www.se.com Schneider Electric 34 2021 Trust Report 12 Vigilance with local communities In 2020, Schneider Electric extended the scope of its risk analysis to communities. The notion of communities, here, corresponds to people living in a geographic proximity of Schneider’s local operations. As a result of this proximity, their conditions of living could be affected by the Group’s activity. Schneider’s local operations can be of two types: • Local facilities, such as a factory or an office building. • Local project sites where Schneider is operating as a contractor or subcontractor for a customer. 2020 was the first time Schneider Electric was formally addressing this risk analysis for communities, developing a framework with the help of an external consultant. In 2021, the Group deepened its analysis by selecting the sites that may present some risks for communities and conducting an analysis specifically for each of these sites. 12.1 Communities living around Schneider’s local sites 12.1.1 Risk assessment for the 30 largest Schneider sites This detailed risk evaluation covers the 30 largest sites by size and employees, both commercial and industrial. Potential impacts analysis The first step of this evaluation was to analyze the potential impact that a Schneider site may have on its surroundings. For that purpose, a comparison was made between the size of the site, and the size of the urban area surrounding it. To take a practical example, in Shanghai, a large Schneider Electric office site may be important at Schneider level (>2,000 employees) but will have very little impact on its immediate urban surrounding (Shanghai is a multi-million inhabitants city). On the opposite end, a smaller site may have a bigger impact on its rural surrounding in Africa or South Asia. Risk nature and level The second step was to qualify the natures of risk and their level, using public data available at country level on topics such as ethical standards (National Corruption Index), individual development (Human Development Index), or health and human rights (Human Right score). Using this data, a composite country risk index was built to reflect the risk level for countries where Schneider’s main sites are located. Conclusions The third step was to combine Schneider’s site impact level with the composite country risk index. The overall result shows that the level of risk on local communities living around Schneider Electric sites is “low” in most cases. This owes mainly to the fact that the Company is usually located in large, urban, or peri-urban areas, crowded with many similar or larger companies. In case of factories, they are mostly located in already existing dedicated industrial areas, with solid infrastructures and transportation networks, and Schneider Electric’s presence does not have an impact on them. Among the top 30 sites, the Group only identified a few that may have a “moderate” impact on local communities and found no site where Schneider Electric could have a “high” or “very high” impact. It is to be noted that although we speak about risks, the notion of impact can also be positive, as it is part of Schneider Electric’s policy to include local parameters in its sourcing policy: providing employment; including a percentage of local companies and contractors for services (catering, maintenance, etc.). 12.1.2 In depth evaluation of 5 sites The management and safety officers of these sites are engaged with a dedicated questionnaire, covering environmental and human rights potential risks and opportunities for the local communities. The result of the evaluation shows that among the five sites reviewed, four have no significant impact and one may have some specific impacts. Four sites with low impact, well mitigated: • The four factories studied are located within dedicated industrial parks, with specific infrastructures including transportation and access. No competition for local resources (water, power, staple goods, etc.) were reported. Their impact on the urban surroundings is low, as they are either located next to a very large city, or in one case, in the countryside and at a reasonable distance from the nearest village. • These sites provide a significant source of employment for local people. Besides, these entities foster local development initiatives such as supporting schools, cultural programs, or local infrastructures (such as hospitals). • The industrial activities performed on these four sites are mostly the assembly of components. There are some marginal activities of plastic injection that are subject to local and national regulations, with regular compulsory reporting. • One of the sites is part of an industrial park, that includes housing facilities for workers (dormitories). These facilities have been recently enhanced, are compliant to local standards, and have not been subject to any specific alert report. However, they remain a point of attention and follow-up on Schneider’s side. One site with medium risk, mitigation actions in progress: • This specific site is hosting an industrial process that involves the use of chemicals. Although these are not critical and restricted substances, they are required to be monitored and processed specifically. • The site is located close to a small urban area, therefore risks of marginal pollution are present. • Several mitigation actions have been implemented by the local team. A specific review of the adequacy of these measures is in progress.