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Sustainable development Green and responsible growth driving economic performance

Group policy Schneider Electric has published a charter for its suppliers, called the Supplier Guide Book, which has been renewed in 2016 and whose first chapter sets out its expectations with regards to sustainable development in the following 5 areas: environment, fair and ethical business practices, sustainable procurement, labor practices, and human rights. These requirements are detailed in a dedicated document called the Supplier Code of Conduct. Since 2004, the Group has been encouraging its suppliers to commit to a sustainable development initiative, first and foremost through measuring the proportion of our purchases made with suppliers who are Global Compact signatories. Since 2012, Schneider Electric has wanted to place itself in a continuous improvement process as well as follow up with its suppliers by encouraging them to make progress according to the ISO 26000 guidelines. This approach is strengthened 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 international standard, the rules defined in the ISO 14001 standard, and is informed that energy performance of its supply has been considered as part of the selection criteria. Suppliers also commit to respect all national legislation and regulations, the REACH regulation and the RoHS directives, and, more generally, the laws and regulations relating to 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. Due diligence and results Integration of the sustainable purchases approach in the selection of new suppliers Schneider Electric uses a qualification process called Schneider Supplier Quality Management to select new suppliers. It is based on an evaluation questionnaire combined with on-site audits by Schneider Electric quality specialists. It includes two specific sections on sustainability. The following have been chosen for criteria of evaluation, as most relevant “watch” areas identified for the business of Schneider Electric: E people & social responsibility: training, human rights & ISO 26000, health & safety; E environment: ISO 14001 and energy savings, eco-design, REACH and RoHS, conflict minerals. It is planned in 2018 to strengthen the existing sections and add an item on child labor and forced labor, in connection with Schneider Electric’s vigilance plan. Schneider Supplier Quality Management includes 4 Supplier Assessment Modules, the last being decisive and where sustainable development criteria account for nearly 30% of supplier evaluation. In addition, all these criteria have a minimum level, below which a supplier cannot be selected to work with Schneider Electric. Schneider Electric carried out 358 audits of this type in 2017. Since 2014, the Group has launched an e-learning program which covers expectations in these fields and defines the documents and proof to be obtained from audited suppliers. In 2017, Schneider Electric

has also digitized its Supplier Approval Module tool, making it more efficient and consistent across the organization. Thanks to this new capability, all newly assessed suppliers have their action plan registered in a central database available to all in real time and making supplier interactions more fluid. These are tracked by our supplier leaders with the suppliers on a monthly or pluri-annual basis depending on the severity of the action plan. Promotion of a continuous improvement process based on the ISO 26000 standard Strategic suppliers A statement on the importance of sustainable development is made to each major supplier of Schneider Electric by its Group Procurement pilot after the latter has been trained in the approach. For these suppliers, in 2012 Schneider Electric began an initiative that is based on an evaluation carried out by a third party. Sustainable development has become one of the 7 pillars used to measure supplier performance since 2011; allowing the highest- performing suppliers to become “strategic” suppliers. The performance resulting from the third-party evaluation is one of the key points of the sustainable development pillar. In 2015-2017, the Group has set to engage 100% of its strategic suppliers in a process of continuous improvement on this pillar. Strategic suppliers represent 55% of Schneider Electric’s purchases volume. At the end of 2017, 88% of the Strategic suppliers have passed the third-party evaluation process, representing over 97% of the purchasing volume of these suppliers. This indicator of the Planet & Society Barometer is integrated into the performance incentive of the Procurement employees receiving a bonus. This assessment process requires that the suppliers put in place a corrective action plan. The elements of the assessment are now an integral part of the business reviews scheduled between buyers and suppliers, on a quarterly to yearly basis, depending on the suppliers. This monitoring supposes an improvement from the supplier. In 2017, the assessment process detected 7 suppliers with low performance on the sustainable development axis. This figure is down by around 50% compared to the previous year. At the initiative of the Group’s buyers and with the involvement of its suppliers, a higher degree of maturity on these subjects has been achieved. In particular, the Group has set a target figure in 2017 of increasing the average score achieved in the assessment. This target was reached and the average score increased by close to 5% between 2016 and 2017. All suppliers In addition to the external assessments, we have defined “off-limit” situations which are:

E employee safety risks; E environmental pollution; E child labor.

These situations have been identified as material issues in Schneider Electric’s supply chain and unacceptable for a supplier of the Group. Each buyer is expected to be alert to detect any problem areas related to sustainable development themes when visiting a supplier’s site. Off-limit cases must be addressed immediately or escalated using the specific defined process. To support this approach, training was made available to Procurement teams: basic training on the ISO 26000 standard for all purchasers is

2017 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC

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