www.se.com Schneider Electric 106 2021 Sustainable Development Report 4 Being efficient with Resources 4.3.9 Circular business models The risks that Schneider Electric sees are around the perception of “one size fits all” for circularity, as well as the temptation to see it through a waste or recycling lens, and the focus on developing the related guidelines, governance, and standards based on this perception. • Product durability versus shorter-term waste loops: all resources are not equal in their thermal, mechanical, or electromagnetic profiles. For the industrial sector, the biggest impact of the circular economy will come from the promotion of reparability, upgradability, “retrofitability”, extension of lifespan, and of related “product second- and third-life services”. Schneider’s products are highly technical in nature with a long lifespan and are highly unlikely to end up as ocean plastic waste, yet a risk that the emerging regulations may be too “resource/waste- centric” can be seen. To meet quality and safety expectations, and adhere to stringent electric and electronic equipment standards, recycled materials are sometimes not available in either quantity and/or quality. The Group actively advocates sector-specific approaches. • Ensuring the safety of people and assets through qualified and certified services. Indeed, while promoting services to extend the products’ lifespan, Schneider grows the ranks of certified experts on its products (through thousands of Field Services Representatives). Leveraging the circular economy, there is a fantastic opportunity to enable more repair, retrofit, and recycling services, on condition that concerned product categories are adequately maintained and serviced by qualified and certified experts. There are opportunities to leverage the circular economies, both externally with customers and internally in operations. Schneider’s value propositions have long delivered resource efficiency, enabling customers to “do more with less”. Schneider’s deeply ingrained belief in the circular economy helps create a win-win-win-win ecosystem: good for the planet, good for customers (lower Total Cost of Ownership, lifespan of assets, etc.), good for the Company as a business (customer intimacy, stickiness, etc.), and good for its people (meaningful jobs, pride to take part in saving resources and energy, etc.). Through circular capabilities such as local models of reuse, retrofit, repair, refurbish, and take-back, and by unleashing the potential of IoT, connecting and digitizing products (predictive maintenance, performance optimization, leasing, pay-per-use, performance contracting), Schneider creates shared value for its customers. Most of Schneider’s new products are digital, connectable, ensure full product lifecycle management and predictive maintenance, and guarantee optimum performance, hence enabling the Group to move towards customer-intimate models like subscription, performance contracting, and leasing. The first focus, before considering end-of-life, is to prolong the lifespan of products. Those solutions, using up to 60% less materials than using brand new equipment, enable pull-through and constant payback, increase customer stickiness, and long- term relationships. Schneider’s first circular distribution center Since 2020, the Schneider Electric site in Bourguebus, France has supported the Group’s strategy to help accelerate its transformation towards the circular economy. Bourguebus helps deliver on 4 key aspects of Schneider’s circular economy strategy including: • Repack: repackaging of new Schneider products whose packaging has been damaged. • Reuse: sorting, selecting, redistributing never-energized Schneider products that are unsold and/or returned by our customers under the “Circular Certified” label. • Refurbish: managing the supply chain for collecting used Schneider products and sending them to the Schneider Electric Privas, France partner site for repair and managing customer orders on our second-hand web platform. • Recycle: dismantling of products to recover and resell the valuable materials. Schneider Electric’s Bourguebus site, France Bourguebus’s innovative circular economy transformation, along with the added value proposition of the “Circular Certified” label, has led to saving 4M€ of stock in 2021 and has avoided 950 tonnes of CO 2 e. In 2022, the site will continue to grow circular industrial capabilities to support business innovation and differentiating offers to customers. This includes capabilities such as refurbish, remanufacture and reverse logistics. One particular customer- centric project will include developing a website that will support the take-back of Schneider products at customer sites. External engagement Schneider Electric has been part of task forces on circular economy, playing leadership roles in multi-stakeholder dialogs. For example, the Group is active in France’s Circular Economy Roadmap and engaged in China with MIIT (Ministry of Industry and Information Technology) on circular strategy, leading AFEP, Gimélec, FIEEC, IGNES, and ORGALIM discussions for its sector on circular economy, publishing articles, and speaking at conferences (Greenbiz, Gartner, WEF, SCM World, peer-to-peer, EthicalCorp, and WindEurope, among others).