61 Life Is On | Schneider Electric www.se.com 2021 Sustainable Development Report 2.11 Sustainable relations with suppliers 2.11.1 Risks and opportunities Schneider Electric has been involved in an ambitious approach to include sustainable development challenges in supplier selection and working processes. This approach is all the more important as Schneider Electric’s procurement volume represents more than EUR 12 billion – and more than 52,000 suppliers. With a complex global supply chain, there are some potential risks that Schneider Electric is committed to mitigating in the areas of health and safety, human rights, ethics, the environment, and sustainable development. Proactively managing upstream supplier risks, through Schneider Electric’s Supplier Vigilance, but also driving ambitious Sustainable Development programs and processes, also improves the Group’s reputation and shareholder value, and greatly lowers legislative and business risks. By working closely with its suppliers to develop their maturity in integrating sustainability, Schneider Electric further de-risks and improves its competitive advantage by continually improving the global supply chain. Key opportunities of collaboration with our partners includes: climate action, circular supply chain models, and socially inclusive workplaces. 2.11.2 Risk identification and management Schneider Electric has a risk management system to identify and manage critical suppliers, and uses a tool, Supplier Risk Management (SRIM), to capture risks and ensure the follow-up of identified cases with an extended source. The Group has also been performing sustainability risk assessments with its own procurement specialists, supported by its Schneider Supplier Quality Management (SSQM) processes and ISO 26000 assessments for strategic suppliers. In addition, Schneider Electric is reinforcing its sustainability risk assessment by geography and type of activity as part of its vigilance plan. Schneider Electric has launched the Trust Line, a professional alert system for stakeholders to escalate any violation of its Code of Conduct/ethics/responsible behavior along the Supply Chain. 2.11.3 Group policy Since 2004, the Group has been encouraging its suppliers to commit to sustainable development initiatives. Since 2012, Schneider Electric has been continually improving as well mandating its strategic suppliers to make progress according to the ISO 26000 guidelines. This approach is supported by the General Procurement Terms and Conditions which all suppliers must abide by: each supplier undertakes to apply the principles and guidelines of the ISO 26000, the rules defined in the ISO 14001 standard. Sustainability is considered as a key selection criteria. Suppliers also commit to respect all national legislation / regulations, REACH regulation, RoHS directives, and, more generally, the laws and regulations relating to the prohibition or restriction of use of certain products or substances. Lastly, suppliers are expected to report the presence and country of origin of any and all conflict minerals supplies in accordance with the requirements of the US Dodd-Frank Act of 2010 known as the “Conflict Minerals” law. In this context, Schneider Electric has a “conflict-free” objective. Schneider Electric publishes a charter for its suppliers, called the Supplier Guide Book, initially launched in 2016. The first section of this articulates expectations for suppliers on sustainable development in the following five areas: environment, fair and ethical business practices, sustainable procurement, labor practices, and human rights. In 2021, the Group adopted a new, revised Supplier Code of Conduct (SCoC), which aligned with the new sustainability commitments of the Group and laid out the most fundamental requirements that need to be met by the suppliers. The key focal areas include environment (climate action, circularity), human rights and decent working conditions, occupational health and safety, fair business practices, grievance redressal, inspection and corrective actions, sustainable procurement, and access to remedy. 2.11.4 Integration of sustainability criteria in the selection of new suppliers Schneider Electric uses a qualification process called Supplier Approval Module (SAM) to qualify new and legacy suppliers. It is based on an auto-evaluation questionnaire combined with on-site audits by Schneider Electric certified auditors. In 2021, to reinforce the assessment on Labor, Ethics, Environment, and Health & Safety, a new auto-evaluation questionnaire has been introduced as part of the qualification process for new suppliers. This self-assessment is the first qualification process step, and only potential new suppliers with approved self-assessments can be chosen to complete the qualification process with the SAM functional audits. The SAM functional audits include different sections on sustainability as a criterion of evaluation, and these sections represent about 15% of the supplier evaluation criteria. The most relevant areas identified are: • People and social responsibility: training, human rights, ISO 26000, and health and safety. • Environment: ISO 14001 and energy savings, REACH and RoHS, and conflict minerals. In 2021 Schneider Electric included SAM in the global Schneider Supplier Portal – Supplier Relationship Management (SSP-SRM tool). Due to this capability, SAM results are available for the Global Supply Chain community, and all newly assessed suppliers have their action plan registered in a central database, available to all in real time, making supplier interactions more fluid. These are tracked by Schneider Electric supplier leaders on a monthly or pluri-annual basis depending on the severity of the risks and classification of the supplier. Schneider Electric completed 740 qualification processes in 2021, including new and legacy suppliers.