25 Life Is On | Schneider Electric www.se.com 2021 Sustainable Development Report • It is particularly heavily involved in the working group on sustainability (chairing environment and circular economy groups) and in the work on the rational use of energy. • It chairs the IEC TC111 Committee on Environmental standardization of Electric and Electronic Equipment and IEC TC 23 Electrical Accessories (protection devices, wiring devices, home and building control systems). • It is the secretary of IEC SC23K on Energy Efficiency Products, Systems and Solutions. • In 2018 it led the UPS manufacturers’ group in the EU Commission’s Product Environmental Footprint (PEF) pilots for defining rules to assess the PEF of products put on the EU market, prior to its implementation of the European policy. • It chairs ISO TC 184 (Automation systems and integration). Digital transformation Digitization is the key driver for the advanced manufacturing, optimizing the production with more flexibility, more interoperability, more predictability, and continuity, providing a new level of system efficiency and sustainability. More data, software and tools enabling virtual descriptions, defined in digital twins, creating new capabilities and services combined with Machine learning and Artificial Intelligence. That’s why Schneider Electric is strongly involved in ISO and IEC technical committees, and association like Industrial Digital Twin Association to deep dive and deploy the Asset Administration Shell through industrial Use Cases of the standardized digital twin and in Universal Automation.Org, to address a more functional and distributed approach for the orchestration of industrial systems. National committees Schneider Electric chairs many French standardization committees hosted by AFNOR (French standards organization) and in other national committees, such as the chair of the French and Swedish Committees for environmental standardization and the French Committee on Circular Economy. It was a major contributor to smart manufacturing initiatives such as the AIF in France. Notably, it is a member of the Council Board and of the IEC Conformity Assessment Board. 1.6 Main ESG risks and opportunities 1.6.1 Evaluation methodology As part of its Extra-Financial Performance Declaration, the Group presents the main risks and opportunities identified with respect to major societal challenges in this section. In order to compile the list of main extra-financial risks for the Group, a panel of both internal and external tools is used to address the expectations of its stakeholders as best as possible. The Group Sustainability team leads the evaluation, working in close collaboration with the Group Risk Management function and with the Duty of Vigilance Committee. The Group’s corporate governance bodies supervise the development of internal control and risk management systems. The Audit & Risks Committee has particular responsibility for following up on the efficiency of internal control and risk management systems and reports to the Board of Directors. Internal tools: • A regular stakeholder consultation (materiality assessment and matrix), at least once every three years (last exercise done in 2020); • The Group risk matrix, led by the Group Risk Management function, updated every year; • Specific committees (Carbon, Human Resources, Ethics, etc.); • Vigilance risks matrix. Continuous monitoring of external signals and international frameworks: • Regulatory framework: the key topics listed under Article R. 225-105 of the French Commercial Code (Extra-Financial Performance Declaration); • International institutions/organizations (United Nations Global Compact and SDGs); • Environment, Social, and Governance (ESG) rating agencies; • Specific requests from investors and customers; • Recommendations from the Task Force on Climate-related Financial Disclosures (TCFD), and various frameworks (SASB, GRI, etc.). The analysis covers the entire value chain of the Group and its stakeholders: suppliers and subcontractors, transactions, customers, as well as Schneider Electric’s scope – extending to the activities at its Foundation – on cross-functional, environmental, social, and societal topics, human rights, and anti-corruption, with a double materiality approach. Each topic is monitored by the relevant departments and their management teams, or “Risk Overseers”, who are in charge of proper risk assessments and the implementation of mitigation and prevention actions. The main departments and managers are: • Sustainability, Access to Energy, and Environment, and the Global Sustainability SVP and Chief Strategy & Sustainability Officer; • Human Resources and the Chief Human Resources Officer; • Procurement and the Chief Procurement Officer; • Governance, Safety, and Ethics, and the Chief Compliance Officer and Chief Governance Officer. The main identified risks are quantified on probability of occurrence and magnitude of impact by these departments to determine gross risks, and an assessment of current mitigation measures informs on potential net impacts. Extra-financial risks presented here are gross risks, i.e., absolute risks before a mitigation plan is implemented. On this basis, the list of extra-financial risks is reviewed and validated by relevant SVPs, the Board of Directors’ secretariat, Internal Audit team, Group Risk Management function and presented to the Human Resources & CSR Committee and to the Group Sustainability Committee at least every 3 years, in coherence with the SSI calendar. Seven main risk categories were identified and are presented in detail in the following pages: • Business conduct • Corporate governance • Cybersecurity and data privacy • Environment • Product, projects, system quality and offer reliability • Human rights • Responsible workplace • Talent development and competencies