63 Life Is On | Schneider Electric www.se.com 2021 Sustainable Development Report 2.11.6 Vigilance plan for suppliers Supplier risk categories and audit plan Schneider Electric is conducting a specific evaluation of suppliers. This evaluation covers all natures of risks identified and considers specific parameters such as the type of industrial process used by the suppliers, their technology, and the geographic location of those suppliers. This allows the Group to factor in risks that may arise from a country’s specific situation (social, political, etc.). These parameters are compiled in a third-party independent database (Responsible Business Alliance methodology, RBA, ex-EICC, of which Schneider Electric has been a member since January 2018). Schneider’s entire network of tier 1 suppliers (52,000) is processed through this methodology and is refreshed every year with the new supplier baseline. The audit plan started in 2018. 2020 was the third year of implementation and Schneider Electric completed this schedule with 374 audits. From 2021 to 2025, Schneider Electric has defined new objectives as part of the sustainability strategy: expanding from the previous plan, the Group set an objective to conduct 1,000 on-site audits on high-risk suppliers and deploy 3,000 self-assessment audits for other suppliers. This audit plan is integrated into the Schneider Sustainability Essentials (SSE). Overall plan For our 2021 plan, the Group identified ~1,300 “high risk” suppliers; this number varies depending on the year. The 2021 – 2025 overall ambition is to cover 1,000 suppliers through on-site audits, directly or through third parties, and 3,000 through a remote assessment. ~52,000 suppliers RBA Risk assessment SSE #17 indicator: 4,000 suppliers assessed under Schneider Electric’s ‘Vigilance Program’ • 374 audits conducted in 2018-2020 • + 1,000 audits 2021-2025 3,000 suppliers targeted for self-assessment evaluation plan in 5 years 1,300 high-risk suppliers targeted for on site audit 1 2 3 On-site audits Schneider Electric’s audit questionnaire and audit methodology are fully aligned with the RBA framework. The RBA framework is linked to the Duty of Vigilance risk matrix categories as follow: • Human Rights: decent workplace: 36 questions, health and safety: 40 questions. • Environment: 21 questions. • Offer Safety: non-applicable in RBA framework. • Business Conduct: 11 questions. • Cybersecurity: non-applicable in RBA framework. In 2021, despite COVID-19 travel restrictions in first part of the year, the Group conducted 205 initial on-site audits with suppliers (audits conducted for the first time with a supplier). These audits allow Schneider Electric to identify non-conformances and request the supplier to implement corrective actions. Re-audits with suppliers already audited were also conducted to review the corrective actions implemented to remediate non- conformances identified during the initial audit. Information and findings regarding on-site audits with new suppliers are described below. A major part of non-conformance in 2021 is related to health and safety, labor standards and management systems (36%, 29%, and 20% respectively). Graph 3 gives the breakdown of non- conformances by topic and graph 4 gives them by geography. Top priority are the most serious non-conformances. For each case, escalation is done at Chief Procurement Officer level. An analysis of the 249 “top priorities” raised in 2021 shows the following issues are the most recurring: • Labor standards (61% of top priority non-conformance issues): lack of respect of working time and resting days (time measurement systems are often insufficient); poor overtime reporting and payment; lack of formalization of working contracts • Health and safety (33% of top priority non-conformance issues): weak emergency procedures; insufficient emergency training issues and preparation drills; insufficient fire alarm and protection systems; lack of medical response equipment; and lack of training. • Environment and management systems (6% of top priorities): lack of administrative compliance, management tools, and systems; and insufficient waste management and pollution prevention systems. Remote self-assessment From 2021 to 2025, Schneider Electric has defined new objectives as part of the sustainability strategy: conduct 1,000 on-site audits on high-risk suppliers and deploy 3,000 self-assessment audits for other suppliers. This year, in 2021, a specific self-assessment questionnaire has been elaborated, building on the experiences of on-site audits performed during the past three years. Among the questions asked, the core ones aim at checking whether the suppliers are compliant on mandatory subjects of labor, human rights, environment, and health and safety. After an initial pilot test, a large-scale launch was made in second half of 2021. At the end of the year, 624 suppliers had submitted answers. Procurement teams are currently in the process of reviewing answers to identify which suppliers may be eligible, in a second phase, to an on-site audit.