%),performance(20%),and security and analytics of the CNS portfolio running on the latest-generation Intel processors.The project will establish a new Nokia 5G global corporate renewable energy initiative bringing together hundreds of large and ambitious businesses committed to 100%renewable electricity.In September 2022,we were recognized as the best newcomer by RE100,the Climate Group and CDP for our work on renewables.In 2022,electricity consumption across our facilities increased 1%compared to 2021.63%(53%in 2021)of total consumed electricity came from renewable sources and our Scope 2 market-based emissions decreased by 40%from 2021 levels.The facilities Scope 1 and 2 emissions were reduced by 34%compared to 2021 and 54%compared to the 2019 baseline.Total energy use across our real estate portfolio was 3%higher compared to 2021.Nokia sites employing renewable electricity in 2022 were located in the following countries:Australia,Austria,Belgium,Bulgaria,Canada,China,Denmark,Finland,France,Germany,India,Ireland,Italy,Netherlands,New Zealand,Norway,Poland,Portugal,Slovakia,Slovenia,Spain,Sweden,Switzerland,UK,and the USA.Core on a Core engineered system lab to measure the power savings of different Intel features,as well as their performance and footprint.Nokia fosters engagement with hardware suppliers to ensure circular and carbon optimized logistic flows,and is partnering to bridge the digital divide and increase universal access to the Internet.Finally,an ESG Design Framework for network functions and applications leverages and builds on the Design for Environment recommendations created by Nokia Bell Labs.The Design Framework is based on three pillars:1.Developing a consistent model across different products and software to evaluate and measure the consumption of virtual resources 2.Defining APIs allowing the exposure of the network function consumption,its monitoring and reporting3.Applying AI/ML rules to analyze,predict and propose active optimization for scaling back when needed or moving the workload to a distribution center where the source of energy is cleaner.Nokias own operations and climateOur real estate team focuses on developing and delivering energy efficient facilities in-line with our overall company goals and science-based target(SBT).We aim to reach 100%purchased electricity from renewable sources by 2025 across our facilities.This covers our offices,laboratories and our own final assembly factories.This target is aligned with the RE100 initiative.The RE100 initiative is the In October 2022,we were pleased to receive the first ever Vodafone Group planet award at the Arch Summit in Luxembourg for our work on climate challenges.29Key dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202229Corporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022 EnvironmentalEnvironmentIn 2022,our existing wind power purchase agreement for our Chennai factory in India was boosted by a new 3 600 panel rooftop solar plant.At our Horizonte building in Portugal,610 new solar panels on top of the employee car park are now generating 18%of all the electricity used in the building.At our flagship factory in Oulu,Finland we have added renewable district heating to the existing purchase of renewable electricity.We continue to encourage the consideration of sustainability in the selection,development,management and disposal of our facilities.Our new sites in Istanbul,Massy,Stuttgart and Sunnyvale all have sustainability certifications(LEED,BREEAM or equivalent).Our site in Singapore also achieved the Singapore Environment Council Eco-Office Champion certification.All markets implemented projects designed to improve facility operational efficiency,including but not limited to the utilization of LED lighting at sites within China,the USA,India,Portugal,Poland,Germany and Singapore;the use of partial free cooling in Finland and Belgium;and replacement/optimization of UPS and chillers in India.Also,transferring operations to more energy efficient sites in Germany and the USA has brought reductions in energy use compared to the previous sites.Employee transportation our car fleetWith our employee transportation we aim to reach the target for our own operation emissions by introducing low emission vehicles and alternate mobility options.In 2022,GHG emissions from our global car fleet decreased by 8%compared to 2021 and are now 24%less than in 2019.In 2022,almost all pandemic related restrictions were lifted,and people were able to travel freely.Employees did not have to use a car for traveling as often as during the pandemic and our new flexible working model also reduced commuting to the offices.We have introduced electric vehicles in all countries that represent most of our fleet emissions.Electrification will accelerate in coming years when charging infrastructure matures and when there is more choice in electric car ranges and more affordable pricing.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 62%of our Scope 1 emissions.In 2022,the GHG emissions for our marine fleet decreased by 5%compared to 2021.ASN has a green charter in place and continued 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 Artificial Intelligence(AI),the mobilization of regional based chartered vessels to reduce transits,and next-gen cable ships with the latest technology in terms of propulsion and power generation.In 2022,the main ASN Marine Fleet Manager committed to proactively go beyond European and International environmental regulations by submitting its application for the label of the Green Marine Europe Program to continually improve its environmental performance.Virtual meetings increased,business travel emissions decreased80 00060 00040 00020 0000Air travel CO2e emissionsNumber of remote meetings 14% 76%-89630Air travel CO2e emissions(metric tons)Number of remote meetings (millions)-58%-81% 372 2120222020201930Key dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202230Corporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022 EnvironmentalEnvironmentEngaging our suppliers on climateOur target for our final assembly suppliers is part of our corporate climate target and requires that they achieve zero emissions by 2030 for the portion of their manufacturing allocated to Nokia.In 2022,we continued working with our final assembly partners on their 2030 roadmaps development.All suppliers delivered factory-level detailed roadmaps.New manufacturing facilities opened with final assembly suppliers in 2022 were also included into the program addressing climate ambitions and roadmaps.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 10 years and together create programs to drive improvements in our upstream Scope 3 emissions.We encourage our key suppliers to report their climate impacts.We set carbon reduction targets through CDP for our suppliers and create improvement programs with them to help reach those targets.In 2022,481(441 in 2021)of our key suppliers representing 64%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 recommended on next priorities.In 2022,our Scope 3 emissions from our supply chain were approximately 683 700 metric 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 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 2022,we continued to address one of the challenges in emissions allocations,namely data quality,by comparing the supplier reported data with Life Cycle Assessment(LCA)data tools and addressing quality issues with suppliers with strong deviations from sector average and LCA values.Our Supplier Diamond Awards in 2022 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 2022 demonstrated commitment to CO2e emission reductions in line with Science Based Targets and had a clear roadmap in place for 2030 and a 2050 path to carbon neutrality.This involved looking at maximizing energy efficiency,such as upgrading their activities to high-efficiency manufacturing equipment,improvement of clean room heat exchange equipment as well as on-site generation of renewable energy and purchased renewable electricity.Read more about our work with suppliers under the Responsible sourcing sub-chapter and the Water in our supply chain section.481Suppliers disclosed data,60%of Nokia spend265Suppliers purchased renewable energy278Suppliers had structured targets for emission reduction,and 96 of them in line and validated by Science Based Targets Initiative418Suppliers reported their GHG emissions(Scope 1 and/or 2)95Suppliers proposed reduction initiatives and collaboration opportunities with NokiaSupplier climate disclosure figurestons CO2e8 200annual reduction achieved by our final assembly suppliers(Nokia relevant)tons CO2e887 900annual reduction achieved by all suppliers activities related to Nokia business288Suppliers engaged their own suppliers on climate disclosure31Key dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202231Corporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022 EnvironmentalEnvironmentReducing 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 2022,our CO2e emissions related to business travel increased to approximately 26 700 metric tons(5600 metric tons in 2021),meaning a 372%increase compared to 2021.A significant part of the increase was due to waived travel restrictions globally,leading to expected increase of travel volumes after a long period of pandemic.We managed to keep the growth still reasonable,having still 63%less travel emissions than in 2019.Despite the increased travel volumes,we were able to keep remote meeting volumes high,seeing an only 8%drop compared to 2021.As the majority of our employees continued working from home offices in 2022 on average 57%(85%in 2021)of all employees during 2022 our commuting emissions have significantly decreased(55%)compared to the time before the pandemic(2019).In 2022,emissions increased by 190%compared to 2021.Travel and commuting emissions are expected to grow as recovery from the pandemic proceeds.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 CO2e emissions from deliveries.In 2022,we reduced the use of new packaging materials in terms of weight by 2 500 tons through reuse of transportation packaging.This was achieved mostly due to improved working practices in our hubs.We look at the most efficient product transportation options and in 2022,our Scope 3 GHG emissions related to upstream and downstream transportation and distribution of our products stood at around 329 800(326 100 in 2021)metric tons CO2e,an increase of 1%compared to 2021.Although in 2022,we managed to lower the share of air transportation mode and raise the sea mode considerably(even utilizing a combination of sea and air mode),used regionalized practices and other means of optimization of transportation,still the overall yearly CO2e emission result was higher mainly due to the significant increase in the volume of transported goods and to the turbulent geopolitical situation.With our business groups we are working on specific reduction targets and on the execution of the roadmap to achieve the contribution of product transportation to Nokias science-based targets.As one of the emission reduction methods in our transportation,we have explored carbon in-setting which is similar to carbon off-setting,except the activities that lead to carbon footprint reduction take place within the context of the value chain.In 2022,we continued our successful pilot from deployment of a Sustainable Aviation Fuel(SAF)carbon in-setting 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 sustainable aviation fuel and have expanded the collaboration on SAF to 3 logistics partners.For 2023,our focus will be to continue improving the environmental efficiency of our transportation by collaborating with the biggest contributors and concentrating on the most environmentally detrimental modes of transport.32Key dataSecurity and privacyOur approachCorporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 202232Corporate governanceOur peopleResponsible businessBridging the digital divideIndustrial digitalizationNokia People&Planet Report 2022 EnvironmentalEnvironmentCircularityEfficiency,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,all 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.As we are not able to dematerialize everything,good waste management practices are important as well.We introduced a new circular metric to guide our operational circularity journey and to close the material loop.Our new target is to be 95%circular with 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 new target is to improve waste management so that disposal to landfill is minimized.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 2022,we achieved a circular waste level of 89%with the data coverage we had in 2022.Circular practices and our products We continue to progress with the creation of telecommunication-specific circular economy standards in the ITU-T(International Telecommunication Union-Telecommunication Standardization

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AeonReport2022SustainabilityEditionEnrichingPeoplesLivesandLocalCommunitiesforTomorrowAeonReport2022.

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LULULEMON 2021 IMPACT REPORTWelcomeThis is lululemons 2021 Impact Report,a detailed account of the progress we are making in our commitments to support the wellbeing of people and restore a healthier planet.Our ambition is to be a brand leader in creating a positive impact for our planet and its people.Our transformative role is to help our industry accelerate wellbeing for all by celebrating our interconnectedness,relentlessly pursuing progress,and advancing collective action.This report lays out our growth throughout 2021 on our path to realizing this vision.Front Cover Illustration“We begin our breathing journey at the point when we become aware with the intensity of our emotions.We feel compressed,rhythm is short,fast movement.Lines are tighter with focus on the colour red(power,makes heartbeat faster,commands attention).”Jacquie Comrie,report illustrator2 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet Supplement CONTENTS Introduction4 A note from our CEO5 A note from our impact leadership 6 Who we are 7 Our enterprise strategy8 How we create value 9 Our Impact Agenda10 How we govern impact11 A year of progress and learning13 16 goals for a healthier future Be Human17 Inclusion,Diversity,Equity,and Action 20 Employee empowerment22 People who make our products Be Well29 Our approach to wellbeing31 Global wellbeing33 Community wellbeing35 Maker wellbeing37 Frontline wellbeing Be Planet 40 Climate action45 Sustainable product and material innovation51 Circularity and new guest models 53 Water and chemistry 55 Packaging and waste Supplement 58 Partnering for change60 Stakeholder engagement 61 Material topics62 Responsible supply chain data63 Climate data 68 SASB Disclosures 70 GRI Standards 74 Glossary75 Assurance statement 77 Forward-looking statements 78 Artist statement ABOUT THIS REPORTThis report serves as a platform to share lululemons enterprise impact strategy.It discloses our progress against publicly stated goals as well as performance related to environmental,social,and governance(ESG)topics under the three pillars of our Impact AgendaBe Human,Be Well,and Be Planet.It covers global business activity performance for our direct operations(including offices,retail locations,e-commerce,guest education centres,and distribution centres)and supply chain(including manufacturing suppliers and distribution logistics).Were reporting for the fiscal year ending January 31,2022(referred to throughout this report as“2021”),unless otherwise noted.Except for greenhouse gas(GHG)emissions data in the Climate Action section,our report does not include information on MIRROR,which we acquired in 2020 and represents a small portion of our business.As our business evolves,we will continue to assess our reporting approach.Our Supplement includes detailed performance information.It was developed in line with the Sustainable Accounting Standards Board(SASB)framework and references select Global Reporting Initiative(GRI)Standards.We have obtained limited external assurance on select reported metrics,including energy consumption and renewable electricity use inownedand operated facilities,Scope 1 and 2 GHG emissions,and Scope 3 emissions from business travel.3 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementA note from our CEOThank you for taking the time to read our second annual Impact Report.This report represents our commitment to transparently sharing our impact journey progress and details our work in implementing and further developing innovative solutions to accelerate lasting,positive change for our people,communities,and environment.The world continues to face many challengesfrom the ongoing COVID-19 pandemic to challenges related to mental wellbeing,from racial injustice to the impacts of climate change.At lululemon,we are guided by our three Impact Agenda pillars:Be Human,Be Well,and Be Planet.This holistic approach enables us to drive our actions in support of our people,the wellbeing of our communities,and a healthier planet for us all.Earlier this year,we evolved our purpose at lululemon to elevate human potential by helping people feel their best.I am pleased to see how our purpose is reflected throughout this report,as we embed our impact into our day-to-day practices in order to underpin our company growth strategy and to inspire innovation and progress across our entire organization.To preview our report,here are just a few examples of our actions to help drive change.In support of our people and communities,we have continued to deliver against our Inclusion,Diversity,Equity,and Action(IDEA)commitments.We increased the diversity of our employees to better reflect the communities we serve,broadened our inclusive design programs,maintained gender pay equity for the fifth year in a row,and maintained full pay equity for 100 percent of all US employees.In addition,through the launch of the lululemon Centre for Social Impact,we invested US$11.9 million in support of our goal to provide access to wellbeing tools to 10 million people by 2025.To help create a healthier planet,and as part of our climate action plan,lululemon procures 100 percent renewable electricity to power all our owned and operated facilities.In our mens business,our products are now made with more than 75 percent sustainable materials,and we are almost a third of the way toward our goal of 100 percent sustainable products by 2030.And in our work toward a circular ecosystem,on Earth Day,we expanded our lululemon Like New resale program to all stores within the United States to keep our products in use longer,which is one of many actions that helped us earn recognition by Fast Company as the#1 retailer for corporate responsibility.To take our actions even further,we recognize that we cannot do this alone,and we have continued to invest in strategic partnerships to accelerate innovation.We partnered with Genomatica to take a leadership role in raw material innovation,developing the first plant-based nylon in the world.And we were especially proud to be one of the two lead investors in the creation of the Apparel Impact Institute Fashion Climate Fund,a US$250 million fund to decarbonize the fashion value chain.On behalf of everyone at lululemon,I am proud of the contributions we have made over the past year to create a healthier world.Our progress reinforces the importance of the impact we can continue to make in the years ahead.While we remain early in our journey,one thing is clearwe are more focused than ever on bringing about thoughtful,more sustainable innovation and design,creating ways to connect and inspire,and seizing the opportunity to disrupt and lead our industry for people and planet.I want to close by thanking our teams around the world for their continued passion and commitment to advancing wellbeing for all.It is the hard work and creativity of our people that makes all of this possible,and enables all that we have yet to achieve.Sincerely,CA LV I N M C D O N A L D Chief Executive Officer4 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementA note from our impact leadershipAs a global business rooted in wellbeing and mindfulness,wehave a responsibility and opportunity to contribute to the wellbeing of people and our planet.Since setting lululemons Impact Agenda two years ago,we have continued to accelerate our pace toward achieving our social and environmental ambitions.In the last year,we have continued to build our foundation and move toward more transformational and collective initiatives.Through our Centre for Social Impact,we have engaged with both local and global social impact organizationssuch as The Trevor Project,the Girls Opportunity Alliance,and The Resilience Fund for Women in Global Value Chainsthat help scale solutions to deeply rooted systemic issues around mental health,wellbeing,and empowerment.Our roots in materials innovation lead us to help unlock new technologies for our products and planet,with industry leaders such as LanzaTech and Genomatica.Recognizing the importance of collaboration,we are especially proud of being a lead investor in the Apparel Impact Institute Fashion Climate Fund,to help decarbonize apparel manufacturing and supply chains.Our employees and partners around the world are creating conditions that help us move toward a more equitable,sustainable,and healthy future.We know the goals in our Impact Agenda are bold,and require courage,energy,and learning.We are thrilled toshare our second annual Impact Report with you,celebrating and reflecting on our progress and path,and will continue toshare the successes and challenges along the way.Join us on our journey to achieve our impact goals.E ST H E R S P E C K Vice President,Sustainable Business and ImpactOur IDEA mission at lululemon is to expand being well to encompass a culture of inclusion where diversity is celebrated,equity is the norm,and action is the commitment.At the heart of that mission is expanding our definition of wellbeing and our commitment to action.This second annual report highlights the strides we have made by listening,learning,and,most importantly,acting.We have integrated IDEA throughout the business and established targeted programs that advance accessibility,address systemic barriers,promote career development for all,including traditionally underserved groups,and positively impact our broader communities.For everything we create whether it be employment policies,how we design our stores,how we interact with business partners,or how we engage with our guests and communitieswe strive to approach it from a place of inclusive design.We centre those most impacted and those who may be currently experiencing the greatest barriers so that we generate delightful and equitable experiences for all.Together,we are building an ecosystem of inclusion that results in increased representation and a healthier work-andmarketplace.We know that the path forward is together and that it will not be a sprint.It will require endurance,courage,integrity,and mutual care.I invite you to celebrate and reflect on our progress and fuel upfor the journey we have ahead of us.5 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementSTAC I A J O N E S Vice President,Inclusion,Diversity,Equity,and ActionWho we areWe are lululemon.Our vision is to create transformative products and experiences that build meaningful connections,unlocking greater possibility and wellbeing for all.We are a business rooted in purpose:we elevate human potential by helping people feel their best.With a company history that dates back nearly a quarter century,we are working to leverage our passion for product innovation,wellbeing,and mindfulness into platforms from which we can inspire and accelerate positive change.We are using our expanding global presence to support people and communities,develop innovative products and services for our varied markets,and engage partners toward achieving a sustainable,healthy,and inclusive future,together.1 Included within the Peoples Republic of China as of January 31,2022,there were nine stores in Hong Kong Special Administrative Region,five stores in Taiwan,and two stores in Macao Special Administrative Region.Europe 37storesPeoples Republic of China1 86storesAsia-Pacific 64storesNorth America387storeslululemon in 2021 numbers53new stores opened574stores29,000 employees17countries where we have retail stores240,000 workers of suppliers who make our products 6 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementOur visionWe create transformative products and experiences that build meaningful connections,unlocking greater possibility and wellbeing for allBe HumanOur people succeed because we create an environment that is equitable,inclusive,and fosters growthBe WellOur communities thrive because we contribute to conditions that support physical,mental,and social wellbeingBe PlanetOur products and actions avoid environmental harm and contribute to restoring a healthy planetProduct innovationCreate ongoing“Oh shit!”moments in the industry and for our guests“Double Mens”Guest experienceA guest-centric experience that creates connection,celebrates product,and cultivates community“Double Digital”Market expansionA truly global brand that expands lululemon to new guests and communities around the world“Quadrupole International”The Power of Three 2 is our enterprise growth plan to 2026.It builds on the success of our achievements and speaks to the priorities that will drive revenue over the next five years.It is underpinned by our Impact Agenda.Our Impact Agenda is our strategy toward a sustainable,equitable,healthy future.It guides the goals we have set to advance positive social and environmental impact as part of enacting our enterprise growth plan.Together,the Power of Three 2 and our Impact Agenda form our enterprise strategy,a comprehensive and strategic roadmap for delivering on our purpose as a business.Our enterprise strategy Our valuesPersonal responsibility We act with honesty and integrity,taking full accountability for our choices and their impact.InclusionWe remove barriers to equity so that everyone has a sense of belonging.ConnectionWe build trusting relationships by valuing and celebrating each humans uniqueness.CourageWe have the heart and strength to do big,challenging,and important things for each other and our planet.FunWe infuse fun and laughter into all we do,which allows us to turn work into play.Our purposeWe elevate human potential by helping people feel their bestPeopleTo develop inclusive leaders who enable growth and wellbeing for allPlanetLead the way in reducing environmental harm and contribute to restoring a healthy planet7 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementHow we create valueValue creation modelWe create societal,environmental,and economic value throughout our value chain.Below are key examples of value creation and how we track progress.SELECT 2021 METRICSInnovation and designWe advance more sustainable materials and circular,inclusive product design,innovate manufacturing processes,and deliver guest opportunities that extend product life and divert product from landfill.3 innovative partnerships(Mylo Consortium,Genomatica,LanzaTech)38%more sustainable materials in products60 cross-functional leaders certified in inclusive designpracticeManufacturing and supplierecosystemManufacturing and supplier ecosystems contribute to economic value and job creation in countries around the world.We prioritize our work with suppliers to foster more sustainable and equitable initiatives.These include safe and respectful working conditions,as well as wellbeing and empowerment initiatives.We also work with our suppliers to improve manufacturing processes that use less water and energy,better chemistry,and more sustainable packaging solutions.240k makers 20k makers with access to wellbeing tools and resources US$2.4M on maker wellbeing programsLogistics and distributionWe have six owned distribution centres and operate a global system of logistics and transportation.While pandemic supply chain challenges make this difficult,we are working to advance more carbon-efficient ways to get our products from factory to retail.We are maintaining zero waste status in our owned distribution centres and have shifted to renewable electricity by purchasing Energy Attributes Certificates(EACs)for our owned and operated facilities.100%renewable electricity 6 zero waste distribution centresLeadership and employeesWe are a team of committed people who care deeply for each other,believe anything is possible,and relentlessly pursue our growth together.We employ over 29,000 people globally.Our highest focus is on employee growth and development.Our inclusive leadership programs support employees in developing their skills and growing as leaders in the world.5,500 employees attended leadership training programs,including a new 1x1 coaching program429 mentees and mentors participated in our Mentorship program Omni-channel guest experienceOur products and experiences support physical,mental,and social wellbeing.Through our omni-channel strategy,we deliver product options that meet the diverse needs of our guests,as well as experiences that strengthen community connections around the world.400 new styles launched 10k classes on demand through MIRRORCommunity engagementWith our Educators,ambassadors,and events,our ecosystems support thriving studios and livelihoods,as well as more equitable access to wellbeing through social impact grants and partnerships with local non-profit organizations.Globally,we build large-scale partnerships and support organizations that offer tools and resources for physical,mental,and social wellbeing.750 organizations collaborated with Centre for Social Impact since 20161.4M people accessed tools and resources for wellbeing550 global and store ambassadorsBe HumanBe WellBe PlanetK E Y8 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementOur Impact AgendaOur Impact Agenda guidesand is integrated intoour business strategy and operations,helping to accelerate inclusive and more sustainable progress and advance a shared culture of positive impact throughout lululemon.We recognize that the wellbeing of people,communities,and the planet are connected.This holistic approach is reflected through the three pillars of our Impact Agenda:Be Human,Be Well,and Be Planet.We created our Impact Agenda in response to the need for businesses to deliver end-to-end impact,accelerating a step change in how our companyand the wider industryoperates.Refining our focusTo drive positive change,we must understand the global sustainability context as well as the landscape of our industry today,including the social and environmental topics that matter most to our business and stakeholders.In 2019,we conducted a materiality assessment to define key issues that would inform our strategy,laying the groundwork for meaningful,measurable action.In 2022,we conducted research and interviewed select stakeholders,including academics,non-governmental organizations(NGOs),and industry associations,to review and refresh the issues that matter most.Our analysis did not change our Impact Agenda focus areas or goals but did highlight emerging topics such as biodiversity.Detailed results of this strategic refresh can be found in the Supplement.We map each key issue to focus areas within our Impact Agenda and relevant sections of our Impact Report,ensuring our strategy and efforts target and positively impact these critical areas.To ensure alignment of our impact with global requirements,we align our three pillars with relevant United Nations Sustainable Development Goals(SDGs).We then activate them by:Embedding the pillars in our culture and building accountability foractioning goalsLeading by example and partnering to innovate for the futureCommunicating with and engaging our collectiveCollaborating and advocating for systems changeBe PlanetClimate actionSustainable product and material innovationCircularity and new guest modelsWater and chemistry Packaging and waste7.Affordable and Clean Energy12.Responsible Consumption and Production13.Climate ActionSDGs supportedBe WellEquitable access to wellbeing tools and resourcesResearch,advocacy,andinclusive innovation3.Good Health andWell-beingSDGs supportedBe HumanInclusion,diversity,equity,and actionEmployee empowermentFair labour practices and wellbeing of people who make our products 5.Gender Equality8.Decent Work and Economic Growth10.Reduced InequalitiesSDGs supported25.Gender Equality10.Reduced Inequalities2 Numbers tied to UN Sustainable Development Goals9 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementHow we govern impactGROUPRESPONSIBILITYBoard of DirectorsIncluding:Corporate Responsibility,Sustainability,and Governance(CRS&G)Committee People,Culture,and Compensation(PC&C)Committee Audit CommitteeActs as a fiduciary to:CRS&G:Oversees our Impact Agenda.Reviews stakeholder engagements,reviews goals and policies,and monitors progress and ESG reporting.PC&C:Oversees compensation,talent management,succession planning,and diversity and inclusion,as well as risk monitoring,compliance,and related activities.Audit:Oversees risk assessments,including compliance risks to our business and supply chain,and monitoring and complying with disclosure requirements.Executive Impact CouncilInclusion,Diversity,Equity,and Action(IDEA)Advisory Council CEO and Senior Leadership team,as well as members from supply chain,product,legal,brand,finance,and people and culture,led by VP Sustainable Business and Impact and VP,IDEA.Oversees,executes,and reports on Impact Agenda and IDEA commitments.Integrates the Impact Agenda into our business strategy.IDEA Function Sets global IDEA goals and supports a culture of inclusion to expand inclusion,diversity,and equity across the organization.Oversees People Networks and task forces for regions and specific business functions.Sustainable Business and Impact (SBI)Function Drives social,environmental,and governance strategy across the organization.Sets Impact Agenda strategy,goals and commitments,enterprise integration,and stakeholder management.Works cross-functionally to advance a culture of impact and delivers progress in key areas.Steering Committees and Advisory GroupsIncludes:IDEA External Advisory Council:Provides expertise on programs.Responsible Supply Chain Council:Oversees key programs for a responsible supply chain and current public developments.Centre for Social Impact Advisory Board:Advises and provides input to strategy and key program areas.Climate Activation Council:Drives strategy and collaboration to identify and execute a pathway to science-based targets.Select Strategic Initiative Steering Committees:Oversee initiatives that require global cross-functional engagement,including lululemon Like New and more sustainable packaging.Collaboration invites change and accelerates progress.With this in mind,we developed a governance structure that brings together diverse people who have accountability as business leaders and are passionate about transforming the current social and environmental status.We have developed a multi-level governance structure to foster collective progress against our Impact Agenda as part of our enterprise strategy.This includes activating meaningful,company-wide practices that deliver on our commitments and evolve our ambitions to stay relevant in a changing world.RESPONSIBLE BUSINESS CONDUCT Ethical conduct Ethical conduct is the foundation of how we do business.To root integrity and respect for everyone in our company culture,we maintain a Global Code of Business Conduct and Ethicsa blueprint for responsible business.At the same time,our Vendor Code of Ethics(VCoE)establishes expectations of our suppliers.Data privacy protectionPeople trust us with their personal information.It is our responsibility to protect that data with strict company security policies.We also follow applicable data protection and privacy laws to ensure employees,guests,and business partners know their information is in safe hands.This is overseen by the Audit Committee,our Chief Information and Security Officer,Data Privacy Officer,and Chief Compliance Officer.Performance-related compensationWe believe in rewarding exceptional performance.The PC&C Committee sets competitive levels of compensation to attract,retain,and motivate the most qualified directors and executive officers who contribute to success and align with our culture.As we evolve our Impact Agenda,we continue to monitor the future role ESG metrics could play in our compensation program.10 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWe maintained gender pay equity across our entire global employee population and full pay equity in the United States for the fifth year in a row.We implemented ZDHC Manufacturing Restricted Substances List(MRSL)at 100%of priority suppliers in 2021,one year ahead of our target date.We procured 100%renewable electricity to power our owned and operated facilities.We launched the lululemon Centre for Social Impact in 2021,which aims to break barriers that prevent access to wellbeing.We met our Scope 1 and2 science-based target to achieve a 60solute reduction of GHG emissions in all owned and operated facilities.A year of progress and learning 2021 represents the first full year of implementing our Impact Agenda,building on years of previous impact work.lululemon is committed to continuous learning to evolve and improve how we contribute to wellbeing for people and our planet.We achieved several impact goals,demonstrating our commitment to action.Here is some of the progress we have made over the past year.11 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementIt is important to celebrate our shared wins and build on these,and to recognize progress is ongoing,with significant industry-wide challenges ahead of us.To achieve our vision,we are always innovatingbuilding on our successes,learning from our failures,and taking every new challenge as an opportunity to learn and grow.We appreciate the connectedness of our business to the wider global context and acknowledge our impact on the future and those around us,as well as the effect that changes in important areas can have for others.The global business environment presents challenges that can negatively impact lululemon and our ability to deliver on our Impact Agenda commitments.We approach these dynamic,complex challenges by listening,engaging with a variety of stakeholders,taking intentional steps to make change,and continuously adjusting as we learn more.In 2021,we identified our most pressing challenges,and have taken steps to address them,ensuring the best path forward.Increasing global inequities in wellbeing.Shifting consumer and employee expectations and preferences(e.g.,options for pre-owned products).Evolution in product and value chain traceability expectations.Interconnectedness of global context and events,and our business and industry operations(e.g.,supply chain complexity).Legislation and regulatory changes.Regional and national regulating bodies continue to evolve legislation on environmental,social,and due diligence topics.A year of progress and learning Global challenges we are addressing:12 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementThe wellbeing of people,communities,and the planet are intricately intertwined.We developed our Impact Agenda with these connections at the forefront:three distinct pillars designed to work together to achieve a rapid,equitable,and more sustainable transition.Driving our actions are 16 targeted goals that,together,will deliver progress toward shared wellbeing.16 goals for a healthier future TopicGoalMetricBaseline YearBaseline2021 Results3GoalGoal YearStatusInclusion,Diversity,Equity,&ActionReflect the diversity of communities we serve and operate in%of racial diversity of assistant store managers and directors4 202021#0 23%of racial diversity of all employees in global stores42020317 23Employee EmpowermentBe the place where people come to develop and grow as inclusive leaders for the world#of hours of paid training and volunteer time for all full-time employees5202113.513.5402025Expand full pay equity%of employees with full pay equity 2020100a000 22People Who Make Our ProductsMake wellbeing programs available to makers7#of cumulative makers in our supply chain who participate in wellbeing programs202120,00020,000100,0002025Achieve Fair Labor Association(FLA)accreditationQualitative2020Updated Vendor Code of EthicsCompleted onboarding stageAchieve FLA accreditation2024TopicGoalMetricBaseline YearBaseline2021 Results3GoalGoal YearStatusInclusive Access to Wellbeing&AdvocacyProvide access to wellbeing tools and resources#of cumulative people reached 20211.4M 1.4M10M2025Invest to advance equity in wellbeing through the lululemon Centre for Social Impact Total amount invested2021$13.7M8$13.7M$75M2025Launch the lululemon Centre for Social Impact QualitativeNANACentre launchedLaunch Centre2021Be WellBe HumanPERFORMANCE DASHBOARDK E YGetting startedMaking progressCompleteOff track,plans in place3 For more information on our 2021 results,please refer to the relevant sections of the Impact Report.4 Includes stores in North America,Australia,New Zealand,Europe,and Middle East.5 Beyond onboarding training and mandatory compliance training.6 We maintain 100%gender pay equity within our entire global employee population,meaning equal pay for equal work across genders.We have achieved pay equity across all areas of diversity in the United States and are seeking,to the extent permitted under local law and regulation,to collect the data necessary to confirm complete pay equity globally.7 In 2021,we updated the language of this goal from“maker empowerment programs”to“maker wellbeing programs”as we further refined our strategy.Our goal to reach 100,000 makers is included within our goal to provide tools and resources to 10 million people.8 lululemon made a US$13.7 million contribution to the Centre for Social Impact,$11.9 million of which has been contributed directly to social impact organizations.The remaining$1.8 million includes$1 million toward a Donor-Advised Fund to be advised for future grantmaking as well as operational costs.13 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet Supplement16 goals for a healthier future TopicGoalMetricBaseline Year Baseline2021 Results3GoalGoal YearStatusClimate ActionMeet our 2030 science-based climate targets%of absolute reduction in GHGs in all owned and operated facilities(Scope 1 and 2)201818,248 tCO2e-82%-60 30%of intensity reduction in GHGs in purchased goods and services,and upstream transportation and distribution(Scope 3)201899.2 tCO2e/net revenue from operations 4%-60 30Source renewable electricity to power our owned and operated facilities9%of renewable electricity 2018100 21Sustainable Product&Material InnovationMake our products with sustainable materials and end of-use solutions%of products made with sustainable materials202027)0 30Achieve sustainable materials for our products%of total sustainable materials procured for our products2020308u 25Circularity&New Guest ModelsOffer our guests new business models that extend the life of products%of stores in North America piloting internationally 2021 220 25Water&ChemistryReduce freshwater use intensity with our priority wet process suppliers%of reduction in freshwater use intensity2021126 l/kgBaseline year-20 25Implement ZDHC MRSL at priority suppliers%of compliance from priority suppliers with the ZDHC MRSL202110000 22Packaging&WasteReduce single-use plastic packaging per unit%of intensity reduction of single-use plastic packaging20210.016kg/unitBaseline year-50 25Be PlanetPERFORMANCE DASHBOARD9 We procured 100%renewable electricity to power our owned and operated facilities,with 99%sourced in compliance with the RE100 technical criteria.However,due to unavailability of an Energy Attribute Certificate(EAC)program,lululemon was unable to source renewable electricity in South Korea.Consequently,renewable energy credits were procured from a nearby geography.14 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementK E YGetting startedMaking progressCompleteOff track,plans in placeIN THIS SECTION17 Inclusion,Diversity,Equity,and Action 20 Employee empowerment22 People who make our productsBe Human15 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWe envision an equitable world.We are taking thoughtful steps toward a more equitable future so our guests,employees,ambassadors,and business partners,including the people who make our products(our makers)feel represented,welcome,respected,and valued.We actively create an inclusive work environment that reflects the global communities we serve.We support the safety and wellbeing of our makers,collaborating with partners and stakeholders to advance positive impact.Be Human Chapter Illustration“Humans are a spectrum of colours.Every human being is different,yet we all have the same point of originour first breath.Through energy we live,grow,and nurture our bodies.We sustain ourselves to continue the cycle of life handed down from our ancestors.”Jacquie Comrie,report illustrator16 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWHAT WERE DOINGInclusion,Diversity,Equity,and Action(IDEA)is complex and transformative.To have maximum impact on people,culture,and business performance,we are deliberately integrating IDEA beyond human resources into every part of our organization.This requires intentional pursuit at our most senior levels,with clear ownership and commitment to creating accountability across the business.In 2021,we refined our approach to focus on five key areas:Listening&Advocacy,Policy&Process,Programming&Initiatives,Learning&Development,and Strategy&Partnering.By listening to employees and acting on their feedback,we make business decisions that positively impact our IDEA targets.Our CEO,as well as many of our senior leaders,continue to participate in intimate listening forums and discussions with employees,with a focus on underserved groups,and act based on what they learn.In 2021,we held nearly 50 listening and connection sessions throughout our global Store Support Centres(SSCs),retail operations,and distribution centres.We have 10 People Networks(formerly known as Employee Resource Groups)to represent employees who have marginalized and historically underrepresented identities.Our global advisory board is made up of lululemon ambassadors who bring diverse knowledge and skills to inform our actions,hold us accountable,and drive meaningful change.We also integrate IDEA into training including IDEA toolkits to help build actionable,inclusive behaviours.Where possible,we partner with other organizations to strengthen our approaches and broaden our influence.Inclusive designWhen we design with inclusion in mind,we design for as many people as possible and honour human diversity.We strive to use inclusive design across our business,including future physical and digital workspaces,creation of employment policies and programs,marketing,and delivery of product and guest interactions.In 2021,we launched the Inclusive Design Certification program with OCAD(Ontario College of Art&Design)Universitys Inclusive Design Research Centre(IDRC).This 12-week program supports employees in applying inclusive design principles in their roles.Following the course,94 percent of participants reported being able to articulate the business and social impact of inclusive design,and 97 percent were able to identify and mitigate common design errors that create barriers for usability.Diverse representationCompanies traditionally focus on diverse representation,which is important but doesnt always provide an accurate picture of the nuances of inclusion.We use a comprehensive Demographic Survey Inclusion Index,an annual,voluntary global employee survey.This helps us understand the demographics of our employee base and assess our inclusion performance.Our 2021 survey had a 78 percent participation rate.Results indicate we have made meaningful progress toward our representation goals of racial diversity.As of 2021,our global workforce is 38 percent racially diverse,a three percent increase from 2020.In 2021,racial diversity of employees at our global stores saw the largest increase of all functions,at six percent.Building diverse leadership is important,and we increased racial diversity of assistant store managers,directors and above,by two percent in 2021.WHY IT MATTERSInclusion,diversity,and equity are foundational for shaping and building our company,industry,and communities,and for creating a shared sense of respect and belonging.This is particularly important when it comes to underrepresented groups.As an organization committed to wellbeing,we work to understand actual and perceived inequities and take action at all levels.We must widen our lens,work collaboratively,and be in a constant state of learning,unlearning,and relearning.Taking action requires us to think differently,listen intently,and understand that a“one size fits all”approach doesnt work.By continuously developing toward an inclusive,diverse,and equitable organization,we reflect a variety of perspectives and meet the needs of the global communities we serve.SDG 5.Gender EqualitySDG 10.Reduced InequalitiesOUR GOALSReflect the diversity of communities we serve and operate in by 2025.To reach that ambition,we will increase representation of racially diverse backgrounds to at least:30%of assistant store managers(ASMs),directors,and above by 202310 40%of all employees in our global stores by 202310Inclusion,Diversity,Equity,and Action 10 Includes stores in North America,Australia,New Zealand,Europe,and Middle East.17 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementInclusion,Diversity,Equity,and Action EMPLOYEE RACIAL DIVERSITY DATADirector and ASM or aboveStore employees Store Support Centre(SSC)employees 2021:23%Racially diverse2021:37%Racially diverse2021:41%Racially diverseEquitable solutionsCreating a culture of inclusion requires us to address inequitable systems and processes.To this end,we launched ongoing,cyclical reviews of our policies and practices in 2021.This process,in addition to our Demographic Survey Inclusion Index,uncovered key opportunities to address systemic barriers experienced by women of colour,and by individuals who live with mental and physical disabilities.Supplier inclusion and diversityWe are expanding our IDEA initiatives to our suppliers to support diverse and inclusive business growth that positively impacts our communities.In 2021,we developed a Supplier Inclusion and Diversity Strategy,with a focus on indirect suppliers(i.e.,companies that provide non-product goods and services to our stores and offices).To start,we will concentrate on US suppliers and expand globally over time.This program intends to grow engagement with companies that are at least 51 percent owned,operated,and controlled by women,underrepresented racial groups,veterans,persons with disabilities,or those who identify as LGBTQ2IA .Our goal is to launch the program by the end of 2022.We also learned that our inclusion scores increased slightly.To further this work,in 2021,we worked closely with our senior leaders to discuss inclusion opportunities and held our senior leaders accountable through function-specific objectives and key results.We also continued to roll out our company-wide IDEA education toolkits,conducted regular store and DC visits to meet with and listen to employees,and further evolved our listening channels.We acknowledge diversity and inclusion can take on different meanings depending on the region or country,so we are working on evolving our goals to better serve each community.2020:21%Racially diverse2020:31%Racially diverse2020:38%Racially diverse18 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementThrough inclusive design,we foster innovation that promotes access to all.Inclusive design enables us to develop digital and physical products,policies,and services by,with,and for historically marginalized communities.And we build solutions that affirm and support our people globally.When we design for inclusion,we generate resilient solutions so we can adapt with changes to culture,technology,and emerging needs.The impacts of our Inclusive Design Pilot program stretch across functions,portfolios,and global markets.For instance,last year the Futures Innovation team created an inclusive scoring matrix to select research agencies that centre on marginalized communities and use equitable design practices.Our Product and IDEA teams engaged an Inclusive Sizing Advisory Board to ensure the many identities and lived experiences of our diverse collective are represented in our approach to product size assortment and stance on body neutrality.Our Product team applied these learnings to outfit Team Canadas Olympic and Paralympic athletes in lululemons first Olympic Games as the official outfitter.Inclusive design also propels our partnership with the Adaptive Training Foundation(ATF),a training facility in Texas for people with disabilities.They are participating in a field-testing program developed and launched by our Product Design team and are providing feedback on how to adapt our gear to people with disabilities.Internally,our People and Culture team co-designed key aspects of our evolved talent development philosophy with employees from underserved communities.By centering their voices through the creation of the processes and policies used to manage performance and develop talent,we work to ensure any unique barriers they experience are addressed and lifted.We are committed to being in a community of practice that designs inclusively through participatory approaches and building relationships to get to community-driven solutions that bring joy and equity to all.In the coming years,we will be deepening our learning and practice of inclusive and equitable design.SpotlightInclusive design for a better world19 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWHAT WERE DOINGWe have an essential role in supporting our employees in their unique journey to realize their full potential.We believe in cultivating leaders within lululemon who also promote betterment in the world.We foster an environment where our employees have equitable access to opportunities,are paid equitably,and feel their wellbeing is supported.We are striving to create an inclusive work environment so everyone feels respected and valued.Through our employee leadership programs and support programs,we are creating an organization where each leader has the power to find and fulfill their unique purpose and contribute to a healthy future.LeadershipWe invest in people to uncover and appreciate their unique strengths.We offer many types of learning that are accessible to all full-time,part-time,and fixed-term employees.Below are a few of the highlights from 2021:Through the lululemon Mentorship program,were supportingour people,building their knowledge,growing their careers,and strengthening inclusive leadership skills.In 2021,429mentees and mentors signed up for the program.55 percentof mentees and 25 percent of mentors self-identified as partof an underrepresented group.We offered a new Leader Series to nurture and grow inclusiveleaders for a better world.Cohorts were delivered in sixlanguages.In 2021,over 1,200 employees(representing89percent of our people managers)attended theLeaderSeries.In 2021,over 5,500 employees attended leadership trainingprograms,including a new 1x1 coaching program,anExecOnline Learning Platform,a Business Acumenprogram,and our global lululemon Leadership Summit.We continue to provide ongoing culture offerings,whichinclude monthly skill-builders tied to our Values in Action,Purpose,Vision&Goals,and Practice of Leadership.Its challenging to measure the exact number of hours of paid training for all our employees.We do know that as of 2021,our Educators in North America(representing approximately 17,000out of our 29,000 global workforce)received a minimum of 13.5hours of training.This included an eight-hour paid VALUES Day(Volunteer,Awareness,Life,Unity,Empowerment,Support),so they can take time off for activities such as volunteering,observance,and self-reflection.Educators also got a minimum of 5.5 hours per year dedicated to personal and professional development.While many other employees may receive more training,we are using 13.5 hours as our conservative 2021 baseline.In 2022,we launched lululemonU,an online learning portal for allemployees.This will expand training for all employees,helping us meet our 2025 goal of 40 hours.Movingforward,wewill continue to improve our measurement and monitoring of globaldevelopmentopportunities.WHY IT MATTERSEmpowered employees are central to our culture,values,and business success.They help us achieve sustainable,inclusive business growth and stay resilient to change.They also help us ensure we remain innovative and at the forefront of our industry to best support our guests and future generations.When we invest in leadership and develop opportunities for ouremployees,we are investing in our business success.SDG 5.Gender EqualitySDG 8.Decent Work and Economic GrowthOUR GOALSBe the place where people come to develop and grow as inclusive leaders for the world.To reach that ambition,we will:Provide at least 40 hours of paid training andvolunteer time to all full-time employees by2025 per year11 Expand gender pay equity to full pay equity for100%of employees in all markets that permitcollection of that data by 202212EMPLOYEE LEADERSHIP GOALEmployee empowerment11 Paid learning and volunteer time is in addition to onboarding training and mandatory compliance training.12 We follow local laws and regulations and where we are able to collect the data necessary to confirm complete pay equity,we will do so.Full pay equity includes gender and race and our reporting scope is currently limited to US only.#hours of paid training and volunteer time for all full-time employees 40 hours2021 baseline13.5 hoursTarget year:202520 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementEMPLOYEE WELLBEINGTo foster the wellbeing of our employees,we provide a range of benefits,including health and dental,retirement savings plans,an employee share purchase plan,and yoga and fitness.We also work to support work-life balance and personal goals.We continue to provide an annual paid VALUES Day(Volunteer,Awareness,Life,Unity,Empowerment,Support)globally,so employees can take time off for activities such as volunteering,observance,and self-reflection.We also offer competitive paid time off and sick leave,as well as a Sweaty Pursuits benefit,which provides$200 in local currency for full-time employees to participate in wellbeing and fitness activities.We know mental wellbeing is imperativelululemon resources include a mental wellbeing toolkit and Employee Assistance program.Weve also expanded mental health training to reach store managers and people leaders,as well as our employees.In 2021,275 employees participated in the program,bringing the total number of trained people to just over 400.By the end of 2022,we will offer mental health training to all people leaders globally and by the end of 2023,to all employees.To advance our culture of impact for employees and build our collective capacity for positive social change,we will launch an Impact Fellowship program in 2022.These paid,application-based fellowships will provide the opportunity for employees to take time away from their current role to develop valuable career experience working directly with the Centre for Social Impacts non-profit partners.We Stand Together FundThe We Stand Together Fund was originally created to provide support to employees experiencing additional financial hardship during COVID-19.In 2021,we expanded the fund to assist employees who face other challenges,such as natural disasters,humanitarian issues,and personal hardship.At the end of 2021,over US$250,000 had been contributed to the fund by lululemon and employees,and 107 applicants were awarded a total of US$107,373.Remaining funds will continue to support beneficiaries in future years.Employee empowermentWe maintain 100 percent gender pay equity within our entire global employee population,meaning equal pay for equal work across genders.We have achieved full pay equity in the United States,and are seeking,to the extent permitted under local laws and regulations,to collect the data necessary to confirm complete pay equity globally.Compensation and pay equity lululemon is committed to being in the top quartile of global retailers for store compensation.As part of this commitment,in 2021,we raised starting base pay for Educators in North America to US$15$17 per hour,depending on store location.Our starting base pay for Key Leaders in North America is now US$17$19.50 per hour,depending on store location.As a result,93percent of Educators and 78 percent of Key Leaders received a base pay increase.This increase is on top of our team-based bonus program,which remains unchanged and provides our people with the potential to earn up to an additional US$3perhour on average,and up to an additional US$6perhour,depending on store-based goals and results achieved.Increases in compensation improve our ability to attract and retain talent to maintain our high-caliber store experience for our guests.Morning warm-up at our Distribution Centre21 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWHAT WERE DOINGTo create a responsible supply chain,and effect lasting,positive change,we are actively leaning into our commitment to safeguard the working and living conditions of people who make our products.In 2021,we worked with 90 finished goods facilities(Tier 1)in 17 countries and approximately 65 raw material suppliers(Tier 2)in 14 countries.13 Our suppliers employ over 240,000 people in the factories that make our products,and approximately 74 percent are women.We expect all suppliers to uphold the strict responsible supply chain and labour practices outlined in our Vendor Code of Ethics(VCoE).We disclose our facilities twice per year,and report to the Open Apparel Registry.Refer to our public Supplier Declaration List for more information about the suppliers we work with.WHY IT MATTERSPeople have the right to safe,healthy working conditions.Challenges in working conditions and labour rights have been well documented across the apparel industry.As a global brand,we take our responsibility for supporting the safety and wellbeing of suppliers employees(our makers)seriously.Because we dont own our manufacturing facilities,we take great care in selecting our suppliers through a screening process that helps identify suppliers who share our company values.We believe a strong,resilient supply chain that retains and empowers its workers is critical to the success of our business and industry,and is the foundation for a more equitable,sustainable future for all.SDG 5.Gender EqualitySDG 8.Decent Work and Economic GrowthSDG 10.Reduced InequalitiesOUR GOALS Make wellbeing programs available to more than 100,000 makers across our supply chain by 2025.Achieve Fair Labor Association(FLA)accreditation by 2024.13 We disclose the facilities for our Top 10 raw material suppliers,which account for approximately 80%of our fabric mills.See Supplier Declaration List for details.People who make our products Makers at Tan De facility,Vietnam22 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet Supplement14 Includes all facilities on our Supplier Declaration List.This includes all Tier 1 finished good facilities,the subcontractors of our Top 10 finished goods facilities,and our Top 10 strategic raw material suppliers,which represent about 80%of our total fabric mills.We work with suppliers who share our values and collaborate with us to uphold robust standards,address systemic challenges,and improve the wellbeing of our makers.We are a participating company of the Fair Labor Association(FLA)and are pursuing FLA accreditation.This provides us with an industry-leading framework for responsible supply chain practices,and the opportunity to help advance progress within the industry.Beyond labour compliance,we support maker wellbeing,building on years of collaboration with our suppliers on workplace practices and community support initiatives.Our responsible supply chain approach is built on three pillars,and supported by a foundation of global standards and best practices,management systems,and data analytics:Monitoring:Conduct supplier monitoring and risk analysis,work with suppliers to remediate issues to meet or exceed VCoE expectations,support their capacity to address root causes,and elevate suppliers to go beyond compliance for more sustainable development.Internal Practices:Integrate responsible sourcing and maker wellbeing practices throughout our company,including responsible purchasing practices and internal training.Building Better:Collaborate to address industry-wide systems challenges,such as fair compensation and maker wellbeing,and offer supplier training.People who make our products Location of disclosed suppliers14North AmericaEl Salvador 1Haiti1Mexico1United States2South AmericaColombia1Peru7Europe,Middle East,and AfricaEgypt1Turkey2Asia-PacificBangladesh3Cambodia10China Mainland30Indonesia7Japan2Philippines4South Korea2Sri Lanka16Taiwan22Thailand1Vietnam33Maker at Tan De facility,Vietnam23 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementIn 2021,we enhanced our data collection and performance monitoring processes to ensure detailed compliance and facility monitoring aligns with our updated VCoE.We are implementing a new responsible supply chain data management system to better identify trends in working conditions and remediation processes.In 2021,we ranked#1 on the KnowTheChain benchmark,which focuses on eliminating forced labour in global supply chains.For more information,refer to our KnowTheChain disclosure and Supplement.Fair compensation in our supply chainWe believe that every maker in our supply chain should earn a wage that allows them to have a decent standard of living.However,due to the structure of the global apparel industry,garment workers wages remain low in many regions.The COVID-19 pandemic has further intensified this issue.Achieving fair compensation in supply chains is a global challenge that must be approached in collaboration with governments,industry,and civil society.As a participating company in FLA,our definition of fair compensation is aligned with the FLA Workplace Code of Conduct.Through our VCoE facility assessments,we verify that all makers in our suppliers facilities are consistently paid,at a minimum,in compliance with legal requirements for regular work and overtime.Many of our suppliers already pay above legal minimum wage.We work with the FLA to collect and analyze worker wage data to benchmark progress and will develop a fair compensation blueprint as part of our accreditation journey.In 2022,we are collecting wage data from key suppliers to carry out a fair compensation gap analysis and further develop our fair compensation roadmap.Monitoring,Vendor Code of Ethics,and our responsible supply chain Building innovative products requires many hands and considerable expertise.Our Responsible Supply Chain team prioritizes the wellbeing of our makers by helping our suppliers address systemic challenges to workplace standards,including support with best practices and resources throughout the COVID-19 pandemic.Our Vendor Code of Ethics(VCoE)outlines our unwavering commitment to respect human and labour rights and promote safe and fair working conditions for people in our supply chain.In 2021,we published our evolved VCoE and Compliance Benchmarks,which align with international standards and FLA requirements.We also updated our facility assessment methodology and will be implementing these new tools in 2022 to meet continuously evolving industry standards.We completed the onboarding stage of the FLA accreditation process and the FLA Sustainable Compliance Initiative(SCI)assessments in three of our facilities.Were supporting facilities to complete remediations as required.These assessment results and corrective action plans are publicly available on the FLA website.In 2021,we monitored our active suppliers through annual assessments and self-assessments,as well as follow-up assessments where required.We also onboarded new suppliers through our new supplier approval process.183 total VCoE assessments were completed in 2021,with 128 conducted by lululemon,38 by an accredited third party,and 17 as supplier self-assessments.Two percent of our active facilities did not pass their assessments.In all cases,we worked with our suppliers to implement Corrective and Preventative Action Plans(CAPAs).As a last resort,if more sustainable resolutions cannot be achieved,we responsibly exit the business relationship.We did not exit any suppliers in 2021 due to VCoE performance.See our Supplement for more details on our findings.People who make our products Maker at RSI facility,Vietnam24 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementSupply chain evolution In the apparel industry,the pandemic has resulted in numerous factory closures,unstable production demand,and reduced or lost wages for many makers.Since the beginning of COVID-19,we have been committed to responsible purchasing practices,including not cancelling orders in production or completion,and providing flexibility in purchasing agreements.We maintain close contact with our suppliers to support safe conditions and adequate wage payment for makers.We have publicly endorsed the International Labour Organizations Call to Action to support robust global social safety measures.lululemon has worked in collaboration with our suppliers to support payment to makers throughout the pandemic.For example,in 2021,we worked with our Vietnam suppliers to encourage payment of at least 50 percent of worker wages,despite government-mandated factory closures that did not legally require wage payment.Our supply chain continues to grow to support our business,with new countries and facilities added to our portfolio to allow for production risk diversification and added capacity.We use industry tools to assess human rights,and environmental and business continuity risk before entering new countries.Maker wellbeingWe collaborate on existing industry partnerships and work directly with our suppliers through training as well as grants to support community wellbeing projects.In 2021,we contributed US$160,000 toward maker wellbeing through our annual Supplier Grant program,reaching 20,000 makers in service of our 2025 goal to reach 100,000 makers.We supported 16projects with 12 different suppliers across 10 countries.Thisprogram supports projects that offer health,education,yoga,and meditation initiatives for factory workers and their localcommunities.We share costs with the supplier by paying up to 50 percent of each project.We also supported our suppliers in pivoting the use of supplier wellbeing grants for COVID-19 reliefinstead.Some examples of recent initiatives include:Far Eastern Apparel(Suzhou)Co.,Ltd.,Vietnam A Womens Healthcare project to provide training on health and wellness and financial management for female workers.Sintex International Ltd.,PhilippinesA Food Gardens Movement project to provide capacity training on setting up,creating,and maintaining food gardens.Textil del Valle S.A.,BIC,PeruMakes bicycles available to employees to provide access to movement as alternative transportation,and to reduce their carbon footprint.Textil delValle also provided harvested organic vegetables from their farm to their employees.MAS Active Trading Pvt.Ltd.,Sri LankaRenovation support for the Manikhinna Divisional Hospital,focusing on the womens and pediatric wards.MAS also funded a project to provide employees and families with all-inclusive access to healthcare.In 2021,we also engaged Women Win,a non-profit organization focusing on strengthening womens economic resilience through impactful partnerships and holistic approaches.They supported us to conduct industry benchmarking and an expanded multi-year plan for wellbeing programs that will start in 2022.For more information on maker wellbeing,please refer to the Spotlight Story and Be Well section in thisreport.Makers rights Were partnering for real,lasting change in our supply chain.Through our Foreign Migrant Worker Standard and program,we are helping to raise standards and build shared approaches that benefit garment workers.Our Foreign Migrant Worker Standard outlines our expectations with respect to foreign migrant workers,including a commitment to ensuring that workers will no longer pay hiring fees,a long-standing practice in theapparelindustry.Through our supply chain traceability work,we are focusing on the rights and treatment of makers in Tiers 3 and 4 in the supply chain,more sustainable fibres and materials,and animal welfare in alignment with current and future certification standards.This work helps us gain visibility and develop strategic programs to improve rights deeper into our extended supply chain.In 2021,we also participated in the Better Buying Partnership Index.This will deepen our understanding of our suppliers perceptions of lululemon and help us learn about ways to continuously improve our program.In 2022,we will participate in the Better Buying Purchasing Practices Index,which will help us go into greater detail and find out how our suppliers are rating us across a range of purchasing practices.People who make our products 25 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementIn Thai Binh City,Vietnam,near Hanoi,surrounded by acres of green space and on-site gardens sits Tan De 6,one of lululemons newer manufacturing partner facilities.It is here that cut and sew specialists create some of the lululemon gear we love.lululemon has been partnering with Tan De since 2017,bringing the Tan De 6 facility on board in March 2021.Well-trained hands and keen eyes for detail have kept Tan De as one of our top finished goods vendors.lululemon and the manufacturing facilities we choose to have as partners help our industry build a healthier world.In 2022,Tan De was selected as one of lululemons 2022 Vendor Here to Be grant recipients,for a project that aims to provide more than 1,000 female employees with access to information and services for sexual and reproductive health.Throughout the past year,Tan De 6 worked hard to create a better community for both the employees and the neighbours of the facility.Using the company-owned garden,they grow fresh food for makers and their families.Leftover strips of fabric are ingeniously reused as ties to give support to the growing plants.They also provide summer holiday activities for makers children,offer assistance for the elders in the surrounding communities,and help flood victims in the central areas of Vietnam.We will continue recognizing,celebrating,and nurturing our interconnected wellbeing.SpotlightTightly knitMaker at Tan De facility,Vietnam26 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementIN THIS SECTION29 Our approach to wellbeing 31 Global wellbeing33 Community wellbeing35 Maker wellbeing37 Frontline wellbeingBe Well27 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWe believe that everyone has the right to be well.In recent years,there has been increasing awareness of the importance and complexity of mental wellbeing,and research shows that wellbeing is strongest among those who focus on all three dimensionsphysical,mental,and social.15 We also recognize that planetary health is a fundamental condition for wellbeingfor humanity and for business.As a global company committed to helping people feel their best,we have a unique opportunity to advance physical,mental,and social wellbeing for all.What we can envision,we can create.15 lululemon 2022 Global Wellbeing ReportBe Well Chapter Illustration“We begin to find balance,connection within one selfmind,body,and soul.Movement becomes broader,more intentional,grounded.Warmth and vibrancy hold us in yellow(happiness,optimism,joy,energy).Hold for the count of four.”Jacquie Comrie,report illustrator28 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWHY IT MATTERSWe are experiencing a global decline in physical,social,and mental wellbeing.This has been worsened by events such as the COVID-19 pandemic,the climate emergency and related natural disasters,geopolitical instability,and uncertainty about the future.According to Gallup,16 nearly 4 in 10 people report they have been affected by depression and anxiety.Far too many people are unable to access the tools and resources necessary to face and overcome challenges.This is especially true for those experiencing disproportionate rates of stress and trauma due to systemic inequities.Wellbeing is also directly linked to planetary health;negative impacts on the environment and eco-systems directly and indirectly affect people and communities.As a company dedicated to achieving a healthier and more inclusive world for all,we have a responsibility to provide access to the right tools,support,and resources,and to disrupt inequity in wellbeing through movement,mindfulness,and connection.OUR GOALS Launch the lululemon Centre for Social Impact by 2021(complete).Provide access to wellbeing tools and resources to more than 10 million people by 2025.Invest at least US$75 million to advance equity in wellbeing through the lululemon Centre for Social Impact by 2025.WHAT DOES IT MEAN TO BE WELL?We understand wellbeing as a lifetime practice of three interconnected elements.Physical wellbeingFeeling healthy and capable.I can perform the activities I want or need to do.Mental wellbeingFeeling emotionally prepared.I am able to handle what the future holds for me.Social wellbeingFeeling connected to others.I am part of something larger than myself and contribute to a supportive community.This definition,framed by planetary wellbeing,aligns our focus on global wellbeing throughout the business,informs the Centre for Social Impact framework,and allows us to advance wellbeing across our collective.We recognize that our lives are interconnected with the health of the planet.As our business grows and our work progresses,we are evolving our definition of wellbeing to explicitly integrate our dependence on a healthy planet and the transformative power of thriving environments.WHAT WERE DOINGWe are breaking down the barriers that prevent access to wellbeing tools and resources.Through the lululemon Centre for Social Impact,which launched in 2021 with a commitment of US$75 million by 2025,we are leveraging our business,expertise,resources,and communities to invest in and advocate for the wellbeing of those most impacted by systemic inequity around the world.The Centre is led and managed by a global internal team of experts in social impact,innovation,and wellbeing.In 2021,lululemon contributed US$11.9 million to social impact organizations,and an additional US$758,000 toward crisis response.Our integrated strategy advances this work within the communities where we operate and across the globe,and we are engaged in a set of extensive and inclusive partnerships to collectively realize this ambition.For example,for over five years we have collaborated with the United Nations Foundation to co-create the Peace on Purpose program,which proactively cares for the wellbeing of UN humanitarian workers around the world and aids in crisis response.Through our work with the Girls Opportunity Alliance,an initiative of the Obama Foundation,we are empowering adolescent girls around the world through education and wellbeing,allowing them to achieve their full potential and transform their families,communities,and countries.In early 2022,we released our second annual Global Wellbeing Index.The findings from this report guide us to define where and how we support further research and advocacy efforts.We also evolved our collaboration with the National Alliance on Mental Illness(NAMI),powering their work to reimagine crisis response in the United States,through the establishment of 9-8-8 as a nationwide mental health crisis and suicide prevention number.16 Wellcome Global Monitor ProjectOur approach to wellbeingSDG 3.Good Health and Well-beingSDG 5.Gender EqualitySDG 10.Reduced Inequalities29 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementInvest in localcommunity resilience.Pursue impact at scale throughpartnerships,philanthropy,research,andadvocacy.Build internalcapacity.CENTRE FOR SOCIAL IMPACT FRAMEWORKOur purpose is todisrupt inequity in wellbeingthrough movement,mindfulness,and advocacy.Our goal is to positively impact 10 million people globally by 2025.Community WellbeingGrants and partnerships that increase access to wellbeing opportunities.Global WellbeingLarge grants and partnerships that advance the wellbeing of those experiencing systemic inequity trauma.Research&AdvocacyGrants,partnerships,and publications that explore solutions for systemic barriers to wellbeing.Maker WellbeingIndustry grants and programs that care for those who make our products.Frontline Wellbeing&Crisis ResponseGrants and programs that support aid workers globally.Culture of ImpactSolutions that create a culture of impact for our people,communities,and guests.Be Well visionOur communities thrive because we contribute to conditions that support physical,mental,and social wellbeing.Our approach to wellbeing30 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementCommunity Wellbeing$2,827,000 Research&Advocacy$500,000 Crisis Response17$758,000 Frontline Wellbeing$2,000,000 Maker Wellbeing$2,411,000 2021 CONTRIBUTIONS17 Crisis response is not included in our US$75 million commitment;this is an additional contribution.18 We measure the number of people reached by collecting impact reports from our global and community partners,which include both expected and realized reach numbers.This number includes recipients of grants and donations,participants in free activities run by lululemon such as yoga and meditation classes,our employees,and makers.Global Wellbeing$4,151,000 2021 NUMBER OF PEOPLE REACHED18We are nurturing global wellbeing through collaborations and innovations that advance the wellbeing of people experiencing disproportionate rates of stress and trauma.Global initiatives include support for the Girls Opportunity Alliance,a program of the Obama Foundation that empowers girls through wellbeing and education,and The Trevor Project,the worlds largest suicide prevention and mental health organization for LGBTQ young people.We invested US$1.5 million and$1 million in these partnerships respectively,and as importantly,are bringing forward access to lululemon resources,platforms,support,and communities.Indigenous wellbeing We continue our commitment to amplifying Indigenous voices,supporting Indigenous communities,and sustaining ongoing partnerships with First Nations,Indigenous-led organizations,and ambassadors.As a full member of The Circle on Philanthropy(The Circle),we work to contribute to Indigenous Peoples in meaningful ways.In the past two years,we worked with The Circle to donate CAD$250,000 each to the Musqueam,Tsleil-Waututh,and Squamish Nations and support the following organizations:Matriarch Movement,which is shifting the mainstream narrative around Indigenous women by amplifying their voices through podcasts,social media,and interviews.Rising Hearts,an Indigenous-led grassroots organization working to elevate Indigenous voices and promote intersectional collaborative efforts.Mtis Nation Columbia River Society,which acts as the advocate,voice,representative,and protectors of the traditional values of the Mtis People(s),and acts as a friendship centre to all Indigenous peoples in the Golden,British Columbia area.Finding Our Power Together,whose primary goal is to end preventable death by suicide in Indigenous communities and support young people to thrive.Saskatchewan Indigenous Yoga Association,which facilitates the training of First Nations and Mtis people to be yoga teachers,with the goal of embedding the healing benefits of yoga within Indigenous communities.Global wellbeingOther business activities 21,000 lululemon employees 29,000 Makers in our supply chain 20,000Centre for Social Impact 1,355,000Total people reached1.4MTotal wellbeing contributions US$11.9MTotal crisis response contributionsUS$758k31 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet Supplement2021 World Mental Health Day activation with The Trevor ProjectWe believe everyone has the right to be well and recognize the opportunities we must address to bring this belief to life.Last year,lululemon launched the Centre for Social Impact with the mission to disrupt inequity in wellbeing through movement,mindfulness,and advocacy.We leverage our expertise,resources,and global community networks to advance wellbeing for those most impacted by systemic inequity.At launch,the Centre invested US$5 million with new and long-term local grassroots partners through global and national non-profits,as well as lululemons Here to Be grant program,which supports organizations around the globe that create inclusive access to movement and mindfulness,and/or advocate for civil and human rights.For World Mental Health Day 2021,we highlighted the work of three collaborators with the Centre through an awareness campaign:Girls Opportunity Alliance,which aims to empower girls through education,the National Alliance on Mental Illness(NAMI),which promotes better mental health and has established a 9-8-8 crisis number with lululemon,and The Trevor Project,which works to end suicide among LGBTQ youth.This campaign created wide-reaching positive impact by amplifying calls to action and building awareness of much-needed wellbeing tools,resources,and support alongside our co-creators.For more information on social impact organizations we contribute to,refer to Partnering for change.SpotlightWellbeing is for everyone32 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementThrough our annual application-based Here to Be grant program,we invest in community resilience and support local organizations around the globe that create inclusive access to movement,mindfulness,and connection.Grant recipients advance equity in wellbeing in many ways,including financial accessibility,culturally sensitive programming,and local community needs.Our goal is that through this partnership with our Here to Be grantees,communities will experience improved mental,physical,and/or social wellbeing.In 2021,80 organizations across the UnitedStates,Canada,United Kingdom,New Zealand,Australia,China,and Asia comprised the Here to Be cohort,including:the Run Beyond Project,Women in Sport Empowered,and the Prison Yoga Project.Our 2021 Here to Be cohort received a combined US$2.3 million in grants,with an average grant size of US$28,650 impacting more than 250,000 people around the world.lululemon accelerated the growth of these organizations through capacity building,leadership development,mentorship,skills-building,and storytelling trainings.THE RUN BEYOND PROJECTCountry:AustraliaThe Run Beyond Project empowersyoung people beyondthe finish line.It uses a program based around running,to develop personal and social capabilities in high school students from marginalized backgrounds.The project prepares students for a challenging but achievable Goal Race and empowers these young people beyond the finish line.Shogufa,an immigrant from Afghanistan,became the first woman in the Run Beyond Project to complete a half marathon.With limited access to sports in Afghanistan,she had never run long distance before.Her mantra,“I learned to never be scared,”helped drive her dedication and resilience.Shogufa is now training to be a doctor and is applying the skills she learned in running to her studies and beyond.Watch her story here.WOMEN IN SPORT EMPOWERED Country:Hong KongWomen in Sport Empowered uses sports as a way to empower,educate,and connect women and girls to realize their aspirations.Their vision is a world where women and girls can thrive without limitations.While completing our S.H.E Mentoring program,Rabia was proud to wear a hijab during all her workouts.She wanted to break stereotypes and be brave enough to be herself while maintaining her identity.Her efforts set an important example for women who may otherwise feel discouraged from doing sports.Community wellbeingPRISON YOGA PROJECTCountry:United StatesPYP supports incarcerated people with trauma-informed yoga and mindfulness practices to promote rehabilitation,reduce recidivism,and improve public safety.After participating in the Prison Yoga Project(PYP)Yoga Teacher Training program,Deva said,“This course literally opened new dimensions of awareness and healing on a level that is beyond anything I thought possible.As a social security disability recipient,I am so aware of the challenges with finances while living on disability checks.Noone should have to juggle food,rent,and then yoga classes if they already live in impoverishment.My desire is to use my certification to reach people in my community.”33 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementThe lululemon Playmaker program,first piloted in 2021,complements our Team Canada partnership,19 with a mission to accelerate equitable access to wellbeing through sport.This work ladders into our shared purpose with the Canadian Olympic and Paralympic Committees to realize the full potential in every Canadian to inspire,unite,and transform the world through sport.Playmaker is a four-month pilot program that supports leaders from four Canadian non-profit or charitable organizations:Spirit North,Cruisers Sports,Fast and Female,and Swim Ontario.lululemon provided CAD$200,000 total in funding for mentorship,coaching,and community building.lululemon also matched the funding of the Canadian Olympic Committees 2021 Olympic Legacy Grant Program,which supports 10 community projects led by Canadian Olympic alumni.In addition to the funding,Playmaker organizations received meaningful skill-building opportunities,including leadership and development,purpose and values,brand consulting,and community partnership building,enabling them to create impact.Spotlight19 Official Outfitter of Team Canada through 2028Play it forwardFast and Female organization in Calgary,Alberta.Photographer:Dave Holland34 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementMaker wellbeingThe people who make our products are one of our most important communities.While global trade brings opportunities for many in global garment supply chains,we are aware that makers in these supply chains,who are primarily women,face many challenges,such as earning low wages,working excessive hours,and experiencing workplace harassment.The COVID-19 pandemic and the tangible effects of the climate emergency have increased these struggles.Over the past several years,we have developed programs that benefit our makers,their families,and communities.In 2021,we funded 16 wellbeing projects in supplier communities,contributing US$160,000 and reaching over 20,000 makers.See Be Human section for more information.In 2021,we contributed US$2.25 million to fund womens initiatives at local grassroots organizations and global non-profits.The fund recipients include CAREs Made by Women,to support programs ranging from violence prevention to leadership,as well as Women Win,which aims to economically empower girls and women through impactful partnerships and holistic approaches.We also made contributions to The Resilience Fund for Women in Global Value Chains.The first of its kind,The Resilience Fund for Women is a funding initiative that invests in the long-term health,safety,and economic resilience of women in global value chains.Our funding will help enable them to expand grantmaking to support locally driven solutions to systemic problems.Makers in Tan De facility,Vietnam35 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementOur culture is grounded in the importance of fostering wellbeing and instilling the ability to pursue choice.This is an important time in history for us to use our voice externally to share our perspectives on reproductive rights.In 2022,through our Centre for Social Impact and our Public Affairs team,we made a US$500,000 contribution to the Center for Reproductive Rights,a non-partisan legal and non-profit advocacy group.Additionally,our US benefits plan allows lululemon employees to receive treatment regardless of where they live,including comprehensive reproductive healthcare and family planning.Our actions reflect our commitment to ensuring access to reproductive healthcare.This is not about partisan politics.It is about using our voice to advocate for wellbeing and the importance of having choice.SpotlightAccess to reproductive healthcare36 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWe are committed to supporting frontline workers to care for their physical and mental wellbeing,so they can effectively care for others.In 2019,we launched Peace on Purpose in partnership with the United Nations Foundation.Through evidence-based practices,this initiative supports the wellbeing of UN development and humanitarian workers on and off the front lines of global conflicts and challenges.In 2020,with the UN Foundation,we radically accelerated this program for online delivery.Our shared work in 2021 will have an even deeper impact.We awarded the UN Foundation an additional US$1.25 million for Peace on Purpose,to accelerate program reach and increase crisis response over the next two years.As the largest funding commitment Peace on Purpose has received to date,this will help build a multidisciplinary approach to support staff during times of crisis.Crisis responseCrisis response is an important part of our direct support of frontline workers,communities,and individuals affected by natural or other disasters and events.We prioritize community-led organizations that support collaborative community solutions wherever possible,working with our regions to identify what basic needs have to be met.In 2021,we provided over US$750,000 to crisis response initiatives.This included US$250,000 for COVID-19 relief in India and Bangladesh,and over US$500,000 toward relief efforts for natural disasters around the world.Frontline wellbeingUnited Nations Foundation Peace on Purpose program37 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementIN THIS SECTION40 Climate action45 Sustainable product and material innovation51 Circularity and new guest models 53 Water and chemistry 55 Packaging and wasteBe Planet38 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementOur lives are interconnected with the health of the planet.Weve set science-based targets that are the foundation for our climate action goals.We seek to lead in innovating more sustainable materials and working toward a circular ecosystem by designing out waste and keeping materials in use for as long as possibleeventually integrating end-of-life products into new products.We work across our value chain to reduce our carbon,waste,and water footprint,improve chemicals management,develop and sell products that reflect the values of our guests,and contribute to a healthier world.Be Planet Chapter Illustration“We feel the tension dissipating,the lines begin to loosen,relax.There is transformation here.Rebirth,renewal,connection to Mother Earth in the colour green(safety,love,support).Exhale for the count of four.”Jacquie Comrie,report illustrator39 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWHAT WERE DOINGAs signatories of the UN Fashion Industry Charter for Climate Action,we committed to achieve net zero carbon by 2050 or earlier.We take a science-based approach.Our climate targets,approved by the Science Based Targets initiative,help us align our goals with the Paris Climate Agreementto limit global warming to well below 2C above pre-industrial levels and pursue efforts to limit warming to 1.5C.Achieving a net zero future requires ambitious strides for cutting emissions across our value chain and within our industry.We started where we have the most controlin our owned and operated facilities.We are proud to have achieved our goals of 100 percent renewable electricity and a 60 percent absolute reduction of GHGs in our owned and operated facilities.As our business grows,we will also continue our focus on reducing our Scope 1 and 2 emissions.However,our biggest challenge lies in our value chain,which represents 99.7percent of our emissions(Scope 3).In 2021,we launched our Climate Activation Council,a cross-functional team with participation from the Product,Transportation,Fulfillment,Manufacturing,Materials,Quality,and Sustainable Business teams,which are accountable for contributing to enterprise shifts and enacting change in their respective functions.Moving forward,we are embedding sub-targets into specific business areas in line with our science-based emissions targets to track performance.WHY IT MATTERSThere is an ever-growing awareness of climate change,and a pressing urgency for solutions.Climate change threatens our living environments,as well as food and water supplies.Itaccelerates biodiversity impacts,and contributes to increased inequities and economic disruptions.Mental health is also affected.More than two-thirds of Americans report feeling anxious about how climate change is affecting the planet.20 In addition,estimates show that climate change impacts such as rising sea levels,extreme weather events,and failed crop yields could decrease global economic output by 10 percent by 2050.21 Most likely,these impacts will disproportionately impact under-resourced people and countries.As a contributor to climate change,the apparel industry must be part of the solution.OUR GOALSAchieve 100%renewable electricity to power our owned and operated facilities by 2021(complete).Meet our 2030 science-based targets by achieving:60solute reduction of GHG emissionsin allowned and operated facilities(Scope1and2)(complete)60%intensity reduction of GHG emissions acrossour global supply chain22(Scope 3)20 American Psychiatric Association21 Swiss Re Institute22 Includes purchased goods and services,and upstream transportation and distribution only.Intensity reduction is per net revenue from operations.For more information on our science-based target,refer to the Supplement.23 For a breakdown of our Scope 1 and 2 emissions and science-based target,please refer to our Supplement.24 Our science-based target for Scope 3 emissions is a subset of our total Scope 3 emissions.For a breakdown of total Scope 3 and science-based target,please refer to our Supplement.Climate action19,852 1,604( 9%)20193,203-15,045(-82%)20202021Total Scope 1 and 2(tCO2e)23 Absolute emissions change from 2018 baseline2018 baseline18,24812,927-5,321(-29%)0123456780.00000064285.714286128571.428571192857.142857257142.857143321428.571429385714.285714Total Scope 3 within science-based target24Net revenue from operations(000s)Emissions intensity(tCO2e per million US dollars of revenue from operations)Scope 3 emissions intensity change from 2018 baseline351,365US$3,979,296-11 18 baseline326,114 2018 baselineUS$3,288,3192019201920192019414,565US$4,401,879-5d3,478US$6,256,617 4 202020202020202021202120212021Scope 3 science-based target(tCO2e)0204060801000.012.525.0 2018 baseline99.294.288.3102.840 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementRenewable electricityIn achieving our 100 percent renewable electricity goal,our Scope 1 and 2 emissions decreased by 82 percent from our 2018 baseline.This was due to the purchase of Energy Attributes Certificates(EACs).We purchase EACs from accredited tracking agencies and,where possible,from wind and solar energy sources.In 2021,we signed a 10-year Virtual Power Purchase Agreement(VPPA)with renewable energy company Enel Green Power(see Spotlight Story).Energy efficiencyWe continue to improve energy efficiency in our owned and operated facilities.In 2021,we expanded our pilot of Energy Management Systems(EMS)in stores to better control our HVAC systems,reduce energy use,and improve guest and employee comfort.In total,we have installed EMS in 38 stores,with plans to continue expanding across our stores in North America in 2022.Transportation and logisticsTransportation and logistics currently make up approximately 22 percent of our total carbon footprint.During the COVID-19 pandemic,we experienced longer lead times and delivery challenges due to factory closures and pressure on ocean freight and seaports.This meant we increased our use of air freight,significantly impacting our Scope 3 target performance.We see these challenges continuing into 2022 and are working on rebalancing transportation modes as we emerge from the pandemic.In 2021,we focused on three logistics initiatives to reduce emissions:Choosing emissions-friendly transportation modesWe saw a 104 percent increase in emissions fromtransportation between 2020 and 2021.We launchedan Air Freight Management Task Force and are shiftingtransportation methods where possible from air freight toocean,truck,or train.Using more sustainable logistics service providers(LSPs)Currently,all inbound LSPs have an approvedscience-based target or are working toward setting a target.Selecting more sustainable fuelsIn 2021,we exploredusing more sustainable fuels as part of our broader strategy,including more sustainable aviation fuel(SAF),electricvehicles,and biofuels for ocean freight.We are working onsecuring an SAF supplier to conduct pilot work in 2022.25 We procured 100%renewable electricity to power our owned and operated facilities,with 99%sourced in compliance with the RE100 technical criteria.However,due to unavailability of an Energy Attribute Certificate(EAC)program,lululemon was unable to source renewable electricity in South Korea.Consequently,renewable energy credits were procured from a nearby geography.Total renewable electricity purchased25(MWh)Total purchased electricity(MWh)Total renewable electricity(%)201920192019202020202020202120212021Renewable electricity in our owned and operated facilities 0.0000005714.28571411428.57142917142.85714322857.14285728571.42857134285.7142860150003000045000600005672018 baseline 2821,56062,5652018 baseline42,68951,11748,49962,5651 18 baseline50%sustainable materials(units,000s)14,33724,837Products made with 2550%sustainable materials(units,000s)11,66816,867Products made with 50%sustainable materials 15%Products made with 2550%sustainable materials12%Products made with sustainable materials 27)%Disclosure20202021Total materials procured30(kg,000s)27,26037,727Total sustainable materials31 procured(kg,000s)8,27914,265Sustainable materials procured308%Our teams transform practices at every stage of the process,including design,merchandising,raw materials,product development,colour,and printing.By working together with cutting-edge technology organizations such as LanzaTech and Genomatica,we help create and scale solutions that deliver more sustainable products to our guests.With our Textile Exchange,we participate in expanding our use of more sustainable materials across the industry,for collective benefit.See the Supplement for a full list of partnerships.Sustainable material innovation requires years of investment in research,development,and partnership.While working toward scalable,permanent solutions,we also need to integrate temporary measures that are commercially available.For example,recycled polyester made from post-consumer single-use packaging(e.g.,plastic bottles)isnt an ultimate solution,but is an improvement over traditional polyester.In 2022,we are building our strategy to enhance our existing traceability system.This will allow greater visibility into our supply chain,including our more sustainable fibres and materials.This traceability strategy will also help us identify opportunities in lululemons overall supply chain visibility as we move toward our 2025 and 2030 goals.46 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementSUSTAINABLE MATERIALS PROCURED BY TYPESustainable product and material innovationMaterialTypeUnit*20202021NylonTotal kg10,64614,066Recycledkg241819%2%6%Renewable kg00%0%0%PolyesterTotalkg6,0569,362Recycledkg2,3574,6559P%CottonTotalkg4,1245,580Sustainably sourced cottonkg1,4982,05067%DownTotalkg91109Responsible Down Standardkg9110900%Animal-derived materialsTotalkg245216Responsible/traceablekg911097P%Forest-based materialsTotalkg1,5751,857Forest Stewardship Council(FSC)-certified natural rubber kg65498%4%Responsible regenerated cellulosics kg7481,185Hd%NYLONSource 100 percent renewable or recycled content nylon for our products by 2030.Our nylon goal is ambitious and challenging.Nylon makes up the biggest portion of our materials and provides lululemon products with the characteristically unique performance,feel,and quality we have become known for.Our goal is to transition from virgin nylon fibre to 100 percent renewable,recycled,or net new fibres that reduce our dependence on fossil fuels while maintaining uncompromising feel and performance.Our initial approach is to innovate into renewable bio-nylon at scale.We have a multi-year collaboration with Genomatica,aleader in biotech innovation and materials,to bring renewably sourced,biobased materials into our product lines,including lower-impact,plant-based nylon.We are collaborating with Genomatica on plant source and traceability to optimize the overall environmental benefits from plant-based nylon.We are developing the technology and working toward commercialization at scale,to help achieve our 2030 product goals.Recycled nylon(generally made from post-industrial material waste)is another option.However,recycled alternatives that align with our product performance standards are currently only available in limited quantities.We will scale through existing and emerging solutions,such as textile-to-textile recycling.We are exploring environmental impact reductions in other areas of the nylon value chain,including solution dye finishes,manufacturing,and facility improvements.Baseline Year Baseline2021 Results GoalGoal Year20202%60 30%renewable or recycled content nylon*kgs in 000s47 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWhile we are proud of the work weve done with more sustainable materials,we must continue to elevate our practices to build the sustainable future we envision.We committed to meeting our ambitious sustainable product targets and are making strides.In 2019,we set a goal of achieving 75 percent sustainable materials for all our products by 2025.In 2021,our mens apparel line hit that goal early.Sustainable materials innovation is a galvanizing focus across our design teams.Recycled polyester was incorporated into one of our most beloved products the Metal Vent Tech 2.0 shirtssetting the groundwork for scaling to our Swiftly womens products.In 2021,we developed a 100 percent recycled polyester fabric and used it for the pockets of our mens apparel.Warpstremethe fabric for our bestselling ABC and Commission pants and shortsalso uses recycled polyester.The Always In Motion boxers underwent a complete redesign,using a responsibly regenerated cellulosic fabric that doesnt sacrifice performance.We will continue to grow our mens apparel business and play our part to reset sustainability as the industry standard.SpotlightRaising the bar on product48 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementPOLYESTERSource at least 75 percent recycled polyester by 2025.In 2021,50 percent of our total procured polyester was made of recycled content(mostly post-consumer recycled PET from plastic bottles).Over the last year,we continued to drive the transition to recycled polyester across all our assortments.We are also participating in the 2025 Recycled Polyester Challenge,a joint initiative between Textile Exchange and the United Nations Fashion Industry Charter for Climate Action,supporting the industrys ambition to increase the global recycled polyester uptake from 14 percent to 45 percent by 2025.However,relying on plastic bottles for recycled polyester supply is a stop-gap measure,and not a long-term solution.With our partners LanzaTech,Far Eastern New Century,and India Glycols,we have developed a successful proof of concept for a polyester yarn and fabric partially made with recycled carbon emissions.We are currently working on the feasibility of a variety of yarn sizes,while optimizing the supply chain to scale the technology.We are also looking at feedstock sources such as post-consumer textiles.COTTONSource 100 percent of cotton from more sustainable sources by 2025.We take a portfolio approach to achieving more sustainable cotton that includes organic,recycled,regenerative,and other third-party certified platforms.Most of our Pima cotton is sourced from Peru.We are working to make meaningful and rapid progress,as we approach our 2025 goal.Sustainable product and material innovation32 The root system of mushroomsANIMAL-DERIVED MATERIALSTrace or certify as sourced responsibly 100 percent of our animal-derived materials by 2025.Animal-derived fibresdown,wool,cashmere,and silkrepresent a small amount of our overall material portfolio (one percent by weight).In 2021,55 percent of our animal-derived materials were traced or certified as responsibly sourced.All down has been fully traced and certified to meet the Responsible Down Standard for many years.We are at the initial stages of sourcing more sustainable,third-party certified wool,and will continue with the assessment of responsible sources for our cashmere and silk.FOREST-BASED MATERIALSCertify or assess by a third party 100 percent of our forest-based materials are sourced responsibly by 2023.Of our forest-based materials,64 percent of our volume consists of regenerated cellulosic fibres,while 27 percent is natural rubber.Almost 100 percent of our regenerated cellulosic fibres have been sourced responsibly since 2018.They are assessed through CanopyStyle Audits to verify producers are at low risk of sourcing from ancient or endangered forests,or controversial sources.In 2021,we celebrated transitioning all our core yoga mats to Forest Stewardship Council(FSC)-certified natural rubber,representing 74 percent of the natural rubber we procured this year(FSC N002716).We continue innovating materials in our yoga mats and are exploring further use of Mylo,a material made of renewable mycelium.32 We are expanding our current program of better cotton sourcing by enrolling the balance of our short-staple suppliers.We are also expanding our commitment to precision farming programs(e.g.,US Cotton Trust Protocol)and planning regenerative agriculture sourcing projects in our existing supply chains.These two techniques help capture more environmental impact data from our cotton supply chain.They also support farmers in transitioning to not only minimize but eventually restore the local environment through regenerative farming techniques.In addition,they ensure greater visibility into social and animal welfare as a direct or indirect result of cotton farming.Baseline Year Baseline2021 Results GoalGoal Year202039Pu 25%recycled polyesterBaseline Year Baseline2021 Results GoalGoal Year20203670 25%sustainably sourced cottonBaseline Year Baseline2021 Results GoalGoal Year202037P0 25%traceable or certifi

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XPeng Inc.2022 ENVIRONMENTAL,SOCIAL AND GOVERNANCE REPORTE N V I R O N M E N T A L S O C I A L G O V E R N A N C E0030042022 HighlightsMessage from the Board of DirectorsAbout XPENGHeralding Low-Carbon Green GrowthSustainability ManagementAppendixPartnering with XPENG to Build an Inclusive EcosystemExploring the Future of Mobility Using Intelligent Technologies09071 51 71 93 13537394 1434555738385971051091 1 11231291371431491 5 1158163Company ProfileCorporate GovernanceHonors ReceivedTackling Climate ChangeEnvironmental Management Feature Building the Green Value ChainGovernance Structure for Sustainable DevelopmentStakeholder EngagementMateriality AssessmentKey Performance IndicatorsContent IndexFeedback FormEmployee RightsHealth and SafetySupply Chain ManagementContribution to the Society Feature Witnessing the Growth of EmployeesTechnology InnovationQuality Products Feature Premium Services for XPENG OwnersENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCETable of Contents005006ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEReporting ScopeReport confirmation and approvalDisclaimerAccess to this ReportReporting StandardsSource of InformationExplanation of referencesThis report covers XPeng Inc.and its subsidiaries.The reporting period is from January 1,2022 to December 31,2022,in line with the fiscal year.The time frame for some of its content has been extended.Unless otherwise stated,this report adopts CNY as the monetary unit.This report was confirmed by the Companys ESG Steering Committee and approved by the Board of Directors on March 17,2023.Certain statements in this report are forward-looking statements about our goals and plans for the future.These forward-looking statements are based on managements current expectations.Uncertainties and other factors may cause our actual results,performance or achievements to be materially different from those expressed or implied by the forward-looking statements.The Company is under no obligation to update any forward-looking statement contained in this report.This Report is available in simplified Chinese,traditional Chinese and English for readers reference.In case of any inconsistency,the traditional Chinese version shall prevail.This report can be viewed or downloaded on the Hong Kong Exchanges and Clearing Market website(http:/www.hkexnews.hk/),as well as on the Companys official website().For any inquiries or suggestions regarding this report,please contact us using the following address:XPeng Inc.,8 Songgang Street,Tianhe District,Guangzhou,Guangdong ProvincePhone:020-6680 6680Fax:020-6680 6689This report refers to the Environmental,Social and Governance(ESG)Reporting Guide in Appendix 27 of the Main Board Listing Rules of the Hong Kong Exchanges and Clearing Limited(HKEx)and the Global Reporting Initiative(GRI)Standards.This report was prepared in accordance with the above mentioned standard requirements,following communication with stakeholders,analysis of material issues,collection of relevant information,the corresponding written reports,as well as management verification,in order to ensure the materiality,quantization,balance and consistency of its contents.In order to comply with the consistency principle in the reporting principles and ensure meaningful comparison,there has been no material change to the methodology or key performance indicators adopted by the Company for the year ended December 31,2022 as compared to those for the year ended December 31,2021.Unless otherwise specified,the information and data cited in this report all come from the Companys official documents,statistical and financial reports,as well as other related public documents.XPeng,Inc.guarantees that this report is free from any false statements,misleading statements or major omissions,and the Board of Directors is responsible for the truthfulness and accuracy of its contents.For convenience of expression and reading,XPeng Inc.,XPENG,the Company,this company and we in this report,all refer to XPeng Inc.and its subsidiaries.Note:1.“XPeng Inc.”is provided for identification only.This report is the third Environmental,Social and Governance(ESG)report issued by XPENG(XPeng Inc.,hereafter referred to as the Company)1,which aims to showcase the management,commitment,actions and achievements of the Company and its subsidiaries in sustainable development.About the Report008ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEESG GovernanceESG Goal ManagementESG Risk ManagementOur board of directors(the Directors)of the Company(the“Board”)attaches great importance to sustainability management.In accordance with the requirements of HKExs Environmental,Social and Governance Reporting Guide,XPENG has established an effective environmental,social and governance(hereinafter“ESG”)mechanism,kept improving the ESG governance structure across the Company,and stepped up the Boards supervision and participation in ESG affairs of the Company and performed the corporate social responsibilities in a faithful manner in pursuit of long-term sustainable development.As the decision-making body of the Company,the Board assumes overall responsibilities for XPENGs ESG strategies,policies,etc.,and authorizes the ESG Steering Committee,headed by the President of the Company to assist the Board in managing and making decisions regarding ESG matters.The Companys ESG Steering Committee is responsible for reviewing,developing and approving the Companys ESG development goals,policies and strategies,regularly discussing and reviewing the Companys ESG goals and their achievement,and reporting to the Board of Directors on a periodic basis.At the implementation level,the Company has established an ESG Task Force dedicated to routine management and overall coordination of ESG-related matters as well as preparing briefing reports of the achievements of ESG work in a timely manner.XPENG sets its ESG goals and continuously keeps tracks of the progress in ESG work in accordance with HKExs Environmental,Social and Governance Reporting Guide as well as other internationally recognized principles and practices.The Board reviews and discusses the Companys ESG goals and will review the progress towards relevant goals to adapt to the latest developments of the external environment and the Companys businesses.With a keen eye on the major impact that ESG risks might have on the Company,XPENG updates the Companys ESG issues on a yearly basis in line with industry-specific ESG risks,regulatory requirements and macro-policies,as well as performs materiality assessments of the ESG issues by means of stakeholder survey,expert review and Board sessions.The Board has participated in the materiality assessments of identified the 2022 ESG issues,held regular sessions over the major ESG risks,and reviewed and confirmed the analysis results of the 2022 materiality issues.007Message from the Board of Directors009010ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE2022 Highlights01E XPLOREROF FU T URE MOBILI T Y011012ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE2022 HighlightsStriving for a green futureImproving product experienceXPENGCompared to conventional ICE vehicles,the electric vehicles delivered by XPENG in 2022 will reduce carbon emissions by approximately 1.72 million tons2 over their entire life cycle,advancing green and low-carbon travel.Annual power generation from solar PV reached 26.62 million kWh,which is equivalent to CO2 emission reduction of 14,188 tons,further promoting the clean energy adoption.In 2022,XPENGs annual charging reached 322,602,875 kWh,with a cumulative carbon emission reduction of about 577,200 tons,which delivers low-carbon living.The Company carried out internal measurement of enterprise carbon emissions and lifecycle carbon emissions of each vehicle model to formulate the carbon emission measurement system.The Company also has established a carbon footprint assessment of its mass production models,and assigned Zhaoqing Plant as a pilot unit for carbon emission status measurements,setting emission reduction targets and breakdown tasks for emission reduction.The Phase I distributed photovoltaic(PV)project located in the Zhaoqing Plant was connected to the grid in November 2021,with an installed capacity of 20.74 MW.Zhaoqing Plant was awarded the title of“Green Plant”from the Ministry of Industry and Information Technology of the Peoples Republic of China,driving the green transformation of the manufacturing.XPENG carried out active R&D and utilization of green materials.And we established a VOC(Volatile Organic Compounds)evaluation standard system and process specification covering the whole vehicle,parts and materials.The Company has been ISO 9001 certified,obtained the EU 2018/858 WVTA certificate for P5 and G3i models,and secured the first type certificate of UNECE R79 in China from TV SD for its P7 model.The Company developed the quality objective in the Supplier Quality Engineer(SQE)field,which is further divided into 30 objectives in 5 segments.The Company obtained the UN R155(UNECE Regulation No.155)certificate of compliance for its cybersecurity management system and 2 models were assigned C-NCAP 5-star rating in recognition of the products superb safety performance.The Company conducted monthly NPS3 surveys to assess customers feedback on our products and services.Such regular feedback from customers will be provided to relevant divisions to improve their respective product and enhance our customers experience.We have more than 6,000 engineers,R&D investment accounted for 19.4%of revenue.With leading software and hardware technologies at its core,the Company made major industry breakthroughs in areas such as advanced driver-assistance system and 800V high voltage platform,as it continues to strengthen technology leadership.R&D personnel accounted for 39.9%Companys total employees,and XPENGs R&D spending reached CNY 5,214.8 million during the year.In 2022,the Company was granted 694 new patents,bringing the total number of patents owned by the Company to 1,823,further enhancing XPENGs innovation capabilities.Building low carbon products：Reduce end-to-end carbon emissions：Establish the carbon emission measurement system：Green manufacturing：Green materials：Excellent product quality：Product safety：Customer satisfaction：Technology innovation：R&D capabilities：Note:2.The full lifecycle carbon emissions of conventional gasoline vehicles come from the China Automotive Low Carbon Action Plan(2022)issued by CATARC.The full lifecycle carbon emissions of different models of XPENG in 2022 come from the XPENGs carbon emission calculation models.Note:3.NPS(Net Promoter Score):also known as word-of-mouth,is a metric used to measure the possibility of a user referring an enterprise or service to others.Corporate social responsibility013014ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGCorporate governanceThe total number of employees reached 15,829 at the end of 2022,up 13.2%from one year ago,boosting employment.The Companys Board of Directors is composed of 8 members,including 1 executive Director,4 non-executive Directors and 3 independent non-executive Directors,among which there is one female Director.Among the members of the Board,the independent directors hold a majority in each of the 4 professional committees,all of which are chaired by an independent Director.The Company has established company-level ESG committee forming a 3-tier sustainability governance structure composed of the“Board of Directors-ESG Steering Committee-ESG Task Force”.The Company conducted 65 anti-corruption training sessions with participation of 11,477 people;and carried out over 70 training sessions on legal compliance covering 100%of employees to cultivate integrity across the Company culture.The Company has obtained the ISO 27001 Information Security Management System Certificate and ISO 27701 Privacy Information Management System Certificate to improve cybersecurity management.The Company has training programs such as Plan X,Plan P,Plan E,Plan N and Plan G to meet the training needs of employees at all levels.The total number of employees receiving training reached 11,786 and the training duration averaged 16.4 hours per person,supporting employees self-development.Customer satisfaction rate reached 96%,and the NPS survey was conducted on a monthly basis with the commitment to provide the customers with quality services.The Company has required suppliers to obtain third-party certification under IATF 16949,ISO 9001,environmental management system,production safety standardization,or equivalent certification.The Company evaluated the ESG performance of its suppliers,and continuously track suppliers ESG performance in the compliance,business ethics,confidentiality infringement,product quality,production safety,environmental management and other dimensions.The Company has signed the Integrity Commitment Letter with 100%of suppliers to build a high quality partnership system.Throughout the year,the Company donated CNY 5 million to the XPENG Public Welfare Foundation to help society as a whole.XPENG Public Welfare Foundation provided funding to 27 social organizations in ecological and environmental fields,contributing to the protection of the environments ecology and biodiversity.The Company has formed the XPENG Volunteer Service Task Force made up of XPENG employees and vehicle owners,which has so far extended services to over 1,000 people and dedicated 5,355.13 hours to community services.The number of disabled employees reached 114,promoting working environment equality.Boost employment：Comprehensive governance structure：Integrity management：Cybersecurity：Employee empowerment：Quality service：Responsible supply chain practices：Philanthropy：Community influence：Equal opportunity employment：015016ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE02E XPLOREROF FU T URE MOBILI T YAbout XPENG017018ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCECompany Profile2.1XPENG2015201720182019202020212022Chengxing Zhidong founded.Entered into our Series A,Series A1,and Series A2 financing arrangements.Entered into our Series B,Series B1,and Series B2 financing arrangements.Commenced delivery of XPENGs first Smart EV model,the G3,to customers.Entered into our Series C financing arrangements.长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长 长长长长长长长长长长长长长 长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长 长长长长长长长长长长长长长Commenced delivery of XPENGs second Smart EV model,the P7,to customers.Listed on the New York Stock Exchange(NYSE)(stock code:XPEV).Listed on the Stock Exchange of Hong Kong Limited(HKEx)(stock code:9868).Commenced delivery of XPENGs third Smart EV model,the P5,to customers.Launched the first self-operated store in Europe.Commenced delivery of XPENGs fourth Smart EV model,the G9.Founded in 2015 and headquartered in Guangzhou,Guangdong Province,China,XPeng Inc.is a technology company focusing on the future of mobility.XPENG designs,develops,manufactures and sells smart electric vehicles to consumers across the globe.The Companys mission is to bring people more convenient and enjoyable mobility by leveraging technologies.Through continual investment in its full-stack in-house R&D,XPENG has actively built up its core capabilities and strives to become one of the leading smart EV companies in China.By the end of 2022,the Company had established six R&D centers,which reside in Beijing,Shanghai,Guangzhou,Shenzhen,Silicon Valley,and San Diego.Through consistent in-house R&D efforts and with leading software and hardware technologies at its core,XPENG brings innovation across autonomous driving,smart connectivity and core vehicle systems,and delivers smart electric vehicles that have become widely popular among the Chinese consumers.XPENG History 019020ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCECorporate Governance2.2Corporate Governance Structure2.2.1XPENGXPENG is committed to making consistent efforts to establish and improve a scientifically sound and robust sustainability governance system to cater to the needs of the future development of XPENG.The Company complies strictly with the requirements of relevant laws,regulations and rules,such as the Company Law of the Peoples Republic of China,NYSE Listed Company Manual and HKEx Main Board Listing Rules4 etc.,to standardize its corporate governance policies and procedures.XPENG continues its efforts in optimizing the Companys policy framework and improving the corporate governance structure according to the actual conditions of the Company and the latest regulatory requirements.The General Meeting of Shareholders retains the decision-making authority as stipulated by laws and regulations as well as the Articles of Association,and it exercises such rights to decide on significant matters such as the Companys business strategy and policies,financing,investment and profit distribution in accordance with the law.The Board is accountable to the General Meeting of Shareholders and exercises the management rights of the Company in accordance with the law.Specifically,it reviews the overall operation and development strategy of the Company,and makes decisions on operating principles and investment plans.It also supervises and gives guidance to management,including,among other functions,guidance on improvement of existing policies and guidelines,formulation of a comprehensive decision-making mechanism,standardization of work processes,establishment of strict approval procedures and build an organization structure with enhanced efficiency and quality of investment decision-making.The Board of Directors has established four professional committees in order to improve the operational efficiency of the Board:the Audit Committee,the Compensation Committee,the Nomination Committee and the Corporate Governance Committee.Shareholders MeetingBoard of DirectorsESG Steering CommitteeSales andServicesFunctionsLegalFunctionsInternalControlFunctionsProductR&DFunctionsManufac-turing FunctionsFinanceFunctionsSupplyChainFunctionsITFunctionsBrandingFunctionsHRFunctionsAdminis-trative FunctionsCapitalMarket&InvestmentCorporate GovernanceCommitteeNomination CommitteeCompensation CommitteeAudit CommitteeNote:4.Excluding rules exempted by HKEx.021022ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEOperational Compliance2.2.2XPENG315N 3 company-wide training sessions on compliance awareness,involving trademark application and use in compliance with the law,software compliance,risk prevention and data security compliance.SessionsSessionsSessions15 training sessions on compliance requirements of particular EU countries for certain departments.Multiple special compliance training sessions focusing on different businesses or scenarios.During the course of the Companys operation,XPENG has adhered to applicable national or local laws and regulations and made consistent improvement to its compliance management system by drawing on international rules and initiatives.The Company delivers compliance training to internal employees to enhance their awareness of compliance.In 2022,the Department of Legal Affairs of the Company organized over 70 internal compliance training sessions,covering the senior management and all departments of the Company,including:Compliance Training023024ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCERisk Control2.2.3XPENGThe Company refers to the internal control framework of the COSO(the Committee of Sponsoring Organizations of the Treadway Commission)and the Sarbanes-Oxley Act Section 404 to establish a risk management framework and related risk management systems to comprehensively manage operational risks.The Company manages the risks in accordance with the process of risk identification,risk assessment,risk response,problem solving,review and reflection,process improvement and additional control,and follow-up reviews,to carry out closed-loop risk management.In 2022,the Company identified several major risks,including risks related to R&D,market competition,and capital resources,by reference to national policies,changes in the market environment,internal operations and stakeholders concerns.The Company performs scenario-based analysis,sensitivity analysis and stress tests on the financial and business impact of major risks.For example,the Company assessed base-case,best-case and worst-case scenarios of major risks and evaluated the possible financial and business impact under each scenario to thoroughly conduct risk prevention and control,as well as plan for alternatives.Further,the Company carries out timely risk warnings for internal and external risks,and regularly revisits its risk management framework and internal control process.The Company has built long-term financial models,forecasting future financial performance,and conducting sensitivity tests on material business assumptions/risks,market assumptions/risks,and financial assumptions/risks,including but not limited to volume of sales,raw material costs,number of stores and charging stations,risk-free interest rates,loan rates,foreign exchange rates,industry competition,and labor market competition.The Board is the highest authority and decision-making body for the Companys risk management.In 2022,within the Board,three independent non-executive Directors and one non-executive Director have risk management expertise.Additionally,one non-executive Director and two independent non-executive Directors constitute the Audit Committee of the Company so as to ensure that risk management is carried out independently of the business lines.Moreover,we have established financial incentives for senior executives,direct managers,and others involved to develop risk management indicators,and strengthen the implementation of risk management measures.Risk Identification and Assessment025026ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENG030201Risk Management and MonitoringAt XPENG,we attach great importance to the effectiveness of the Companys risk management and internal controls.On behalf of the Board,the Audit Committee reviews how management develops,implements and oversees risk management and internal controls on a quarterly basis.Additionally,an annual review is conducted to ensure the effectiveness of our risk management and internal control systems.The Company conducts quarterly operational audits and relevant assessments in order to identify the major risks faced by the Company,update the internal control policies and ensure effective operation of the internal risk management system,we have completed an overall operational audits across a full spectrum of business in 2022.To ensure the effectiveness of the risk management and internal control systems,the Company established an internal control model based on“three lines of defense”:The first line of defenseThe second line of defenseThe third line of defenseThe first line of defense is mainly composed of the Companys business and functional departments in charge of daily operations and management.These departments design and implement relevant control measures and risk responses.The second line of defense is mainly composed of finance,internal control,legal,Quality and Safety Management Center,among others.Their key responsibilities are to assist the first line of defense in establishing and improving the risk management and internal control systems,as well as to oversee and ensure its effectiveness.The third line of defense is mainly composed of the audit team and the supervision team within the internal control department.The audit team regularly carries out independent evaluations to ensure the effectiveness of the Companys risk management and internal control system.In order to ensure its independence,the audit team reports directly to the Audit Committee.The supervision team regularly assists management in promoting integrity and ethical values to all employees,as well as handling any reports of corruption.027028ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEResponsibilities of the Board of Directors2.2.4XPENGOur Board of Directors performs regular follow-up assessments of the effectiveness of the Companys internal controls in line with the requirements of the listing rules and applicable laws and regulations to protect the rights and interest of the shareholders.The senior management is responsible for the production and operation and management of the Company,as well as leading the implementation of the Board resolutions.The senior management of the Company also takes charge of implementing the annual plans and investment initiatives set out by the Board,formulating specific rules and regulations of the Company,and executing other authorities and responsibilities granted by the Companys Articles of Association or the Board of Directors.In order to standardize daily business operations,the Company has established policies,systems,and guidelines covering,R&D,procurement,production,sales,human resources,and finance etc.When nominating and appointing members of the Board of Directors,the Company gives comprehensive considerations to a wide variety of factors,including gender,age,industry experience,professional background,educational background,etc.,to ensure diversified skills and experience required by different business areas and increase the share of female in management.As of the end of 2022,the Companys Board of Directors is composed of 8 members,including 1 executive Director,4 non-executive Directors and 3 independent non-executive Directors,among which there is one female Director.The members of the Board bring a variety of experiences in industries such as Internet technology and service,smart vehicle R&D and manufacturing and strategic investment.Among them,1 non-executive Director and 2 independent non-executive Directors have experience in the consumer goods industry,while 3 independent non-executive Directors and 1 non-executive Director have corporate governance experience in risk management.Meanwhile,the Company keeps assessing and monitoring the areas where Board diversity can be improved so as to elevate corporate governance.Among the members of the Board,the independent Directors hold a majority in each of the 4 professional committees,all of which are chaired by an independent Director.Matters that fall within the scope of responsibilities of each of the professional committees are subject to the approval of the professional committees before being submitted to the Board of Directors for deliberation so as to better give play to the roles of the independent Directors in supervision and decision-making,and so on.In 2022,the Company convened 5 meetings of the Board of Directors,which were attended by all directors that were required to attend.XPENG places a high premium on information disclosure and investor relations management.We publish quarterly and annual result reports as well as circulate other announcements where necessary.The Company communicates with investors on a periodic basis and actively shares the investors suggestions and feedback about the Companys products,operations and governance with internal teams so as to maximize the protection of the investors rights.Board DiversityIndependence and Effectiveness of the BoardProtection of the Rights of the Investors029030ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEBusiness Ethics2.2.5XPENGXPENG adopts a zero-tolerance approach toward any form of corruption in conducting business.The Company complies strictly with such laws and regulations as the Anti-Money Laundering Law of the Peoples Republic of China,Supervision Law of the Peoples Republic of China,Law of the Peoples Republic of China Against Unfair Competition,formulates company-wide rules and policies including the Employee Code of Conduct,Code of Integrity and Administrative Measures of Conflict of Interests,publishes the Anti-Corruption&Sanctions Policy and Code of Business Conduct and Ethics,clearly defines such behaviors as corruption and bribery,including briberies,kickbacks,illegal gains and money laundering,and lays out relevant control measures.Moreover,our policies set forth the rules and disciplinary policies in the workplace withThe Company has made available multiple misconduct reporting channels,including email(report_),hotline and WeChat,all of which are published on its official website to allow customers,suppliers,media,investors and internal employees to report or leave complaints.While we encourage reporting using real names,we also accept anonymous reporting.We will launch a probe into any clues that are deemed worthy of investigation.The Company has established a standardized process for handling misconduct complaints,in which the internal control department will arrange designated personnel to conduct an investigation in a timely manner when a misconduct report is received,and a final investigation report will be submitted to the chairman of the Board of Directors.The Company strictly protects the personal information of complainants and whistle-blowers,so that only personnel in charge of the reported cases have access to the complainants information and make connections.It is forbidden to take retaliatory actions against employees who raise concerns or complaints.In addition,in the case of a reward being granted to an informant,the sponsor investigator shall apply for the reward being transferred into the Integrity at XPENG account or other secure non-personal account from which the money is directly transferred to the informant,keeping the transfer record sealed in the case file.At XPENG,we carry out ongoing and various training activities with regard to integrity education,values,code of conducts,and law®ulations facing Board members,management,regular employees and outsourced employees of the Company.We regularly share with the management and all staff the value of integrity and make it clear that all new hires should receive training in our code of conduct.The Company and its business departments also carry out training in the code of conduct training either regularly or from time to time,as part of our ongoing effort to promote the awareness of compliance and integrity among all staff.During the past four fiscal years,the Company had zero cases of fines or settlements with regard to anti-competitive behaviors.In 2022,3 corruption lawsuits and business ethics violations were filed and closed within the Company.The 3 cases that have been concluded involve three employees,two of whom were sentenced to bribery by non-State staff and were sentenced to six months imprisonment;one was sentenced to the crime of embezzlement and was sentenced to 8 months imprisonment.All cases did not have a significant adverse impact on the Companys operation.And the Company also took lessons from the cases and will keep strengthening and improving employees legal awareness to build a strong line of integrity.employees compliance behavior included in their performance review and evaluation.Also,we conduct business ethics related audits and have identified the ethical risks in business accurately.The Company incorporates integrity statements and confidentiality clauses into the agreements with third party partners,and requires suppliers to sign an Integrity Commitment Letter upon their bid submission.Meanwhile,we include the integrity related clauses into the contracts to be signed with the suppliers.We immediately stop working with any suppliers that violate the Companys integrity standards and pursue legal remedies for infringement.In 2022,100%of our suppliers signed the Integrity Commitment Letter.Misconduct ReportingIntegrity Education6511,47715,738.5Total length of employee anti-corruption trainingHoursSessionsPerson-timePerson-timeNumber of anti-corruption training sessionsNumber of employees participating in anti-corruption trainingNumber of Board members participating in anti-corruption training031032ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEHonors Received2.3XPENGGoogle,KANTARThe Ministry of Industry and Information TechnologyGlobal Industrial Internet Conference Smart Connected Vehicle Summit 2022J.D.Power5 ChinaThe Economic ObserverWindTop 20 Chinese Global Brand Builders 2022-XPeng Inc.Leading Innovation Enterprises 2022-XPeng Inc.Wind ESG Hong Kong-Listed Company Best Practice Award(Society)2022-XPeng Inc.“CNY 180,000-300,000 Comprehensive Excellence Award”and“less than CNY 300,000 Ecology Star”in the WICE(World Industry Council for the Environment)World Smart Cockpit Survey-XPENG P7Ranked 1 in NEV-APEAL in the mid-size BEV segment-XPENG P7stGreen Plant 2022-XPENG Zhaoqing PlantNote:5.Founded by Mr J.D.Power III in 1968,J.D.Power is world renowned for the independence and objectivity of its research and is one of the most authoritative market research companies around the world.033034ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGJ.D.Power ChinaAuto Business ReviewChina Automotive Engineering Research InstituteWIREDChina Automotive Engineering Research InstituteRanked 1 in the NEV-IQS in the small-size BEV segment-XPENG G3iTOP 10 Xuanyuan Award-Best Cars of the Year-XPENG G95-Sart Model in i-VISTA6 China Smart Vehicle Index-XPENG P5Best Electric Cars of the World 2023-XPENG G95-Star Health Car-XPENG G9stNote:6.The i-VISTA China Intelligent Vehicle Index is the worlds first consumer-oriented neutral,impartial and professional third-party testing and evaluation system for smart connected vehicles.It was established by China Automotive Engineering Research Institute in 2017,with the guidance of China Automotive Engineering Research Institute and China Association of Automobile Manufacturers.The index is based on the research results from intelligent vehicle integration system test zones,in combination with natural driving and traffic data research findings in China.035036ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE03E XPLOREROF FU T URE MOBILI T YSustainability ManagementXPENG is highly attuned to the impact of our business on the environment and society.We continue improving our ESG governance structure and actively communicate with key stakeholders to promote an orderly implementation of the Companys sustainability management work.037038ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEGovernance Structure for Sustainable Development3.1XPENGCompositionBoard of DirectorsESG Steering CommitteeESG Task ForceResponsibilitiesIn 2022,we upgraded our former ESG Leading Group into the ESG Steering Committee,forming a 3-tier sustainability governance structure composed of the“Board of Directors-ESG Steering Committee-ESG Task Force”and establishing the closed-loop management system consisting of decision-making,communication,execution,reporting and assessment to ensure effective implementation of the ESG management work.Furthermore,in response to Chinas“dual carbon”policy,we have upgraded our former Carbon Neutrality Project-based Working Group to the Carbon Neutrality Working Group in charge of the Companys carbon neutrality strategy planning and daily management to advance the Companys carbon management and achieve the“dual carbon”goals.Includes all Board members.Assumes overall responsibility for ESG work and oversees the Companys ESG direction and strategy,identifying,assessing and managing any significant ESG risks in Companys business.It regularly receives reports from the ESG Steering Committee and other relevant management teams,and it is also in charge of reviewing and approving the Companys Sustainability Report andother ESG Management policies.The ESG Steering Committee formulates the Companys ESG vision,goals,strategies,policies,etc.;monitors the implementation of the Companys ESG strategy,and reviews the progress toward the ESG goals and provides advice regarding the ESG performance;assesses the ESG related risks and opportunities,reports to the Board of Directors on ESG work and provides advice each year regularly;reviews the Companys ESG report and other ESG related information disclosures.Responsible for the daily execution of ESG strategies set forth by the Board of Directors and the ESG Steering Committee,ongoing follow-up on the ESG requirements from regulators,investors and stakeholders,timely reporting on ESG performance,preparing ESG reports,and assisting the ESG Steering Committee in carrying out supervision and assessment.Led by the Co-President of the Company,along with senior management in charge of Product planning,R&D,Manufacturing,Branding and Public Relations,Internal Controls,Legal,Financing and Investments,Administration,Finance and Operations platform and other functions.Includes key personnel from Product Planning,R&D,Battery,Quality and Safety,Procurement,Manufacturing,Charging,Branding and Public Relations,Administration,Public Welfare Foundation,Financing and Investment,Finance and Operations platform and other core functions.039040ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEStakeholder Engagement3.2XPENG Operational compliance Tax payment in accordance with laws Energy conservation and emission reduction Product quality Service and experience Information security and privacy protection Online promotion Offline showcase and promotion activities WeChat Official Account New product release conference Market research Customer satisfaction survey Legitimate interests Compensation and benefits Training and education Occupational health and safety Diversity and equal opportunities Corporate governance Return on investment Risk management and control Information transparency Supply chain management Cost control Fair competition Rural revitalization Assistance for disadvantaged groups Environmental protection Information disclosure Media interaction Contributions to NGOs Impact on sustainable development General meeting of shareholders Roadshows Regular information disclosure Email and telephone inquiries On-site investigation Supplier meetings and review Supplier contracts and agreements Supplier training Participation in community projects Public welfare activities Low-carbon promoting activities Press releases Media briefings Townhall meetings Employee training Internal and external websites Government Enterprise Seminar Information deliveryWhile placing a high premium on communications with the stakeholders,XPeng Inc.has put in place a variety of stakeholder communication channels,timely disclosing information to stakeholders on operations and production,environmental protection,technology innovation,development strategy and other relevant aspects.We protect stakeholders right to information and participation,integrate stakeholder expectations gathered into the Companys operations and work together with stakeholders to promote sustainable development.StakeholdersGovernment andsupervisory organizationsCustomersEmployeesInvestorsBusiness partnersSociety and the environmentMedia and NGOsKey ConcernsCommunication Channels/Methods041042ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEMateriality Assessment3.3XPENGBased on the original list of important issues,we will identify and classify the material issues for this year and build a database based on the following five aspects:national policies,company development plans,ESG disclosure standards,ESG rating indicators for the capital market,and peer issue bench-marking.Feedback is gathered from Directors,management,employees,customers,investors,partners,media,the public and other stakeholders in daily operation regarding the sustainable development of XPeng Inc.as the basis for screening material issues.The Board of Directors participated in the screening,evaluation and supervision processes regarding material issues,and several directors filled out materiality analysis questionnaires to provide feedback on the issues and suggestions related to ESG management.According to the principle of materiality,the survey results are statistically analyzed,and each issue is given a different weight according to the degree of risk.The issues are classified according to the two dimensions of importance to the Companys development and“importance to stakeholders.This allows us to form a materiality mapping matrix,and the results are evaluated both by the Companys management as well as external professionals.Develop and implement action plans on material issues,with focused report disclosure of relevant information.XPENGS 2022 ESG ISSUEMATERIALITY MAPPING MATRIXKey issuesEnvironmentalHighly important issuesGovernanceImportant issuesSocialIdentifying the material issuesStakeholder CommunicationsMateriality Analysis and ReviewIssue Response and Disclosure01020304Product Quality and SafetyInformation Security and Privacy Protection Resource EfficiencyTechnology Innovation andIntellectual PropertyOccupation Health and SafetyCustomer Service and SatisfactionEmplopyee Training and DevelopmentCorporate Citizen and CharityDiversity and Equal OpportunityWater Resource ManagementImportance to Companys developmentImportance to stakeholdersEmission ManagementSupply Chain ManagementGreen Technology and Product Climate ChangeRisk and Crisis ManagementCorporateGovernanceBusiness EthicsLaborManage-mentThrough active communication and research,XPeng Inc.gathers feedback from various stakeholders in order to identify important ESG issues and be able to make key disclosures in this report.Meanwhile,XPeng Inc.will continue to refine the Companys sustainability management according to the material issues identified.The materiality assessment of XPeng Inc.is mainly divided into the following stages:043044ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE04E XPLOREROF FU T URE MOBILI T Y5,214.839.9i4R&D investment.Million CNYPercentage of R&D employees.Number of newly authorized patents.Exploring the Future of Mobility Using Intelligent TechnologiesAs an explorer of future mobility,XPENG is committed to bringing people more convenient and enjoyable options for the future of mobility.Beginning with high quality products and services,we continually enhance the safety performance of our products,optimizing oursmart driving solutions and creating value for consumers leveraging technological advancements.045046ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCETechnology Innovation4.1Innovation Systems4.1.1XPENGInvestment in R&D(Million CNY)R&D investment as a percentage of revenue(%)Number of R&D positions201 9201 92,070.289.21,725.929.52,0634,114.319.65,2715,214.819.46,313202020202020202120212021202220222022XPENG stays well ahead of the industrys development trends by innovating products and services that create new momentum and benchmarks within the industry.Our“full-stack inhouse research and development capabilities,along with the rapid iteration of software and hardware integration”are core components in our strategy to drive technology innovation.Therefore,we constantly enhance the level of technology and innovation across our portfolio of assets.XPENG clearly defines its technology research and development strategy,on top of its continuous and strong R&D investment,establishing international R&D centers and R&D teams,as well as increasing incentives to innovate and improving intellectual property rights protection measures.We are committed to maintaining our leading position in smart EV technology advancement and product innovation.047048ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCER&D Strategy and Blueprint4.1.2R&D Team4.1.3XPENGSilicon ValleySan DiegoEuropeGuangzhou HeadquarterBeijingShanghaiYangzhouShenzhenZhaoqingAdhering to our full-stack inhouse research and development strategy,XPENG is committed to bringing innovation to autonomous driving,smart connectivity and core vehicle systems.Through cutting-edge software and hardware technologies,we are transforming the future of mobility with technology and providing users with a unique mobile experience.By the end of 2022,XPENG had established six R&D centers in locations such as Guangzhou,Shanghai,the Silicon Valley,San Diego,etc.,gradually forming a leading R&D system in China with a global blueprint.XPENG has a multi-level,diversified,large-scale,in-house international team of talent.Several of our founders and executives are senior technical talents from different industries,providing the Company with a solid talent foundation.By the end of 2022,our R&D team had 6,313 people,accounting for 39.9%of our total employees.XPENG considers R&D and innovation achievements in performance evaluations,linking R&D and innovation with compensation,and providing monetary rewards/incentives for employees who contribute to intellectual property rights,such as patent and software inventions,in order to promote employee innovation.At the same time,we have set up the Outstanding Inventor Award,and we publish the ranking of patent proposals along with the inventors standings each quarter.Global Footprint049050ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCELeading Technology Achievements4.1.4XPENGPermit for Autonomous Driving Public Road TestsCity NGPLeading Charging TechnologyBrand New Interaction of the Smart Cockpit010203XPENG dedicates itself to in-house R&D of smart technologies in various areas including smart cockpit and advanced driver-assistance system,in order to enable its competitive edge and maintain its technology leadership.On September 17,2022,XPENG launched the pilot program of city NGP(Navigation Guided Pilot)in Guangzhou.As the first mass-produced advanced driver-assistance system for city scenarios in China,City NGP demonstrates that XPENG is leading the world in terms of advanced driver-assistance and surpassing competitors in certain driving scenarios.City NGP not only meets the essential driving needs,but also has the ability to deal with complex scenarios,With City NGP,the passage efficiency across 90%of driving scenarios is on par with the manned driving time measured by the navigation system.The XPENG G9 was granted permission to conduct the road test for smart connected vehicles in Guangzhou,the first unmodified mass-produced commercial vehicle to qualify for autonomous driving public road tests in China.In 2022,the penetration rate of XPENG Highway NGP reached 65%.By the end of 2022,the highway-assisted driving mileage exceeded 54 million kilometers.Our new-generation 480kW ultra-fast charger adopts high-power cooling technology with 670A flow rate capacity.As the first mass-produced car based on the 800V high-voltage SiC platform in China,the XPENG G9 can replenish up to 200 kilometers in 5 minutes with the 480kW ultra-fast charger built by XPENG itself.In 2022,XPENG started to mass-produce and install these ultra-fast chargers to unleash the power of the 800V platform as far as possible.The full-scenario voice 2.0 features the MIMO multi-zone technology incorporated in the in-vehicle voice system so that the voice assistant is ready at all times,even understanding successive instructions from different passengers without needing to be continually reactivated.Even in places where the network signals are absent or weak,such as underground parking lots,highways and outdoor spaces,the new voice assistant in G9 can complete interactions and control over 600 functions of the vehicle.Powered by the mass-produced voice product featuring mill second-level response,the voice assistant in G9 truly realizes“YOU GET WHAT YOU SAY”,significantly expanding the choices of voice interaction.051052ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGIndustry-Wide Cooperation4.1.5XPENG is actively engaged in technology exchanges and cooperation with other partners,integrates leading research resources,and collaborates with partners to promote infrastructure construction so as to encourage shared growth of the industry and with our partners.In August 2022,XPENG partnered with Alibaba Cloud,a global leading cloud computing and AI technology company,to build Chinas largest autonomous driving intelligent computing center,Fuyao,in Ulanqab for training of the autonomous driving model.Once completed,the training speed of XPENGs core autonomous driving training model can increase by up to 170X.【Case】XPENG Builds the Autonomous Driving Intelligent Computing Center in Partnership with Alibaba Cloud053054ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGIntellectual Property Protection4.1.6010203To ensure sustained innovation of the Company,XPENG complies strictly with the Trademark Law of the Peoples Republic of China,the Patent Law of the Peoples Republic of China,and other applicable laws and regulations,and develops the Rules and Policy for Intellectual Property Protection,Measures for Management of Intellectual Property Work,and Measures for Management of Patent Work,among others,to standardize the intellectual property protection work in an all-round manner and enhance the market competitiveness of the Company.In 2022,we made revisions to the Measures for Management of Intellectual Property Work to further clarify the trademark application process and patent application process and many other aspects.During the reporting period,the Company had zero case of intellectual property infringement.In 2022,XPENG was awarded as“National Intellectual Property Advantageous Enterprise”.During the year,the Company was granted 694 new patents,bringing the total number of patents owned by the Company to 1,823.Strengthening the protection of rightsSafeguarding the rights of othersCarrying out special trainingwe voluntarily monitor trademark confirmation and infringements in the market by means of web search,internal feedback and collaboration with external agencies and choose suitable rights safeguarding schemes for different types of infringements to safeguard our own rights.the Company respects the intellectual property of others,and assesses innovation solutions as to the risks of infringement at the review valve points of whole vehicle development;during the development process,legal counsels assist R&D personnel in identifying the infringement risks of the technical proposals and provide design suggestions for avoiding the risk points;in cooperating with the suppliers,we avoid the risks by signing disclaimers and requiring the suppliers to provide declarations of non-infringement.throughout the year,the Company organized 11 intellectual property training sessions for internal employees,including 2 company-wide training sessions,6 training sessions for R&D personnel,and 3 training sessions for marketing and branding personnel.Moreover,we invited external partners to carry out 3 training sessions on European patents and expertise for internal patent staff to promote employee awareness of intellectual property protection.055056ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEProtection of Customers Rights1XPENGFeature Premium Services for“XPENG Owners”We do our best to provide all car owners with high quality services,keep customers expectations top-of-mind and protect customers rights.We place a high premium on customer satisfaction and strive to provide all car owners with a high quality service experience.XPENG is committed to protecting all car owners with thoughtful,best-in-class services.We continually improve our service management,protect customers rights and provide car owners with a care-free guarantee to enhance the experience of each car owner.Privacy ProtectionXPENG complies strictly with applicable laws and regulations in the places where it operates,including the Cybersecurity Law of the Peoples Republic of China,Data Security Law of the Peoples Republic of China and Personal Information Protection Law of the Peoples Republic of China and acts on the principles and guidelines contained in the General Data Protection Regulation(GDPR)with regard to the use of information and privacy protection.This allows us to protect data against unauthorized access,disclosure,use,modification,damage or loss.We have released and implemented a series of management policies and norms such as the Privacy Policy,Data Compliance Management Procedure,Measures on Data Disclosure Management to all of our employees,and continuously regulate privacy protection and information security.We also continually update our internal privacy protection policies according to the actual conditions and external policies.By doing so,the Company introduced 16 additional policies and updated 22 policies in 2022.We embed the protection of user privacy into the Companys risk compliance management and regard it as an important component of the data compliance review process.We also conduct both internal audits and third-party audits on compliance of privacy policies,and follow a zero-tolerance policy toward violations of the privacy regulations.XPENG has set up an Information Security and Data Compliance Committee,which assumes overall responsibility for information security and data compliance management It is chaired by the Deputy Chairman of XPENG and is composed of the vice presidents of various business lines.In particular Mr.Ronghai Huang previously served as the technical director at Alibaba and holds extensive experience in the field of Internet technology R&D and security management.The committee sets up two sub working groups:(1)the Information Security Working Group,which is responsible for cybersecurity,information security,and data security matters involved in the Companys business operations through the Data Intelligence Center Information Security and Cloud Technology Department;and(2)the Data Compliance Working Group,which is responsible for data compliance matters with regard to important data,personal information protection and outbound data transfer,etc.,involved in the businesses of the Company through the Legal Department.With strict information security protection measures in place,XPENG neither reported any information leakage or cybersecurity incident nor was penalized due to information security vulnerabilities or other cybersecurity incidents in the last 3 years.057058ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEISO 27001ISO 277017XPENG010203040506The Company has obtained the ISO 27001 Information Security Management System.The Company has obtained the ISO 27701 Privacy Information Management System certification.Seven of our core systems have obtained the National Level 3 Certificate in Cybersecurity Protection.Privacy risk screeningData collection proceduresSafe data storagePrivacy protection trainingEmergency responseThird party liabilityWe have integrated the principle of privacy protection into the Companys product development and system architecture while carrying out Data Protection Impact Assessment(DPIA)to identify and mitigate privacy risks before data processing.We have also launched the General Data Protection Regulation(GDPR)compliance program and released the XPENG White Paper on GDPR.We provide users with explanations pertaining to the collection,use,retention and protection of personal information through documents such as privacy policies,product/function descriptions,and service scenario guidelines,and inform users how they can exercise relevant rights.We comply with statutory requirements regarding where,how and for how long personal information shall be stored,and take appropriate encryption,de-identification and other technical measures for the storage of information.The internal use of data is subject to the minimum necessary rule,and must go through our security compliance review process to prevent risks associated with outbound data transfer and protect personal information rights.We organize online training and examinations on information security and privacy compliance awareness for all employees,and clearly disclose public feedback channels for information security and privacy protection both through training and publicity.We have formulated policies such as the Measures for Management of Information Security Emergency Response and the Contingency Plan for Information Security Incidents and relevant measures for handling emergencies,clarifying the process for handling information security incidents to safeguard against information security risks.In 2022,the Company organized 4 information security protection drills and 5 externally certified information security protection drills.We conduct annual audits on SOX listing compliance,ISO 27001&ISO 27701,GDPR compliance and European WP29 compliance,we also conduct assessment on the national information system multi-level protection each year.Additionally,we carry out third-party vulnerability analysis,including simulated hacker attacks,with each system update designed to strengthen our the information security management capabilities.All third-party cooperation is subject to relevant processes and approvals,and requires signing a confidentiality agreement that defines confidential information,confidentiality obligations,and liabilities for breaches of the agreement.059060ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE00000010203XPENGNumber of information security vulnerabilities or other cybersecurity incidents长长长长长长长长长长长长长长长长长长长长长长长pieceMillion CNYpiecepiecepersonFine paid as a result of information security vulnerabilities or other cybersecurity incidentsNumber of complaints with regard to breach of customer privacy received from regulators and other external agenciesNumber of customers and employees affected by Company data leakageNumber of data leakage incidentsCustomer Communication ChannelsCustomer Complaint ResolutionXPENG places a high premium on active communications with its customers.The Company maintains open customer communications through a diverse range of channels including XPENG Service Hotline,customer satisfaction surveys,XPENGs app service group and brick-and-mortar stores to make sure that customers opinions and suggestions are responded to in a timely and effective manner.XPENG attaches particular importance to the voice of our customers.We have actively improved customer complaint handling system and relevant processes to improve the customer experience.In 2022,the telephone customer service channel received approximately 44,000 customer complaints,and 100%of the complaints were responded and resolved.System guaranteeProcess guaranteeTechnical supportWe continue to enhance our complaint handling systems in the Management Procedures/Measures for Customer Complaint Handling,to standardize our complaint service quality and assessment mechanisms under different scenarios and optimize customer service with regard to handling complaints.We continue to optimize our closed-loop complaint handling mechanism.The department that receives the complaints is responsible for the entire complaint process and resolution,and the handling process is monitored through the system to make sure that the problems are solved in a timely manner.We take the initiative to confirm whether the complaint is resolved,and seek customer feedback on the effectiveness and efficiency,etc.,of complaint handling as important output for improving service management.With the help of advanced technologies such as vehicle self-diagnosis functions,intelligent fault diagnosis,and remote processing capabilities,we can locate and address potential faults that may cause complaints.061062ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE010203XPENGResponsible MarketingXPENG adheres to the standards of responsible marketing,signing sales contracts with customers in a transparent and fair manner.We formulated marketing-related policies,clarified responsible marketing requirements,and established a series of internal publicity compliance guidelines.In addition,we further standardized advertising and marketing content,providing consumers with complete,accurate,objective and easy-to-understand information,and strengthening our compliance control in marketing,pricing,channels and relevant operations to protect consumers rights.Marketing trainingAssessment,reward,andpunishment mechanismGuiding sustainable consumptionWe require all sales personnel to receive relevant training,inform customers of all risks as well as the proper use of our products,and ensure fair marketing throughout the entireprocess of sales,delivery,and after-sales.Any related problems and questions are dealt with and answered in a timely manner.We incorporate compliance marketing into the assessment dimensions for sales commission.If there is any infringement,the sales commission for the month will be affected accordingly.For the person directly responsible for the infringement,different degrees of disciplinary punishment will be given in accordance with the Employee Code of Conduct and other relevant rules and regulations,and according to the number and severity of violations in the store during the year,store managers will be held accountable.We provide green/healthy products,degradable goods and other eco-friendly products in our official store;we encourage on-demand consumption,and our sales staff is trained to recommend non-expensive/highest profit products according to user needs,and encourage customers to use points for purchase to the greatest extent first,allowing more rights and interests for our customers as much as possible.063064ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEProviding Quality Service20102XPENG3371,000577,200As part of shaping the future mobility experience,XPENG is committed to providing a smart service experience that is different from differentiated from that in traditional driving and building a better and smarter service system for smart electric vehicle owners.We gain insights into customer questions and their problems with vehicle use by launching the unified online/offline service interface,appointing customer service operation managers in the offline stores and talking to customers face-to-face.Meanwhile,we answer customers questions online in a timely manner through our XPENG APP knowledge bank,system query tool for customer profile and customer service live chat group,etc.XPENG takes customer real-life scenarios into consideration of the siting of charging stations so as to enable its electric vehicle owners to charge their cars at the most convenience while enjoying their lives.XPENG Energy Replenishment SystemSuper charging resourcesharing in remote areas3 km energy replenishment life circleXPENG is the industrys first electric vehicle maker with a charging network that covers all prefecture-level administrative regions and centrally-administered municipalities across China(337 cities in total).In regions where super charging resources are scarce,XPENG provides the rarely seen 180kW DC super charging services.XPENG continues to expand its energy replenishment network.The“3 km Energy Replenishment Life Circle”serves more than 83%of car owners in 10 core cities including Beijing,Shanghai,Guangzhou and Shenzhen so that the time needed for the car owners from departure to charging facility is reduced to less than 10 minutes.In more than 300 cities including Guiyang,Kunming,Huangshi and Guilin,the coverage of the“3 km Energy Replenishment Life Circle”reaches up to 71%.In 2022,XPENG super charging was made available in 337 cities across China.CitiesStationsthTonsThe 1,000 self-operated charging station of XPENG was put in use.The amount of charging of XPENG throughout the year reached 322,602,875.63kWh,which is equivalent to a cumulative carbon emission reduction of about 577,200 tons.065066ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE010102020303XPENGXPENGX-SERVICE:Smart and Fast Service for a More Pleasant ExperienceX-CERTIFIED Certified Second-hand CarsX-SERVICE is an online,easily accessible mobile smart service built for users based on the XPENG Intelligent Service Platform,and is committed to transforming the traditional service experience to XPENG owners.XPENG Inc.is committed to creating an intelligent and high-quality second-hand car trading service chain,allowing car owners to sell or replace vehicles with efficient value preservation,and allowing car buyers to choose and purchase vehicles transparently and safely,creating a new travel life for all.Online|exclusive group serviceIntelligent|Integrated smart diagnosisMobile|one-hour distance to serviceThrough an exclusive service group,the service partner meets the full-cycle service needs of users when ordering,delivering and enjoying our cars.An integrated solution to provide users with online pre-diagnosis and appointment services.Using our intelligent service platform to trigger mobile services,we offer one-hour distance to service within the core urban area,to better meet the needs of car owners.Buy with confidenceUse with confidenceSell with confidenceEstablish an intelligent assessment with an objective and reasonable official certification system,providing 199 official tests,original factory upgrades,official transaction transfers and other services to ensure efficiency and safety,and provide certified second-hand car financial solutions.We protect the rights and interests of second-hand car owners,offering the basic services of new cars;we provide a 7-day return policy and exchange services,and establish a full-cycle after-sales maintenance record tracking.Implementing the rest assured replacement service for our brand,which provides high subsidies,insures 30 days of service,and provides safe and convenient official one-stop service.067068ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEEnsuring Customers Safety 3010203XPENGXPeng Inc.attaches great importance to the users intelligent assisted driving safety education,and has launched the industrys first smart assisted-driving safety system-intelligent driving points,reminding car owners to follow the standards of use for auxiliary driving functions,helping car owners understand the safety boundaries of intelligent assisted driving,and improving their safety awareness.XPENG intelligent driving safety systems focus on intelligent assisted driving,with intelligent driving points as the core.The systems cover the two major aspects of education and assessment,including pre-use training,admission assessment,and safety reminders during use,throughout the different stages of learning-mastery-use.Safety EducationIntelligent Driving Points RemindersIntelligent Driving Points Incentive MechanismLaunch online intelligent driving classroom,develop intelligent assisted driving science cognition,operation guides and other related content,and improve users safe driving skills in three stages including introductory level to science,advanced level to science,and guidance for use.When users use assisted driving and cause frequent or long-time disengagement,fatigued driving,frequent lack of attention to road conditions,and similar risks,the system will deduct points according to different degrees of danger,and automatically push relevant safety reminders and corresponding safety learning content.High-scoring users(personal intelligent driving with a residual score greater than 90 points)can get priority XPENG OTA public beta rights in the future.069070ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEShaping the XPENG Owner Culture4XPENGX-MOMENTX-WALKERDozens of XPENG owners met at XPENG office visiting XPENGs headquarters to hold face-to-face communications with the G9 Product Manager,exploring local Cantonese culture and checking in on XPENG flying car and so on.What a wonderful time throughout 4 days and 3 nights.It is a hoot and a half.Testimony from a XPENG OwnerWe build the bridge of communication with car owners through our“XPENG Owners Club”and continue to enrich the customer experience with XPENG cars through premium car owner cultural activities such as“X-MOMENT”and“X-WALKER”to enhance the emotional resonance between XPENG and our car owners.X-walker refers to XPENG owner volunteers,made up of loyal customers who highly identify with the XPENG brand,products and culture.We invite them to participate in special activities,such as public welfare events,auto shows and store activities to increase positive interactions between car owners and XPENG.In 2022,X-walker car owner volunteers participated in public welfare volunteer activities such as the Zhanjiang Mangrove Forest Beach Cleaning and Planting,Green Home Youth Action-XPENG Owner Weaving at Panda Village as well as the delivery ceremony for the first batch of G9s.the urban welfare map refers to the exclusive welfare sharing and activity-co-creating platform for XPENG owners.Using the urban welfare map as a bridge,XPENG owners who join the urban welfare map can not only enjoy a more pleasant life,but also derive exclusive promotional traffic for their own brick-and-mortar stores,creating an exclusive welfare community together with other XPENG owners.XPENG Owners Banquet GuangzhouX-walker Activity of Mangrove Forest Beach Cleaning and Planting in ZhanjiangX-walker Panda Village Public Welfare VolunteerVisits to XPENG Users from the Midwestern Region Visited XPENG Headquarters in Guangzhou for ExchangesVisits to XPENG:We invited XPENG owners to XPENG headquarters in Guangzhou for interactive communications and for owners to gain deeper insights into the culture of XPENG,experience our products,and take part in expert seminars on products as well as for us to listen to the real feedbacks and voice of XPENG owners.XPENG Owners Banquet:We invited XPENG owners to get together for banquets,where,in addition to a lottery drawing,XPENG staff carried out in-depth communications with XPENG owners to hear first-hand from our customers and their thoughts on product technology iterations,marketing,sales and marketing.We create exclusive and high-end car owner activities for our premium customers,spreading XPENGs spirit of exploration.In 2022,X-MOMENT innovated activities for XPENG owners by organizing several visits to XPENG headquarters in Guangzhou and XPENG owners banquets in 4 cities.Urban Welfare Map071072ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEImproving Customer Satisfaction520192020202120222022 Goals84%13%N/ANote97G0203XPENGXPENG complies strictly with the Law of the Peoples Republic of China on Protection of Consumer Rights and Interests,respects the lawful rights and interests of the consumers,puts owners satisfaction first,and keeps improving the consumer experience.In 2022,the Company conducted monthly NPS7 surveys focusing on what makes users referring the XPENG products and services to others.We used the feedback from these surveys for user follow-up and to make improvement plans for relevant departments to enhance our owners product and service experience.Moreover,we continued to improve our customer evaluation indicators,utilizing customer evaluations as an important reference point for follow-up work and refinements,and continuously upgrading the quality of our products and services.In 2022,XPENGs five-star rating was 96%,exceeding our initial goal.Note:7.Net promoter score,also known as word-of-mouth,is a metric used to measure the possibility of a user referring an enterprise or service to others.XPENG NPS survey began in April 2022.Note:N/A indicates the goal of respondents as a percentage of the total number of customers is unknown.Goal setting and reviewMulti-dimensional evaluation indicatorsTimely survey deliveryPercentage of satisfied respondentsPercentage of customers who responded to our survey The achievement of the previous goals is reviewed to provide a reference for current service experience improvement and setting the current goals.Comprehensive surveys are conducted regarding indicators such as service partners,service quality,service efficiency and service environment,and we strive to obtain thorough and objective customer evaluations.After vehicle delivery,the questionnaire is sent to achieve a 100livery rate of our satisfaction survey.073074ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEQuality Products4.2Product Series4.2.1XPENGG9P7P5G3iDriven by technological evolution,XPENG continues to discover more diversified functions of its products and has built advanced theory of product evolution toward for the future.By amassing global leading technologies,we improve the product management system across the entire value chain,and strive to provide global consumers with safe,more reliable and superior quality products.Note:8.Certain features of the models may vary according to the configuration.Please refer to the actual configuration of the products.Full scenario intelligence,super computing power,comprehensive sensing800V ultra-fast charging platform with mass-produced chargersBrand-new architecture scheme,ushering in the era of brand-new centralized electrical/electronic architectureIndustry-leading ADAS&Xmart OS intelligent in-car systemAdvanced sport sedan curves&wing door designExceptional control,dual motor 4 driveIndustry-leading ADAS&Xmart OS intelligent in-car systemX Robot Face dynamic intelligent aesthetics designX-Safety comprehensive active/passive safety,X-HP smart temperature controlXmart OS in-car intelligent systemX Robot Face family design languagePanoramic space cockpit075076ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGProduct Quality4.2.2ISO 90012019201920202020202120212022202205750.025s2,321,21909250.0164,5975,844,321061,5510.2371,14026,855,11913,39932,3520.151,35120,988,131XPENG continues to improve its product quality management system.In 2022,the Company updated the Process Quality Control Procedures,and formulated and implemented the Whole Vehicle Inspection Control Procedures.Moreover,the XPENGs powertrain technology was developed in full compliance with the European Union laws and regulations as well as the WLTP(the Worldwide Harmonised Light Vehicle Test Procedure)requirements.The charging gun and charging interface designs were developed based on local real-use scenarios in the European Union to ensure the usability and safety of the products.The XPENG P5 and G3i models have obtained the(EU)2018/858 on European Whole Vehicle Type Approval(WVTA),and the XPENG P7 model has passed Chinas first type certification of UNECE R79 from TV SD.XPENG continued to refine its after-sales service quality measures such as the Management Measures for Fast Response to Market Quality Problems and the Measures for the Management of Market Quality Information,and promoted the visualization of data indicators and the efficiency of quality improvement.In order to address market quality problems identified from multiple channels,including 400 hotline complaints,store-side maintenance,back-end warnings,and others,XPENG uses quality methods and tools to analyze the problems,in accordance with the Three Reality Principle9.At the same time,it evaluates the effectiveness of our problem solving through mechanisms such as quality-focused daily meetings,director-level weekly meetings and meetings with the Company presidents.In 2022,we identified development,market and supplier problems,established a historical problem experience bank and standardized processes,and introduced an IT system to root out problems.We also created a checklist during the product development process to ensure proper spot check and confirmation upon data publishing,and perception assessment,and identified potential problems during the development process.When handling each case of quality issues,we identify the common points from multiple aspects such as design,suppliers,production logistics and sales service,etc.,to formulate countermeasures from the perspective of quality systems.In this way,we address the root causes of problems and achieve effective prevention.In 2022,the Companys SQE made special improvements including assistance to disadvantaged suppliers and guarantee of important functions and performed regular spot checks to ensure quality standards were implemented effectively.XPENG follows the requirements of the national Regulations on the Administration of Recalls of Defective Motor Vehicles and has formulated a recall management document,Administrative Measures for the Recall of Defective Vehicles,to clarify the recall implementation process.In 2022,the Company reported no recalls of products due to problems in product quality or security.As part of its ongoing effort to ensure successful product quality assessment,the Company continues to improve the product quality control system,introducing 2 more review dimensions(product safety and information security)and refining the process control.Throughout the year,the Company supplemented 30 control delivery standards,optimized 46 control delivery standards,in addition to expanding and fine-tuning the existing system/process documents to meet business needs.In 2022,XPENG formulated the Monitoring and Measuring Equipment Management Procedure to present the quality validation and assessment results data in a more intuitive manner.From R&D validation to manufacturing of the XPENG P7,quality control spans the entire processes through 18 quality gates and over 1,700 dynamic/static inspection items.The key function inspection items are subject to 200%inspection.In the meanwhile,the Company has 250 testing vehicles and 151 experimental items with cumulative test driving mileage of over 5 million kilometers.As always,XPENG remains,deeply committed to quality control in accordance with stringent quality standards.To improve target management in process control,we break down the quality objectives and enhance the system of responsibility to achieve the objectives through communication meetings and the assessment mechanism.In 2022,the Company developed the quality objective in the Supplier Quality Engineer(SQE)field,which is further divided into 30 objectives in 5 segments.Meanwhile,we formulated the 2022 Business Implementation Plan in the SQE Domain and followed up on the monthly performance.XPeng Inc.has obtained the ISO 9001 Quality Management System Certificate.Product Quality AssessmentQuality Problem Handling【Case】XPENG P7 Extreme Quality Assurance,Manifesting its Excellent QualityNumber of products recalled(unit)Balance at the start of the warranty period(unit:thousand CNY)IndicatorExpenses paid during the warranty period(unit:thousand CNY)Operating income(unit:thousand CNY)Warranty expense as a percentage of the annual revenueNote:9.The scene,the situation,and the objects,which means taking practical countermeasures according to the actual situation of the scene.XPENG077078ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE0102030405Quality Culture EnhancementXPENG has formulated the XPENG Quality Culture Manual and certified the Companys Quality Culture Ambassador to be responsible for the promotion of its culture of quality assurance.Furthermore,the Company launched QC improvement campaigns and invited XPENGs management to get involved in the event and final appraisal process for QC improvement areas.In this way,we realized company-wide involvement in quality improvement initiatives.Emergency Relief SystemHonors and AwardsTo handle emergencies,the Company has formulated an emergency contingency plan for timely emergency response for its core products.In the past 3 years,the COVID-19 pandemic had major negative impact on logistics turnover efficiency.In order to ensure the production of each model,the Company performed a dynamic parts assessment for maintaining strategic stock and implemented classified management of parts stock according to the associated risks of parts.We also assessed the material risks on a monthly basis tracking the pandemics impact on supply to adjust the quantity of stock.Meanwhile,we created stock on the VMI supplier side for certain parts and promoted multi-channel and multi-point supply of the parts and components to ensure safety of the supply chain.In March 2022,Zhaoqing High-Tech Zone Management Committee awarded the Mayors Quality Award to Zhaoqing XPeng Automobile Co.,Ltd.(Zhaoqing Plant).In November 2022,China Quality Certification Center awarded the CCC Type A Enterprise Certificate to Zhaoqing XPeng New Energy Investment Co.,Ltd.(Zhaoqing Plant).XPENG was ranked 1 in residual value among domestic BEV brands by J.D.PowerXPENG G3i was ranked 1 in new car quality in the small BEV segment by J.D.Power.XPENG P7 was ranked 1 in APEAL in the middle size BEV segment by J.D.Power.ststst079080ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGProduct Safety4.2.3XPENG P5 won i-VISTA 5-star ratingUN R1555-star rating5-star rating5-star health carC-NCAP10 rating:5-star(comprehensive score:92.2%)C-IASI11：3 indicators won China Insurance Automotive Safety Index G rating(excellent)C-NCAP rating:5-star rating(comprehensive score:89.4%)C-IASI：3 indicators won China Insurance Automotive Safety Index G rating(excellent)G3P7P5XPENG complies strictly with national requirements such as the Measures for Management of Road Motor Vehicle Production Enterprises and Product Access,Technical Specification for Remote Service and Management System for Electric Vehicles and Provisions on Management of New Energy Automobile Production Enterprises and Product Access to ensure that the products meet the technical standards for safety,environmental protection,energy saving and anti-theft.XPENG has also established a monitoring platform on new energy vehicles(NEV)enterprises to monitor the relevant information in terms of whole vehicle,power battery,driving motor,vehicle failure in real time.The platform has passed access testing by Chinas regulatory platform to ensure data consistency between testing and access.XPENG obtained UN R155(UNECE Regulation No,155)certificate of compliance for cybersecurity management systemXPENG P5 obtained C-AHI 5-star rating in the second batch of model tests 2022XPENG G9 obtained the rating of 5-star health car of 2022 from China Automotive Engineering Research InstituteNote:10.C-NCAP is the abbreviation of China-New Car Assessment Programme.C-NCAP conducts comprehensive safety performance testing of the cars,including passenger protection,pedestrian protection and active safety.11.C-IASI is the abbreviation of China Insurance Automotive Safety Index.Its test items include the damageability and repairability index,vehicle occupant safety index,pedestrian safety index and vehicle assistant safety index.081082ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGProduct Safety Performance MonitoringProduct Safety AuditsProduct Safety Risk AssessmentProduct Safety TrainingXPENG has formulated detailed handling processes for major incidents and batch quality problems and clearly defined the fast response requirements and emergency handling mechanisms.The Company conducts internal check of potential product risks,creates the warning and monitoring platform,and arranges full-time staff to monitor the operating status of the products 724.In this way,the Company is able to identify and improve any abnormal operating status to ensure vehicle safety.The Company sets management indicators with product quality safety,monitoring of safe operation,incident response and analysis,regularly monitors,measures,analyzes,assesses and improves the indicators,reports to personnel with responsibilities and powers on the results of product safety performance analysis and assessment periodically.Moreover,the Company conducts an internal audit at least once a year,at an interval of no more than 12 months,to ensure the adequacy and effectiveness of the product safety management system.The Product Safety Working Group is responsible for formulating the rules for management guidelines for product safety assessment and performs safety risks assessments.The Company determines the levels of potential safety risks identified upon assessment,prioritizes the issues with higher risk levels and keeps the full-process records for analysis.The Company actively organizes the employees to participate in various quality and safety training sessions.In 2022,the Company organized 3 product safety training sessions with regards to safety system building.083084ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE05E XPLOREROF FU T URE MOBILI T Y1.72 14,1882Heralding Low-Carbon Green GrowthAdhering to green development,XPENG implements the concept of sustainability throughout its production and operation,so as to optimize resource utilization and reduce pollutants.We actively explore low-carbon technologies to advance carbon neutrality and drive sustainable development.Full life cycle reduction of Co2 emissions from electric vehicles we delivered for year 2022,compared with conventional ICE vehicles.Million tonsTons12Participations Photovoltaic power generation helped reduce CO2 emissions.Participated in the compilation of carbon emission accounting standards for the automotive industry.Note:12.The data for CO2 emission reduction comes from the Zhaoqing Phase I PV power project and the Guangzhou base PV project.085086ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEGreen Design1XPENG Feature Building the Green Value ChainIntegrating the green concepts into the entire life cycle of automotive products,XPENG takes active measures across the whole chain of product design,raw material selection,manufacturing,logistics&transportation and resource recycling,so as to achieve a harmonious coexistence between products and the environment and build the green value chain of XPENG.At the sub-forum themed Chinas Path to Decarbonization:ESG Practice and Development of the 4th Forum for Credit System Construction of Chinese Cities,XPENG was listed among Xinhua Credit“Jinlan Cup”best cases of“carbon peak and carbon neutrality”technology innovation.XPENG actively promotes green design and R&D to improve the impact of its electric vehicle life cycle on the environment under the premise that vehicle performance and safety is ensured.Lightweight and high rigidity helped extend the vehicle product life,reduce carbon emissions during the vehicle life cycle,and improve the efficiency of the electric drive system.Through a low-wind resistance design,overall vehicle energy consumption was reduced,leading to lower carbon emissions.By improving the operating conditions of the intelligent computing center,we reduced energy consumption of intelligent computing,making it more efficient and greener.We used green,non-hazardous and recyclable materials to reduce pollution to the environment.087088ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEGreen Materials2XPENGValuing the environment-friendly characteristics of products from the source,XPENG carried out active R&D and utilization of green materials.We work diligently to use green,harmless and recyclable materials to reduce environmental pollution.We have established a comprehensive control system for banned substances and are gradually promoting the reduction and substitution of hazardous substances while ensuring that the environmental performance of the entire vehicle meets appropriate standards.The Company controls hazardous substances and recycling rate targets in products according to the Compliance Management Measures for Prohibited and Restricted Substances and Recycling.Hazardous substances must meet the Requirements for Prohibited and Limited Substances in Automobiles.While meeting the national standard GB/T 30512 of the Requirements for Prohibited Substances in Automobiles,the materials of spare parts and components have additional requirements including that asbestos substances should not be detected,and that the content of phthalates not exceed 0.1%.In 2022,we established a VOC(Volatile Organic Compounds)evaluation standard system and process specification covering the whole vehicle,parts and materials.Control and Substitution of Hazardous Substances【Case】Carbon reduction project by closed-loop recycling of aluminum plates for automobilesXPENG comprehensively recycles aluminum plates used in the stamping process of four doors and two covers(self-made components).In 2022,we completed the transformation of the production line and the closed-loop recycling of aluminum plates,realizing fine classification.We recycled 100%of the leftover stamping materials from the original production line of the plants.After the melting and rolling processes,we developed and produced aluminum plates with the same performance and reused them for automobiles,thus reducing the carbon emissions of aluminum materials for bodywork.The project has been designated as a special project for pollution control,energy saving and carbon reduction by the National Development and Reform Commission.089090ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGGreen Manufacturing3Adhering to green manufacturing,we strictly controlled the use of resources and pollutant emissions in vehicle production to reduce unnecessary waste of resources in accordance with the Environmental Protection Law of the Peoples Republic of China and the related laws and regulations on pollutant emissions in the operation sites.We promoted clean production,waste recycling and low-carbon energy solutions in our manufacturing plants through source-controlling emission reduction,in-process control and end-of-pipe treatment.The Zhaoqing manufacturing base was recognized as“Green Factory”by the Ministry of Industry and Information Technology in 2022.The Company made a number of energy saving and emission reduction efforts,and promoted the use of clean energy.The Phase I distributed photovoltaic(PV)project located in the Zhaoqing manufacturing base was connected to the grid in November 2021.Utilizing the vacant space at the plant,we constructed distributed photovoltaic systems on the roofs of final assembly and welding workshops,as well as parking lots.The project has an installed area of 170,000 m2 and an installed capacity of 20.74 MW.As of December 31,2022,the total power generation of the project reached 24,550,000 kWh,of which 11,493,000 kWh was used by XPENG.With an average PV consumption rate of 47%,we saved electricity costs of more than CNY 3.77 million and reduced CO2 emissions by 13,085.0 tons.The PV project in the Guangzhou base generated a total of 2,070,000 kWh of electric power during the reporting period,of which 2,059,000 kWh was used by XPENG.With an average PV consumption rate of 99%,we reduced 1,103.50 tons of CO2 emissions.In the future,XPENG will continue to promote the use of clean energy.We plan to build the Phase II PV project in the Zhaoqing manufacturing base,and deploy photovoltaic power generation projects at the manufacturing bases and office building headquarters.The Company recycled its air conditioning condensate water,cooling tower drained water,RO concentrated water generated by the painting pure water station in the plants,and the cooling tower also used circulating water.In 2022,the total water consumption of the Company was 987,330 m and the amount of recycled water(reuse of sewage water)was 153,066 m.Meanwhile,for production wastewater and domestic wastewater,the Company carried out physicochemical and biochemical processes at the wastewater treatment station,and commissioned qualified third parties for monitoring processes to ensure that the wastewater met the discharge standards before being discharged,so as to avoid water pollution.With municipal water as the Companys water source,there was no issue finding an applicable water source,nor were there any incidence of or fine of polluting water resources during the reporting period.In the future,we aim to reduce the use of fresh water by,for example,increasing the amount of recycled water,and reducing wastewater discharge.We are committed to reaching an industry-leading level in terms of water efficiency.Energy Saving and Green DevelopmentWater Resources Management091092ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGWaste Gas ManagementWe took measures to protect the air quality environment during the production process.We reduced the generation and emission of pollutants by adopting low VOC emission paints,building catalytic combustion and dust removal equipment,etc.In 2022,XPENG emitted 0.4 tons of sulfur oxides,2.3 tons of nitrogen oxides and 2.0 tons of particulate matter.In the future,we aim to continuously reduce the emissions of nitrogen oxides,sulfur oxides and particulate matter per unit of production to safeguard air quality.Welding workshopCoating workshopCoating plantWe adopted a high efficiency dust collector filter to adsorb fume and dust,with dust removal efficiency of 99%.We used a mobile welding fume purifier for scattered CO2 protection welding machines.The welding fume was purified by a mobile welding fume purifier to meet relevant standards before being discharged to the workshop,so as to improve the internal working environment and effectively reduce waste gas emissions.We adopted the B1B2 water-based spraying process,thus reducing VOCs emission by 15%compared with conventional process.We used the industrys latest waste gas concentration rotor incinerator(RTO device),which enabled the organic pollutants in the waste gas to be fully combusted and decomposed.With a removal rate of more than 95%,this effectively purified the organic pollutants.We reduced waste gas emissions by controlling the consumption of cleaning solvents,reducing the frequency of robotic color change cleaning,optimizing process parameters and simulation procedures,etc.093094ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE01020304XPENGWaste ManagementFor waste management,The Company formulated internal management policies such as Environmental Protection Management Procedures and Hazardous Waste Management Procedures to control all aspects of waste such as separate collection,transfer and removal.We established a solid waste system platform for declaring the transfer of waste.Then we entrusted a qualified third party to ensure proper disposal of the waste.We carried out cement hardening and anti-seepage treatment for the waste dumping site,and installed ground leachate collection ditches.Safety measures such as a dry powder fire extinguishing system,a combustible gas monitoring system and an electrostatic discharge device were equipped to avoid environmental pollution accidents.In addition,metal scraps,waste packaging materials,hazardous wastes(paint sludge,waste organic solvents,sludge,waste paint drums,etc.)and domestic waste were sorted and recycled to minimize the negative impact of waste on the environment.In 2022,the Zhaoqing manufacturing base achieved its target of generating less than 14.28 kg of hazardous waste per vehicle as scheduled.In the future,we aim to reduce waste emission density by harmless and resourceful management of waste generated in production.Hazardous Waste Management Measures:Separate collectionRegistrationProper transferHazardous waste reductionMonthly inspection of the classification of hazardous waste in the workshop to avoid mixing with domestic and industrial waste.Weighing and recording all incoming hazardous waste;tracking and managing hazardous waste management goals for each plant.Signing hazardous waste disposal contracts with qualified third-party units,establishing a record process for hazardous waste transport and warehousing,and cleaning up hazardous waste in accordance with the Hazardous Waste Transport Management Measures.Reducing hazardous waste generation by adding liners to the glue barrel for welding,adjusting the lower limit of the glue pump,recycling empty barrels,recycling residual glue and draining paint residue.095096ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEGreen Packaging4XPENGUnitIndicators20212022ton2662131.210-62.310-6Green Logistics5Green Recycling6We replaced the original wooden frame packaging with recyclable and reusable iron frames so as to reduce the use of disposable cartons and wooden boxes.The Company enabled a total of 3 suppliers to make packaging improvements in 2022,and 5 suppliers were involved by the end of 2022.We reduced the use of large cartons by about 55 per day,with a total reduction of about 20,000 cartons during the reporting period.In the future,we will continue to promote another 15 suppliers participation in this initiative.Amount of packaging materialsPackaging material density14ton/CNY(thousand)In transport,we improved the loading capacity of single transportation and reduced the frequency of transport by optimizing our transport strategy and increasing the full load rate of transport,thus reducing the carbon footprint of products.According to the contract structure and recent scheduling resources,we adjusted the vehicle loading order.In consideration of the estimated sales trend,we replenished the inventory in advance for transport orders without full load,thus improving the full load rate and reducing the energy consumption and carbon emission in transport.In consideration of the efficiency of water transport and railroad transport,we increased the proportion of railroad transport in inland regions,and reduced the demand for connecting transport from ports to warehouses,thus reducing unnecessary transport journeys.Increasing the Full Load RateOptimizing the Mix of Water-rail Multimodal TransportWe have established a whole-process waste power battery recycling management procedure to manage end-of-life batteries generated from prototype tests,production and after-market sales/clients.We are also exploring battery cascade utilization and recycling and reuse.For the end-of-life batteries generated by after-market sales/clients,consumers can send their vehicles to the after-sales service center for professional diagnosis by XPENG maintenance technicians.We will dismantle the batteries that meet end-of-life conditions,and enter the relevant information into the internal information management system and traceability management system.We then transport them to professional warehouses for temporary storage in accordance with relevant transport requirements,and finally we hand them over to qualified suppliers for recycling and reuse.Note:13.Including the consumption of packaging materials in the Zhaoqing manufacturing base and Guangzhou manufacturing base.14.Unless otherwise specified,density indicators such as density of packaging materials used,density of energy used,and density of emissions in this report are calculated using operating revenues in CNY(thousand)as the denominator.097098ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCETackling Climate Change 5.1Governance5.1.1XPENGXPENG actively responds to the challenges posed by climate change.Referring to the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD),we carried out climate change management and took practical actions in four areas:governance,strategy,risk management,and indicators and targets.In 2022,the Company further improved its management mechanism on tackling climate change.We upgraded the former Carbon Neutrality Project Working Group to Carbon Neutrality Working Group,which is fully responsible for the Companys strategic planning and daily management in carbon neutrality.The Carbon Neutrality Working Group,headed by the vice president of the Company,included functional leaders or key members in product planning,R&D,battery,quality and safety,project management,

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Climate Change Report 2022ContentsChief Executives statement2Our business at a glance 4Climate Action Plan-2022 progress and 2023 update6Our strategy and approach to climate change8Producing materials essential for the low-carbon transition10Reducing the carbon footprint of our operations14Partnering to reduce the carbon footprint of our value chains22Enhancing our resilience to physical climate risk28Climate policy engagement32Climate governance33Just transition34Climate disclosure35Emissions and energy data37Assurance statement by KPMG40Cover|Employee at IOC tailings in Labrador City,NL CanadaOur operations are located on land and waters that have belonged to Indigenous peoples for thousands of years.We respect their ongoing deep connection to Country and recognise their vast knowledge of the land,water and environment.We pay respects to Elders,both past and present,and acknowledge the important role Indigenous peoples play within our business and our communities.Visit to find out more2022 highlightsHigh-grade iron ore Simandou:Signed a non-binding term sheet with our partners to progress the co-development of infrastructure.Theproject will deliver high-grade ironore,suitable for the DRI-EAF2 steelmaking process.Green steel Blast furnace optimisation:Extended our collaboration with over 20 customers,such as Baowu,POSCO,Nippon Steel Corporation and Shougang,with potential carbon emissions reductions of up to30%.BioIronTM:Successfully piloted an innovative,low-carbon iron-making process on Pilbara iron ore.Hydrogen-based DRI1:Collaborated with BlueScope and Salzgitter Flachstahl to test direct reduction of our products using green hydrogen and develop cleaner processing options.Iron Ore Pilbara:Planned investment of$600 million in 230MW of solar power facilities and 200MWh of storage.This is in addition to the 34MW solar facility installed at Gudai-Darri.Pilbara:Developed partnerships with Scania,Caterpillar,Volvo and Komatsu to deploy more efficient autonomous haulage solutions and battery-powered trucks.Marine biofuels:Joined a trial with BP.Arvida:Invested in a new aluminium recycling facility and plans to replace our closing smelter with an expansion of the AP60 smelter to produce low-carbon aluminium.Alma:Committed$188 million to expand production of higher-value low-carbon billets.Laterrire Plant:Commissioned a new aluminium remelt furnace.ELYSISTM:Conducted commercial testing of direct emissions-free smelting technology with 450kA cells under construction.Low-carbon material:Partnered with organisations including Volvo,Ford and AB InBev(Corona Canada).Aluminium Queensland smelter repowering:Commenced evaluation of proposals to repower our aluminium assets with up to 4GW of wind and solar,backed up by energy firming and storagesolutions.Queensland Alumina:Progressed to a pre-feasibility study for a double digestion project to reduce emissions and operational expenditure.Oyu Tolgoi:Acquired full ownership of Turquoise Hill Resources Ltd(TRQ)for$3.1 billion,increasing our direct project ownership to 66%.Rincon:Acquired Rincon for$825 million and approved funding of$194 million for early works to develop an accelerated starter plant with plannedexpansion.NutonTM:Joined strategic partnerships to test leaching technology on legacy copper waste and sulphide orebodies.Critical minerals from waste:Began extracting tellurium concentrate at Kennecott.Achieved first production of scandium oxide and demonstration of an innovative spodumene(lithium)concentration process at our Critical Minerals and Technology Centre(RTITQuebec Operations).Copper and Minerals Rio Tinto Iron and Titanium(RTIT)Quebec Operations:Committed$537 million(C$737 million)in partnership with the Government of Canada to decarbonise RTIT Quebec Operations and boost critical mineralsprocessing.Richards Bay Minerals:Partnered with Voltalia for solar power(20-year power purchase agreement).Renewable diesel:Launched a pilot at Boron,with trials also planned forKennecott.Grow in materials enabling the energy transition Develop products and technologies that help our customers decarbonise Accelerate the decarbonisation of our assets1.Direct Reduced Iron.2.Direct Reduced Iron Electric Arc Furnace.1Climate Change Report 2022|Climate Change Report 2022Chief Executives statementOur purpose is to find better ways to provide the materials the world needs.Meeting the incremental demand of the energy transition,and ensuring local supplies of critical minerals globally,deepens our relevance to the world and ensures our long-term profitability.We are creating real momentum,and seeing early results gives me conviction that we have the right objectives,the right team,and the rightstrategy.Our Scope 1 and 2 emissions targets of 15%reductions by 2025 and 50%by 2030 are aligned with 1.5C the stretch goal of the Paris Agreement and are really challenging.In contrast to many of our peers,about 80%of our emissions are driven by processing and producing metals and minerals,which are high temperature,hard-to-abate activities.The remaining 20%are from our mining operations.The low-carbon transition is complex:developing new technologies and implementing major projects to decarbonise our business will take time.We estimate that we will invest$7.5 billion in capital between 2022 and 2030 to deliver our decarbonisation strategy.So we need to be disciplined about our capital investment and make a commercial case for each mitigation project.Our experience shows that we cannot solve this simply by allocating capital.We also need to attract the right talent,deploy new technology at scale,secure approvals from regulators and partner respectfully with local communities and Indigenous peoples.Inaddition,higher carbon prices and other government incentives are needed to drive the production and consumption of low-carbon metals and minerals.In 2022,our Scope 1 and 2 emissions were 30.3Mt CO2e(31.0Mt in 2021),a reduction of 7low our 2018 baseline.This is primarily the result of switching to renewable power at Kennecott and Escondida in prior years,aswell as lower than planned production from the Kitimat and Boyne aluminium smelters in 2022.Wedid not advance the actual implementation of our abatement projects as fast as we would have liked last year,so our capital expenditure on decarbonisation projects was$94 million,lower than we anticipated when we set our targets.Challenges have included late delivery of equipment,resourcing constraints impacting study progress,construction and commissioning delays,and project readiness.6 1 abatement programmesIn response,we established six abatement programmes,with dedicated people,to focus on the decarbonisation challenges that cut across our product groups:repowering our Pacific Aluminium Operations,renewables,ELYSISTM,alumina process heat,minerals processing and diesel transition.We are building capability and gaining a deeper understanding of our decarbonisation challenge(both constraints and opportunities),and our related operational expenditure increased to approximately$140 million in 2022.As a result,we are better placed to deliver the complex and large-scale structural changes to our energy system needed to achieve our 2030 target.Given the long lead times for some of these projects,we established one additional programme to increase our investments in nature-based solutions projects and now expect these to make a more significant contribution to our targets.Ifdone well,these projects can play a substantial role in addressing carbon emissions and biodiversity loss,while also providing benefits to local communities.Our people working on these“6 1”abatement programmes,and our substantial investments in technology,will drive the innovation and transformation needed to accelerate our low carbon transition and ensure the long-term resilience of our business.Scope 3 partnershipsOur Scope 3 emissions were 584Mt CO2e in 2022 over 1%of the global total.These are primarily from our customers in Asia,processing our iron ore into steel and bauxite into aluminium,so our level of control is limited.The best way to tackle these emissions is to work in partnerships to develop the technologies needed to produce low-carbon metals and minerals.Lastyear we increased our engagement with our customers,governments,universities and others.It is encouraging that the initial testing phase of our BioIronTM process showed great promise and demonstrated that using microwave energy and sustainable biomass as a reductant is well suited to Pilbara ores.Andweare continuing to scale up the ELYSISTM technology the worlds first carbon-free aluminium smelting process towards the demonstration of even larger commercial-size cells.In the past year,I have spent time engaging with a diverse range of stakeholders on the need to work together and address climate change with urgency.Given the structural changes we must make to our energy system,2030 is just around the corner.Our success relies on our ability to strengthen our resilience to the physical,societal and economic effects of climate change and the energy transition,while building partnerships and capabilities that enable us to secure newopportunities.Jakob StausholmChief ExecutiveOver a year ago,we put the low-carbon transition at the heart of our new strategy,setting a clear pathway to deliver long-term value as well as ambitious targets to decarbonise ourbusiness.Climate Change Report 2022|2“We will only invest in quality assets which will give robust returns under a range of economic,geopolitical and carbon scenarios,creating a resilient portfolio with significant upside to the energy transition.We are applying similar thinking to our approach to decarbonisation.”3Climate Change Report 2022|Our business at a glanceConsolidated sales revenue bydestinationConsolidated sales revenue by productOur key assets are located in close proximity to our major markets:54.3%8.8%6.5%7.4.9%7.1%$55.6bn59.0%4.8%5.6%5.8$.8%$55.6bnIron ore$32,801bnCopper$3,196bnGreater ChinaJapanAluminium2$13,790bnOther$3,098bnMinerals$2,669bnAsia1EuropeUSOtherIron ore3AluminiumCopperMinerals3Mines17436Smelters,refineries and processing plants401814Mt CO2 Scope 1 and 2 emissions3.1Mt21.1Mt1.5Mt4.0MtRioTinto share ofproductionIron ore272.9Mt(2021:266.8Mt)Bauxite54.6Mt(2021:54.3Mt)Aluminium3,009kt(2021:3,151kt)Mined copper521.1kt(2021:493.5kt)Titanium dioxide slag1,200kt(2021:1,014kt)Underlying EBITDA$18.6bn(2021:$27.6bn)$3.7bn(2021:$4.4bn)$2.4bn(2021:$4.0bn)$2.4bn(2021:$2.6bn)1.Excluding Greater China and Japan.Greater China includes China and Taiwan.2.Aluminium includes bauxite and alumina.3.Our Iron Ore product group includes our 17 iron ore mines in the Pilbara and three salt operations(Dampier,Port Hedland and Lake MacLeod).Our Minerals product group includes the Iron Ore Company of Canada(IOC).4.Covering processing plants engaged in the material transformation of input products with total Scope 1 and 2 emissions greater than 100,000 tonnes CO2.The integrated processing facilities at RTIT Quebec Operations are counted once.Climate Change Report 2022|4Materials for low-carbon transitionGlobal dataRioTinto dataDemand by sectorConstruction&infrastructurePower/electricalAuto(transport)Machinery&equipmentConsumer durablesOther14U%2%9#%85$%Finished steel 1,700MtAluminium 96MtCopper 31MtIron ore/steelAluminiumCopperTotal emissions 1,020Mt CO2e 10.4 tCO2e/tTotal emissions 3,150Mt CO2e 1.7 tCO2e/tTotal emissions 109Mt CO2e 3.5 tCO2e/t29Mt 14Mt CO2e 0.5 tCO2e/t AlSecondary aluminium650Mt 325Mt CO2e 0.5 tCO2e/t steelScrap-based steel110.6Mt 5.3Mt CO2e 0.5 tCO2e/t CuSecondary copper 12,000MtTotal material moved10,000Mt Total material moved 1,000MtTotal material moved134Mt2 7.5Mt 180Mt CO2e 1.3 tCO2e2/t Al2O35.6Mt CO2e 0.7 tCO2e/t Al2O3Alumina2t69Mt 3.0Mt 820Mt CO2e 12 tCO2e/t Al14.5Mt CO2e 4.8 tCO2e/t AlPrimary aluminium1,250Mt 2,750Mt CO2e 2.2 tCO2e/t steel Ore-based steel121Mt 0.2Mt 34Mt CO2e 1.6 tCO2e/t Cu0.2Mt CO2e 0.9 tCO2e/t CuPrimary refined copper1t1t365Mt 50%Al2O355Mt 49%Al2O34.7Mt CO2e 0.02 tCO2e/t ore0.9Mt CO2e 0.02 tCO2e/t oreBauxite4,300Mt 0.6%Cu120Mt 0.6%Cu70Mt CO2e 3.1 tCO2e/t Cu1.3Mt CO2e 2.3 tCO2e/t CuCopper ore32,450Mt 62283Mt 6170Mt CO2e 0.03 tCO2e/t ore3.7Mt CO2e4 0.01 tCO2e/t oreIron oreProductEmissions ProductEmissions ProductEmissions 200t600t15t5t1t2t8t1.Ore-and scrap-based steel are notional categories based on RioTinto estimates of raw material inputs for different steel production pathways.2.Smelter grade Alumina only.3.Copper ore product before processing.4.RioTinto total iron ore emissions include equity-basis emissions from our Pilbara operations and from IOC.Sources:RioTinto analysis and estimates,CRU,Skarn Associates,Wood Mackenzie,International Aluminium Institute.5Climate Change Report 2022|Climate Change Report 2022Our Climate Action Plan 2022 progress and 2023 updateIn 2022,our shareholders supported our Climate Action Plan(CAP)in a non-binding advisory vote on the companys ambitions,emissions targets and actions to achieve them.We will continue to publish our progress on climate change annually in line with the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD).The Board is fully aligned with this action plan and believes it will deliver value for our shareholders,our customers and wider society.The table below summarises progress in 2022 and our action plan in 2023.1.Scope 1 and 2 emissions targets and roadmapWe have committed to reach net zero by 2050 and have set ambitious interim targets relative to our 2018 equity emissions baseline:to reduce greenhouse gas(GHG)emissions by 15%by 2025 and to reduce GHG emissions by 50%by 2030.1Progress in 2022 Repowering Pacific Aluminium operations:we issued arequest for proposal for more than 4GW of wind and solar projects to support repowering of the Boyne smelter.Tomago issued expression of interest seeking renewable projects to support repowering of the smelter(a non-managed joint venture).Renewables:we installed the first 34MW of solar capacity at Gudai-Darri and announced that we are planning to invest$600 million for solar,storage and transmission to deliver a further 230MW of solar power and 200MWh storage in the Pilbara from 2023-2026.We started construction for the first phase of our 30MW project at Kennecott and commenced direct market engagement for our US footprint(Boron,Resolution,Kennecott)for around 1GW of renewables.We issued expression of interest for an islanded 35MW microgrid at Amrun and signed a Solar PV 130MW power purchase agreement(PPA)for Richards Bay Minerals(RBM)with Voltalia.Construction of a 20MW hybrid project continued at QIT Madagascar Minerals.ELYSISTM:production from our pilot cell continued,as did construction of larger commercial scale cells at Alma.Alumina process heat:we developed our approach to decarbonising our refineries.Order of magnitude studies for electric steam generation and electrical infrastructure requirements are in progress.A feasibility study has been completed for the hydrogen calcination project.An order of magnitude study for double digestion has been completed with approval to proceed with the pre-feasibility study.Minerals processing:$537 million(C$737)partnership with the Government of Canada to decarbonise RTIT Quebec Operations and boost critical minerals processing.Diesel transition:we have progressed biofuel trials at Boron and Kennecott.We began trialling an underground battery electric loader and haul truck at Kennecott.Wedelivered our first road-sized haul truck into the Pilbara fortesting.Nature-based solutions(NbS):we completed pre-feasibility studies for NbS projects at five high-potential landscapes.Actions in 2023 Repowering Pacific Aluminium Operations:progress renewable supply options for the Boyne and Tomago aluminium smelters.Renewables:approve and commence construction of 100MW solar PV for the Pilbara.Progress studies on the next 130MW solar PV for the Pilbara.Sign PPA for Amrun microgrid and start construction in 2023/24.Sign a Wind PPA at RBM.Sign commercial agreements for our US operations(Kennecott,Resolution and Boron).ELYSISTM:commission 450kA ELYSISTM cells currently under construction at Alma.Alumina process heat:develop the decarbonisation energy transition strategy for the Yarwun and Queensland Alumina(QAL)refineries.Complete feasibility studies for electric steam generation and thermal storage options at QAL and Yarwun,and seek approval for electric boilers at Vaudreuil.Advance studies on double digestion,hydrogen and electric calcination.Commence construction of hydrogen calcination industrialisation demonstration at Yarwun.Minerals processing:commission Blue Smelting demonstration plant at RTIT,Quebec,to test ilmenite pre-reduction process.Commence industrial trials of biochar at RTIT Quebec Operations and RBM,and investigate options to develop a sustainable supply chain.Commission plasma burner pilot at IOC.Diesel transition:progress plans to convert the entire fleet at Boron to renewable diesel ahead of the requirement to do this in California in 2024.Develop a viable trolley assist option for the existing haul fleet to enable substantial reduction in diesel use while on trolley.Nature-based solutions:conduct feasibility studies for the development of five carbon offset projects.1.Our net zero commitment applies to our Scope 1 and 2 emissions only.For planning purposes,we define short-term as up to two years,medium-term as 2-10 years and long-term as beyond 10 years.For our analysis of physical climate risks,we define short-term as 2030,medium-term as 2050 and long-term as 2100.Climate Change Report 2022|62.Scope 3 emissions goals and customer engagementOur approach to addressing Scope 3 emissions is to engage with our customers on climate change and work with them to develop and scale up technologies to decarbonise steel and aluminium production.Progress in 2022Steel value chain Engaged with nearly all our direct iron ore sales customers(representing two thirds of our total iron-ore related Scope 3 emissions).This has led to decarbonisation collaboration and projects with customers accounting for 59%of our direct iron ore sales.Partnerships on track.We advanced 49 projects,together with over 30 partners.Aluminium value chain Initiated engagement with customers representing nearly all of our bauxite sales.Shipping 30%reduction in emissions intensity achieved(relative to 2008 baseline).On track to exceed target through energy saving initiatives and use of transitional fuels(biofuel/LNG).Accelerating development of end-state fuels(green methanol and green ammonia)via partnerships.Completed installation of energy savings devices on first vessels capable of 10-12%emissions reductions.Actions in 2023Steel value chain Progress work on a microwave lump drying pilot plant with Baowu.Develop BioIronTM at a larger scale,via a specially designed continuous pilot plant.Complete concept studies with BlueScope and determine the next phase of processing Pilbara ores with hydrogen and a melter.Aluminium value chain Agreement to hold workshops on decarbonisation confirmed with three major customers representing over half of our sales.Further engagement with other bauxite customers will depend on the level of interest.Shipping Review biofuels plan following completion of 12-month trial.Progress partnerships on end-state fuels.Advance programme to install energy savings devices on our vessels during dry-docking.Incorporate(over 2023-24)nine LNG dual-fuel chartered vessels into our fleet.Advance iron ore green corridor development in partnership with the Global Maritime Forum.3.Capital allocation alignment with our 1.5C decarbonisation strategyWe estimated that we will invest$7.5 billion in capital between 2022 and 2030 to deliver our decarbonisation strategy(approximately$1.5 billion over the period 2022 to 2024).We also expected our incremental operating expenditure to support the CAP to be in the order of$200 million per year,including research and development initiatives.For example,we planned to spend about$50 million on our iron and steel decarbonisation initiatives in2022.Progress in 2022 Our capital expenditure on decarbonisation projects in 2022 was$94 million compared to an originally estimated spend of$500 million.Our incremental operational expenditure to support the CAP including spend on steel decarbonisation initiatives,was approximately$140 million.Operational expenditure on steel decarbonisation initiatives was$24 million in 2022.Resourcing constraints,COVID-19 lockdowns and the need to develop the business case for some technologies has delayed someprojects.Actions in 2023 Depending on project planning,approvals and implementation,we estimate that our capital expenditure on decarbonisation will increase over the three years to 2025 and total$1.5 billion.Our incremental operational expenditure in 2023 is estimated to be$200 million for the six abatement programmes and offset development.4.Climate policy engagementWe continue to encourage our industry associations to align their advocacy with the goals of the Paris Agreement.We review the climate advocacy of our industry associations each year,and we publish our review on our website and consider it when we decide whether to renew our memberships.Progress in 2022 We published our review of industry associations in February 2022 and conducted an interim and year-end review of their advocacy.We engaged with four industry associations to discuss their climate advocacy.Actions in 2023 In 2023,we will publish our review of industry associations and maintain our engagement with them on climate advocacy.5.Climate governanceIn the short-term incentive plan(STIP),safety,environment,social and governance matters,including climate change,are now assigned an explicit performance weighting of 35%,of which 20%relates to safety and 15%to ESG.The“E”component is 5%of the STIP and relates entirely to climate change performance objectives.Progress in 2022 In 2022,the business approved or delivered Scope 1 and 2 abatement projects that would contribute 0.29Mt CO2 of abatement towards the 2025 target against a target of0.8Mt.Achieved specific milestones relating to steel decarbonisation,zero-carbon aluminium and shipping.Actions in 2023 Climate change performance objectives are assigned an explicit performance weighting of 10%in the STIP in 2023.We will assess progress of moving carbon abatement projects through the various stages of development all the way to execution to meet our decarbonisation ambition.6.Just transitionWe are committed to supporting a just transition to a low-carbon economy that is socially inclusive and provides decent work and livelihoods.Progress in 2022 In 2022,we established an Executive Comittee-sponsored cross-functional just transition working group,undertook an assessment of our current just transition maturity,and developed a tool to profile risks and opportunities at our assets.Actions in 2023 In 2023,our priorities include assessing just transition-related risks and opportunities across our assets;defining just transition principles;awareness-raising across the business;and continued engagement with civil society organisations,host communities,employees and others.7.TCFD disclosureWe support the TCFD recommendations and are committed to aligning our disclosures with the Climate Action 100 (CA100 )Net Zero Company Benchmark in 2023 reporting.Progress in 2022 Climate-related disclosures on governance,strategy,risk management,and metrics and targets were integrated into the 2021 Annual Report.Our CAP aligns with the CA100 Net Zero Company Benchmark.Actions in 2023 We will continue to publish our progress on climate change annually in line with the recommendations of the TCFD.7Climate Change Report 2022|Climate Change Report 2022We have positioned the low-carbon transition at the heart of our business strategy to strengthen ourlong-term resilience and pursue new growth opportunities.Inaddition tosetting ambitious 1.5C-aligned emissions targets for our operations,our strategy aims to help decarbonise our value chains and provide the materials essential for the energytransition.Our strategy and approach to climate changeOur approachTo capture new growth opportunities in materials with strong low-carbon transition-related demand:Our ambition is to increase disciplined capital growth of up to$3.0 billion annually by 2024to 2025.We will seek to grow further in copper and battery materials and bring additional tonnes of high-grade iron ore and low-carbon aluminium to market.To work with our customers to tackle full value chain emissions:We will increase research and development of cleaner products.We will partner with our customers to help them meet their Scope 1 and 2 emissions goals.To strengthen our alignment with the Paris Agreement and our long-term ambition of achieving net zero emissions by 2050:We aim to reduce our Scope 1 and 2 emissions by 15%by 2025 and by 50%by 2030.We expect to invest an estimated$7.5 billion in decarbonisation projects,predominantly in the second half of thedecade.Grow production of materials enabling theenergy transitionDevelop products and technologiesthat help our customers decarboniseAccelerate the decarbonisation ofour assetsGlobal scenariosOur scenario approach is reviewed every year as part of our Group strategy engagement with the Board.We have recently updated our scenario framework to focus on two prevailing macro-level business concerns:the speed of global economic growth and the trajectory of climate action,each heavily influenced by global geopolitics and governance.Our two core scenarios(Competitive Leadership and Fragmented Leadership)are used to generate a central reference case for commodity forecasts and valuations.Additional scenarios(including our Paris-aligned Aspirational Leadership scenario)are used to further evaluate the positive and negative effects of the energy transition across our portfolio and stress test investment decisions.We determine the approximate temperature outcome in 2100 by comparing the emissions pathways to 2050 in each of our scenarios with those set out in the Shared Socio-economic Pathways(SSP)by the Intergovernmental Panel on Climate Change(IPCC).We do not undertake climate modelling ourselves,but we are consistent with the estimates for temperature and cumulative temperature between 2020 to 2050 in the SSPs.The emissions pathway of Aspirational Leadership is most closely aligned with the IPCCs shared socio-economic pathway 1(SSP1-1.9)with emissions reaching net zero by 2050,which limits warming to 1.5C.Competitive Leadership is most closely aligned with SSP1-2.6(approximately 2C of warming)and Fragmented Leadership is aligned with emission scenarios SSP2-4.5(temperatures exceeding 2.5C by 2100).We also use the IPCCs highest emissions scenario(SSP5-8.5)when assessing the physical risks of climate change.So,when assessing risks and opportunities to the business we use a 1.5C-aligned scenario to assess a fast low-carbon transition and we use the highest emissions and high temperature outcome scenario(SSP5-8.5)to assess physical climate risks.While there are many uncertainties about how a changing climate may negatively affect gross domestic product(GDP)growth,physical impacts of climate change are integrated into the GDP growth assumptions in our three scenarios.These are most significant in Fragmented Leadership and least significant in Aspirational Leadership.Thesteel sector Our strategy and approach to climate change are informed by a deep analysis of the interplay of global megatrends,explored through the lens of plausible global scenarios.These set the context for our industry and underpin our commodity price outlooks,portfolio and capital allocation choices,and how we operate as a business.We recognise our success relies on our ability to strengthen our resilience to the physical,societal and economic effects of climate change and the energy transition while building partnerships and capabilities that enable us to secure new opportunities.Our strategy has three pillars,each backed by a series of commitments and ambitions.Our approach is supported by strong governance,with a focus on creating streamlined processes and building capabilities,including in green materials processing,renewable energy deployment and nature-based solutions,which are expected to enable us to reach net zero emissions from our operations by 2050.Thethree pillars of our strategy inform our Climate Action Plan,which aligns with the CA100 Net Zero Company Benchmark and was approved by our shareholders at our 2022 AGMs.transition scenarios in the value chain section of this report are presented to highlight the roles and timing of different low-carbon steelmaking technologies and to develop projections of our potential future Scope 3 emissions from processing our ironore.At the UN Climate Summit in late 2022(COP27),there was broad recognition that the pace of decarbonisation across the global economy is too slow to limit warming to 1.5C and that current climate policies in many countries are not yet aligned with their stated ambitions.Consequently,neither of our two core scenarios are consistent with the expectation of climate policies required to accelerate the global transition to meet the stretch goal of the Paris Agreement.Although our operational emissions reduction targets align with the goals of the Paris Agreement,ourtwo core scenarios do not.Therefore,we also assess our sensitivity and the economic performance of our business against our Aspirational Leadership scenario,which reflects our view of meeting the stretch goal of the Paris Agreement.Our approach to climate change is intrinsically linked with our four objectives:to be best operator,to achieve impeccable ESG credentials,to excel in development and to strengthen our social licence.Delivering on our climate commitments will rely on these capabilities and will also help build our reputation as a partner of choice for new growth opportunities created by the energy transition.Climate Change Report 2022|8Table 1:Key scenario metricsAspirational Leadership1.5CCompetitive Leadership2CFragmented Leadership2.5C2030 outcome2021-2050 CAGR2030 outcome2021-2050 CAGR2030 outcome2021-2050 CAGRGlobal average carbon prices1 in 2030,(2021 US$/t CO2 eq)599.3B8.0B2.9%Global emissions,Gt CO2 eq39.5-11$9.9-3.5H.3-0.8%Global energy demand,mtoe10,4800.3,9850.5,3070.2%Global GDP growth(PPP),%4.4%3.9%4.3%3.8%2.9%2.2%Energy intensity of global GDP,toe/$1000 2015 PPP0.07-3.4%0.08-3.2%0.08-2.3rbon intensity of total energy,gCO2/MJ42.1-12.7F.5-5.0F.4-1.9%Global energy from electricity,mtoe2,8803.9%2,9363.9%2,6681.8%Global wind and solar capacity,GW9,84510.6%7,47610.0%5,7327.1%Electric vehicle(EV)sales(%)368.1.6c.9.48.8%9.5%1.Carbon prices are used as a proxy for a broader range of climate policies.2.11%p.a.decline in CO2 emissions based on 2021-49 period in net zero pathway(by 2050).Emissions in 2030 are highest in Competitive Leadership due to high GDP growth.3.2021-50 CAGR based on global electric vehicle sales.Group scenario global GHG pathways compared to IPCC scenarios(temperature outcomes in 2100)Fragmented Leadership is characterised by limited progress on policy reform with volatile low growth.The business environment is defined by weak final demand and greater uncertainty,and requires close ties with governments to manage risk.It is a world defined by geopolitical and domestic tensions,spurred by populist agendas that offer leaders little opportunity to build consensus around reform and environmental agendas.Nations eventually achieve their 2030 Nationally Determined Contributions(NDC)as agreed in Paris in 2015 but abandon further progress toward long-term carbon goals as outlined at COP26 in Glasgow.Climate policy is insufficiently ambitious to incentivise significant mitigation in industrial sectors resulting in flat global emissions post-2030;consequently global warming exceeds 2.5C and the physical impacts of climate change limit GDP growth in this scenario.Competitive Leadership reflects a world of high growth and strong climate action post-2030,with change driven by policy and competitive innovation.A proactive reform environment encourages stronger business innovation,higher investment and improved productivity.This allows global GDP to continue growing at close to recent historical levels with a growing contribution from India and other developing countries.The increasing prevalence of major climate events after 2030,and ongoing pressure from civil society organisations and businesses to provide policy certainty,continue to galvanise national and international climate action.As a result,nations drive against historical precedent toward achieving their Glasgow Climate Pact commitments,resulting in global GHG emissions falling from 54 Gt CO2e today to 21Gt in 2050.Aspirational Leadership reflects a world of high growth,significant social change and accelerated climate action with all countries setting new NDCs that collectively achieve net zero emissions by mid-century.Domestic politics is driven by demands for economic prosperity,social justice and environmental action.Despite geopolitical differences,major economies tend to work together through multilateral frameworks and proactively work towards limiting temperature change to 1.5C.This results in developed economies and China leading from the front,implementing large increases in carbon pricing,sharply lowering the material intensity of their economies and providing strong financial support to low-income economies.The Aspirational Leadership sensitivity is designed to reach net zero by 2050,and to help us better understand the world on a 1.5C pathway and what this would mean for our business.Different IPCC scenarios represented in light grey lines specific to temperature range across different scenarios-1001020304050607080200020102020203020402050200020102020203020402050200020102020203020402050Aspirational Leadership(1.5 C scenarios)Competitive Leadership(1.9 C to 2.1 C scenarios)Fragmented Leadership(2.6 C to 3.0 C scenarios)Gt CO2e9Climate Change Report 2022|Climate Change Report 2022Price range across scenariosUpperLowerFinished steelIron ore:65%finesDemandPrice ranges0.51.52025-292030-392040-50 280801001201401601802002202402602020203020402050%Producing materials essential for the low-carbon transitionThe energy transition is a key driver of commodity demand today and will continue to be so over the next two decades.This will come on top of the demand growth from continued urbanisation and industrialisation(particularly in emerging economies)and it will trigger a new phase of demand growth in developed economies,which have faced saturating demand over the past two decades.In all scenarios,Chinas steel demand growth is forecast to slow as its economy matures.This is offset by construction growth in India and Southeast Asian countries.Steel demand is strongly driven by urbanisation and GDP growth and less exposed to the green energy transition than copper and aluminium.Wind turbines have a higher steel intensity than conventional generation,but the shift to electric vehicles will reduce steel demand in the automotive sector in favour of aluminium.Even by 2050,weexpect that more than half of future crude steel production will remain based on iron ore(compared to about two-thirds today).In Fragmented Leadership,global iron ore demand remains broadly flat.Theabsence of challenging carbon targets keeps premiums for high-grade ores around their historical norms.Prices for both 62 fines and high-grade 65 fines are subdued.In Aspirational and Competitive Leadership scenarios,stronger underlying GDP and construction demand growth support prices and offset the rising use of scrap materials.In both of these scenarios,the transition to low-carbon steelmaking will be accompanied by an increase in premiums for high-grade iron ores(eg 65 fines)as current low-carbon steelmaking technologies are relatively inefficient at processing unwanted contaminants in iron ore.This is more material in Aspirational Leadership due to the higher carbon penalties imposed.Price differentials for low quality iron ores are also likely to widen.The commodities we produce have a vital role to play in the low-carbon transition.Copper demand will rise with the renewable electrification of energy,and lithium will be a fundamental ingredient in batteries and grid-firming energy storage solutions.Demand for aluminium will grow for uses like energy-efficient lightweight electric vehicles.Steel demand is primarily driven by urbanisation and industrialisation it correlates with GDP growth and is less exposed to the low-carbon transition than other commodities.It will be essential in a range of applications,from high-speed rail networks to wind and solar support structures,and green hydrogen production facilities.The production of green steel will also bolster demand for high-grade iron ore.While the low-carbon transition is expected to create additional demand for our commodities,the outlook for demand varies significantly between our scenarios as a function of GDP growth,technology uptake,and scrap supply and use.Different demand trajectories,combined with industry supply responses and global carbon policy evolution,determine the market prices for our three major commodities and implications for our Group-level and asset valuations,as shown below.Price range across scenariosUpperLowerIron ore:62%fines2025-292030-392040-50 0.51.5KeyAspirational LeadershipCompetitive LeadershipFragmented LeadershipClimate Change Report 2022|10Price range across scenariosPrice range across scenariosUpperUpperLowerLower In Aspirational Leadership and Competitive Leadership,traditional and energy transition demand in the transport and electricity sectors doubles demand for aluminium semi-fabricated products over the next three decades.Thissupports aluminium prices over all time horizons.As higher global carbon penalties materialise,the overall industry cost structure will move upwards,further supporting prices in these two scenarios.In Fragmented Leadership,constrained economic growth and limited climate action suppress growth in aluminium demand to more moderate levels.Share of secondary recycled material rises from 28%today to 45%by2050.Copper demand rises by 65-150%by 2050 across the three scenarios.Copper benefits from the rapid adoption of electric vehicles and growth in solar and wind generation,which all have higher copper intensities than conventional technologies.These are key demand drivers in Aspirational and Competitive Leadership scenarios.Copper prices are expected to be higher than historical norms over the next two decades.This is most pronounced in Aspirational and Competitive Leadership scenarios due to higher demand requirements.In the 2040s,prices decline in real terms due to moderating demand growth and greater use of scrap material,which rises from 31%today to 40%by 2050 across the scenarios.Implications for RioTintos portfolio and operationsWe aim to invest in quality assets that give robust returns under our scenarios,creating a resilient portfolio with a significant upside to the energy transition.We have continued to invest in our copper portfolio through traditional assets such as Oyu Tolgoi and Kennecott,as well as early-stage application of our Nuton copper leaching technology.Inaluminium,we continue to develop emissions-free smelting technology with ELYSISTM trials,as well as working to reduce the emissions of our existing capacity(see the section on Scope 1 and 2 below).In iron ore,Simandou will become a major supplier of high-grade iron ore that can be used in DRI-EAF steel processing and complement our existing product mix.Inother commodities,we are evaluating a range of opportunities to produce lithium(including at Rincon and Boron),as well as making demonstrable progress on various critical mineral developments that are essential for the energy transition.This alignment with the low-carbon transition is reflected in the financial resilience of our portfolio across all scenarios considered.Ourestimate for Group value in the Aspirational Leadership scenario lies between those for Fragmented and Competitive Leadership.Thisreflects higher estimated valuations for our copper and aluminium businesses in Aspirational Leadership,based on the above price profiles,offset by higher expected carbon penalties across our operating jurisdictions,and lower prices for lower-grade iron ore products.The same pattern holds for EBITDA margins at Group level.AluminiumCopperDemandDemandPrice rangesPrice ranges2025-292030-392040-50 0.51.52025-292030-392040-50 0.51.5280801001201401601802002202402602020203020402050(0801001201401601802002202402602020203020402050%Note:Real 2022 prices.We do not publish our commodity price forecasts as this would weaken our position in commercial negotiations and might give rise to concerns from regulators and market participants.11Climate Change Report 2022|Climate Change Report 2022Our portfolio risks and opportunities in the low-carbon transitionIron oreCopperAluminiumStrong GDP growth and accelerated EV penetration and global electrification(backed by renewable electricity)support demand growth and margins across the portfolioStrong GDP growth and EV penetration support demand with value upside for hydro-based smelters(more pronounced in Aspirational Leadership)Lower demand growth and poor carbon policy reduce margins and upside for low-carbon smelting and refining(Kennecott and Escondida)China slowdown and increasing self-sufficiency reduce demand for seaborne bauxitePressure to meet rapid demand growth supports growth projects(and Nuton)if they satisfy environmental and social requirementsEnvironmental and social approval hurdles for new projects including Resolution Copper and La GranjaHigher carbon penalties support ELYSISTM,hydro-based smelting assets in Quebec and repowering projects in AustraliaGeopolitical tensions could reduce joint venture partnership opportunities and create potential engineering,procurement and construction(EPC)and logistical issuesSlowing demand and low carbon penalties greatly reduce value upside of ELYSISTM and hydro-based smeltersCompetition to secure large-scale firmed renewable electricity to repower coal-based Pacific Aluminium OperationsAspirational LeadershipCompetitive LeadershipFragmented LeadershipLower medium-run demand versus Competitive Leadership due to higher scrap-use affecting Pilbara products(recovers post 2040)Strong global GDP growth and continued urbanisation support iron ore demand including for Pilbara productsSlowdown in China and global GDP growth erode demand,creating margin pressure across the portfolioMineralsAccelerated uptake of EVs and battery storage solutions supports growth projects(Rincon and Tamarack joint venture)Reduced battery material growth opportunities but resilience from operating high-grade TiO2 and borates assetsStrong outlook for battery materials but international competition for greenfield and mergers and acquisitions opportunities limit growth optionsIncreasing ESG scrutiny of new projects and more stringent regulationsCarbon penalties for downstream processing of TiO2 and battery materialsSupply disruption risks and volatility bolster demand for precious metal and critical mineral by-productsLarge increases in carbon pricing and penalties drive demand for high-grade iron ore supporting Simandou and IOCStronger customer preference for Simandou and IOC ores for lower-carbon traditional and emerging steelmakingSmall and regional increases in carbon prices help preserve longer-term margins for low-cost,Tier 1 Pilbara oresKey:risks&opportunities tableHigher opportunityHigher riskModerate opportunityModerate riskClimate Change Report 2022|12Producing materials essential for the low-carbon transition continuedClassifying our portfolio:revenue,capital expenditure(capex)and operating assetsWe classify commodities into five categories based on climate-related transition risks and growth opportunities:Type 1(highest transition-related demand):lithium,graphite,cobalt,nickel Type 2(other transition materials):copper,aluminium(including alumina and bauxite),manganese,zinc,other minerals Type 3:iron ore Type 4:metallurgical coal Type 5(highest transition-related risk):thermal coalType 1 and Type 2 materials align with a draft classification proposed by the investor coalition Climate Action 100 .Having divested the last of our coal businesses in 2018,we are orienting our growth capex towards materials that enable the energy transition,including copper,lithium and high-grade iron ore.Our ambition is to increase our growth capital to up to$3 billion per year in 2024 and 2025,developing new options and finding innovative ways of bringing projects onstream faster.Growth capex in iron ore relates to higher-grade ore from projects such as Simandou.Capex on mine development at Gudai-Darri and the Western Range is included in total capex.2022Production(Mt Cu eq)Revenue1($m)Growth capex($m)Total capex($m)Operating assets($m)Type 1(lithium,graphite,cobalt,nickel)001515835Type 2(copper,aluminium,otherminerals)2.4625,2894823,47134,264Type 3(iron ore)2.4533,11503,26519,263Type 4(metallurgical coal)00000Type 5(thermal coal)000001.Revenue includes share of equity accounted unit sales and intra-subsidiary/equity accounted unit sales.13Climate Change Report 2022|Climate Change Report 2022Reducing the carbon footprint of our operationsWe are working to decarbonise our operations to strengthen our alignment with the goals of the Paris Agreement.In 2022,we did not advance our abatement projects as fast as we would have liked;however,our Scope 1 and 2 emissions fell to 30.3Mt CO2e,which is 7low our 2018 equity emissions baseline.Ambitious targets aligned with 1.5COur targets are to reduce our Scope 1 and 2 emissions by 15%by 2025 and by 50%by 2030(relative to 2018 levels),and to reach net zero by 2050.These targets cover more than 95%of our operational emissions and are on an equity basis.We will continue to adjust the 2018 baseline to exclude reductions achieved by divesting assets in the future,and to account for acquisitions.For example,following the acquisition of TRQ in December 2022,we increased our equity in the Oyu Tolgoi copper mine from 33%to 66%,which will result in an increase in our baseline and target trajectory in our 2023 reporting(seedata tables for further detail).In the Glasgow Climate Pact adopted at COP26,governments resolved to pursue efforts to limit the global temperature increase to 1.5C.The Pact states that this“requires rapid,deep and sustained reductions in global greenhouse gas emissions,including reducing global carbon dioxide emissions by 45%by 2030 relative to the 2010 level and to net zero around mid-century,as well as deep reductions in other greenhouse gases”.This is consistent with the IPCCs Special Report on 1.5C that sets out multiple pathways to limiting warming to 1.5C,which average around net zero emissions by 2050.While there is no universal standard for determining the alignment of targets with the Paris Agreement goals,we conclude that our Scope 1 and 2 targets for 2030 are aligned with efforts to limit warming to 1.5C.In 2021,KPMG provided limited assurance over the alignment of our Scope 1 and 2 targets with efforts to limit warming to 1.5C.They also provided assurance of the roadmap to delivering those targets(asset out in our 2021 Climate Change Report).For this 2022 report,KPMG provide limited assurance over our progress reporting against our 2022 Climate Action Plan commitments(inaddition to their assurance of our Scope 1,2 and 3 emissions).Their statement is included at the end of the report.Our Scope 1 and 2 emissions in2022In 2022,our Scope 1 and 2 emissions were 30.3Mt CO2e(31.0Mt in 2021),a reduction of 7low our 2018 baseline.This is primarily the result of switching to renewable power at Kennecott and Escondida in prior years,as well as lower than planned production from the Kitimat and Boyne aluminium smelters in 2022.We purchased renewable electricity certificates at Kennecott in the US and switched to renewable electricity contracts at the Escondida mine in Chile(managed by BHP;Rio Tinto owns 30%).In contrast to many of our peers,about 80%of our emissions are driven by processing and producing metals and minerals,which are high temperature,hard-to-abate activities.The remaining 20%are from our mining operations.The four most significant sources of our operational emissions are electricity at 41%(purchased and generated),carbon anodes in aluminium-and reductants in titanium dioxide furnaces at 21%,fossil fuels for heat at our processing plants and alumina refineries at 20%,and diesel consumption in our mining equipment and rail fleet at 13%.The carbon intensity of our assets varies widely across our portfolio,and largely reflects the balance between mining and processing activities.Most of our assets already sit at the low end of their respective commodity carbon intensity curves(see charts in appendix).Operations with a predominant mining and logistics focus are less carbon intensive,while refining and smelting operations are high-temperature,energy-intensive processes.Consequently,approximately 70%of our emissions today are from our aluminium business.Largely because of the high energy intensity of the aluminium business,our Group-wide consumption of electricity is about four times that of other global diversified mining majors.However,our share of renewable electricity consumption is high and we are making investments and supply decisions to increase this.We are reviewing our Scope 2 reporting and moving towards dual location-based(using grid averages)and market-based(using supplier-specific emissions factors)reporting in 2023,at which time the percentage of renewables we consume will also be recalculated using the updated assumptions.Climate Change Report 2022|14Progress towards our 2025 target slower than plannedWe did not advance the actual implementation of our abatement projects as fast as we would have liked last year,so our capital expenditure(capex)on decarbonisation projects was$94 million,lower than we anticipated when we set our targets.Challenges have included late delivery of equipment,resourcing constraints impacting study progress,construction and commissioning,and projectreadiness.So far,we have reduced our Scope 1 and 2 emissions by 7low our 2018 baseline.Weexpect carbon emissions increases of 1.5Mt CO2 as we grow production between 2023 and 2025.Overall,we therefore estimate a need to plan,develop and implement 4.2Mt CO2 of abatement projects to meet our 15%emissions reduction target by 2025 categorised as follows:0.6Mt CO2 from projects already approved but not yet executed 0.9Mt CO2 from projects yet to be approved but in advanced planning 2.7Mt CO2 from projects in early stages of design and planning.2022 Scope 1 and 2 emissions by operations and source(equity basis)There are risks and dependencies to delivering the projects to achieve our 2025 and 2030 targets.Many of the abatement projects identified are at early stages of development and it may be months or years before they reach final investment decision,construction and operation.Others may depend on local approvals or require collaboration with a wide range of stakeholders to achieve the large-scale low-carbon transformation that we are aiming for.The breakdown of our abatement projects above assumes that the full abatement potential is delivered on schedule.However,our experience suggests that there will be delays and that we will require a more significant use of offsets to achieve our 2025 target.We still have much work to do to progress our abatement projects and we continue to aim for our 2025 target to maintain focus within the organisation and drive action across ourportfolio.Our pathway to our 2030 target:6 1 abatement programmesBetween now and 2030,the two most important decarbonisation levers are firstly,switching the electricity we generate and purchase to renewables,and,secondly,addressing emissions related to process heat at our alumina refineries and minerals processing operations.Beyond 2030,we aim to achieve deeper reductions on the pathway to net zero as we deploy ELYSISTM and phase out the use of carbon anodes at our aluminium smelters,as well as progressing low emissions trucks and mobile equipment at our miningoperations.We face continuing challenges to improve thecommercial returns and overall readiness ofmany of our abatement projects.The commercial returns of abatement projects will also be influenced by local carbon prices,which currently remain relatively low in many ofthe countries where we operate.In 2022,we established six abatement programmes,with dedicated people,to focus on the decarbonisation challenge across our product groups:repowering our Pacific Aluminium Operations,renewables,aluminium anodes ELYSISTM,alumina process heat,minerals processing and diesel transition.Weare also increasing our investment in our Nature Solutions team and now expect high integrity offsets to play a greater role in our decarbonisation strategy.As a result of the six programmes plus our investment in nature-based solutions(NbS),weare now better placed to make complex structural changes to our energy system by 2030,as we work towards our ambitious target that is aligned with the stretch goal of the ParisAgreement.Electricity1 41%Anodes and reductants21%Process heat20%Mobile dieselOther213%4%of totalAluminium 48uxite&alumina 21%Minerals 13%Iron ore1 10%Copper 5%Shipping&corporate functions 20.3MtMt CO2e1.Our Iron Ore product group is primarily our operations in the Pilbara and includes some salt production.Our Minerals product group includes the Iron Ore Company of Canada(IOC).Our 2022 equity emissions do not include the additional equity share of the Oyu Tolgoi mine that was purchased in mid-December 2022.2.Other includes perfluorocarbons and land-based emissions.Note the sum of the categories may be slightly different to the total due to rounding.15Climate Change Report 2022|Climate Change Report 2022Decarbonising electricity:repowering Pacific Aluminium OperationsA continued shift to renewables is central to meeting our 2030 targets and will remain an important area of focus beyond 2030.The Boyne smelter and Gladstone power station in Queensland,and the Tomago smelter in New South Wales,are part of our Pacific Aluminium Operations and all operate in coal-based power grids.These facilities account for 28%of our Scope 1 and 2 emissions and more than half of our emissions from electricity use.Green repowering solutions are essential to the long-term sustainability of these operations.The scale of the smelters electricity use means that their transition must take into account the impacts on the broader grid and overall system requirements.This requires complex technical,commercial and political negotiations balancing the needs of multiple stakeholders.Following the signing of a Statement of Cooperation with the Queensland Government in 2021 to work towards establishing more renewable energy in Central Queensland,we began direct market engagement.A formal market request for proposals was undertaken in June 2022 to support the development of large-scale wind and solar power to supply power to the Boyne smelter through the Queensland grid by 2030.This smelter requires 960MW capacity of reliable power to operate,which equates to at least 4GW of quality wind and solar power capacity with firming.We continue to work with the Queensland Government and energy providers to design a renewable energy solution as we approach the end of our supply contract for electricity generation to the smelter.In 2022,we impaired the remaining full value of the Boyne smelter in Queensland,Australia as a result of reduced capacity and the high cost of energy from the coal-fired power station impacting economic performance.(For further detail of the impairment,see note 4 to the Financial Statements).2030 pathway:emissions reduction potential by major abatement programmeIn September 2022,Tomago Aluminium Company released an expression of interest to develop,invest in or procure long-term traceable renewable energy and dispatchable firm power generation projects or contracts to supply its production assets,and underpin its decarbonisation strategy and net zero ambition.Decarbonising electricity:renewablesdeploymentAs we increasingly electrify our processes and mobile fleets,these will need to be supplied by green energy.In the Pilbara,we have one of the worlds largest microgrids,underpinned by 480MW of gas-based power capacity and each year we spend approximately$100-200 million on natural gas to power these operations.We are working towards a plan that will enable 1GW of renewable power capacity in the Pilbara by 2030,which will largely displace gas-fired electricity generation and could support the electrification of our mobile fleet as the technology becomes available.In 2022,we announced that we are planning to invest$600 million in the Pilbara to fund construction of two 100MW solar power facilities,one 30MW solar facility1,and 200MWh of on-grid battery storage by 2026.This is in addition to the 34MW solar farm installed at the recently commissioned Gudai-Darri iron ore mine.When these solar projects are fully operational,they will displace approximately 30%of our gas usage.Developing large-scale renewable projects in the Pilbara requires extensive stakeholder engagement to facilitate studies and approvals.We are working collaboratively with regulators,Traditional Owners and other key stakeholders about potential renewable developments.Some Traditional Owners have actively participated in planning activities including site selection for wind monitoring and ecological studies.In December,the Western Australian Government announced a new multi-pronged approach to fast-track green energyapprovals.Planning for 1GW is ongoing,and in late 2022 we signed early agreements to develop a design for a 100MW solar farm suitable for the Pilbara environment and to better understand and plan for potential project risks.Earlystudies and planning for wind farm developments also commenced in late 2022.Our planning effort is also considering our future energy needs to support further decarbonisation requirements.It makes sense for us to invest our own capital to develop renewables in the Pilbara as we own much of the infrastructure and operate the grid.In other locations,power purchase agreements may be a better option for us as other investors focused on renewables can develop large capacity solutions at a more attractive cost of capital,offering us savings in operating cost.In2022,we signed a 130MW solar power purchase agreement for Richards Bay Minerals(RBM).Further projects are being pursued to help us achieve our 100%renewable power ambition in South Africa.Since we reset our agreement with the Government of Mongolia,we approved an Electricity Supply Agreement to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid.In 2022,we continued our work with the Government to support the development of long-term renewable energy generation options on the Mongolian grid and meet Oyu Tolgois commitment to sourcing power domestically.Long duration(defined as 8-150 hours)energy storage will be required as we decarbonise our businesses through the adoption of renewable power from wind and solar sources,as they become the dominant source of energy.In2021,we became an anchor member of the newly created Long Duration Energy Storage(LDES)Council that was launched at COP26.In 2022,we supported the publication of the LDES Council report on thermal storage(released at COP27)and started two parallel studies to supply green steam to our operations by integrating thermal energy storage with renewable energy.TBU2022 emissions2030 potential abatement01Pacifc Aluminium OperationsRenewablesAluminium anodes/ELYSISAlumina process heatMineral processingDiesel transition234567897.75.84.71.60.06.24.64.22.10.23.60.52018 emissions baseline32.5Emissions reduction to 2022-2.22022 emissions30.3Growth to 20301.1Abatement programmes-12.3Other required abatement(includesNbS)2.82030 emissions(50%reduction)16.2New projects will need to be carbon neutral orhave emissions mitigated elsewhere in theportfolio.Mt CO2e1.In our release dated 30th November 2022 and Capital Markets Day presentation,we announced plans for the two 100MW solar power facilities and omitted the additional 30MW facility.Climate Change Report 2022|16Reducing the carbon footprint of our operations continuedDecarbonising aluminium anodes:ELYSISTMEmissions from the use of carbon anodes,such as in our aluminium smelters,are 6.3MtCO2e today and a longer-term challenge.We established the ELYSIS partnership in 2018 with Alcoa and with support from Apple and the governments of Canada and Quebec to develop the worlds first carbon-free aluminium smelting process,using inert anodes instead ofcarbon.With the first industrial scale pilot cell smelting zero-carbon aluminium at the ELYSIS Industrial Research and Development Center,work is now focused on scaling up the ELYSISTM technology towards the demonstration of even larger commercial-size cells.Construction of these prototype cells is underway at the end of an existing potline at our Alma smelter and we expect this to be commissioned in 2023.The smelting cells will operate on an electrical current of 450kA,which is the commercial scale for many large,modern aluminium smelters.So,between now and 2030,we are deploying ELYSISTM for growth of new zero carbon aluminium smelting capacity rather than to reduce emissions from carbon anodes at existing smelters.Beyond 2030,we expect to phase out the use of carbon anodes at oursmelters.Decarbonising alumina process heatIn the alumina refining process,we use coal and gas to generate steam in boilers and gas to generate heat for calcination.In 2022,emissions from these sources were 4.6Mt CO2e.Our pathway for decarbonisation is through electrification,including the use of renewable energy to create hydrogen.In 2021,we formed two partnerships to research using hydrogen to reduce emissions in alumina refining:a study with the Australian Renewable Energy Agency to assess hydrogen use in industry and support a coordinated approach to developing a local supply chain,and a study with Sumitomo Corporation into building a hydrogen pilot plant at our Yarwun alumina refinery in Gladstone,Australia.In 2022,we continued to progress our studies and are working towards approval for an industrial demonstration of the use of hydrogen in the calcination process.In 2023,we aim to complete studies on options to electrify steam generation at our Australian refineries,while at Vaudreuil in Canada we will progress towards a financial investment decision to produce steam from electric boilers.Thermal storage options studies will be delivered in parallel,as our refineries require a continuous source of heat.Several technologies will be investigated that could allow the use of renewable electricity when available to be stored as heat and used later to generate steam for the refinery.At our Queensland Alumina refinery,our potential double digestion project improves energy efficiency,reducing steam demand for therefinery.Decarbonising minerals processingOur minerals processing programme covers titanium dioxide,iron ore pelletisation,boron and lithium.We use energy for heat and chemical reduction.We developed ilmenite smelting in Sorel-Tracy,Quebec in the 1950s and we have agreed to invest$537 million(C$737 million)to help reduce emissions by up to 70%at the RTIT Quebec Operations.We are working in partnership with the Government of Canada and trialling technological innovations,including BlueSmelting,a new ilmenite smelting technology that,if successful,would allow us to reduce and eventually eliminate the use of coal in the process.In the shorter term,we are electrifying our sources of heat.We ordered four plasma torches in 2021,and we expect to install these in 2023 to commence a trial at the pelletising plant at IOC in Canada.Weare also investigating the use of biochar as an alternative to coal and have trials testing the use and product quality,while we look at options for sourcing sustainably produced biochar.Diesel transitionEach year we use approximately 1.3 billion litres of diesel in our trucks,trains and other mobile equipment.In 2022,this contributed emissions of 3.6Mt CO2e.We are targeting battery electrification to eliminate these emissions though other technologies will also be important.We expect batteries to develop over time and have been working with heavy mobile equipment suppliers to develop large battery trucks,while working with others in the mining sector to develop charging solutions for them.The Charge On Innovation Challenge,founded by BHP,Rio Tinto and Vale,is complete.This seeks to accelerate commercialisation of effective solutions for charging large electric haul trucks and we are now working with winning vendors to develop low-carbon solutions.We are leading a sector-wide programme linked to the International Council on Mining and Metalss Innovation for Cleaner,Safer Vehicles,to establish an interoperability framework so that battery trucks and charging solutions can develop in parallel and successfully converge.We will trial the first large battery truck in the Pilbara in 2024 and 2025.We are also working with on-road truck and other equipment manufacturers to introduce smaller and more energy-efficient equipment into mine sites,including automated road-sized electric trucks.As we progress on electrification,which we expect could be mass-deployed from around 2030,we are investigating using biofuels as an interim step to accelerate our progress towards our 2030 target.In 2022,we advanced our biofuels piloting at Boron,and we are working towards transitioning the fleet to 100%biofuels in 2024.A trial of biofuels is also ongoing at Kennecott.However,a scalable global supply chain for biofuels has yet to be fully developed,and we need to use biofuels that are sustainably produced.Nature-based solutions(NbS)and offsetsGiven the high cost of emissions reductions and lack of feasible production-scale low-carbon technology solutions for parts of our business,our long-term commitment is for our operations to be net zero emissions by 2050,rather than zero emissions.While prioritising emissions reductions at mines and smelters,we are also exploring the role that NbS and offsets can play in our decarbonisation journey.Given the challenges to reduce emissions at our operations noted above,carbon offsets and removals are expected to form a significant part of our decarbonisation strategy this decade.Our connection to a large global landholding with unique and varied biodiversity provides us with the opportunity to develop and invest in high-integrity NbS.At scale,high-integrity NbS can play a substantial role in addressing carbon emissions and biodiversity loss,while also providing socio-economic and wellbeing benefits to local communities.We define high-integrity as projects that balance positive outcomes for people,nature and climate and take an integrated landscape perspective.Todo this we are working with communities to implement locally appropriate activities that provide a fair share of benefits to all stakeholders,with robust application of human rights and environmental safeguards,and to secure permanent,additional carbon emissions reductions.This high-integrity definition and associated assessment criteria are based on existing standards for the voluntary market.Together,the definition and criteria guide our two workstreams:a.Developing NbS at,or near,our assetsIn 2022,we completed pre-feasibility studies at five high-potential landscapes near our assets in Australia,Madagascar,South Africa and Guinea.These studies covered a diverse set of landscapes including forests,coastal dunes,mangroves and pastoral lands.The scale of the first-round projects is significant,with the potential for approximately 500,000 hectares of land under conservation,restoration or sustainable management,and generating up to one million tonnes of offsets per year by 2030.Core to this work is putting communities at the centre and empowering them to enhance their livelihoods through the protection,sustainable management,and restoration of nature and biodiversity.This approach helps to reduce social and environmental risks of our operations and is highly complementary to our work in theseregions.We are now progressing the first round of sites through feasibility studies including stakeholder engagement and partner identification and completing carbon and biodiversity assessments on the next set of priority sites.b.Securing high-quality carbon credits from the marketGiven the long lead times to develop our own NbS projects,in parallel we are ramping up commercial activities to secure high-quality carbon credits focusing on regions where our Scope 1 and 2 emissions are highest.Our preference is to have deeper involvement with a smaller number of projects to ensure that we are retiring high-integrity carbon credits.We anticipate that this will require us to explore a range of upstream partnership models(including long-term offtakes,co-investment and co-development)with high-quality partners and developers.17Climate Change Report 2022|Climate Change Report 2022We have developed a set of quality criteria covering the carbon integrity of the project and the social and ecological safeguards that underpin it that form the basis of our NbS project quality due-diligence process.Beyond the voluntary standards,we further test projects using our development criteria for high-integrity NbS before investmentAccelerating the creation of high integrity nature-based solutions projects in the regions where we operateOur ambitionWorkstreamsIntegrity criteriaThe recent application of these criteria on the North American carbon offset spot market led to more than 80%of projects failing our internal due diligence,reinforcing the importance of upstream partnerships.We intend to use these criteria in upstream partnership collaborations to either augment existing projects or shape new projects.In 2022,we worked with a steel producer and bank in China to trial a carbon offset iron ore cargo1.We used carbon credits sourced from aVerra-certified forest management project(conversion of logged to protected forest)inHubei province to offset the emissions associated with Scope 3 upstream activities,as well as Scope 1 and 2 emissions from mining,rail and marine shipping of the iron ore to a port in China(this represents less than approximately 5%of the emissions associated with producing steel with that cargo).Carbon capture and mineralisationWe continue to explore carbon capture and mineralisation options leveraging our exploration and geological expertise.Together with Carbfix,we are planning to permanently store carbon underground at our ISAL aluminium smelter in Iceland.Carbfix will use our land surrounding the ISAL smelter for onshore CO2 injection in the worlds first carbon mineral storage hub.Our goal is to use the Carbfix technology to further decarbonise our operations.We have also launched a partnership partly sponsored by the United States Department of Energy with climate technology and research bodies to assess the potential to store carbon dioxide as rock at the Tamarack nickel project in Minnesota.The geology of the Tamarack site holds the potential to permanently store large amounts of carbon captured from the atmosphere or from hard-to-abate industries by mineralising it through natural chemicalreactions.1.The following Voluntary Carbon Units were retired upon delivery of the cargo:9918-159315717-159318418-VCS-VCU-324-VER-CN-14-1935-01012017-31122017-19918-159415717-159423014-VCS-VCU-324-VER-CN-14-1935-01012017-31122017-1 Develop large-scale NbS projects near our assets in Australia,Madagascar,South Africa and Guinea,using local partners and communities to co-design and implement.Secure long-term quality credits via commercial deals in regions with significant Scope 1 and 2 emissions(such as Australia,North America)and explore options to move upstream into co-financing/development for long-term security.We assess:intervention viability,developer credibility and medium and long-term management plan(beyond credit period)other funding sources and their impact on additionality claims threats to permanence(buffer,leakage assumptions)and use in-region benchmarks baseline credibility and desktop geospatial reviews for NbS projects impacts of upcoming carbon methodology changes that may adversely affect credits ability to source recent and future vintage years monitoring and adaptive management practices for project efficacy and continuous improvement.We ensure that:projects meet RioTintos standards and have Climate,Community and Biodiversity(CCB)certification orequivalent developers community approach is fair.We test for Free,Prior Informed Consent(FPIC)and whether benefits distribution is fair and transparent projects do not replace intact eco-systems or introduce invasive species integrated,regenerative landscape stewardship approaches(water,biodiversity,ecosystem services)areprioritised.Social and wellbeingCreate sustainable jobs and regenerative micro-economies from NbS projects that we have developed or originatedNatureOriginate NbS projects that result in more than 500,000ha being under conservation,restoration or regeneration by 2025CarbonBuild a sustainable and long-term carbon credit portfolio generating approximately 1.7 million tonnes annually by 2030Ensuring defensible carbon baseline and accounting for real carbon reductionsPermanenceAdditionalityQuantificationEcological safeguardsSocial safeguardsEnsuring ecological and social benefitsDevelopDevelop NbS projects on or near assetsInvestSecure credits in heavy emission regionsClimate Change Report 2022|18Reducing the carbon footprint of our operations continuedCapital allocation alignment with our decarbonisation strategyIn 2022,we shifted our focus from multiple projects captured in our marginal abatement costs curve to six abatement programmes that cut across our product groups.We are prioritising investment in decarbonising electricity and process heat this decade,aswell as developing the technology such as ELYSISTM and low carbon vehicles that will deliver reductions in the longer term.Given the long lead times for these projects,we now expect offsets to make a greater contribution towards our ambitious targets.We are committed to aligning our future capital expenditure with our 2025 and 2030 Scope 1 and 2 emissions targets.We estimate that we will invest$7.5 billion in capital between 2022 and 2030 to deliver our decarbonisation strategy.Our capital expenditure on decarbonisation is expected to increase over the three years to 2025,reaching an estimated total of$1.5 billion.In 2022,our decarbonisation-related capital expenditure was$94 million compared with an original estimate of$500 million.Our capex on decarbonisation projects in the years from 2023 to 2025 mainly relates to renewables deployment in the Pilbara.Decarbonisation investment across the rest of the Group will accelerate beyond 2025.This capital expenditure includes further decarbonisation of the Pilbara electricity system and other abatement projects.These projects will deliver a range of economic outcomes but in aggregate are value accretive at a modest carbon price.Most importantly,they safeguard the integrity of our assets over the longer term and reduce the risk profile of our cash flows.We will also work with third parties through long-term contracts,which are not included in the$7.5 billion capital expenditure noted above.These decisions will of course go through the same rigorous investment process we have for all our projects,and we will remain open-minded about the right mix of direct investment and third-party contracts.In 2022,our incremental operating expenditure to support our decarbonisation work was approximately$140 million compared with an original estimate of$200 million.This includes$24 million on our steel decarbonisation initiatives.Having divested the last of our coal businesses,we are also phasing out investment in some other carbon-intensive assets.The world will need more aluminium,more copper,more high-grade iron ore and more lithium and this is where we are focusing our growth investments.However,we will only invest in quality assets that will give robust returns under a range of economic,geopolitical and carbon scenarios,creating a resilient portfolio with significant upside to the energytransition.We are applying similar thinking to our approach to decarbonisation.This aims to de-risk cash flows for the longer term while remaining very disciplined today.We will also be well positioned to benefit from any carbon incentives if these are rolled out more widely.Our framework guides our decision making.The framework has five key elements value,materiality of abatement,maturity of technology,competitiveness versus internal and external benchmarks and alignment with the net zero 2050 target.This ensures our investments in abatement projects are phased in the most logical way,prioritising near-term work around energy inputs and where we already see attractive economics.These projects can have very different technical risk profiles from tried and tested to pioneering technology and trades-offs between transitionary and long-term solutions.Many require a carbon price to compete at the challenging internal hurdle rate we set for investment.Based on our current assumptions,carbon prices below$100/tCO2e may be enough for us to decarbonise power and support our investment in renewable generation and firming infrastructure.Higher carbon prices and other forms of support are necessary to enable us toaddress harder-to-abate parts of our carbon footprint,such as process heat and carbon anodes,and remain commercially competitive in a global market.We have used a shadow carbon price of$75 per tonne as part of the investment case for large capital projects;however,we are not using this shadow price to incentivise smaller energy efficiency investments.We will reconsider the merit of using this in evaluations of abatement projects in future.19Climate Change Report 2022|Climate Change Report 2022Low-carbon technology innovation“Technology will bring changes we cannot yet imagine we need to remain open-minded and that is why we are taking a portfolio approach to R&D and not focusing on one particular technology to the exclusion of others.”Nigel StewardChief ScientistAddressing climate change requires us to replace fossil fuels with zero carbon sources of electricity,such as wind,solar,hydropower,geothermal and others.It will also require the electrification of the wider energy system.This transition will increase demand for key minerals and metals that we produce,such as copper,aluminium and iron ore for steelmaking,as well as creating demand for new materials such as lithium.Our strategy is to provide these materials,and we will have to do this with a net zero carbon footprint ourselves.Today,the key materials for the energy transition are not produced without the use of fossil fuels,so we must innovate and create new technology solutions to do so.We have built an industry-leading Technology and R&D organisation,partnering with universities,governments,companies and start-ups to accelerate technology deployment to support our strategy,and already we have delivered some breakthroughs.We are improving our battery materials capabilities,reducing our carbon footprint through biofuel deployment,andpartnering with customers and technology developers to decarbonise steelmaking.We are disciplined in our approach to R&D,with five components to our technology roadmap,aligned with our strategic priorities:health and safety,lightening our overall environmental footprint,supporting growth,decarbonising our operations and our products,and improving productivity.On the low-carbon transition we are focused on energy storage;hydrogen;and repowering our vehicles,trains and ships.And we are using new processing technology to create new growth streams.Our aim is to be the innovation leader in providing materials produced with zero carbon and superior ESG footprint to drive the energy transition.We also strive to be the fastest at translating new ideas into sustained business value.Accessing transformative innovation will require us to take risks,something best done outside the core businesses,which is why we are partnering extensively.We believe our technology innovation and development will bring competitive advantage.Its also imperative to our future success that we build new capabilities and continue to innovate.There are challenges in achieving net zero across our operations,but also opportunities.There is fierce competition and the pathway to success is uncertain.What is certain is that we wont achieve our net zero aspirations without this innovation in technologies and in our products.Over the next 10 years wind and solar deployments will help to address emissions from electricity generation.However,this needs to be firmed to support the 24/7 needs of our operations,especially at our aluminiumsmelters.In the short term,we still see the need for conventional power sources to firm renewable electricity generation.However,new zero-carbon firming or long duration energy storage solutions are being developed this is an active area with many new start up firms innovating in this field.There are four types of long duration energy storage:thermal,chemical,electrochemical and mechanical.Electro-mechanical storage methods are the only ones capable of storing the large amounts of energy required and then delivering this energy at the power required to our large processing assets and mine sites.Pumped hydropower is such an electro-mechanical storage system that is well known and used today where available.We are also tracking new liquid air and compressed air mechanical storage technologies,and pathways are being pursued to make these technologies more economically viable.Energy storageAlternatively,demand will have to be modulated,and we are developing the capability in our aluminium smelters to flex power demand as a function of renewable electricity production.Lithium-ion battery electrochemical storage is cheaper than the new mechanical storage methods,but still remains expensive,and there is insufficient storage capacity for our sites.Thefirming of electricity via electrochemical storage still requires development and there are many start ups active in the space.Weexpect breakthroughs to be deployable in the 2035-2045 timeframe.The good news is that certain thermal storage technologies can provide firm,low-cost power to our energy-intense alumina refineries and other hydrometallurgical plants that require steam,and we are actively pursuing these technologies at present.Gudai-Darri solar plant.The Pilbara,AustraliaClimate Change Report 2022|20Breakthrough technologies are opening up new revenue streams for Rio Tinto.Customers increasingly want to know the provenance of their metals and minerals.We have the ELYSISTM zero-carbon aluminium smelting,and at the Alma smelter weve implemented AP4X cell technology,which enables low carbon aluminium production leveraging the highest amperage in its class.At RTFT,we became the first producer of scandium oxide in North America,using an innovative process we developed to extract high purity scandium oxide from waste streams without the need for any additional mining.Scandium is an essential material in aluminium-scandium(Al-Sc)alloys in automotive and aerospace applications.Weve also produced spodumene,a source of lithium,in a demonstration plant at RTFT.Theprocess used was developed by researchers at our Critical Minerals and Technology Centre,and offers the environmental benefit of not using chemical products and generating only dry,inert residues.At Kennecott,weve started producing tellurium a critical mineral used in solar panels from by-product streams generated during the refining process.We expect to use hydrogen as a reductant for zero-carbon steelmaking,for ilmenite reduction at RioTinto Iron and Titanium Quebec Operations(RTIT)and Richards Bay Minerals,and as a pathway for calcination in our alumina refineries.Atthe moment,though,hydrogen is very expensive and will require a technological breakthrough to be economically viable.Hydrogen is a very energetic material to produce requiring approximately four times more energy per tonne than aluminium but it can provide a great deal of energy back to decarbonise some hard-to-abate industry sectors.There will be very high-power requirements to generate sufficient hydrogen to meet future demand;however,the electrolyser supply chain to deliver green hydrogen is not yet well established and it will take time before it will be a material contributor to decarbonisation.While competitive green hydrogen requires very low-cost green electricity at scale,it also needs lower capital costs.We have invested in Electric Hydrogen,a Californian start up that has reduced capital intensity by a factor of three relative to competitor options through better process design and system engineering,as well as a scientific breakthrough.Where possible we will always seek to electrify our processes as much as we can,for example by using electric boilers to raise steam,rather than using hydrogen as a fuel.This is a far more efficient use of the valuable renewable electricity resource.We lose energy each time we transform an energy from one source to another,and this is what makes direct electrification so compelling and capital-efficient.Therefore,we plan to use hydrogen for its chemical properties where electrification cannot play a role.Furthermore,we will consume it close to its point of generation to avoid supply chain leakage and energy transformation losses.Processing innovationHydrogenAnother technology weve advanced is copper heap leaching,called NutonTM.It offers the potential to economically unlock low-grade copper sulphide resources and copper-bearing waste,and achieve higher recoveries on oxide and transitional material.Italso has environmental benefits,including more efficient water usage,lower carbon emissions and the ability to reclaim mine sites by reprocessing waste.NutonTM technology pilot plant,Bundoora,Australia.21Climate Change Report 2022|Climate Change Report 2022Partnering to reduce the carbon footprint of our value chainsWe need to tackle our Scope 3 emissions,as we fully appreciate that to thrive in the long term we need to be part of net zero value chains.The best way for Rio Tinto to contribute to the low-carbon transition is to partner with our customers and others in our value chain to develop innovative solutions and help shape demand for low carbon metals and minerals.Our Scope 3 emissions were 584Mt CO2e in 2022 over 1%of the global total.These are primarily from our customers in Asia,processing our iron ore into steel and bauxite into aluminium,so our level of control is limited.Our approach to Scope 3 emissions balances ambition,pragmatism and our level of agency:it is focused on our most significant sources and is grounded in actions where we can have impact.Complex structural changes are needed in hard-to-abate sectors,such as steel,aluminium and shipping,to transition to net zero.While it is clear that we have a key role to play,we do not set an overall Scope 3 emissions target as we have limited ability to directly influence the production processes of our customers or their customers.In addition,reducing our Scope 3 emissions by shifting our portfolio away from fossil fuels or the natural depletion of coal mines is not an option for us.In 2022,we increased our engagement with nearly all our direct iron ore and bauxite customers and worked with them to optimise their current operations and to develop the low-carbon technologies needed to reduce emissions across our value chains.It is encouraging that this issue remains high on the agenda when we meet our customers.Two things are clear:first,success will require deep collaboration across the value chain,from iron ore producers to steel makers,as well as technology providers,universities,and industry groups;and,secondly,consistent carbon policy is critical to accelerate the transition.As we develop new capabilities across a wide variety of fields in steel,aluminium and shipping,we are learning from our experience to channel resources into the most promising areas that can have the greatest impact.Thelow-carbon technologies we need in these sectors including BioIronTM,hydrogen as a reductant and green methanol will take years or decades to develop and implement in partnerships between industries and governments.Progress wont be linear;there will be trade-offs,dilemmas and setbacks on the path to net zero.In 2023,we aim to step up our activities and partnerships to accelerate delivery of real-world outcomes.Each of our technology partnerships has individual goals and targets and our progress towards them is detailed below.Our Scope 3 emissions in 2022Our Scope 3 emissions were 584Mt CO2e in 2022(558Mt CO2e in 2021,restated to be equivalent in methods to 2022).Over 94%of this is from the downstream processing ofiron ore,bauxite and other products.Over76%of these processing emissions arise in China,which has pledged to be carbon neutral by 2060,and another 18%come from Japan,South Korea and other countries that have pledged to be carbon neutral by 2050.Estimating our Scope 3 emissions remains challenging,but we have made further improvements in accuracy and completeness in 2022,notably the inclusion of voyage-specific emissions data from chartered ships.Customer-specific emissions data from the 583.9Mt CO2e2022 Scope 3 emissions by category and source(equity basis)26.1 8.8386.6147.315.11%-DRI-EAF83%Purchasedgoods and other7%-Coke Production9%-Steel Convertor19%-Sinter Plant64%-Blast Furnace70%-Smelting(electricity)17%-Smelting(anodes and other)10%-Alumina Process heat17%Fuel3%-Refning(electricity)PurchasesIron OreDownstream Customer EmissionsBauxite and AluminiumOtherCustomersMarineFor many of our customers that policy signal is not clear enough.We have seen a significant increase in the number of our customers that are setting public targets for their Scope 1 and 2 emissions(ourScope 3)and have ambitions to reach net zero by 2050.About 50%of our total iron ore sales are to steel producers that have already set public targets to reach net zero by 2050,up from 28%in 2021.Over 40%of our bauxite sales are to customers that have set net zero emissions targets,though only approximately 5%is to companies that are aiming for net zero by 2050.As these numbers rise,so will our ability to partner through the value chain to achieve our common sustainability objectives.An inevitable structural shift toward green steel is underway.In the short to medium term,the industry is predominantly focusing on blast furnace optimisation and we are working closely with customers to support their ambitions.Inthe medium to long term,the industry will move towards cleaner processing routes such as DRI-EAF1.Steelmakers will increasingly value higher-grade ores with fewer impurities that are more energy efficient to process.Therefore,we are working in partnerships with customers,technology providers,universities and others to develop low-carbon technologies to process our iron ore into steel.This includes exploring DRI pathways using hydrogen and sustainable biomass.We are also working on options to beneficiate and upgrade our Pilbara ores to be better suited to low-carbon steelmaking technologies.1.Direct Reduced Iron.Climate Change Report 2022|22processing of our products continue to be limited in availability.We are working with a number of suppliers to understand emission factors for larger purchased goods and fuels with a focus on ensuring an equivalent cradle-to-gate boundary as the current factors.The full details of our updated approach to estimating Scope 3 emissions and our assumptions are available in our separate 2022 Scope 1,2 and 3 Emissions Calculation Methodology Report on our website.Our Scope 3 downstream processing emissions from bauxite and alumina rose from 144Mt CO2e in 2021 to 147Mt CO2e in 2022.This is due to an increase in sales to customers in countries with a higher than average emissions factor,as well as more accurate bauxite and alumina customer emissions reporting.Scope 3 processing emissions related to our iron ore rose from 365Mt CO2e in 2021 to 387Mt CO2e in 2022 primarily due to changes in product mix and an increase in iron ore sold.The steel value chainSteel is one of the most cost-efficient construction materials and is essential in low-carbon infrastructure,transportation and buildings.Steel has a similar carbon footprint to hydro-based aluminium today on a per tonne of product basis.However,with close to 2 billion tonnes of crude steel produced globally in 2022,the industry overall emits over 3 billion tonnes of CO2 annually,equivalent to around 8%of global carbon emissions.In all our scenarios,we anticipate an increase in the use of steel scrap,especially in China,as the scrap pool rises,although this will depend on quality and quantity.However,even by 2050,we expect that more than half of future crude steel production will remain based on iron ore(compared to about two-thirds today).Meanwhile,blast furnace optimisation will be driven by the use of higher-grade ores,including iron ore lumps and pellets,as well as the replacement of pulverised coal injection with hydrogen and the oxygen enrichment of the blast air enabling gas recycling.There is no proven process route at an industrial scale to produce primary net zero steel today;however,the industry is developingand scaling a range of new technologies.These include hydrogen-based DRI feeding into an electric arc furnace or into a basic oxygen furnace(BOF)via an intermediary melter step,direct smelting,theuse of sustainable biomass,and carbon capture and storage(CCS),as well as more speculativetechnologies such as electrolysis.The speed and scale of deploying these new technologies will depend on technological breakthroughs,trends in capital intensity to close the cost gap with existing production methods,customer willingness to pay and government policies,including carbon prices.The low-carbon transition pathway of the steel industry is uncertain today but can be explored and better understood through scenarios.Oneexample is the scenario analysis presented in Net-Zero Steel Sector Transition Strategy first published in 2021,and updated in September 2022,by the Net Zero Steel Initiative(NZSI).NZSI is an industry platform,part of the Mission Possible Partnership,that brings together stakeholders across the whole steel supply chain to help put the sector on a path to net zero emissions by mid-century.The two NZSI net zero-aligned scenarios result in different carbon emission pathways for the steel industry,with reductions ranging from 11%to 33%by 2030,and from 50%to 76%by 2040(in Tech Moratorium and Carbon Cost respectively,compared to the NZSI 2020 baseline).Assuming that the steel industry follows the NZSI Tech Moratorium scenario,our own analysis indicates that our iron ore-related Scope 3 emissions would fall by 44%by 2035(24%in our 2021 Climate Change Report).This projection includes expected production growth at our Pilbara operations in Western Australia and the Iron Ore Company of Canada and assumes the development of our Simandou project in Guinea.The greater forecast reduction in Scope 3 emissions versus the 2021 Climate Change Report is due to a range of factors.They include,firstly,refinements to the 2022 NZSI model resulting in increased CO2 reduction via enhanced blast furnace technologies.Secondly,expectation of a faster transition to DRI-based steelmaking via the Melter-BOF route and,thirdly,increased future lump proportion from our Pilbara mines would both have the potential to impact Scope 3 targets.Fourthly,the forecast assumes a greater role for Rhodes Ridge joint venture mines in future production.Our focus areas for iron and steel decarbonisationOur approach is to pursue and support a range of decarbonisation options aligned with the technology pathways highlighted by the NZSI analysis,through partnerships with our customers,suppliers,universities and research institutes.In 2022,we engaged with nearly all our direct steel customers(by sales volume).This represents approximately 70%of our total iron ore sales1 and two thirds of our related emissions.We have an engagement tracking framework with customer projects covering 59%of our sales volume.Wehave consolidated these initiatives under six focus areas,with coordination from a dedicated Steel Decarbonisation team2 within our Commercial team.This includes beneficiating our Pilbara ores to be better suited to green steel technologies,optimising the traditional blast furnace route to reduce emissions and innovating green solutions using hydrogen and biomass in a sustainableway.In 2022,we made progress on 49 projects,together with over 30 partners,building technical and commercial optionality for the future across the steel value chain.In 2022,wespent$24 million on our iron and steel decarbonisation initiatives,lower than our planned spend of$50 million.We are aiming to increase our investment in our steel decarbonisation initiatives in 2023 and the level of spend will depend on the speed of success of our research and development initiatives.1.The balance includes spot buyers,traders and others procuring from our China portside business.2.Steel Decarbonisation team has 16 people primarily engineers and research personnel,supported by people from our Iron Ore,Development and Technology,Commercial and Business Development teams,working in all our customer markets.NZSI Tech Moratorium scenario technology pathwaySteel production(Mt)2,5002,0001,5001,00050002020202520302035204020452050Blast Furnace(BF/BOF)Smelting Reduction with CCSScrap EAFAverage TechnologyBest Available technolgy(BAT)BAT with H2 injectionBAT with Biomass PCINatural gas based100%green hydrogenNatural gas with CCS/UNatural gas based100%green hydrogenNatural gas with CCS/U50%green hydrogenScrap EAFSmeltingReductionwith CCSDRI EAFDRI Melter BOF23Climate Change Report 2022|Climate Change Report 2022Goals2022 progress2023 objectives1.Blast furnace optimisation99%of our iron ore is processed through the blast furnace route today,the optimisation of which could result in potential carbon emissionreductions of up to 30%.We will collaborate with over 20 customers,includingBaowu,POSCO,Nippon Steel Corporation(NSC)and Shougang,to help them generate those savings as an intermediary decarbonisationstep.This includes pilot work on microwave lump drying with Baowu,and progressing our partnership with NSC on test work for lump ores and exploring a new grade of pellets.We collaborated with China Baowu on low-carbon steelmaking and research projects.The lump drying technology in Baowus Meigang subsidiary is one of the signature projects.Through the development and industrial demonstration of green and efficientdrying technology for blast furnace lump,the proporti

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Sustainability Report 2022Sustainability Report 2022.Mercedes-Benz Group2FOREWORDGOVERNANCE 6 Stakeholder Perpectives 12 Sustainable corporate governance 42 Integrity and compliance 60 Data responsibility 69 PartnershipsENVIRONMENT 82 Stakeholder Perpectives 90 Climate protection 117 Air quality 125 Resource conservationSOCIAL 145 Stakeholder Perpectives 152 People 188 Sustainable urban mobility 195 Traffic Safety 209 Human rights 227 Social commitmentFACTS&FIGURES 237 Report profile 243 Calculation and documentation of CO2 emissions 245 KPMG auditors report 248 GRI Index 249 Glossary 257 ImprintThis Sustainability Report also includes the content audited in the Non-Financial Declaration.The relevant passages in this Sustainability Report are marked in blue font colour in the continuous text.Audited graphs and tables are also referenced accordingly via footnotes.Unless explicitly noted,this content was audited with reasonable assurance.Unless marked with footnotes,graphs and tables have not undergone external audit,regardless of the colors used.Sustainability Report 2022.Mercedes-Benz GroupForeword3ForewordDear Reader,According to current forecasts,the global passenger car market is expected to exceed 91 million vehicles in 2030 around 25 percent more than in 2022.Our task at Mercedes-Benz is to meet this growing need for individu-al mobility in a sustainable way.To achieve this,we have defined a clear path on which we have reached important milestones along our value chains in recent months.The core of our business continues to be convincing products:we now offer at least one fully electric model in every segment we serve from the compact EQA to the spacious EQS SUV.And that is well-received:in 2022,more than twice as many customers opted for a vehicle from our electric brand Mercedes-EQ than in the previous year.With our concept car Vision EQXX,we underlined our claim to be the innovation leader in e-mobility:On its record-breaking drive from Stuttgart to Silver-stone,it covered over 1,200 kilometres on a single battery charge with an average consumption of just 8.3 kWh/100 km.In order to attract even more people to electric cars in the long term,we also need a well-developed charging infrastructure.Via Mercedes me Charge,our customers already have access to around one million charging points worldwide.In addition,we will build up our own high-power charging network in North America,Europe,China and other key markets.In order to conserve valuable resources,one of our major goals is the circular economy.In this regard,the battery is an important factor for electric vehicles.That is why we are building our own battery recycling factory in Kuppenheim,where we will achieve a recycling rate of over 96 percent thanks to innovative technology.In addition to sustainable products,we are increasingly focused on sustainable production.Since 2022,our own producition sites are CO-neutral on the balance sheet.By 2030,we want to cover more than 70 percent of the energy demand in production with renewable ener-gies especially by expanding solar and wind energy at our sites and concluding further corresponding power purchase agreements.Its not only the demand for green energy that is in-creasing,its also the demand for responsibly sourced raw materials.This is why we work with the Canadi-an government,for example.Through direct contact with raw material producers,we want to open up new sources for important materials.This gives us grea-ter influence on sustainable supply chains and the observance of human rights all the way to the mines.With our Raw Materials Report“we create more Many things are expected from Mercedes-Benz inside and outside our factory gates.We want to live up to these expectations in a sustainable way.This includes the ambition of making our fleet of new passenger cars net carbon-neutral by 2039.By 2030,we plan to be around halfway there.To make faster progress on climate protection,we need maximum commitment and even stronger cooperation between politics,industry and society.Compelling products continue to be the core of our business:We now offer at least one fully electric model in every segment in which we compete from the compact EQA to the spacious EQS SUV.In order to conserve valuable resources in the process,one of our major goals is the circular economy.That is why already during the development of our vehicles we use a“design for circularity”approach.For example,we already consider the recycling of our batteries during their development.Sustainability Report 2022.Mercedes-Benz GroupForeword4 public transparency.Additionally,tools like the“Human Rights Respect System”and our“Responsible Sourcing Standards”help us a lot,which is why we encourage our direct suppliers to comply with them.And with our governance and compliance structures,we ensure a responsible approach to future technologies be it big data,automated driving or artificial intelligence.New technologies and business models also require new skills.As an employer,we are responsible for more than 170,000 colleagues from 145 nations.That is why in Germany alone,we will invest more than 1.3 billion in the qualification,training and further education of our employees by 2030.We are also strengthening traditional locations such as Stuttgart-Untertrkheim or Berlin-Marienfelde by developing them into centres of excellence for future technologies.Beyond the boundaries of our company,education is also a concern for us:we make donations to fund a global fellowship programme that will provide know-ledge,coaching and scholarships to thousands of young people from around the world in order to implement innovative projects in the areas of environmental sustain ability and decarbonisation.To raise the seed money for the programme,we auctioned the worlds most valuable automobile a Mercedes-Benz 300 SLR Uhlenhaut Coup for the record price of 135 million.There are many expectations towards Mercedes-Benz:Our customers expect first-class products.Our colle-agues expect future-proof jobs.Our shareholders expect an appropriate return on their investment.And society expects our commitment inside and outside the fac-tory gates.All these claims are legitimate.The best way to deliver on them is to make our company economically successful and sustainable in the long term.At Mercedes-Benz,we are firmly committed to this.We have set the course with our sustainable business stra-tegy.On the following pages,youll read about the pro-gress we made in 2022.We wish you an interesting read and look forward to a constructive dialogue with you.YoursOla KlleniusMarkus SchferRenata Jungo BrnggerAt Mercedes-Benz,we have been conceiving sustainability holistically for many years.Environmental protection,social aspects and good corporate governance must go hand in hand.That is why on the path to the all-electric future we want clean supply chains and respect for human rights,from the raw materials mines all the way to our customers.The right governance helps us in this regard,for example,in the form of our Human Rights Respect System.GOVERNANCE6Sustainability Report 2022.Mercedes-Benz GroupGovernance Stakeholder PerspectivesThe handling of ESG risks is increasingly coming into focus for many companies.This trend is accelerated by the growing due diligence obligations for companies.What does this mean for an international Group with complex supply chains?In this interview,Thilo Mangold,Head of the Group Risk and Opportunity Management,talks about new perspectives and what they have to do with a speak up culture.“ESG risks on the radar”Mr Mangold,in order to manage risks,one must first identify them.What social risks does Mercedes-Benz deal with?There are a number of them.First of all,a social risk describes the danger that events,developments,or actions hinder us from achieving our goals.To prevent this,we systematically address labour and human rights risks,for example.We do this not only in all the countries we operate in,but also in all areas of our value chain,from research and development,procure-ment,production,to sales and our financial services.Some risks arise from the fact that we,as an interna-tional corporation,are subject to various,sometimes heterogeneous regulatory requirements.Others are directly related to our sustainable business strategy.Through forward-looking risk management,we ensure the long-term performance and innovative strength of the Group.It is crucial to take countermeasures for the identified risks as early as possible.To sum up:The traditional risk map has changed.It has become much denser due to the increasing integration of ESG issues and an increasingly complex environment with numerous stakeholders.But that is only one side of the coinWhat is the other side?Where there are risks,there are also opportunities for the Group.In risk and opportunity management,we aim to identify and analyse these opportunities,where we can position ourselves as a first mover to make a positive difference for our customers,employees,investors or other stakeholders in the future.Through risk and opportunity manage-ment,we have the ability to identify changes in the Groups environment at an early stage,such as those affecting human rights,diversity or resource conservation,and to develop appropriate responses with foresight.That is an important building block in creating additional value for both the Group itself and its stakeholders.Thilo MangoldMercedes-Benz AG 7Sustainability Report 2022.Mercedes-Benz GroupGovernance Stakeholder PerspectivesHow does the handling of classic and ESG risks or opportunities differ?The first difference lies in how they are identified.To stick with the metaphor of the risk map,it is important to be sensitive to the new topics and to view the entire environment with a 360-degree view.It is about raising awareness of the expanded risk map in our organisation.In this way,early warning signals can be detected as quickly as possible.At the same time,such assessment has also become more complex,since classical risks can usually be quanti-fied more easily.Putting a price tag on ESG risks that shows the potential impact on the companys results is much more difficult.This is mainly due to the fact that cause and effect are often not clearly connec-ted.Sometimes,effects occur in places that were not previously considered.We have to deal with this and adjust our methods accordingly.In addition,another perspective must be taken into account in the assessment:the inside-out perspective.It assesses how a potential damage resulting from a risk would affect the Groups environment.Methodology is a good keyword.Can such hete-rogeneous risks as,for example,human rights violations and the shortage of skilled workers be managed in one system at all?To put it bluntly,we cannot afford to work with a patchwork.We have a clearly defined process and an associated IT system,a single source of truth.The input for this comes from numerous sources.For the area of human rights,the Social Compliance depart-ment,among others,provides important informati-on via the Human Rights Respect System.Risks arising from the shortage of skilled workers,on the other hand,would be reported primarily by Human Resource Management.Behind each of these are different evaluation logics,yet everything is based on a uniform screening and reporting process.All of this serves our goal in central risk management:to bundle and analyse information.The assessment of external impulses also plays an important role.To capture them,we have established a so-called risk radar within the company,where we regularly work together with colleagues from the investor relations,external affairs or communications departments,for example.There,early warning signals and current issues are discussed,and it is examined what opportunities and risks could arise for us.The earlier we recognise deve-lopments,the better.What possibilities do you see to promote early detection?Developing sensitivity for ESG issues throughout the entire corporation is a central aspect.We are achieving this step by step,based on informati-on accessible to everyone and a dialogue within the Group.At the same time,we need people who openly address risks.This is what is meant when we talk about a speak-up culture.This culture is essential for risk management because it helps to ensure that issues critical to success are discussed and assessed at an early stage.Perhaps some may be concerned about being seen as a sceptic,which is why it is not so easy to deal with risks in a trans-parent way.Part of our job in risk management is to address these challenges and alleviate any con-cerns.Our team therefore works across divisional and national boundaries to create a culture in which we jointly assess risks at an early stage and take countermeasures together early on as well.Thilo Mangoldheads Group Risk and Opportunity Management at the Mercedes-Benz Group.Although he mostly deals with risks in his daily work,he still describes himself as a very optimistic and at the same time realistic person.Sensitivity to new topics in the risk landscape and a 360-degree view are important in order to counteract risks at an early stage and take advantage of opportunities.8Sustainability Report 2022.Mercedes-Benz GroupGovernance Stakeholder PerspectivesInequalities of outcome and opportunity are jeopardizing social cohesion,making it more difficult to work together towards a net-zero future.What should businesses do to support equality,fairness and inclusion?And what role can a luxury car manufacturer like Mercedes-Benz play in this respect?Aninterview with James Gomme,head of WBCSDs(World Business Council forSustainable Development)Business Commission to Tackle Inequality.“We need to make sure that value is distributed equitably”Mr.Gomme,income and wealth have always been unequally distributed in societies.However,you say that a critical point has now been reached.Why?First of all,while inequality between countries has been decreasing in recent decades,the wealth and income gap within countries has widened.We are now seeing wealth inequality as high as it has been since the early 1800s,with the richest 10 percent of the population holding 75 percent of all wealth,and the poorest 50 percent holding just 2 percent.Historically,extreme inequality has been a precursor to instability,and today is no different.At the same time,other emerging trends such as conflict,cli-mate change,technological disruption,and the COVID-19 pandemic,for example,are all hitting the most vulnerable the hardest and have the potential to further escalate the scale of inequality around the world in the years ahead.So,while inequality has been a part of our societies over the ages,we have,I believe,now reached a critical junc-ture.The high level and structural nature of inequality,coupled with several historic disruptions,make mounting inequality a systemic and a business risk one that af-fects not only individual communities or companies,but entire economies and societies.How does this imbalance relate to the climate crisis and the transformation aim to net-zero?The planetary crisis that we are facing is having profound impacts on people.It is undermining human health,disrupting access to essential products and services,and destroying livelihoods.The World Bank predicts that 132 million people could be pushed into extreme James GommeWBCSD9Sustainability Report 2022.Mercedes-Benz GroupGovernance Stakeholder Perspectives poverty by 2030,as a result of climate change if we do not take concerted action.It will therefore not be possi-ble to tackle inequality without robust efforts to mitigate and adapt to climate change.At the same time,it will also be impossible to address the climate emergency without putting people at the center of this agenda and working to ensure that the journey to a net-zero econo-my creates a fairer,more prosperous future for all.We must recognise that the transformation is going to profoundly impact workers,suppliers,communities,and consumers at the local and global level.Compa-nies need to engage with governments and other sta-keholders to intentionally and collaboratively mitigate negative impacts and to ensure a transition in which everyone can see opportunity.What can companies do to foster this scenario?There are a number of key actions that business can take to tackle inequality.First of all,corporate respect for human rights should sit at the centre of everything.It helps to ensure that human dignity moves to the center of how business gets done.It reinforces a companys capacity to lift people out of poverty,impro-ving the lives of the worlds most vulnerable people.Following from that there is a role for business in terms of utilizing its innovation and capacity building to make essential products and services more accessible and affordable for consumers who are currently under-served.Business has to explore new ways,perhaps in collaboration with government or through new blen-ded finance mechanisms,to try and make sure that everyone has access to what they need to be healthy and productive.And then,theres a key pillar of action around jobs and economic opportunities.Business has to make sure that opportunities are available to everybody,regardless of their backgrounds,and that workers and those entering the workforce are empow-ered with the right skills to thrive,both now and in the future.Finally,there is also an urgent need to ensure that value and risk are distributed more equitably.To-day,over a billion working people worldwide earn less than they need to afford a decent standard of living.To tackle inequality and restore faith in our economic system,it is critical to ensure that work provides a path out of poverty and an opportunity for upward mobility and prosperity for all.What responsibility do these topics imply for a luxury manufacturer like Mercedes-Benz?I think,there is a huge opportunity to redefine what luxury means,in terms of not only being the experi-ence that the consumer has in relation to the product,but also the assurance that this product has been produced in a way that maximises positive social impact throughout its value chain.That every com-ponent of that product has been sourced or created in a way that has distributed value to a wide variety of global stakeholders,has enriched their lives and has made a contribution to tackling inequality.Our research at the BCTI(Business Commission to Tackle Inequality)indicates that this is increasingly important for consumers and moving forward could represent an important source of competitive advantage.Social inequality is often primarily viewed from a risk perspective.Do you also see opportunities when it comes to tackling inequality and realizing a more just and inclusive society?While the business case for action to tackle inequa-lity is certainly about mitigating risk,it is also about building a world of opportunity in which companies can thrive in the long-term.Tackling inequality can strengthen the operating environment by building trust,enhancing social and political stability,and con-taining crises.There is also mounting evidence that it is an important driver for long-term,sustainable If all stakeholder groups work together,a just transition can succeed.10Sustainability Report 2022.Mercedes-Benz GroupGovernance Stakeholder Perspectiveseconomic growth.Furthermore,as momentum builds behind a shift in the way business performance is perceived and measured,tackling inequality is also about unlocking a variety of company-level benefits,including attracting and retaining talent,winning consumers,enhancing access to capital and staying ahead of policy and regulatory change.Of course,measures to promote social equality will come with costs,but these costs should be seen as investments in long-term business success.So,yes,there are huge opportunities,both in the operating environment and at the individual company level.What encourages you that the global community will succeed in reversing the current trend and effectively combating inequality?There are a few things that give me hope.Firstly,I take a lot of encouragement from the progress that has been made with regard to efforts to address the climate emergency in recent years.Of course,we still have a lot of work to do here as well,but we are seeing the entire global business community rally behind net-zero commitments.We have also seen governments take strong action,and we have seen bodies like TCFD(Task force on Climate-related Financial Disclosure),and the ISSB(International Sustainability Standards Board)start to set clear standards which are helping to further mainstream action.For me,this represents an important blueprint for the path we need to tread on the social side of sustainable development as well.And then on a personal level,interacting with leading companies in this space also gives me hope.There is a growing community of passionate individuals and purpose-led companies,who are driving this agenda forward at pace,and we are really pleased to be able to count on their leadership.The urgent call to action now is for all businesses to use the tools and resour-ces at their disposal to head off the risks posed by mounting inequality.We need to ensure that equal op-portunities and better outcomes are available for all.James Gommejoined WBCSD in March 2016 on a long-term secondment from Mitsubishi Corporation,Japans largest general trading and investment company.In July 2021,James launched The Business Commission to Tackle Inequality,a high-profile initiative that is seeking to clearly establish the role of busi-ness when it comes to tackling the critical systemic challenge of mounting levels of inequality globally.Initial recommendations for action are sum-marized in the report “Tackling inequality:The need and opportunity for business action.”The way the entire global business community is rallying behind net-zero commitments shows that the path can only be taken together.This also applies to the path to social goals.11Sustainability Report 2022.Mercedes-Benz GroupGovernanceGOVERNANCE 12 Sustainable corporate governance 42 Integrity and compliance 60 Data responsibility69 PartnershipsThis Sustainability Report also includes the content audited in the Non-Financial Declaration.The relevant passages in this Sustainability Report are marked in blue font colour in the continuous text.Audited graphs and tables are also referenced accordingly via footnotes.Unless explicitly noted,this content was audited with reasonable assurance.Unless marked with footnotes,graphs and tables have not undergone external audit,regardless of the colors used.Sustainable corporate governanceGERMANYRastattBremenDsseldorfSindelfingenUntertrkheimLudwigsfeldeBerlinHamburg KamenzKlleda/ArnstadtKuppenheimTHAILAND/VIETNAM/INDONESIA/MALAYSIAHo Chi Minh CityBangkokPekanJakartaUSA/MEXICOCharlestonTuscaloosaAguascalientesROMANIACugirSebeHUNGARYKecskemtPOLANDJaworARGENTINABuenos AiresSPAINVitoriaSOUTH AFRICAEast LondonEGYPTCairoINDIAPuneCars Plant/EVVans Plant/EVBattery PlantEnginesTransmissionsAxles(EV)ComponentsBattery RecyclingCZECH REP.MostSLOVENIAMariborFuzhouBeijingCHINA13Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceSustainability as a driver of changeThe Mercedes-Benz Group aims to create value that is sustainable economically,ecologically and socially:This is one of the core principles of the Group.It applies not only to the Groups own products and manufacturing locations,but also to the entire upstream and downstream value chain.It has translated this approach in its sustainable business strategy,with which it firmly embeds sustainability considerations in the daily business activities.In this way,the Mercedes-Benz Groupintends,among other things,to fulfil the demands and expectations of its stakeholders i.e.customers,employees,investors,business partners,non-governmental organizations and society as a whole.Strategy chapter,AR 2022One of the most important transformation goals at the Mercedes-Benz Group is decarbonisation,which the Group has made a firm component of its sustainable business strategy.At Mercedes-Benz Group,this goal is reflected in“Ambition 2039”and the“Electric Only”approach.By the end of this decade,Mercedes-Benz intends to be all-electric wherever market conditions allow.The Mercedes-Benz Group at a glance GRI 2-1/-2/-4/-6 The Mercedes-Benz GroupAG is the parent company of the Mercedes-Benz Group and has its registered office in Stuttgart.With effect from 1 February 2022,DaimlerAG changed its name to Mercedes-Benz GroupAG.As well as Mercedes-Benz GroupAG,the Mercedes-Benz Group is made up of all subsidiary companies over which the Mercedes-Benz GroupAG The global production network of the Mercedes-Benz Group in the midst of transformationSustainable business strategy14Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governancecan exert a direct or indirect controlling influence.The Mercedes-Benz GroupAG determines the strategy of the Group,is its controlling body and,as the Group parent company,is responsible for legal,regulatory and compliance functions worldwide.The Mercedes-Benz Group markets and sells vehicles and services in almost all countries of the world and has some 30 production sites in Europe,North and Latin America,Asia and Africa.Mercedes-Benz Group2022Employees(Status December 31,2022)168,797Production sites30Unit sales(in mill.units)2.456Financial key figures(in millions)Revenue150,017Research and development expenditure Mercedes-Benz Cars and Mercedes-Benz Vans8,541Personnel expenses(wages and salaries,social welfare services)29,607Total dividend(in)5.2015Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceThe brand portfolio of Mercedes-Benz Cars includes,along with the Mercedes-Benz brand,the brands Mercedes-AMG,Mercedes-Maybach and Mercedes-EQ.The Mercedes me brand offers access to the digital services of Mercedes-Benz Cars.Mercedes-Benz Vans is a full-service provider in the van sector.The Mercedes-Benz Mobility business division supports sales of the Mercedes-Benz Groups automotive brands around the world through tailored mobility and financial services.Mercedes-Benz Mobility is also active in the field of innovative mobility services.Areas of action and the foundations of sustainability GRI 3-2 The Mercedes-Benz Group acts in line with the sustainable business strategy adopted by the Board of Management of Mercedes-Benz Group AG in 2019 with the agreement of the Supervisory Board.Sustainability topics are thus an integral part of the business strategy.Strategy chapter,AR 2022The Mercedes-Benz Group has set itself ambitious goals and defined six strategic areas of action for reaching these goals.The strategic goals are based on the UNs 17 Sustainable Development Goals(SDGs)especially SDGs 8 and 9 and 11 to 13 among other factors.In addition,they take into account recognized international frameworks,the requirements of the external and internal stakeholders and global trends.Group-wide areas of action and areas of responsibility,as well as business-specific targets,processes and measures are derived from this analysis.The Mercedes-Benz Group undertakes periodic materiality analyses.It uses these as the basis for a discussion of the current fields of action and an assessment of the need for updates.The Mercedes-Benz Group has also formulated strategic ambitions for each of the six areas of action:1.Climate protection and air quality:Plans call for the Mercedes-Benz new vehicle fleet to be CO2-neutral on the balance sheet across the entire value chain by 2039 and to no longer have any relevant impact on NO2 levels in urban areas by 2025.2.Resource conservation:The Mercedes-Benz Group wants to decouple resource consumption from busi-ness volume growth.3.Sustainable urban mobility:The Mercedes-Benz Group wants to contribute to the improvement of the quality of life in cities through its leading mobility and transport solutions.4.Traffic safety:The Mercedes-Benz Group is working to make its vision of accident-free driving a reality as it develops automated driving systems while also taking social and ethical issues into account.5.Data responsibility:The future of the Mercedes-Benz Group consists of sustainable,data-based business models.With these business models,it focuses on the needs of its customers and the responsible handling of data.6.Human rights:The Mercedes-Benz Group has as-sumed responsibility for respecting and upholding human rights along its automotive value chain.Company profileAreas of actionEnabler Climate protection&air quality Traffic safety Integrity Resource conservation Data responsibility Partnerships Sustainable urban mobility Human Rights People16Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceThe Mercedes-Benz Group has defined three enablers,or principles,that are crucial for achieving success in the six areas of action:integrity,people and partnerships.1.Integrity:In order to firmly anchor integrity in all areas,the Mercedes-Benz Group considers two crucial aspects:first of all,by establishing adequate structures with appropriate policies and processes,the organisation is able to provide the foundation for all parties to act with integrity.Secondly,the Group focuses on putting each employee individually in a position to understand the concept of integrity and thereby to act ethically and sustainably.2.People:As an attractive employer,the Mercedes-Benz Group promotes the diversity of its workforce and provides the necessary skills to mas-ter the challenges of digitalisation.3.Partnerships:The Mercedes-Benz Group enters into partnerships with social and political players in or-der to achieve the goals of the sustainable business strategy against the backdrop of the ecological and social challenges in these times.The Groups prin-ciples for political dialogue and advocacy provide the basis for responsible and reliable action within these partnerships.Six fields of action and three enablers17Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceUnited Nations Sustainable Development Goals In 2015,the United Nations defined a blueprint for worldwide sustainable development.This includes 17Sustainable Development Goals(SDGs).Through their innovation and investment power,businesses play a decisive role in achieving these goals which the Mercedes-Benz Group actively embraces.In order to assess its corporate performance with regard to the 17 SDGs,the Mercedes-Benz Group conducted an SDG analysis together with the analytical experts of TruCost in 2020.This involved examining the positive and potentially negative impacts of its business activities on the SDGs.In addition,the Mercedes-Benz Group identified those UN Sustainability Goals that entail the greatest opportunities and risks for itself.The Mercedes-Benz Group uses the results to make an even greater contribution to achieving the UNSustainable Development Goals through its correspondingly aligned business activities.To this end,the Mercedes-Benz Group is focusing on the areas in which it can create the greatest value.One example ofthis is the“Electric only”approach.The following SDGs are the focus of the work of the Mercedes-Benz Group:SDG 8 Decent Work and Economic Growth:The Group develops and implements a risk-based management approach to respect and protect human rights in its own business units as well as in the supply chain through this,the Mercedes-Benz Group supports the implementation of humane working conditions.Through its production and large procurement volume,the Mercedes-Benz Group also creates employment all over the world.SDG 9 Industry,Innovation and Infra-structure:Digitalisation and electrification with these,the Mercedes-Benz Group is shaping the sustainable mobility of the future and contributing to greater safety and climate protection,for example.It is also able to demonstrate the potential of digital innova-tions for society.SDG 11 Sustainable Cities and Communi-ties:The Mercedes-Benz Group is making a contribution to sustainable mobility in densely populated urban areas with its vehicles,data-based solutions for greater traffic safety or improvement of traffic flow,as well as multimodal connectivity of mobility packages.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 sustainable production.SDG 13 Climate Protection Measures:Through its sustainable business strategy and the associated 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.ProductdevelopmentSupply chainProductionVehicle operation Recycling,remanufacturing and disposal41%of all raw materials with increased risk checked Almost 86%of the production material suppliers of Mercedes-Benz Cars and Mercedes-Benz Vans have signed the“Ambition Letter”Share of renewable energies in the production of Mercedes-Benz Cars and Mercedes-Benz Vans in total electricity consumption is 100%of the materials in all cars and vans of up to 3.5 t gross vehicle weight can be reusedor recoveredPilot factory built at Kuppen-heim site for recycling lithium-ion battery systems;73%of the returnable high-voltage lithium-ion batteries are being routed to remanufacturing for reuse in vehicles or for second life in energy storagesCO2 emissions at Group-wide production sites worldwide reduced by 43%compared with 2021 825on-site visits at its production material suppliers with regard to compliance with various sustainability requirements were performed by the Mercedes-Benz GroupThe average CO2 emissions of the Mercedes-Benz new passenger car fleet in Europe(European Union,Norway and Iceland)are expected to be 115 g/km(including vans registered as passenger cars)when applying the legal regulationsThe Mercedes me Charge digital charging service has integrated over 1,000,000AC and DC charging points worldwide by the end of 2022The share of electrified vehicles(xEV)in Group sales at Mercedes-Benz Cars is 16%worldwide The share of fully electric vehicles in Group sales at Mercedes-Benz Vans is 4%worldwide Energy consumption per vehicle at Mercedes-Benz Cars reduced by 17%compared to 2021;at Mercedes-Benz Vans by15%Water consumption per vehicle at Mercedes-Benz Cars reduced by 10%compared to 2021;at Mercedes-Benz Vans by14%The“DRIVE PILOT”has been approved for sale in Germany,enabling conditional auto-mated driving(SAE Level 3)on suitable highway sections in Germany at speeds of up to 60 km/h.8.5 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 positions at the Mercedes-Benz Group worldwide is 24.7%ProductdevelopmentSupply chainProductionVehicle operation Recycling,remanufacturing and disposal41%of all raw materials with increased risk checked Almost 86%of the production material suppliers of Mercedes-Benz Cars and Mercedes-Benz Vans have signed the“Ambition Letter”Share of renewable energies in the production of Mercedes-Benz Cars and Mercedes-Benz Vans in total electricity consumption is 100%of the materials in all cars and vans of up to 3.5 t gross vehicle weight can be reusedor recoveredPilot factory built at Kuppen-heim site for recycling lithium-ion battery systems;73%of the returnable high-voltage lithium-ion batteries are being routed to remanufacturing for reuse in vehicles or for second life in energy storagesCO2 emissions at Group-wide production sites worldwide reduced by 43%compared with 2021 825on-site visits at its production material suppliers with regard to compliance with various sustainability requirements were performed by the Mercedes-Benz GroupThe average CO2 emissions of the Mercedes-Benz new passenger car fleet in Europe(European Union,Norway and Iceland)are expected to be 115 g/km(including vans registered as passenger cars)when applying the legal regulationsThe Mercedes me Charge digital charging service has integrated over 1,000,000AC and DC charging points worldwide by the end of 2022The share of electrified vehicles(xEV)in Group sales at Mercedes-Benz Cars is 16%worldwide The share of fully electric vehicles in Group sales at Mercedes-Benz Vans is 4%worldwide Energy consumption per vehicle at Mercedes-Benz Cars reduced by 17%compared to 2021;at Mercedes-Benz Vans by15%Water consumption per vehicle at Mercedes-Benz Cars reduced by 10%compared to 2021;at Mercedes-Benz Vans by14%The“DRIVE PILOT”has been approved for sale in Germany,enabling conditional auto-mated driving(SAE Level 3)on suitable highway sections in Germany at speeds of up to 60 km/h.8.5 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 positions at the Mercedes-Benz Group worldwide is 24.7%ProductdevelopmentSupply chainProductionVehicle operation Recycling,remanufacturing and disposal41%of all raw materials with increased risk checked Almost 86%of the production material suppliers of Mercedes-Benz Cars and Mercedes-Benz Vans have signed the“Ambition Letter”Share of renewable energies in the production of Mercedes-Benz Cars and Mercedes-Benz Vans in total electricity consumption is 100%of the materials in all cars and vans of up to 3.5 t gross vehicle weight can be reusedor recoveredPilot factory built at Kuppen-heim site for recycling lithium-ion battery systems;73%of the returnable high-voltage lithium-ion batteries are being routed to remanufacturing for reuse in vehicles or for second life in energy storagesCO2 emissions at Group-wide production sites worldwide reduced by 43%compared with 2021 825on-site visits at its production material suppliers with regard to compliance with various sustainability requirements were performed by the Mercedes-Benz GroupThe average CO2 emissions of the Mercedes-Benz new passenger car fleet in Europe(European Union,Norway and Iceland)are expected to be 115 g/km(including vans registered as passenger cars)when applying the legal regulationsThe Mercedes me Charge digital charging service has integrated over 1,000,000AC and DC charging points worldwide by the end of 2022The share of electrified vehicles(xEV)in Group sales at Mercedes-Benz Cars is 16%worldwide The share of fully electric vehicles in Group sales at Mercedes-Benz Vans is 4%worldwide Energy consumption per vehicle at Mercedes-Benz Cars reduced by 17%compared to 2021;at Mercedes-Benz Vans by15%Water consumption per vehicle at Mercedes-Benz Cars reduced by 10%compared to 2021;at Mercedes-Benz Vans by14%The“DRIVE PILOT”has been approved for sale in Germany,enabling conditional auto-mated driving(SAE Level 3)on suitable highway sections in Germany at speeds of up to 60 km/h.8.5 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 positions at the Mercedes-Benz Group worldwide is 24.7Along 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.In doing so,the Group considers the entire value chain.This encompasses the complete life cycle of the vehicle from development to its recycling after the use phase.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.Product developmentThe Mercedes-Benz Group offers a broad product portfolio of passenger cars along with both private and commercial vans.It is systematically electrifying all model series and,as part of this,is strongly involved in research and development.Supply chainMercedes-Benz vehicles consist of several thousand components raw materials such as iron,copper or aluminium,preliminary products,preliminary products such as steel,semi-finished products such as seats,wiring harnesses,etc.and the supply chain is accordingly complex:it comprises nearly 40,000 direct suppliers for production and non-production materials,mainly from the regions of Europe,Asia and North America.These in turn have sub-suppliers.ProductionThe Mercedes-Benz Group has more than 30 production sites of its own on five continents worldwide.There,components for electric vehicles are assembled,transmissions,axles and engines are produced,batteries are assembled or recycled,or the final assembly of vehicles takes place.Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceProductdevelopmentSupply chainProductionVehicle operation Recycling,remanufacturing and disposal41%of all raw materials with increased risk checked Almost 86%of the production material suppliers of Mercedes-Benz Cars and Mercedes-Benz Vans have signed the“Ambition Letter”Share of renewable energies in the production of Mercedes-Benz Cars and Mercedes-Benz Vans in total electricity consumption is 100%of the materials in all cars and vans of up to 3.5 t gross vehicle weight can be reusedor recoveredPilot factory built at Kuppen-heim site for recycling lithium-ion battery systems;73%of the returnable high-voltage lithium-ion batteries are being routed to remanufacturing for reuse in vehicles or for second life in energy storagesCO2 emissions at Group-wide production sites worldwide reduced by 43%compared with 2021 825on-site visits at its production material suppliers with regard to compliance with various sustainability requirements were performed by the Mercedes-Benz GroupThe average CO2 emissions of the Mercedes-Benz new passenger car fleet in Europe(European Union,Norway and Iceland)are expected to be 115 g/km(including vans registered as passenger cars)when applying the legal regulationsThe Mercedes me Charge digital charging service has integrated over 1,000,000AC and DC charging points worldwide by the end of 2022The share of electrified vehicles(xEV)in Group sales at Mercedes-Benz Cars is 16%worldwide The share of fully electric vehicles in Group sales at Mercedes-Benz Vans is 4%worldwide Energy consumption per vehicle at Mercedes-Benz Cars reduced by 17%compared to 2021;at Mercedes-Benz Vans by15%Water consumption per vehicle at Mercedes-Benz Cars reduced by 10%compared to 2021;at Mercedes-Benz Vans by14%The“DRIVE PILOT”has been approved for sale in Germany,enabling conditional auto-mated driving(SAE Level 3)on suitable highway sections in Germany at speeds of up to 60 km/h.8.5 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 positions at the Mercedes-Benz Group worldwide is 24.7%ProductdevelopmentSupply chainProductionVehicle operation Recycling,remanufacturing and disposal41%of all raw materials with increased risk checked Almost 86%of the production material suppliers of Mercedes-Benz Cars and Mercedes-Benz Vans have signed the“Ambition Letter”Share of renewable energies in the production of Mercedes-Benz Cars and Mercedes-Benz Vans in total electricity consumption is 100%of the materials in all cars and vans of up to 3.5 t gross vehicle weight can be reusedor recoveredPilot factory built at Kuppen-heim site for recycling lithium-ion battery systems;73%of the returnable high-voltage lithium-ion batteries are being routed to remanufacturing for reuse in vehicles or for second life in energy storagesCO2 emissions at Group-wide production sites worldwide reduced by 43%compared with 2021 825on-site visits at its production material suppliers with regard to compliance with various sustainability requirements were performed by the Mercedes-Benz GroupThe average CO2 emissions of the Mercedes-Benz new passenger car fleet in Europe(European Union,Norway and Iceland)are expected to be 115 g/km(including vans registered as passenger cars)when applying the legal regulationsThe Mercedes me Charge digital charging service has integrated over 1,000,000AC and DC charging points worldwide by the end of 2022The share of electrified vehicles(xEV)in Group sales at Mercedes-Benz Cars is 16%worldwide The share of fully electric vehicles in Group sales at Mercedes-Benz Vans is 4%worldwide Energy consumption per vehicle at Mercedes-Benz Cars reduced by 17%compared to 2021;at Mercedes-Benz Vans by15%Water consumption per vehicle at Mercedes-Benz Cars reduced by 10%compared to 2021;at Mercedes-Benz Vans by14%The“DRIVE PILOT”has been approved for sale in Germany,enabling conditional auto-mated driving(SAE Level 3)on suitable highway sections in Germany at speeds of up to 60 km/h.8.5 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 positions at the Mercedes-Benz Group worldwide is 24.7%ProductdevelopmentSupply chainProductionVehicle operation Recycling,remanufacturing and disposal41%of all raw materials with increased risk checked Almost 86%of the production material suppliers of Mercedes-Benz Cars and Mercedes-Benz Vans have signed the“Ambition Letter”Share of renewable energies in the production of Mercedes-Benz Cars and Mercedes-Benz Vans in total electricity consumption is 100%of the materials in all cars and vans of up to 3.5 t gross vehicle weight can be reusedor recoveredPilot factory built at Kuppen-heim site for recycling lithium-ion battery systems;73%of the returnable high-voltage lithium-ion batteries are being routed to remanufacturing for reuse in vehicles or for second life in energy storagesCO2 emissions at Group-wide production sites worldwide reduced by 43%compared with 2021 825on-site visits at its production material suppliers with regard to compliance with various sustainability requirements were performed by the Mercedes-Benz GroupThe average CO2 emissions of the Mercedes-Benz new passenger car fleet in Europe(European Union,Norway and Iceland)are expected to be 115 g/km(including vans registered as passenger cars)when applying the legal regulationsThe Mercedes me Charge digital charging service has integrated over 1,000,000AC and DC charging points worldwide by the end of 2022The share of electrified vehicles(xEV)in Group sales at Mercedes-Benz Cars is 16%worldwide The share of fully electric vehicles in Group sales at Mercedes-Benz Vans is 4%worldwide Energy consumption per vehicle at Mercedes-Benz Cars reduced by 17%compared to 2021;at Mercedes-Benz Vans by15%Water consumption per vehicle at Mercedes-Benz Cars reduced by 10%compared to 2021;at Mercedes-Benz Vans by14%The“DRIVE PILOT”has been approved for sale in Germany,enabling conditional auto-mated driving(SAE Level 3)on suitable highway sections in Germany at speeds of up to 60 km/h.8.5 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 positions at the Mercedes-Benz Group worldwide is 24.7The following table shows some of the significant progress made by the Mercedes-Benz Group in the various fields of action and with respect to its defined enablers over the course of 2022.Remanufacturing&recyclingThe Mercedes-Benz Group observes the waste hierarchy,with the top priority of avoiding waste.Only then,according to the waste hierarchy,should measures be im-plemented to allow reuse of various components and parts through remanufacturing,or to recover materials through recycling.Use/operationWith its brands and mobility products/services,the Mercedes-Benz Group is repre-sented in almost every country in the world.In 2022,Mercedes-Benz delivered around 2.5 million passenger cars and vans to its customers.It markets all-electric vehicles under the Mercedes-EQ brand.It also wants to support its customers in adopting an eco-friendly driving style and in their decision to buy locally emission-free vehicles.Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governance123Materiality matrix and ranking of sub-issuesIssue profilesFinal list of the significant issuesInput for review of sustainable business strategy and identification of ESG risks and opportunitiesList of the areas of action and enablers for sustainability plus further potential significant sustainability issuesStakeholder surveyExpert interviewsInside-outEvaluation of the effects of business activities onsustainability issuesOutside inMeasurement of the effects of the sustainability issues on business activitiesValidationDocument analysisImpact measurement20Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceSustainability managementMateriality analysis GRI 3-1/-2 A comprehensive materiality analysis was carried out in 2021 in order to determine which sustainability topics are particularly relevant for the Mercedes-Benz Group and its stakeholders.This was completed in 2022.This materiality analysis addressed the six strategic areas of action as well as further potentially relevant sustainability topics and trends.A total of 17 topics were evaluated,and these were further divided into 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 environment and society are brought into focus.Outside in:The impact of external requirements and expectations of the Groups sustainability performance on its business activities,business results and general situation is considered.The analysis consisted of several components.The basis for assessing the relevance of the sustainability topics and trends was a comprehensive desk analysis and an international online survey.The survey queried approximately 15,000 people from 52 countries who depicted relevant stakeholder groups such as employees,private and business customers,interested consumers,suppliers and business partners,investors,politicians and government officials,scientists,and representatives of government administrations and non-governmental organisations(NGOs).In addition,the Mercedes-Benz Group conducted around 20 interviews with both internal and external experts from the aforementioned stakeholder groups.Procedure for materiality analysisInside 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 issues1 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.21Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceThe goals here were to assess the sustainability performance of the Group to date and identify sustainability trends in order to gauge the relevance of the sustainability topics.The Mercedes-Benz Group also took the first steps to evaluate the effects of its business activities on the environment and society.The results were taken into account when assessing the relevance of topics in the inside-out dimension.In order to assess topics from an outside-in perspec-tive,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.In a subsequent step,the sustainability topics that resulted from this analysis were assessed by the Mercedes-Benz Group with regard to financial position,liquidity,cash flows,profitability and business development in order to define the topics for the Non-Financial Declaration.Non-Financial declaration,AR 2022The materiality analysis thus conforms with the reporting requirements of the Global Reporting Initiative(GRI)and the CSR Directive Implementation Act(CSR-RUG).Materiality matrix1,2Topic cluster Topics Sustainable corporate governanceEmbedding sustainability in the management of the company across the value chainConsideration of environmental and social risks(ESG)in risk managementEmbedding sustainability in the business strategySustainability as a criterion for remunerationResponsible tax payment and handling 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 e-vehiclesClimate adaptation of Mercedes-Benz sites and operationsEmission 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 Circular economyResource conservation in the supply chain Sustainable mobilitySustainable mobility systemsAccess to mobilitySustainable logisticsExpansion of the charging infrastructure22Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceThe materiality matrix shows the topics according to their relevance:“Climate protection and adaptation”,“Emission reduction”and“Resource conservation”have the highest importance based on the analysis and the stakeholder survey.The same applies to the thematic complexes of“Respecting human rights”and“Sustainable mobility”,which have become even more relevant.This confirms the Groups own strategic fields of action.A new addition is the topic complex“Responsible corporate transformation”.The results of the materiality analysis were discussed in depth with all responsible departments and were presented to the Group Sustainability Board(GSB).They provide an important basis for critical consideration and further development of the sustainable business strategy.In addition,the Mercedes-Benz Group bases its identification of sustainability-related opportunities and risks on the topics identified in the materiality analysis.The Mercedes-Benz Group discloses significant ESG risks and opportunities in the Risk and Opportunity Report included in the Annual Report.Risk and Opportunity Report,AR 2022Topic complex and topicsTopic cluster Topics Traffic safetyVehicle safetySafe road trafficAutomated drivingData responsibilityData protectionCyber security Responsible use of Artificial IntelligenceData-based solutions for sustainable mobilityRespecting human rightsRespecting human rights in own entitiesHuman 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 Education and trainingEmployee health and safetyWorkplace health promotionOccupational health&safetySustainability-oriented corporate cultureLeadership cultureModern types of employment and working timesDiversity and equal opportunitiesDiversity in the workforce Adequate remunerationConsideration of diversity in the development and marketing of products and servicesStakeholder relations and partnershipsPolitical dialogue at national and international levelStakeholder dialogue at company levelLocal and regional stakeholder dialogueCorporate citizenshipCompany-run projects for the community(commitment to location)Employee engagement and volunteeringWorldwide promotion of projects run by non-profit organisations and foundations within the scope of 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 investor23Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceMercedes-Benz AGDivisional Strategy LeadersGroup Strategy,Communication,External Affairs,Human Resources,Investor Relations,Accounting&Financial ReportingGroup Sustainability Board(GSB)Business units&functionsFeedback&guidanceprogress reportSustainability Competence Office(SCO)progress reportcoordinatescoordinatescoordinatesGroup Research,Sustainability&RD FunctionsBoard of ManagementMercedes-Benz Group AG Central FunctionsMercedes-Benz Mobility AGChairpersons:-Renata Jungo Brngger,Member of the Board of Management for Integrity and Legal Affairs-Markus Schfer,Member of the Board of Management,Chief Technology Officer,Development&ProcurementMembers of the Board of ManagementCompliance,Legal Product&Technology&Sustainability24Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceManaging sustainability GRI 2-1/-6/-9/-11/-12/-13/-14/-18/-19/-20 GRI 303-1 Mercedes-Benz GroupAG is responsible for the Group governance and provides services for all corporate entities.As the parent company,it also defines the strategy of the Mercedes-Benz Group.It decides on strategically important matters in its operational business 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 in the interests of the well-being of the Group.The Mercedes-Benz Group adheres to the German Corporate Governance Code,as documented by the annual Statement of Compliance.Statement of Compliance 2022The remuneration for the Board of Management and Level 13 executives,as well as for Level 4 managers in some cases,includes both financial and sustain-ability targets in the form of the variable components of the company bonus.These consist primarily of transformation targets including those involving CO2 emissions,due diligence obligations in raw material procurement,and traffic safety in addition to further non-financial targets.These targets relate to the top-ics of customers,integrity and employee commitment and diversity.In addition,the Mercedes-Benz Group defines further criteria in the areas of the environ-ment,social concerns and governance in order to determine the annual bonus for the Board of Manage-ment and senior executives.Since 2020,this has also included the achievement of CO2 fleet targets.Remuneration Report 2022 Annual Report 2022The Mercedes-Benz Group manages the work in the strategic areas of action alongside other tasks by means of an internal reporting process that uses detailed scorecards.This process is supported by Governance25Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceclear lines of responsibility in the management and organizational structures used at all of the divisions.The Group Sustainability Board(GSB)is the central management body for all sustainability topics and reports to the Board of Management.The GSB is chaired jointly by Renata Jungo Brngger(the Board of Management member responsible for Integrity and Legal Affairs)and Markus Schfer(the Board of Management member responsible for Development and Procurement,who is also the Chief Technology Officer).The Chairman of the Board of Management and all other Board of Management members,as well as the managers of all relevant functions and departments,are members of the GSB for example Finance,Investor Relations,External Affairs,Marketing&Communications and Human Resources.The management processes with cross-divisional and functional relevance in relation to sustainability are covered by this governance structure in order to regularly review and improve the Mercedes-Benz Groups performance.The GSB decides on relevant sustainability issues and assigns tasks to the respective areas of responsibility.The GSB regularly submits progress reports and proposals for decisions to the Board of Management regarding the action fields included in the Groups sustainable business strategy.The Supervisory Board monitors and advises the Board of Management in its deliberations relating to the transformation targets,which also include non-financial and sustainability-related targets.The operational work is done by the Sustainability Competence Office(SCO),which consists of experts from the units managed by the two Co-chairs of the GSB as well as additional specialists from Corporate Strategy,Finance and Corporate Communications.The SCO provides advice to the specialist units and helps them complete the tasks assigned to them by the GSB.The SCO also monitors the progress made in the six areas of action and the three enablers defined in the sustainable business strategy.The results are reported to the GSB and the Board of Management of Mercedes-Benz Group AG in the form of detailed scorecards at least twice a year.An internal dialogue format(“Sustainability Forum”)has been established to strengthen the exchange between the SCO at the Groups headquarters in Stuttgart-Untertrkheim and the specialists at the various national and international companies.The forum focuses on information and dialogue on current developments of the sustainable business strategy,the associated goals as well as the six fields of action and three enablers.In addition,there is an active exchange of information and knowledge on developments in the different countries and national companies as well as on best-practice approaches.The Mercedes-Benz Group has also developed specific training measures to encourage employees in sales branches to adopt sustainable practices.Since 2021,for example,it has regularly offered online sales training to promote the economical use of resources such as water and electricity.More sustainable sales operationsThe Supervisory Board of Mercedes-Benz GroupAG monitors the implementation of the sustainable business strategy.It is therefore important that the Supervisory Board and its committees are adequately informed about the sustainability issues related to the environment,society or corporate governance(ESG).To ensure this,ESG topics are regularly addressed at 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 Supervisory Board,Dame Polly Courtice in particular contributes her extensive expertise in the area of sustainability at various points.Advisory Board as an important driving forcePolicies,standards and principles GRI 2-23-/24 Integrity,compliance and legal responsibility are cornerstones 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 Integrity Code.This is supplemented by other in-house principles and policies.26Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceThe“House of Policies”is the digital platform for policies.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 policies,while Group companies can access advice on local policy implementation.The Mercedes-Benz Group also uses the ten principles of the UN Global Compact(UNGC)as a fundamental guide for its business activities.As a founding member,it is strongly committed to the UN Global Compact(UNGC).The Mercedes-Benz Groups internal principles and policies are founded on this international frame of reference and other international principles,including the Core Labour Standards of the International Labour Organisation(ILO),the OECD Guidelines for multinational enterprises and the UN Guiding Principles on Business and Human Rights.Risk and opportunity management GRI 2-12/-23/-24/-25 GRI 3-3 GRI 413-2 The Mercedes-Benz Group is exposed to a large number of risks that are directly linked with the business activi-ties of Mercedes-Benz GroupAG and its subsidiaries or that result from external influences.The Mercedes-Benz Group defines risk as the danger that events,devel-opments or actions will prevent the Group or one of the business divisions from achieving their goals.This includes monetary and non-monetary risks.At the same time,it is important to identify opportunities in order to safeguard and enhance the competitive capability of the Mercedes-Benz Group.The Group defines an opportunity as the possibility of securing or exceeding the planned goals of the Group or a business division asa result of events,developments or actions.In order to identify these risks and opportunities at an early stage and assess and manage them systematically,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 sustainably support the achievement of the corporate targets and to enhance risk awareness at the Group.The risk management system is integrated into the value-based management and planning system of the Mercedes-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 recognise the possible opportunities arising in business activities early on and to use them in the best possible 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.The employees responsible for risk management have the task of defining and,if necessary,initiating measures for the identification,assessment,avoidance or mitigation of risks or for the protection of the Group against such risks.In the context of opportunity man-agement,measures are to be taken for seizing,improv-ing and(fully or partially)realising opportunities.Firm integration of sustainability-related risks and opportunitiesRisk and opportunity management is a firm component of the Group-wide planning,controlling and reporting process.It is designed to support the sustained achievement of the corporate targets and to ensure risk awareness at the Mercedes-Benz Group.In identifying sustainability-related risks and opportunities,Mercedes-Benz Group is guided by the topics identified by the materiality analysis and thus includes the areas of action of the sustainable business strategy,for which concrete goals have been assigned.Sustainability-related risks and opportunities are understood to be conditions,events,or developments involving environmental,social or governance factors(ESG),the occurrence of which may have an actual or potential impact on the Mercedes-Benz Groups profitability,liquidity and capital resources.This further includes any risks and opportunities whose 27Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceoccurrence may have a positive or negative impact on the economy,the environment,or society.Sustainability aspects as they relate to the environment include,among other things,the effects of climate conditions and changes,as well as the impact of the Groups transformation process as a result of changed political conditions,technological developments and changing markets.Labour law standards,occupational and product safety,product liability and suppliers compliance with labour law standards are examples of circumstances categorized as social issues.The area of governance is concerned with matters such as honesty in tax affairs,measures taken to prevent corruption,and ensuring data protection.ESG-related risks and opportunities associated with the Mercedes-Benz Groups own business activities,business relationships and products and services,and which are very likely to have a serious negative impact on the non-financial aspects in accordance with Sections 315c,289c of the German Commercial Code(HGB),are not currently apparent.Climate-related risks and opportunities in connection with the recommendations of the Task Force on Climate-Related Financial Disclosures(TCFD)are environment factors and are thus also identified and assessed as part of the risk management process.Further information can be found in the Risk and Opportunity Report.Risk and Opportunity Report,AR 2022Communicating and assessing risks and opportunities GRI 2-12/-18 The organisational embedding of risk and opportunity management is carried out by the risk management organisation established at the Group.The responsibility for operational risk management and for the risk man-agement processes is borne by the divisions,corporate functions,organisational units and companies.They report on the concrete risks and opportunities at regular intervals to their superordinate units.Unexpectedly occurring material risks must be promptly reported.The information for reporting to the Board of Management,Audit Committee and Supervisory Board is passed on to corporate risk management by the business divisions.The Group Risk Management Committee(GRMC)is responsible for ensuring the continuous improvement and evaluating the efficiency and effectiveness of the risk management system.The GRMC is composed of representatives from the Accounting&Financial Report-ing,Legal Affairs,Compliance and Group Security units,as well as the members of the Board of Management of Mercedes-Benz GroupAG,Mercedes-BenzAG and Mercedes-Benz MobilityAG responsible for Finance,and is chaired by the members of the Board of Man-agement of Mercedes-Benz GroupAG responsible for Finance&Controlling,Mercedes-Benz Mobility,and Integrity and Legal Affairs.Corporate Audit contributes significant findings through the internal controlling and risk management system.Dialogue with stakeholders GRI 2-12/-16/-29 The Mercedes-Benz Group attaches great importance to engaging in a dialogue with its interest groups.This dialogue enables it to look at its sustainability commitment from different angles,to identify and pick up on new trends and to exchange experiences.It also aims to engage in discussions of controversial topics at an early stage.The key concern for the Mercedes-Benz Group is to be part of a dialogue that is fruitful and productive for all parties involved.The prerequisite 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.Whether an individual,organisation or group is a stake-holder of a company depends on the extent to which decisions of the company influence them or,conversely,the extent to which they can influence the companys decisions.Based on this,the Mercedes-Benz Group has identified customers,employees,investors and suppliers as its primary stakeholders.In addition,the Mercedes-Benz Group regularly exchanges views with civic bodies such as non-governmental organisations.The Group also maintains contact with associations,trade unions,the media,analysts,local authorities,people from the surrounding neighbourhood of the companys locations,and figures from the worlds of science and politics.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 InformationDialogueParticipation28Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceIn order to implement dialogue with its stakeholders across the organisation,the Mercedes-Benz Group has defined clear responsibilities and communication channels for this process and established specific forms of dialogue.The various dialogue formats are initiated by experts from Integrity and Legal Affairs or other departments such as External Affairs(EA).Dialogues and events Memberships,associations and initiativesThe Mercedes-Benz Group makes use of various formats in order to engage in dialogue with relevant stakeholders.Among other things,it organises annual“Sustainability Dialogue”events and conducts stake-holder surveys as well as expert conferences and thematic exchanges for example in the form of workshops or through the Advisory Board for Integrity and Sustainability.In addition,it monitors current public discussions and gathers information about related expectations by participating in sector-specific and cross-sector networks and initiatives.Studies and other scientific publications are also evaluated and internal media analyses undertaken.These measures help the Group to identify developments and the associated expectations in areas beyond the dialogue events that it has initiated at an early stage.The Mercedes-Benz Group aims to strengthen trust in the Mercedes-Benz brand with innovative and signifi-cantly more sustainable solutions,as sustainability is one of the brand promises of Mercedes-Benz.It guides the Group as a key operating principle,not only in strategic decisions but also in direct customer con-tact.The aim is to inspire customers with respect to sustainability and make it tangible for them at every touchpoint.The Net Promoter Score(NPS)is a fixed element of the Mercedes-Benz Groups customer satis-faction measurement for the overarching evaluation of customer satisfaction:with this internationally recog-nised indicator,customers are asked how likely they are to recommend a company or a brand to people close to them.The Mercedes-Benz Group also uses the NPS as part of the remuneration component.Sustainability DialogueAn important instrument for implementing these goals is the communication with stakeholders in the form of the Sustainability Dialogue,which has been held annu-ally in Stuttgart since 2008 and brings various stake-holder groups together with members of the Board of Management of Mercedes-Benz Group AG and executive management.The participants attend a range of work-shops,where they discuss selected issues related to Exemplary instruments of the Stakeholder Management approach29Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governancesustainability and work together to further develop their approaches.The experts responsible for specific topics take up the momentum generated by the participants and work together with the stakeholders to incorporate these ideas into their work.They then report on the progress achieved at the following years event.The Mercedes-Benz Group held the Sustainability Dia-logue as a hybrid event in 2022.More than 200 external and internal participants in a total of seven working groups engaged in discussions of various topics both on-site in Sindelfingen and online and also participated in a public stakeholder dialogue.In addition,organizational and thematic preparations were made for the Sustainability Dialogues in China and India scheduled for early 2023.Advisory Board as an important driving forceThe Advisory Board for Integrity and Sustainability has been providing support for the companys sustainability work since 2012.The boards members are independent external specialists from the fields of science and busi-ness,as well as from civic organizations,and include experts who possess specialized knowledge regarding environmental and social policy,the development of transport,traffic and mobility,and human rights and ethi-cal issues.The members of the Advisory Board support the Mercedes-Benz Group with constructive criticism on questions related to integrity and corporate responsibility.The Advisory Board convenes several times a year in meetings that are chaired by the member of the Board of Management responsible for Integrity and Legal Affairs.One of these meetings specifically serves to share information with other members of the Board of Management and members of the Supervisory Board.As part of a Sustainable Strategy Week,the responsible managers from the various specialist units meet with the Advisory Board members to discuss the areas of ac-tion and enablers identified in the sustainable business strategy and also talk about targets,strategies,mea-sures and the results achieved with these.The Advisory Board also holds regular meetings with managers and other employees to discuss specific topics.Two new working groups were established in the reporting year in order to strengthen this dialogue.The goal here is to promote more extensive discussions on the topics of“Integrity and employees”and“Climate change mitiga-tion and resource conservation”.In 2022,the Advisory Board also addressed,among other things,the new Corporate Citizenship Strategy,the social dimension of sustainability and its impact on the Mercedes-Benz Group,and the topic of climate neutrality.Sustainable investmentThe strong demand for ESG funds among institutional and private investors leads to a demand for more trans-parency on how ESG factors are taken into account in asset management and investment decisions.At the same time,this offers companies an added opportunity to differentiate themselves in the competition for equity and debt capital by demonstrating a sustainable business strategy,ambitious goals and transparent ESG reporting along the entire value chain.A variety of reporting frame-works are now available to provide this evidence.For example,investors expect companies to publish reports conforming to standards such as those of the TCFD(Task Force on Climate-related Financial Disclosure)and the SASB(Sustainability Accounting Standards Board).The International Sustainability Standards Board (ISSB)also developed a global minimum standard for sustainability reporting in 2022,which is to be used from the 2023 reporting year.The extent of legal dis-closure obligations is also increasing for investors,for example,through the Sustainable Finance Disclosure Regulation(SFDR)for companies,for example,through the EU taxonomy,the Corporate Sustain-ability Reporting Directive(CSRD)and the European Sustainability Reporting Standards(ESRS).The ESG reporting is thus becoming increasingly more complex and demanding.The external reporting of the Mercedes-Benz Group focuses on the reporting standards relevant to the Groups investors(including TCFD,SASB and GRI).Meanwhile,the Mercedes-Benz Group continuously monitors the way in which the ESG reporting requirements of its capital providers are evolving and reviews their implementation in its own reporting.TCFD reference table SASB reference table30Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceFinancing the sustainable business strategyThe implementation of the Mercedes-Benz Groups sustainable business strategy requires a major amount of investment.For this reason,one of the Groups goals is to ensure that its securities are viewed by the capital market as a sustainable investment.To this end,the Mercedes-Benz Group maintains a continuous dialogue with players on the capital market as representatives of investors in equity and debt.Various platforms are used here.In 2022,the Mercedes-Benz Group presented this approach to investors and analysts at its first digital ESG conference(Environmental,Social and Governance).The Investor Relations&Treasury unit at Mercedes-Benz Group AG works closely together with the companys in-house sustainability departments and is also integrated into the relevant committees.This is how the Mercedes-Benz Group is responding to the fact that sustainable investment has become a central investment strategy in particular for institutional investors,who set especially high standards of transparency for external reporting according to ESG criteria.In the reporting year,Mercedes-Benz Group AG converted the existing credit line of 11 billion into a sustainability linked loan(SLL).In this way,the company links its credit line to sustainability achievements in the area of climate change mitigation for example,the global share of all-electric vehicles in the Mercedes-Benz fleet.The arrangement fee for the existing credit line is reduced if the Mercedes-Benz Group achieves the selected sustainability targets.With this transformation,the company also continues to implement its“Ambition 2039”in the area of sustainable financing.Ratings and green bondsESG rating agencies such as MSCI,Sustainalytics,ISS ESG and CDP are additional important players in the capital market and in the sustainability-oriented investment process.Today the rating and ranking results of most providers are made available to the public and serve as an additional source of information for many investors.Among other things,the Mercedes-Benz Group has therefore been using the CDP framework for more than 15 years to disclose data on climate-related activities,and once again reached the leadership category in the reporting year with an A rating.Since 2021,the Mercedes-Benz Group has also reported its water-relat-ed activities in the separate CDP Water Questionnaire and was able to achieve an B rating rating in the report-ing year.In 2022,it once again received an A rating from MSCI.Sustainalytics continues to rank it strongly in its peer group of automobile manufacturers.The Groups ISS ESG rating once again corresponded to the best pos-sible rating in the automotive sector(Prime Status C ).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 internal change processes.In 2020,the Group developed a Group-wide Green Finance Framework in order to position the Mercedes-Benz Group even more effectively as a sustainable company worthy of investment and to enable it to utilize ESG-based capital for its business development.It makes it possible for the Group to finance investment targeted at the development,production and customer financing of all-electric vehicles through bonds and loans,for example.The Mercedes-Benz Group has issued green bonds in September 2020 and March 2021.In November 2022,Mercedes-Benz Group issued its first green bond outside the European market as a green panda bond in China.The framework is based on the Green Bond Principles(the voluntary process guidelines of the International Capital Market Association ICMA)and the Green Loan Principles,which are the joint voluntary process guidelines of the Loan Market Association(LMA),and the Asia Pacific Loan Market Association(APLMA).It is planned to be developed to be consistent with the significant contribution to the environmental objective of climate change mitigation under the technical screening criteria of the EU taxonomy.In addition,the Mercedes-Benz Group strives for the certification with the highest rating-“Dark Green”-for the planned 2023 framework update from the respected Centre for International Climate and Environmental Research(CICERO).Green finance second option31Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceSustainable investment of pension fundsThe Mercedes-Benz Group operates as an investor itself when it invests the companys pension assets.ESG criteria are also playing an increasingly important role in this area.For German pension assets,the following objectives have been defined for the consideration of ESG criteria:Creation of transparency in dealing with sustainability aspects,exploitation of opportunities from sustainable developments and the appropriate consideration of sustainability risks.For the majority of German pension assets the investments are made by asset managers to whom the Mercedes-Benz Group issues individual mandates.In coordination with the Investment Committees,the Mercedes-Benz Group pays,as part of its sustainability concept,increased attention to the consideration and transparency of sustainability aspects in the investment process.In addition,the risk and return aspects associated with sustainable investments are also taken into account.For liquid asset classes of the German pension assets,the Mercedes-Benz Group only works with investment managers who have signed the UN Principles for Responsible Investment.It also uses a negative list to exclude investing in companies and countries that do not fulfil the Groups core requirements.Furthermore,the Mercedes-Benz Group focuses on gradually integrating sustainability aspects via benchmarks or sustainability performance indicators,for example into its mandates.In 2022,the Mercedes-Benz Group also further expanded its ESG-themed investments and took its first steps to create an internal reporting system for various sustainability metrics for its German pension assets.The measures implemented as part of the Groups sustainability concept are regularly assessed and adapted to current developments.Sustainability is also one of the investment principles of Daimler PensionsfondsAG.In other countries,the Group takes country-specific requirements into account.Tax obligation GRI 3-3 GRI 207-1/-2/-3 The Mercedes-Benz Group views itself as a responsible company that endeavours to meet all of its global tax obligations and use public funding responsibly.In this way,the Group can also fulfil its social and ethical responsibilities.The Groups tax strategy operates according to the following principles in particular:With efficient,high-quality and reliable expertise,processes,systems,methods and controls,the Mercedes-Benz Group wants to ensure that the tax ob-ligations of the Group companies are met and integrity standards are maintained.In line with the principle of being a good corporate tax citizen(i.e.fulfilling its resonsibility as a taxpayer),the Mercedes-Benz Group conducts legal,proactive and non-aggressive tax planning activities on the basis of economic considerations(“tax follows business”).The Mercedes-Benz Group also strives to work coopera-tively,transparently and constructively with the tax authorities.In this process,it maintains its legal stand-points and defend its interests wherever it believes such actions are appropriate and legitimate.The Group tax strategy drawn up by the board of management of the Mercedes-Benz Group AG defines the limits of action here,and this strategy is further specified and implemented by means of organizational and content-related policies,guidelines and instructions.The tax strategy is regularly reviewed for appropriate adjustments.The tax policies define the responsibilities,tasks and obligations of those individuals at the Group who deal with tax issues,and also contain specific provisions for ensuring that legal requirements are met,thus raising the awareness of tax issues among employees.Management is kept informed about relevant tax issues by means of monthly reports and regular communications,as well as when required.Moreover,it is involved in compliance processes:Regular communication between CFO and Head of Taxes Regular information to the Supervisory Board on risks and opportunities as well as current regulatory issues32Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceThe Code of Conduct stipulates that all intentional violations of external and/or internal tax guidelines must be reported and investigated.The same applies to any failure to make corrections to procedures performed in an erroneous manner,as outlined in our internally valid Treatment of Violations Policy.The whistleblower system BPOThe Mercedes-Benz Group has established a Tax Compliance Management System(Tax CMS)in order to ensure effective tax compliance throughout the Group.The Tax CMS is a separate sub-unit of the general intra-Group Compliance Management System.The Tax CMS also operates an active tax-risk management system that is consistently applied throughout the Group in order to monitor and check whether tax obligations are being fulfilled,and also to support those responsible for ensuring such fulfilment.Another goal here is to identify and reduce tax risks at the Group,and thus the associated personal risks that may be faced by the employees active in this area.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 the companys risk management policy.The Mercedes-Benz Group did not become aware of any criminally relevant material violations of tax laws during the reporting year.Compliance management33Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceOne 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 which economic activities in the EU are considered to be aligned with the taxonomy and thus environmentally sustainable with regard to the 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 regulation.According to Article 8 of the taxonomy regulation,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 activ-ity must be mentioned and explained in further detail in the delegated acts for the taxonomy regulation.Descriptions of relevant activities and technical screen-ing criteria are currently available as delegated act(EU 2021/2139)for the first two environmental objectives(climate change mitigation and climate change adapta-tion).Climate change mitigation in particular is to be regarded as the relevant environmental objective for the Mercedes-Benz Group.On the basis of the descriptions contained in the delegated act 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 transport technologies 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 trucksIn a final Interpretation Document that the European Commission published on 6 October 2022,the Commis-sion stated that the term“low-carbon”only relates to the assessment of taxonomy alignment within the framework of the technical screening criteria and is not relevant for reporting on taxonomy eligibility.With regard to automak-ers in particular and as an example,the document shows that the activity“manufacture of low-carbon vehicles”also includes vehicles with combustion engines.For the Mercedes-Benz Group,this clarification by the European Commission means that the manufacture of all Group vehicles is reported as taxonomy-eligible.Economic activity 6.5 relates to leasing and sales financing of all vehicles purchased from third parties.Economic activity 6.6 mainly comprises the continuing Daimler Truck portfolio at Mercedes-Benz Mobility.Economic activities in certain energy sectors as specified in the complementary delegated act to climate objectives exist at Mercedes-Benz Group only to an immaterial extent and exclusiviely serve the operation of economic activity 3.3.EU taxonomy34Sustainability Report 2022.Mercedes-Benz GroupGovernance.Sustainable corporate governanceTaxonomy 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 taxonomy-aligned,provided they meet certain technical screening criteria.Here,the fulfilment of certain technical screening criteria with regard to the relevant economic activities must make a substantial contribution to an environmental objective defined by the taxonomy regulation and,on the basis of defined“do no significant harm criteria”(DNSH criteria),also exclude the possibility of significant interference with another environmental objective.It must also be ensured that minimum standards are met with regard to issues such as upholding human rights or combating corruption(minimum safeguards).Fulfilment of a substantial contribution to the climate change mitigation environmental objectiveAccording to the delegated act,all vehicles complying with the 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 referred hereafter to as“low-carbon vehicles”.Exclusion of the possibility of significant interference on the basis of the“do no significant harm criteria”Compliance with DNSH criteria is used in a second step to demonstrate that the economic activities in question do not significantly interfere with other environmental objectives.In connection with 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 will be manufactured in the future.In connection with economic activity 6.5,the analysis of the criteria has to be performed on the basis of the respective low-carbon vehicles.Climate change adaptation.A climate risk assessment was conducted for relevant production sites in order to analyse physical climate risks on the basis of significant climate-related hazards.Adaptation measures were then evaluated on the basis of the identified risk exposure.The analysis took into account recognized scenarios from the Intergovernmental Panel on Climate Change(IPCC),including one scenario that depicts the biggest physical impacts.Various time horizons(e.g.2040)and a trend analysis were examined.The verification of the DNSH criteria for economic activity 6.5 is essentially based on the consideration of relevant conditions of use and the environment,such as heat and cold requirements in the context of vehicle development and testing.Sustainable use and protection of water and maritime resourcesWith regard to the production of low-carbon vehicles,the Mercedes-Benz Group ensures fulfilment of the DNSH criteria mainly through the use of established environmental management systems and internal environmental risk assessments(environmental due diligence process).The company has established environmental management systems at its production sites around the world in accordance with EMAS or ISO 14001.These environmental management systems are certified at regular intervals.As part of the internal environmental risk assessments,consolidated production sites are evaluated according to a number of factors,including those relating to water quality.Recommendations for minimizing risks are then drawn up and the progress is appropriately monitored.The Group also uses external data sources to identify sites that are subject to risks regarding water scarcity.Transition to a circular economyWith 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

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SustainabilityDataBookLast update:June 2023Sustainability Data Book1 1Promoting SustainabilityEnvironmentSocialGovernanceContent IndexOverviewSustainability Data Book OverviewOverview of Toyota Motor CorporationGRI2-241 Editorial Policy2 Update History3 ContentsSustainability Data Book OverviewUpdated in June 2023The Sustainability Data Book explains Toyotas sustainability approach and policies for ESG initiatives along with practical cases and numerical data,as a medium for specialists and those who are particularly interested in sustainability issues.Since fi scal 2021,the Sustainability Data Book,which had conventionally been released annually,has been updated whenever necessary so that the information can be disclosed in a timely manner.Period CoveredFocusing mainly on the results of initiatives implemented during the previous fi scal year,the contents are updated as necessary throughout the year.For update history,please see the following page.Scope of ReportThis Book introduces the initiatives and activities of Toyota Motor Corporation and its consolidated subsidiaries etc.in Japan and overseas.The scope of data covered is described in each section.Toyota References in This DocumentToyota Motor Corporation:Information on or initiatives of Toyota Motor CorporationToyota:Information on or initiatives of Toyota Motor Corporation and its consolidated subsidiariesReference Guidelines Task Force on Climate-related Financial Disclosures(TCFD)Sustainability Accounting Standards Board(Reference code SASBTR-AU-is indicated at each applicable part.)P.119 SASB Content Index GRI Standards(Reference code GRI-is indicated at each applicable part.)P.120 GRI Content Index ISO 26000 GuidelinesThird Party AssuranceThird Party Assurance denotes data assured by an Independent PractitionerDisclaimerThis report includes not only past and current facts pertaining to Toyota Motor Corporation and other companies within the scope of coverage of the report,but also plans and projections at the time of its publication as well as forecasts based on management policies and strategies.These forecasts are assumptions or determinations based on information available at the time they are stated,and the actual results of future business activities and events may differ from the forecasts due to changes in various conditions.In cases where information provided in prior reports is corrected or restated and in cases where material changes occur,the details thereof will be indicated in this report.The readers understanding about this point would be appreciated.Editorial PolicyEditorial PolicyUpdate HistoryContentsIntegrated ReportSecurities Reports/SEC FilingsFinancial Results/Operating ResultsSustainability Data BookCorporate Governance ReportNon-fnancialFinancialIR section of Toyotas websiteSustainability section of Toyotas websiteToyota Times websiteSustainability Data Book2 2Promoting SustainabilityEnvironmentSocialGovernanceContent IndexOverviewSustainability Data Book OverviewOverview of Toyota Motor CorporationEditorial PolicyUpdate HistoryContentsJune 2023 Promoting Sustainability Environment Climate-related Financial Disclosures Based on TCFD Recommendations Social Governance SASB/GRI Content IndexDecember 2022 Promoting Sustainability Public PolicyOctober 2022 All pages updated(Review of FY2021 initiatives and layout)August 2022 Environment Climate-related Financial Disclosures Based on TCFD Recommendations SASB/GRI Content IndexJanuary 2022 Environment Strategy and Management,Environmental DataDecember 2021 Promoting Sustainability Fundamental Approach,Public policy Safety Information Security and Privacy (The content transferred from“Governance”to“Society”and expanded disclosure of more information about our contribution to the society.)Business Partners Dealers Diversity and Inclusion Social Recognition Intellectual Property(Newly added)Risk Management Fundamental ApproachNovember 2021 EnvironmentOctober 2021 Quality and Customer Social Contribution Activities Respect for Human Rights Business Partners Supply Chain Diversity and Inclusion Social Data Risk Management Business Continuity Management(BCM)Compliance Bribery/Corruption Prevention MeasuresJuly 2021 Overview of Toyota Motor Corporation Promoting Sustainability Organizational Structure Quality and Customer Quality Respect for Human Rights Health and Safety Diversity and Inclusion Human Resources Social Data Corporate Governance Risk Management Initiatives for Information Security ComplianceUpdate HistorySustainability Data Book3 3Promoting SustainabilityEnvironmentSocialGovernanceContent IndexOverviewSustainability Data Book OverviewOverview of Toyota Motor CorporationEditorial PolicyUpdate HistoryContentsOverviewSustainability Data Book Overview Editorial Policy 1 Update History 2 Contents 3Overview of Toyota Motor Corporation Company Profile 5Promoting Sustainability Fundamental Approach 6 Organizational Structure 6 Materiality(key issues)7 Toyotas SDGs 7 Stakeholder Engagement 8 Public Policy 9EnvironmentPolicy and Environmental Management Fundamental Approach 11 Environmental Management 11 Initiatives with Suppliers 13 Initiatives with Dealers and Distributors 15 Stakeholder Engagement 16Climate Change Fundamental Approach 17 Life Cycle 18 Product 22 Production 25Resource Recycling Fundamental Approach 28 Activities to Achieve Resource Recycling 28Harmony with Nature Fundamental Approach 31 Biodiversity 31 Water Environment 35Climate-related Financial Disclosures Based on TCFD Recommendations Governance 37 Strategy 38 Risk Management 43 Metrics and Targets 44Environmental Data Greenhouse Gases(GHG)47 Energy 48 Water 49 Recycling 50 Waste 51 VOC,NOx,SOx 51 Conversion Factors 51FY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)52Third-party Verification 55SocialRespect for Human Rights Fundamental Approach 58 Organizational Structure 58 Policy Development and Dissemination 58 Human Rights Due Diligence 59 Initiatives for Migrant Labor(Forced Labor)60 Initiatives for Wage 61 Initiatives for Appropriate Working Hour 61 Management and Flexible Work Styles Initiatives for Anti-harassment 62 Initiatives for Inclusion of Diverse Culture 62 Initiatives for Child Labor 62 Initiatives for Freedom of Association 63 Initiatives for Precarious Work 63 Responsible Mineral Procurement 64 Education Related to Human Rights 64Diversity,Equity,and Inclusion(DE&I)Fundamental Approach 65 Organizational Structure 65 Womens Activity 66 Childcare/Nursing Care Support 69 Inclusion of Persons with Disabilities 70 Inclusion of LGBTQ Employees 71 Initiatives Related to Race and Nationality 71 Employment for Over 60s 72Value Chain Collaboration Fundamental Approach 73 Initiative with Suppliers 73 Initiative with Dealers 75Vehicle Safety Fundamental Approach 76 Integrated Safety Management Concept 76 Active Safety 77 Passive Safety 78 Emergency Response 78 Automated Driving Technology 79 Initiatives to Improve Traffic Safety Awareness 79Quality and Service Fundamental Approach 80 Organizational Structure 81 Product Safety Initiatives 81 Quality Risk Management 81 Fostering Quality-oriented Awareness and 82 Culture Coping with Quality Problems 82 After-sales Service 83 Customer Feedback System 84ContentsSustainability Data Book4 4Promoting SustainabilityEnvironmentSocialGovernanceContent IndexOverviewSustainability Data Book OverviewOverview of Toyota Motor CorporationEditorial PolicyUpdate HistoryContentsInformation Security Fundamental Approach 85 Organizational Structure 85 Information Security Measures 86 Preparing for Information Leaks and External 86 Attacks Security for Automobiles 87Privacy Fundamental Approach 88 Organizational Structure 88 Respect for Privacy and Protection of Personal 89 InformationIntellectual Property Fundamental Approach 90 Organizational Structure 90 Intellectual Property Activities 90Human Resource Development Fundamental Approach 91 Recruitment 92 Education and Career Development 92 Evaluation of and Feedback to Employees 94 Employee Engagement Survey 94 Initiative to Promote Psychological Well-being 94Health and Safety Fundamental Approach 96 Organizational Structure 97 Health and Safety Education 97 Initiative for Health 98 Initiative for Safety 100Social Contribution Fundamental Approach 102 Organizational Structure 102 Social Contribution Activities 102Social Data Employees 103 Supply Chain 104 Quality 104 Social Contribution Activities 104GovernanceCorporate Governance Fundamental Approach 106 Corporate Governance Structure 106 Board of Directors 108 Audit&Supervisory Board 109 Executive Compensation 109 Internal Control 109Risk Management Fundamental Approach 110 Organizational Structure 110 Risk Management System 111 Business Continuity Management(BCM)111Compliance Fundamental Approach 114 Compliance Education 114 Bribery/Corruption Prevention Measures 115 Initiatives for Taxation 115 Speak-up 115 Checks to Enhance Compliance 116Governance Data Governance 117SASB/GRI Content IndexSASB Content Index 119GRI Content Index 120Sustainability Data Book5 5GRI2-1,75 Company ProfileOverview of Toyota Motor CorporationUpdated in June 2023No.of plants and manufacturing companies(as of the end of March,2023)No.of R&D centers(as of the end of March,2023)Europe63Other70Japan168North America135Asia264Excluding JapanNo.ofEmployees 375,235(as of the end ofMarch,2023)Asia66,176Europe23,730Japan203,212Other23,117North America59,000No.of vehiclesproduced8,694,032(FY 2023)Asia1,858,509Japan3,788,593Other507,186North America1,768,437Europe771,307No.ofvehicles sold 8,821,872(FY 2023)Asia1,750,773Japan2,069,133Other1,565,337Europe1,029,955North America2,406,674No.of plants and manufacturing companies(as of the end of March,2023)No.of R&D centers(as of the end of March,2023)Europe63Other70Japan168North America135Asia264Excluding JapanFinancial DataFor our major fi nancial data,please see our offi cial website.Financial DataSASBTR-AU-000.ASASBTR-AU-000.BPromoting SustainabilityEnvironmentSocialGovernanceContent IndexOverviewSustainability Data Book OverviewOverview of Toyota Motor CorporationCompany NameToyota Motor CorporationPresident and Representative DirectorKoji SatoCompany Address Head Offi ce Tokyo Head Offi ce Nagoya Offi ce1 Toyota-cho,Toyota City,Aichi Prefecture,Japan 1-4-18 Koraku,Bunkyo-ku,Tokyo,Japan4-7-1 Meieki,Nakamura-ku,Nagoya City,Aichi Prefecture,JapanFoundedAugust 28,1937Capital635.4 billion yen(as of the end of March,2023)Main Business Activities Automotive business Financial services(vehicle loans and leasing,etc.)Other operations(information technology,etc.)No.of Employees(consolidated)375,235(as of the end of March,2023)No.of Consolidated Subsidiaries569(as of the end of March,2023)No.of Associates and Joint Ventures Accounted for by the Equity Method168(as of the end of March,2023)Vision&PhilosophyFor details of our Vision&Philosophy,please see our offi cial website.Vision&PhilosophyCompany ProfileGlobal/Regional DataCompany Profi leSustainability Data Book6 6Organizational Structure Aim Addressing issues of greater importance and urgency on a priority basis while grasping,for example,changes in the external environment and social needs.Initiative Continuously promoting and improving our sustainability activities with oversight and decision-making provided by the Board of Directors.We will work in close liaison with relevant departments to carry out environmental,social,and governance-related initiatives(as indicated on the right).Toyota has appointed a Chief Sustainability Officer(CSO)to lead the engagement with external stakeholders and dissemination of information regarding sustainability activities.Sustainability MeetingSustainability SubcommitteeChairpersonExecutive PresidentDeputy Chief Offi cer,General Administration&Human Resources Group(Senior management positions responsible for sustainability)MembersMembers include 3 external offi cers,the Chief Sustainability Offi cer and the Chief Human Resources Offi cerOffi cers and General Managers from related divisions will participate in keeping with agenda topics such as the environment,fi nancial affairs,and human resourcesFrequencyTwice a year,in principleFour times a year,in principleFunction To help increase corporate value by refl ecting opinions and external advice about key sustainability-related issues in management practices to achieve sustainable growth To implement operations related to the promotion of sustainability To consult with the Sustainability Meeting about key issues and submit reports to the Board of DirectorsFundamental Approach Aim Contributing to the creation of a prosperous society through our business activities based on the Guiding Principles at Toyota while continuing to uphold the spirit of the Toyoda Principles,which we have inherited since our foundation.Aiming to be the“best company in town”that is both loved and trusted by local people to achieve the mission of“Producing Happiness for All”under the Toyota Philosophy compiled in 2020.Contributing to the sustainable development of our society and planet by promoting sustainability under the Toyota Philosophy.Toyota PhilosophyGuiding Principles at Toyota Initiative Advancing initiatives based on our Sustainability Fundamental Policy and individual policies and guidelines.Sustainability-related policies Sustainability Fundamental PolicyEnvironmentEarth CharterPolicy on Harmony with NatureInformationInformation Security PolicyToyota Privacy NoticeHuman rightsHuman Rights PolicySupply chainBasic Purchasing PoliciesPolicies and Approaches to Responsible Mineral SourcingGreen Purchasing GuidelinesSupplier Sustainability GuidelinesPolicy for Sustainable Natural Rubber ProcurementHealth and safetyDeclaration of Health CommitmentBasic Philosophy for Safety and HealthSocial contributionBasic Principles and Policies of Social Contribution ActivitiesComplianceToyota Code of ConductAnti-Bribery GuidelinesTaxationTax PolicyGRI2-1214,17,24,28,29,3-1,26 Fundamental Approach6 Organizational Structure7 Materiality(key issues)7 Toyotas SDGs8 Stakeholder Engagement9 Public PolicyPromoting SustainabilityUpdated in June 2023Management Oversightand decision-makingConsultationOperation Board of DirectorsSustainabilityMeetingSustainabilitySubcommitteeReportsConsultationOpinionsand adviceOperational ExecutionOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityFundamental ApproachOrganizational StructureMateriality(key issues)Toyotas SDGsStakeholder Engagement Public PolicySustainability Data Book7 7Materiality(key issues)Aim Identifying key issues to sustainably enhance our own corporate value while contributing to society in view of the ever-changing social trends,external voices,and increasingly diversifi ed,complicated issues.Initiative Promoting initiatives to realize the six key issues(materiality).Listing issuesMajor references International guidelines,norms(GRI,SASB,SDGs,etc.)Priority items of evaluation organizations Trends inside and outside Japan Risk and opportunity perspectiveEvaluation from internal and external viewpointsExternal Priority items for investors or evaluation organizations Opinions obtained through communication with stakeholdersInternal Factors we have cultivated so far(founding spirit)Anticipated environmental changes(transformation into a mobility company)Evaluation from social viewpoints Value that Toyota can offer society Contribution to solving social issues(SDGs)Discussion Discussion at Sustainability Meeting attended by Outside Directors and Audit and Supervisory Board MembersEnhancing corporate valueContributing to society(SDGs)Respect for people,empower various human resourcesMake safe,reasonably priced,high-quality carsMaintain a stable business baseBuild a future mobility societyAddress climate change and promote the use of new energy sourcesMake the value chain resilient and sustainableProcess of identificationBasis for identificationSix materiality issuesTransformation into a mobility companyFactors that we should change or reinforceBusiness(fnancial):Adapt to CASE*Non-fnancial:Commit to ESGFounding spirit Factors that we should continue to maintainPrinciple:Five Main Principles of ToyodaStrengths:Capabilities and technologies of monozukuri(manufacturing),Toyota Production System,cost reduction,quality,many partners,etc.*CASE:Connected,Autonomous/Automated,Shared,and ElectricToyotas SDGs Aim Producing happiness for all individuals in the era of diversification,with a“YOU perspective”that sees the other side of the story.Initiative Promoting initiatives based on the desire of working for the benefi t of others,which has been passed on since our founding.Examples Initiatives for the global environmentInitiatives for a happier societyInitiatives for working peopleSDGs InitiativesOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityFundamental ApproachOrganizational StructureMateriality(key issues)Toyotas SDGsStakeholder Engagement Public PolicySustainability Data Book8 8 Aim Engaging in stakeholder-oriented management to contribute to sustainable development and striving to maintain and develop sound relationships with stakeholders through open and fair communication.Initiative Holding dialogues with major stakeholders through Toyotas relevant divisions and offi ces around the world.Disseminating information about Toyotas initiatives through dialogues with external experts to examine,for example,the direction of our sustainability-related initiatives,and through speech delivery at external lecture meetings.Stakeholder EngagementCommunication methods and frequencyIncorporation into corporate activitiesCustomersToyota Customer Assistance Center(as needed)Responding to customer opinions by telephone and email formsImproving customer satisfaction activitiesOffcial website,product websites(as needed)Disseminating company information and business details,providing FAQs,etc.Information sharing through social media(as needed)Disseminating company information and business detailsDisseminating information in response to customer demandCommunication methods and frequencyIncorporation into corporate activitiesEmployeesJoint labor-management roundtable conferences/Labor-management meetings(several times a year)Discussions/negotiations,opinion exchanges and mutual understanding regarding labor-management issuesStrengthening labor-management relationshipsEmployee satisfaction survey(once or twice every two years)Surveying employees satisfaction regarding workplace culture and company lifeCommunication methods and frequencyIncorporation into corporate activitiesBusiness PartnersDealersVarious meetings,seminars,and events (as needed)Sharing corporate policiesBuilding closer,mutually benefcial relationships based on mutual trustSharing purchasing policies and strengthening mutual study and partnershipsCommunication methods and frequencyIncorporation into corporate activitiesShareholdersShareholders Meeting(once a year)Unconsolidated and consolidated fnancial statements,audit and supervisory board reports,and deliberation and decisions on resolutionsFinancial results announcement(four times a year)Press and telephone conferences to explain Toyotas fnancial status and initiativesIndividual meetings(as needed)Explanation and discussion on fnancial status,local projects,technologies,products,etc.with institutional and private investorsImproving management quality through constructive dialogueInvestor information website,etc.(as needed)Providing information on fnancial status,business details,etc.Communication methods and frequencyIncorporation into corporate activitiesLocal Communities/Global SocietyRoundtable conferences with local residents (several times a year)Explanation and discussions with local representatives on Toyotas initiatives at each plantInviting local communities to Toyotas events and participating in local events(as needed)Social gatherings with local residentsParticipating in joint projects between public and private sectors(as needed)Cooperating in progressive initiatives such as verifcation testsParticipating in economic and industry organizations (as needed)Participating in collaborative activities with NGOs and NPOs(as needed)Social contribution activities in each region around the worldRecognizing social needs in individual regionsToyotaBased on our“Customer First”policy,we take measures to incorporate the comments and opinions of customers into better products and services.Timely and appropriate disclosure of operation and fnancial results to shareholders and investors,and constructive dialogues toward sustained growth and enhancement of corporate value.Bilateral communications to build teamwork and foster a sense of unity based on a labor-management relationship founded on mutual trust and responsibility.Close communication to achieve a mutually benefcial relationship based on mutual trust.SuppliersSupplier conventions,various meetings with supplier associations,seminars,and events (as needed)Dialogue with various stakeholders to build good relationships with local communities and to solve global social and environmental issues.Improving workplace culture and evaluating and planning various labor-management and personnel policiesPromoting mutual understanding and forming stable local communitiesImproving advanced technologies and recognizing/resolving social issuesIntroducing policies to improve the vitality of the nation/industriesMajor initiative we participate inWorld Business Council for Sustainable Development(WBCSD)P.16 Stakeholder Engagement(Environment)P.59 Engagement with stakeholders(Human Right)OverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityFundamental ApproachOrganizational StructureMateriality(key issues)Toyotas SDGsStakeholder Engagement Public PolicySustainability Data Book9 9Public Policy Aim Carrying out Toyotas mission“Producing Happiness for All”and aiming to be the No.1 company in the community,loved and relied on by local residents.For example,in terms of climate change,it is very important to expand the use of electrified vehicles worldwide.In the process of achieving this objective,governments and the authorities concerned have a crucial role in developing energy policies and infrastructure.Working and learning together with stakeholders,Toyota will maximize its contribution to local communities and the development of public policies in consideration of policies,social needs,technological advancement,and various customer needs while always bearing transparency and compliance in mind.Initiative Building good relationships with governments and their administrative agencies,regulators,political parties,NGO,local communities,customers,and other stakeholders.Participating in economic organizations and industry associations around the world and many officers and employees are involved in and contribute to formulating policy recommendations.Disclosing Toyotas Views on Climate Public PoliciesBeing more transparent about our activities,building and increasing trust with the public,and further strengthening cooperation between all stakeholders by summarizing our views on key climate-related policies and providing an overview of the industry associations to which we belong.Toyotas Views on Climate Public Policies 2022OverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityFundamental ApproachOrganizational StructureMateriality(key issues)Toyotas SDGsStakeholder Engagement Public PolicySustainability Data Book101011 Policy and Environmental Management17 Climate Change28 Resource Recycling31 Harmony with Nature37 Climate-related Financial Disclosures Based on TCFD Recommendations47 Environmental Data52 FY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)55 Third-party Verif cationEnvironmentOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationSustainability Data Book1111SDGs Contri-butionsGRI2-25,2-27,3-3,305-6,306-2,308-1,308-211 Fundamental Approach11 Environmental Management13 Initiatives with Suppliers15 Initiatives with Dealers and Distributors16 Stakeholder EngagementPolicy and Environmental ManagementUpdated in October 2022Environmental Management Aim To achieve sustainable development together with society,establish the environmental management system with consolidated subsidiaries to ensure through risk management and compliance and maximize environmental performance.Always improve the management system and quickly respond to changes in environmental issues including worsening climate change.Initiative Establish an Environmental Management SystemEstablish strategies,policies and approaches in each fi eld under the lead of the three committees of the Environmental Product Design Assessment Committee,the Production Environment Committee,and the Resource Recycling Committee,under the supervision of the Board of Directors.Share our target with the following companies and proceed with environmental managementConsolidated subsidiaries on a fi nancial accounting basis(493 companies).Unconsolidated vehicle production companies(9 companies).Set environmental affairs offi ces in the six regions(North America,Europe,China,Asia,South America,and South Africa)and proceed with global environmental efforts with consideration given to local conditions.Global Environmental Management FrameworkToyota Motor CorporationRegion Strategy/targetImplementationRegional 2025 Target ShareCooperateE.g.,various globalcommitteesToyota Environmental Challenge 2050Global 2025 TargetEnvironmental Product Design Assessment Committee,Production Environment Committee,Resource Recycling Committee,etc.E.g.,Regional Environmental CommitteeNorth America,Europe,China,Asia,South America,and South AfricaOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental Approach Aim Reduce the environmental footprint and contribute to the sustainable development of society and the world throughout all areas of our business activities.Build close,cooperative relationships with a wide spectrum of individuals and organizations involved in environmental preservation.Initiative Toyota Earth CharterConducting continuous environmental initiatives since the 1960s.Established the Toyota Earth Charter in 1992(revised in 2000).Formulated our long-term initiatives for the global environment by 2050 as the Toyota Environmental Challenge 2050,in 2015.*Subsequently advancing various initiatives centered on this.*2015:The 21st session of the Conference of the Parties to the United Nations Framework Convention on Climate Change(COP21)was held this year.Vision&PhilosophyToyota Earth CharterP.45 Toyota Environmental Challenge 2050Fundamental ApproachEnvironmental ManagementInitiatives with SuppliersInitiatives with Dealers and DistributorsStakeholder EngagementSustainability Data Book1212Major Targets and Progress(excluding the initiatives to address climate change,recycle resources,and ensure harmony with nature)2025 Target2021 InitiativesChemical substances Implement thorough management by carefully considering legal trends in each country and region Steadily introduced vehicles that satisfy the latest legal requirements and substance regulations Continued to evaluate and improve chemical substance management structures by auditing and investigating suppliers processes in various regions on a global basisAir quality Product:Steadily introduce low-emission vehicles and boost further improvement by introducing and increasing ZEVs*Production:Continue volatile organic compound(VOC)emission reduction activities and maintain industry-leading level*Zero Emission Vehicles:Vehicles that have the potential not to emit any CO2 or nitrogen oxide(NOx)during driving,such as battery electric vehicles(BEVs)and fuel cell electric vehicles(FCEVs)Product:In response to stricter emission regulations in various countries and regions,introduced vehicles that satisfy those regulations Production:Promoted a switch to water-based paint in the bumper painting processTook measures to completely eliminate the use of ozone-depleting substances(ODS)No significant releases occurred P.51 Environmental Data TWaste Promote activities to thoroughly reduce waste globally and aim to minimize the volume of resource input and waste,with the environment and economy in balance Promoted waste reduction and efficient use of resources through measures aimed at the sources of waste P.51 Environmental Data R Production:Maintain the volume of waste per vehicle produced at each plant below 2018 levels Production:Took measures aimed at the sources of waste,developed and deployed production technologies,and implemented daily reduction activities Hazardous waste management:Ensured that end-of-life vehicle treatment was in compliance with the laws and regulations of each country at every plant Did not import or export any hazardous waste listed in Annexes I,II,III or VII of the Basel ConventionLogistics packaging Implement initiatives to reduce and recycle plastics used in packaging and recycle them Promoted kaizen with a focus on increasing use of returnable containers and reducing the weight of packaging P.51 Environmental Data SRisk management Thoroughly comply with environmental laws and regulations and strengthen proactive prevention activities for environmental risks in each country and region Two non-compliance issues(one concerning abnormal water quality and one concerning exhaust gas)in the production area Completed measures for the cases One complaint(concerning noise)in a non-production area Completed measures for the caseOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationISO*1 14001/ISO 50001Certification as of 2021ISO 14001:All plants of Toyota Motor Corporation and consolidated subsidiaries(122 companies)ISO 50001:8 of the above companies*1 International Organization for StandardizationRisk Management and ComplianceTake the following actions at the operating bases of Toyota Motor Corporation and consolidated subsidiaries:Implement preventive measuresUndertake risk management in accordance with criteria that meet or exceed laws and regulationsHave systems in place,just in case,to respond to a violation or a complaint in a timely manner,and if such a situation occurs,work to prevent reoccurrence through identification of root causesConduct mutual learning for plants by sharing practices among Toyota Group companies Maximize PerformanceProceed with initiatives to address climate change,resource recycling,and harmony with nature based on the Toyota Environmental Challenge 2050.P.13 Initiatives with Suppliers P.17 Climate Change P.28 Resource Recycling P.31 Harmony with NatureFor chemical substances,air quality,and other compliance-related initiatives,and also for waste and logistics packaging,proceed with initiatives based on the 2025 target.Outside Evaluation for Our Commitment to Climate Change and Water SecurityCDP*2 Corporate ResearchSelected for inclusion in the A List,which is the highest evaluation for climate change and water security by the CDP(in December 2021).*2 An international NGO that encourages and assesses corporate disclosures on environmental initiative based on calls from global institutional investors with high levels of interest in environmental issuesFundamental ApproachEnvironmental ManagementInitiatives with SuppliersInitiatives with Dealers and DistributorsStakeholder EngagementSustainability Data Book1313OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party Verification Aim Work together with suppliers toward reducing the environmental footprint throughout the product life cycle based on the concepts of mutual trust and mutual benefit,thereby contributing to accomplishing a sustainable society.Initiative Green Purchasing*PolicyImplementation of the Green Purchasing GuidelinesAsk all tier 1 suppliers,including new suppliers,to implement basic initiatives based on the TOYOTA Green Purchasing Guidelines(the“guidelines”),and also deploy and enlighten the guidelines to all tier 2 and subsequent suppliers so that the guidelines will take root.Ask through the guidelines that initiatives be taken toward reducing the environmental footprint at each companys production plants and throughout the product life cycle,and that related legal compliance be ensured.*Prioritizing the purchase of parts,materials,equipment and services with a low environmental footprint when manufacturing productsOverseas Practices related to the Green Purchasing PolicyAsk the purchasing base in each region to implement the guidelines in line with local conditions and make continuous efforts.CasesToyota Motor North America(North America)Updated the existing guidelines and issued the Green Supplier Requirements in April 2021,and reinforced environmental management by including compliance with requirements(CO2 emission reductions)in the terms and conditions.Green Purchasing Guidelines Supplier Sustainability GuidelinesCompliance with the GuidelinesReferred to the possibility that if we do not observe improvement after the occurrence of a suppliers violation of the guidelines,such as non-compliance with laws and regulations,the transactional relationship may be subject to review.Already informed tier 1 suppliers of these points by including them in the Supplier Sustainability Guidelines(revised in 2021).Supplier Sustainability GuidelinesMonitoringSelf-assessment SheetUse a self-assessment sheet to confirm the status of initiatives by each company and share the results.FY2022 ResultsReceived responses from 227 main companies in Japan and provided feedback on the scoring results.CDP Supply Chain ProgramIntroduced the CDP Supply Chain Program in 2015 to support continuous environmental initiatives conducted with suppliers,enabling us to determine the suppliers risks,opportunities and initiatives on climate change and water security.Create opportunities for environmental communication by annually holding briefing sessions and response guidance where we share information on social trends and Toyotas environmental policies,and provide feedback on response results,with the number of participating suppliers increasing every year.2021 ResultsReceived responses from suppliers accounting for approximately 83 percent of the total purchasing value by Toyota Motor Corporation.Approximately 54 percent of these suppliers reduced their CO2 intensity(per unit of net revenue)compared to the previous year.(Affected by the sluggish production due to the COVID-19 pandemic,the fluctuation rate was greater than that of the previous year.)Main Results of the CDP Supply Chain Program(2021)Climate ChangeWater SecurityNumber of responding companies133118Response rate9895Percentage responding“Yes”Governance(board-level oversight,corporate policy)9576Identifying risks8968Integrating issues into business strategy9475Setting quantitative targets9470Initiatives with SuppliersFundamental ApproachEnvironmental ManagementInitiatives with SuppliersInitiatives with Dealers and DistributorsStakeholder EngagementSustainability Data Book1414OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy a