www.se.com Schneider Electric Universal Registration Document 2021 76 Chapter 2 – Sustainable development 2.1 Sustainability at the heart of our strategy 2.1.5.2 Materiality analysis 2020 methodology In 2020, Schneider Electric built its third materiality matrix by questioning external stakeholders (e.g., customers, suppliers, international organizations, trade associations, experts, shareholders) and top and senior managers within the Group, including the Executive Committee. Nearly 200 stakeholders have been consulted in total (143 through an internal survey, 54 interviewed in person). Participants were first asked what they felt were the key worldwide trends most likely to impact Schneider Electric in the future, before being asked to assess the significance of 31 issues according to a quantitative scoring scale. Then, participants were interviewed for qualitative evaluation and justification of the given scores. Participants were guided to prioritize the most transformative issues. Issues were scored according to their importance as follows: 1 Medium or low importance 2 Important 3 Critical 4 Chosen in top three most critical topics These surveys and interviews also enabled Schneider Electric to consolidate the relationship with its stakeholders and learn about their expectations. Beforehand, the challenges were defined using a study of the sector’s stakes (analysis of the different CSR guidelines, sector benchmarks, etc.) and a comparison with the 2017 materiality analysis. With the help of consulting firm Utopies, the aim is to ensure that Schneider Electric reports on the most important economic, social, and environmental challenges; identifies current and future opportunities and risks for the business; and updates its sustainability agenda with key stakeholders’ expectations. In particular, the materiality matrix was one of the sources used to design the 2021-2025 Schneider Sustainability Impact and Schneider Sustainability Essentials, and to confirm the topics to be addressed in the registration document. Key learnings Overall, stakeholders point to growing instability – whether environmental, social, political, or economic. This creates uncertainties for businesses, which should work on building resilience: • Climate is the main trend identified externally and internally. It includes the trend for energy transition and electrification, on which external stakeholders expect Schneider Electric to take the lead. • Inclusion and the need for a just transition covering the Company’s extended responsibility to its ecosystem, in particular in the supply chain, to ensure the low-carbon transition equally benefits all. Stakeholders also mentioned the growing expectations in providing ethical and sustainable products. • Resilience, and the move towards more local supply chains, specifically post-COVID-19, can be a way to mitigate geopolitical uncertainty and a rise in protectionism. • Ethics in digital: the growth of digitalization and the need for stronger ethics represents both an opportunity and a risk for Schneider Electric. This covers topics such as the power of data and the ethical use required, the opportunities and dangers of Artificial Intelligence (AI), as well as people’s well-being, or job security in a transitioning world. • Resource scarcity and circular economy showed very high expectations internally. During the discussions, some elements were often mentioned: 1. The vision of the Group, endorsing the link between sustainability and digital, is complex and not always easy to understand for non-experts. Schneider Electric could be more pedagogic in its advocacy. 2. There are high expectations for Schneider to become a globally recognized leader for a decarbonized world, with its products and solutions, and in terms of thought leadership. 3. All 31 topics are deemed important, reinforcing our holistic vision of sustainability. Issues were prioritized based on three groups: − Licence to operate – fundamental “must have” topics such as product quality and safety, and cybersecurity. − Standard issues – topics which are on track, and on which Schneider Electric must remain mobilized (e.g., health and security, environmental excellence, corruption). − Key transformational topics – those which have the potential to transform markets and differentiate Schneider Electric from others (e.g., climate change engagement, circular economy, human engagement). 4. The SSI is a renowned and transformative program which is a source of pride internally, and recognition externally, but which needs a new lease of life: simplified, with increased internal buy-in and awareness.