Report of Activities on Procurement and Supplier Management

| Mensaje del Director de Compras y Seguros 1

Report of activities on Procurement and 1. Presentación Supplier Management and their contribution to the Group’s Sustainability 2020-2021

www.iberdrola.com

Report of activities on Procurement and Supplier Management www.iberdrola.com and their contribution to the Group’s Sustainability | Message from the Procurement and Insurance Director 2

Message from the Procurement and Insurance Director

Within the Iberdrola group, the Procurement and Insurance function is a strategic activity due to its contribution to competitiveness and cost efficiency. In 2020, supplier sustainability was included as one of Iberdrola’s strategic objectives at the group level for the 2020-2022 period and it made a commitment to have 70% of its main suppliers sustainable by 2022. Although improving the sustainability of our suppliers has been one of the individual annual objectives for the Procurement staff for years, this new challenge places greater demands on measuring and improving the sustainability profile of our supply chain. Sustainability is a key value for Iberdrola, both because of the demands and assessments made by our stakeholders (shareholders, financial institutions, customers, etc.), which helps us to positively differentiate ourselves, and because of our own sense of corporate responsibility to contribute to improving the society in which we live, which is in Iberdrola’s DNA. The Procurement Division has a specific Smart Supply Asís Canales, Chain department focused on risk management and Procurement and Insurance Director the promotion of sustainability policies in our supply chain. By relying on the supplier management platform, we measure, evaluate and drive our supply chain to achieve the highest sustainability standards.

2020-2022, key years for the sustainability of the Iberdrola group’s supply chain

Report of activities on Procurement and Supplier Management www.iberdrola.com and their contribution to the Group’s Sustainability | Content 1

Content 1. Overview...... 2 2. Procurement in the Iberdrola group...... 6 3. Policies and procedures...... 15 4. Procurement process transparency...... 28 5. Supplier registration and classification...... 30 6. Suppliers and human rights...... 34 7. Sustainability in procurement management and supplier relationships..... 38 8. Credit risk analysed in suppliers...... 46 9. Risk of fraud and corruption in suppliers...... 48 10. Dialogue with suppliers...... 52 11. Commitment to continuous improvement...... 56 12. Supplier diversity programme...... 58 13. SDG awareness-raising actions...... 60 14. Supplier innovation programme...... 63 15. Supplier of the Year Awards...... 65 16. Main benefits for suppliers...... 67 17. Awards...... 69 18. COVID...... 72 19. Short and medium-term priorities and objectives...... 74 Annex 1: Detailed local information for listed subsidiaries: Neoenergia and Avangrid ...... 77 Annex 2: Example of a Supplier Risk Scorecard in GoSupply:...... 84

Report of activities on Procurement and Supplier Management www.iberdrola.com and their contribution to the Group’s Sustainability | Overview 2

1. Overview

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The mission of the Group’s Procurement and Insurance The Procurement Division is the corporate and centralised execution for the entire Iberdrola group of equipment and material procurement and Insurance (except energy and fuel), construction and service contracts, and insurance programmes (except life, accident, health and Department retirement insurance) to meet the strategic objectives set by assumes and the Board of Directors in terms of cost efficiency, strategic alignment, internal Group regulation, sustainability, ethics and promotes in its compliance with the legislation in force. daily management Additionally, the Risk Management and Insurance Unit participates, also in a corporate and centralised manner, in the values and the management of the Iberdrola group’s operational risks through cooperation with the businesses and corporate areas. commitments In its day-to-day undertakings, the Procurement and Insurance acquired by the Division strives to create value for its stakeholders by assuming and promoting the Group’s values and commitments Iberdrola group in regarding the ethics and social responsibility issues in the Group’s Code of Ethics and Social responsibility policies terms of ethics and . The purchasing process involves mechanisms to ensure transparent, comprehensive and responsible management responsibility throughout the supply chain. This has enabled the company to take on globalisation and internationalisation processes with the confidence that the values and commitments to ethics and responsibility are transmitted to suppliers, regardless of their global location or area of activity.

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When responding to internal and external demands, the Suppliers are Procurement Division is proactive and firmly committed at all levels, developing new capabilities and interacting with considered suppliers from their first contact with the Group. Suppliers are considered strategic players within the Iberdrola group and strategic players the purchasing function has the necessary mechanisms to guarantee a fair, transparent and ethical value chain. within the Iberdrola group

Fight against climate change and protecting biodiversity

Workplace Contributing to the health & safety and wellbeing of our workforce communities development

Priorities of the sustainable development

Promoting plan CSR in the Sustainable economic supply chain growth

Good governance, Innovation, transparency digitalization and stakeholder and quality engagement

The promotion of socially responsible practices in the supply chain is one of the 7 priorities in the Group’s 2020-2022 Sustainable Development Plan: “Energy to Thrive”.

Report of activities on Procurement and Supplier Management www.iberdrola.com and their contribution to the Group’s Sustainability | Overview 5

SUSTAINABLE DEVELOPMENT PLAN 20-22 “ENERGY TO THRIVE”

The `Energy to thrive´ SD Plan demonstrates Iberdrola’s commitment to fight against climate change and to the well-being of society, through the development of more than 350 actions at the environmental, social and governance level. These actions respond to the demands of our stakeholders and place the company at the highest standards of the sustainable development field.

2022 Main targets: Green Hydrogen: projects to H2 produce more than 50 MW of Green energy: we will increase green Hydrogen green energy consumption with an additional 3,300 MW Our networks: reaching up to 75% of digitalized networks in HV & MV Digitalization: 16.7 million E nvironmental smart meters installed Sustainable moblity: we will install 150.000 recharging points by 2025 We led the energy transition for more Fight against climate change: we will reduce our emissions until than two decades to combat climate 100 g CO /KWh Renewables: we will accelerate change through innovation and the 2 investment in clean energy, incorporating more than 12 GW production of clean energy. Water: reduction of water consumption, up to Biodiversity: we will reforest 3 <500 m /GWh with 2.5 million trees, reaching 8 million by 2025 R&D: research and development investments of 330 M € Circular economy: 100% of office waste will be recycled and recovered

2022 Main targets:

Training: we will increase the number of employee training Safety: achieve 99 % of hours to 55 permanent contract

Sensitization: support for Social Action: reach S ocial the initiative Universo Mujer 1.3 million beneficiaries through of CSD across 16 federations the Social Foundations Program We work for the universal access to energy, contributing to improve Driver of employment: creating Excellence: Iberdrola U more than 400.000 jobs at Universities Program, with people’s life quality, creating direct, indirect and induced level more than 40 initiatives employment and assisting those most vulnerable. Training and Education: more Equality: reach 25% of women scholarships and grants reaching in managerial positions and 33.000 beneficiaries maintain equal pay

Access to energy: reaching 11.5 Intelligent solutions: more million people through the products and services tailored Electricity for all program. to our customers, reaching up to 12 million

2022 Main targets:

Cybersecurity: more Sustainable financing: than 1.800 Cybersecurity maximize green financing, currently analyses per year above €15 billion

Compliance: continuous G overnance Plans for 80% of suppliers improvement of the compliance with identified needs for systems of the holding company and We develop best practices at the improvement the group's subholding companies corporate governance level, supporting the sustainable financial market and Responsible supply: to have Implement best practices in the promoting socially responsible 70% of our suppliers with Governance and Sustainability practices in in the supply chain. sustainability policies System Sustainable events: increase in the certification of sustainable New system for 100% centralized purchases events, with at least 5 per year

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2. Procurement in the Iberdrola group

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Mission The Procurement and Insurance Division’s mission is “to set out the strategy and procedures for and supervise the purchasing of equipment and materials (apart from fuel), as well as contracts for works and services, and insurance schemes (apart from life and accident insurance, and health and pensions) for the whole Iberdrola group, in compliance with the strategic aims established by the Board of Directors, adhering to the company’s Corporate Governance System at all times.”

Procurement’s mission perfectly defines the nature of centralisation (permits synergies and the application of best practices for purchases throughout the entire Group) and the 4 fundamental values to be respected:

SERVICE ocus on internal customer ontinuous improvement Iberdrola complies uality and timeliness with the strategic objectives established by the Board of Directors QUALITY AND COMPETITIVENESS PROCUREMENT EFFICIENCY Search for ecellence AND SUPPLIER ontribution of value in suppliers MANAGEMENT Savings and cost reduction

COMPLIANCE thics standards and control Relationship ith suppliers

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Procurement department The Iberdrola group has a common corporate purchasing model. The Procurement department comprises over 265 professionals strongly rooted in the local business and is managed centrally. This enables us to benefit from the talent and proximity to operations of the business areas and corporate fabric of the countries in which we work.

Geographical distribution of Procurement staff

98 59 50

36 21

The Procurement team is organised with a clear focus on “The Procurement the management of purchasing categories, in which specialisation by product/service allows for greater knowledge team is organized of the product and the market, a better relationship with suppliers for collaboration and innovation and improves with a clear focus purchasing efficiency, both internally and in terms of savings. on category In addition, our purchasing categories are grouped by Business, to align purchasing actions with the strategies and management” needs of the businesses, contributing to both their growth and efficiency. In 2020, the categories were grouped into 4 main departments, one for each Business: Networks, Renewables, Liberalised Business and Corporate.

Report of activities on Procurement and Supplier Management www.iberdrola.com and their contribution to the Group’s Sustainability | Procurement in the Iberdrola Group 9

Procurement Management

SR PRS

GR SSSS MS MGM

Reneables Spain ategory orporate ategory etor S ategory holesale rail ategory Meico ategory thers

The Procurement Department is coordinated at a global level, which allows for the identification of synergies and the strategic alignment of purchasing decisions.

Procurement Priorities The current priorities of the Procurement Department are:

• Competitiveness: The growth of the renewable, networks and retail businesses is subject to increasing competition. Procurement is a key element in selecting the right suppliers and optimising costs. The Procure- ment departments of the businesses and countries have annual targets to contribute to the growth of their respective businesses. • Efficiency: Savings are one of the main values added by a centralised procurement department. By optimising procurement costs, the Net Operating Expenses can be improved and the cost of investments reduced. The procurement departments of the businesses and countries have annual savings targets.

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• Sustainability: Sustainability is in Iberdrola’s DNA, and transferring it to our supply chain is one of our key activities as a leading company. The Procurement departments of the businesses and countries have annual targets for improving their suppliers’ sustainability. • Internal Customer Satisfaction: Procurement nego- tiates and optimises contracting for the different businesses and corporate areas. Internal customer satisfaction is measured every year. Given that one of their recurring concerns is the duration of the purchasing process, the Procurement departments of the businesses and countries have annual targets for improving both deadlines and the internal customer satisfaction index. • Digital Transformation: Procurement is responsible for taking advantage of the digital tools available to optimise its processes and contribute to the other objectives. Objectives are set for purchasing systems (IBuy, etc.), process automation and robotisation, and optimisation of data use through business intelligence tools. • Governance and Compliance: The Procurement process must be robust and ensure compliance with the guidelines established in Iberdrola’s corporate policies. Procurement support systems make it possible to increase guarantees that the process complies with the established procedures and to identify deviations to take corrective actions. • Supply Chain Development: For the most strategic equipment and services, depending on the market situation, Procurement must proactively seek suppliers that complement existing ones. This is especially important for Iberdrola’s newest products, such as green hydrogen, or for those where there is a demand and supply imbalance.

Each year, the heads of the various procurement departments have specific objectives related to these priorities. These objectives are linked to the Procurement team’s variable remuneration.

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Key figures: volumes, countries, supplies, suppliers Iberdrola’s invoiced volume for purchases of equipment, materials, and contracting of works and services, and its geographical breakdown for the 2020 fiscal year, are shown +8,600 in the following table: Tenders managed in the year

General supply of equipment, materials, works and services (€ 2020(*) 2019 2018 million)

Spain 2,070 1,815 1,564

United Kingdom 1,484 2,014 1,775

United States 2,790 2,583 1,945

Brazil 1,283 1,622 1,335 +20,000 Suppliers with one or more Mexico 507 510 957 orders during the year Other 360 173 177

Total 8,494 8,716 7,753

(*) Volume invoiced in the year. Amount awarded in 2020: €14,071.1 million. The way these figures evolved in 2020 was significantly These purchase affected by the volumes invoiced by suppliers linked to offshore wind projects in the United Kingdom, onshore wind volumes serve as projects in the USA, and photovoltaic solar projects in Spain. a growth engine These high volumes of purchases drive growth in the countries where the Company enters into contracts, encouraging in the countries business, industrial and social development in those regions, by creating jobs for the service providers and in their auxiliary where Iberdrola industries. Iberdrola’s activity employs an estimated 400,000 contracts professionals in collaborating companies in addition to the Group’s own employees.

In 2020, the Group’s main suppliers were, in alphabetical order:

• Eiffage • Elecnor • Fcc Industrial e Infrastructuras • General Electric • Longi Solar Technology • Northline Utilities • O’Connell Electric • Siemens Gamesa

Report of activities on Procurement and Supplier Management www.iberdrola.com and their contribution to the Group’s Sustainability | Procurement in the Iberdrola Group 12

• Trina Solar Iberdrola follows • Vestas a local supplier None of the main suppliers accounts for 5% of the total volume invoiced in the year. development

Distribution of purchases by supply type in 2020: strategy that has allowed Equipment and Materials the creation of 32 % indirect jobs 68 %

Works and Service

There were no significant changes in the company’s supply chain during the financial year, although it is of note that the Australian company INFIGEN and the French company ALTO POWER have been integrated into Iberdrola’s Procurement model.

Iberdrola follows a strategy of developing local suppliers for its strategic procurements, which has allowed for the creation of indirect jobs and the maintenance of a strong industrial fabric in the geographies in which it operates.

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At the end of 2020, purchases from local suppliers7 amounted to 89% of the total, broken down as follows:

% of general supplies purchased from local suppliers 2020 2019 2018

Spain 82 79 85

United Kingdom 91 84 71

United States 97 98 97

Mexico 63 76 60

Brazil 100 99 100

IEI 8 65 50 65

Iberdrola group 89 89 85

In addition to generating economic wealth and creating direct and indirect employment, Iberdrola acts from a sustainable and responsible point of view as a market leader, motivating suppliers to improve their environmental, ethical and social profiles through activities that promote excellence in management. This goes beyond technical quality and helps to make suppliers more competitive. During 2020 Support for entrepreneurs or start-ups Iberdrola has Iberdrola has been supporting the creation and consolidation of new business projects with a range of significant initiatives, made purchases with the following being of particular note: in Spain from • The volume of purchases by Iberdrola in Spain in 2020 from companies that have been in existence for fewer companies with than 5 years was €91 million, increasing by 68% com- less than 5 years pared to 2019, representing clear support for entrepre- neurship. of service for • Iberdrola has developed its supply chain risk and sus- the value of 91 tainability management model based on the platform developed by the Spanish start-up GoSupply. million euros • Through PERSEO, Iberdrola’s start-up programme, more than €70 million has been invested in start-ups in the energy sector worldwide since its creation (2008).

7 Based on a supplier’s Company Tax ID, it is considered local if it is registered in the main countries in which Iberdrola operates. 8 Iberdrola Energía Internacional

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• Throughout 2020, more than 25 pilot projects have been carried out with start-ups in technological areas such as Artificial Intelligence, Big Data, IoT, robotics and batter- ies, grid maintenance and planning, electric mobility, energy efficiency, facility maintenance, etc. • During 2020, Iberdrola launched 7 challenges to the start-up community in on-shore and off-shore wind power and photovoltaic generation, in electric mobility and in the construction and maintenance of power networks. • In the Innovation section of Iberdrola’s website you can find out which challenges are currently open (https:// www.iberdrola.com/innovation).

INTERNATIONAL PROGRAM 'START-UPS' IBERDROLA - PERSEO KEY FIGURES

+70 million euros invested in startups around the world

+3,000 emerging companies in our ecosystem (increasing at a rate of 300 per year)

€40 million to create and invest in companies that support electrification and difficult-to-decarbonise sectors

8 startups in our portfolio (+25 real tests/year as a first step to establishing a partnership)

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3. Policies and procedures

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Code of Ethics The principles of This is a key element in the integrity of Iberdrola’s business. action included The vision and values incorporated in the Code of Ethics are embodied by principles of conduct that bind the Group in in the Code of how it relates to third parties and represents its commitment to the highest standards of company ethics and transparency. Ethics represent It sets out specific principles for suppliers in accordance with the Group’s principles and values, and is included as an the commitment attachment to orders and contracts. to the highest

Procurement Policy standards of The Procurement Policy , approved by the Board of Direc- business ethics tors, sets out the global framework for monitoring and manag- and transparency ing risks (market, credit, business, regulatory, operational and reputational, cybersecurity and criminal) resulting from the purchase of materials and equipment, and the commission- ing of construction work and services throughout the Iberdrola group. It has an emphasis on compliance with ethical commitments by company employees and suppliers.

The Procurement Policy is based on the following basic principles:

Ethics Rigorously apply the Code of Ethics to promote a strong risk culture and develop an ethical and honest business culture throughout the organisation to support the professional and ethically responsible behaviour of all employees.

Standards and control Establish in a coordinated manner the criteria and controls related to purchasing and contracting equipment, materials, works and services to the benefit of the companies integrated in the Group, guaranteeing full respect for the corporate organisation derived from the Group’s corporate governance system.

Added value Implement the necessary mechanisms so that purchasing decisions benefit the Company and the Group’s companies, guaranteeing a balance between technical suitability, quality and price, as well as the quality of the supplier as a basic condition for adding value.

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Relationships with suppliers Supplier selection Establish supplier selection processes that meet objectivity, impartiality and equal opportunities criteria, ensuring at all times processes are that employees are professional and loyal to the Group and its shareholders, regardless of their own and third-party interests. established that

Promote suppliers’ strict compliance with contractual conditions comply with criteria and applicable regulations, as well as the principles of conduct included in the Code of Ethics . of objectivity,

Promote a supplier relationship policy based on the principles impartiality and of business ethics and transparency, pursuing continuous equal opportunities improvement and mutual benefit, while promoting innovation and development.

Equipment Promote employee motivation and active participation and the training and professional development necessary for them to perform their duties.

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Growth and development Promote continuous, inclusive and sustainable economic growth, productive employment and decent work for all the professionals who make up the Group’s value chain, in line with the eighth Sustainable Development Goal (SDG) approved by the United Nations.

Supplier risk assessment in the procurement policy: The Procurement Policy defines the following supplier risks:

• Credit Risk “A credit risk assessment of the Supplier will be required in major purchases or tenders, seeking sufficient contractual guarantees to ensure all obligations are met.” • Cybersecurity Risk “Processes will be included to identify and establish cybersecurity requirements to mitigate the risks associated with access to The purpose of the the Group’s information and communications and information services and systems by our suppliers and Procurement Policy their subcontractors.” is to establish the • Sustainability Risks “[…] the supply chain will be promoted and driven to achieve high standards global framework of sustainability globally and there should be a continuous measurement model in all three areas of for the control and the model set by the Company: environmental, social management of and governance. The sustainability level of awarded Suppliers will be the risks resulting analysed and assessed. A culture of sustainability will be fostered among the Suppliers, establishing from purchasing improvement plans when optimal levels are not activities reached”.

• Risks associated with Human Resources “[…] the Supplier will be required to indicate in its bid the work it proposes to subcontract, as well as the names of any potential subcontractors. This will be analysed in the context of the assessed proposal” • Tax Risk “No contract will be entered into with any supplier that is not up to date with its fiscal or tax obligations, or any other obligation for which the Group might incur subsidiary liability.”

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Ethical commitments of group suppliers Ethics and The Code of Ethics , which is part of the Governance and Sustainability System, was approved by the Board of Direc- transparency tors in 2002 and last revised on May 11, 2021. are two of the The Code of Ethics lays down specific action principles for suppliers in line with the Group’s principles and values. These Iberdrola group’s principles are annexed to the orders and contracts signed by fundamental the Iberdrola group. pillars The full text of the Code of Ethics is available at: https:// www.iberdrola.com/wcorp/gc/prod/en_US/corporativos/docs/ code_of_ethics.pdf

Suppliers’ ethics mailbox Ethics and transparency are two of the Iberdrola group’s fundamental pillars. Both values are promoted in our relationships with our suppliers and in the suppliers’ own dealings with their business partners.

To this end, Iberdrola has ethics mailboxes for suppliers. The mailboxes guarantee the confidentiality of all information and persons mentioned in such communications and allow anonymous complaints to be processed. These mailboxes can be used:

• To report behaviour that may involve non-compliance with the corporate governance system by any employee in the Iberdrola group or any illegal act or perpetration by a supplier, by any of its subcontractors or by their respective employees, of any act in violation of the law or the Code of Ethics within the framework of its business relationship with the companies in the Iberdrola group. • To ask questions or make suggestions about the Code of Ethics .

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General contracting terms and conditions Iberdrola’s The purchasing conditions of the Iberdrola group are general documents that regulate the relationships between the purchasing Iberdrola group companies and its suppliers; they are usually conditions a basic part of the contractual documentation.

These conditions contain binding contractual clauses for incorporate performance by the parties within the most stringent levels specific clauses of health and safety, occupational risk prevention and environmental respect. They incorporate specific clauses on of the supplier’s supplier corporate social responsibility based on the UN’s Universal Declaration of Human Rights, the Agreements of corporate social the International Labour Organisation and the principles of responsibility the Global Compact (respect for and protection of human rights, eliminating all forms of forced and mandatory labour, preventing all forms of child labour, eliminating all discrimination practices, working against corruption, etc.).

To work with the Iberdrola group, the supplier must adopt the necessary measures to:

(i) Promote good practices that support and respect the protection of human rights. (ii) Avoid complicity — of any kind — in the violation of rights. (iii) Respect I workers’ freedom to join a trade union and the right to collective bargaining and comply with the supplier’s local laws. (iv) Eliminate all kinds of forced and compulsory labour, understood as all work or service required of an individual under the threat of any kind of penalty. Only labour that is offered freely and voluntarily by the individual is acceptable. (v) Reject any kind of child labour in its organisation and respect the minimum working age as governed by current applicable legislation and have suitable, reliable mechanisms to verify the age of its employees. (vi) Eliminate any discriminatory employment and work practice. Discrimination is understood as any differen- tiation, exclusion or preference by reason of race, co- lour, sex, religion, political opinion, nationality or social condition that leads to the annulment or alteration of equal opportunities in employment.

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(vii) Have a preventive approach to environmental issues to achieve sustainable development, limiting activities whose impact on the environment may be harmful.

In relation to the fight against corruption, the Supplier declares, guarantees and commits to:

(viii) Comply with the relevant anti-corruption laws, both now and in the future. The Supplier agrees that they will not offer, promote, pay, authorise or carry out any type of payment, either now or in the future, or directly or indirectly, that may (1) influence any official decision relating in any way to the Contract or any associated activity, with any Affected Party or with the State or any type of governmental body; (2) give themselves an un- fair advantage in relation to the Contract or any associated activity; or (3) obtain or retain business or divert it to any entity or individual, in relation to the Contract or any associated activity.

For this purpose, the “Affected Party” shall be understood to mean any official, director, employee or representative of: (i) any governing body, department or federal, state, auton- omous, provincial or municipal agency of any state; (ii) any international organisation or its departments or agencies; or (iii) any company or other entity belonging to or controlled by the State, including public companies or others in the energy sector; as well as any political party or candidate for political office:

(ix) Maintain complete and truthful accounting records and other documentation relating to the Contract or any associated activity, including those relating to payments made to third parties, in accordance with generally ac- cepted accounting principles.

The Supplier agrees that it will allow Iberdrola, following a request made by the company reasonably in advance, to inspect their accounting records and other documentation at any time. A request will be considered reasonable when it is made at least fourteen (14) calendar days before the inspection date.

(x) It has not made and will not make political contribu- tions, donations or any other type of payment relating to the Contract or with any associated activity, nor will it offer or promise the aforementioned at the request

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of an Affected Party without prior written consent from The supplier will Iberdrola. allow Iberdrola to (xi) If Iberdrola, reasonably and in good faith, believes that the Supplier has breached any of the terms of this review the degree clause, they must cooperate in good faith with Iberdro- la to confirm whether such a breach was in fact com- of compliance mitted. during the term The supplier will inform Iberdrola of any situation in which a breach of the aforementioned principles has been verified, of the contract as well of plans to remedy the situation. If these corrective plans are not adopted, Iberdrola reserves the right to cancel the contract.

When the supplier has to subcontract to carry out the services or deliver the supplies commissioned by Iberdrola, it must establish the principles indicated in the contracting conditions applicable to the subcontractor or reseller.

At all times during the term of the contract, the supplier must allow Iberdrola to review the degree of compliance with the principles established in these clauses.

The full text of the purchase conditions can be found at: https://www.iberdrola.com/suppliers/tenders/contracting- terms

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Procurement procedure At Iberdrola, the The Procurement procedure develops the Procurement Policy . Procurement Management of purchasing equipment, materials, works and/ or services includes the part of the supply chain involved, from Department purchase planning until the contractual relationship with the supplier has been formalised. is in charge of The Procurement Department is the agency within Iberdrola the purchasing that manages this task on behalf of the units or companies heading up the business and their subsidiaries through the procedure following stages:

Request Bidding Award Order Reception Invoice

Procurement procedure flow

In 2020, the Procurement Department renewed its ISO certificate for the quality management system according to the UNE-EN-ISO 9001:2015 standard, which currently covers the companies belonging to the Iberdrola group in Spain, the United Kingdom, Mexico and the United States.

This was a very important milestone and a recognition of the Group’s efforts to integrate the processes and their quality standards and confirmed the consolidation of the corporate purchasing model.

Systems supporting the Procurement activity 2020 was a crucial year for improving and digitalising Iberdrola’s Procurement Department. At the end of 2019, and in line with the Procurement digitalisation plan, two platforms were launched at the same time that have revolutionised purchasing and supplier management processes.

• IBuy, a collaborative global tool that supports the management of procurement processes, including requests for proposals, negotiations with suppliers, contracts and internal approvals of all these processes,

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all in a digital native environment and with robotisation of certain processes. IBuy integrates real-time analysis and risk assessment of each supplier.

• GoSupply, the new Supplier Management platform through a global tool managed by the Spanish start- up GoSupply. This system can classify current and potential suppliers, as well as assess and monitor their sustainability integrating with the IBuy application.

GoSupply is fully integrated with IBuy and can, among other things, monitor compliance with the 2022 strategic sustainability objective for our supply chain.

The IBuy-GoSupply project has been recognised as one of the most innovative uses of SAP technology in projects developed in Spain and Portugal in the 2020 SAP Quality Awards for, among other reasons, incorporating disruptive functionalities such as robotic process automation (RPA) with robots that replicate human actions to reduce the need for direct human intervention and integrating 360º supplier risk assessment systems. The IBuy-GoSupply The implementation of these new platforms has meant the project has been replacement of the previous tender management and supplier registration and classification systems that the Iberdrola recognized as group had in different geographical areas and is an important milestone as it enables uniform, global, efficient and fully one of the most integrated management. innovative uses of Supply chain risk assessment and mitigation SAP technology in The implementation of the new procurement and supply chain systems, IBuy and GoSupply, have made it possible to projects developed improve and systematise the management of risks linked to in Spain and the supply chain. Portugal The procurement system has incorporated the mandatory tasks of risk control of participating suppliers with a focus on being proactive and efficient. Being proactive by requiring analysis from the earliest stages of tenders and efficiency by bringing the data closer to the buyer in the purchasing process itself.

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The scheme reflecting the relationship between the systems is as follows:

Supplier Master data CIG and KPIs Supplier Selection

Supplier Risk Before last Report Sourcing SP negotiation

Proposal of Award Supplier Risk KPIs API

Risk assessment is based on a common model and depends, in each tender, on the nature of the purchased item, the The risk assessment country and business and the amount. This assessment is mandatory at three critical points in the process: is based on a • When the tender is launched, in the selection of common model suppliers to invite to participate in the tender. In this way, the buyer is one step ahead, knowing the risk and depends, in profile and whether any action should be taken at the outset to avoid or mitigate risks. each tender, on

• Before the last negotiation. In this way, risk mitigation the nature of what mechanisms can be established and incorporated into the suppliers’ final offers to ensure procurement was purchased, decisions that are in the best interest of Iberdrola and the country and fair to the suppliers. business and the • Prior to approval by the governing bodies. This last check involves a final analysis to verify that the situation amount has not changed before submitting it for approval.

The assessment of technical, operational and cybersecurity risks is carried out in each of the procurement processes in the technical evaluation of bids and is also included in the

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IBuy system, with specific approval chains depending on the amount, country and business.

Critical suppliers The procurement policy determines the following 3 levels of criticality of supply as a general guide:

HIGH LEVEL MEDIUM LEVEL LOW LEVEL

Critical supply. AssignedA to those Supplies in which substitutionB is Non-critical supply. SuppliesC in supplies in which it is very dicult, possible with limited cost. There are which substitution is not expensive and/or problematic to no significant advance payments. problematic and/or which do not substitute the Supplier. For example: Although they may be few, there aect essential processes. For captive supply (single Supplier), legal are alternative suppliers in the example: sucient number of requirement, essential supply in the nuclear sector, serious eect on the market. Business processes alternative Suppliers, possibility of production process (strategic outsourced to a single contractor rapid substitution, marginal cost equipment), existence of advance whose replacement would not overrun. payments and/or high value guarantees cause significant delays. There are or warranties provided by the Group, historical references of similar high risk of impact on reputation or jobs/supplies without performance countries considered at risk due to their incidents. It does not require high low performance in terms of human labour qualification or technical rights or corruption. The cost of supply complexity. failure would be great expense and/or significant penalties.

Iberdrola’s key suppliers are those that play a strategic role Iberdrola key in meeting the business plans and objectives of the group and vary depending on the Group’s investment plans for each suppliers vary year. depending on the In general, critical suppliers are considered to be those suppliers that, in cumulative value for the year, receive orders investment plans for an amount equal to or greater than 400,000 euros. each year

Number of suppliers % invoices (in €)

2020 2019 2020 2019

Critical Suppliers 1,511 1,534 93.94% 93.86%

Non-critical suppliers 18,370 20.375 6.06% 6.14%

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In practice, “360 suppliers” are monitored on the GoSupply platform if they participate in tenders with an estimated value of 400,000 euros or more.

Tier-1 suppliers The depth of Iberdrola’s supply chain is a challenge when it comes to establishing analyses and conditions beyond direct suppliers (Tier-1). At present, responsibility for the behaviour of the next levels of the supply chain is transferred to direct suppliers through the conditions established in the Code of Ethics and general contracting conditions.

However, alternatives are being explored to improve knowledge and control of subcontractors and suppliers throughout the chain. New technologies and digitalisation that offer opportunities to deepen the supply chain are being explored.

The Value of the Procurement Organisation - Compliance and Control Mechanisms

Internal controls Documented Framework External controls

Procurement Polic Suppliers code of ethics General contracting terms and Procedure and conditions

Sstems and continuous monitoring

Workflow Approvals Monitoring and ertified procure Supplier registration Continuous monitoring User roles promotion ment and classification Fraud DB process Monitoring reports Sustainabilit S

Control in decision making

ecision oint ransparency and Sustainability bectives SG redit and fraudcorruption Signature for Procurement ris analysis Single procurement support system Procurement oordination ommittees and approval by ompliance ith the Governing odies Modern Slavery ct

Ex-post controls Internal Audit Ethics Mailboxes ActionProtocolo guide for actuacin Code of ethics breaches

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4. Procurement process transparency

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Iberdrola has designed its procurement process to guarantee Iberdrola best practices in corporate governance and the principles of business ethics and transparency in all the Company’s areas guarantees the of activity. best corporate The Procurement Department guarantees equal opportunities, applying criteria of objectivity and impartiality in its rela- governance tionships with suppliers, and promoting advertising and competition in the selection processes under a general framework practices, with of management efficiency. the principles of In order to achieve greater transparency in the process, the call for and receipt of bids and negotiation with suppliers is business ethics allocated exclusively to the Procurement Department or, if ap- and transparency propriate, the Procurement Business Manager. in all areas of One of the procurement team’s annual objectives is to final- ise a certain percentage of negotiations through competitive activity of the and transparent closing mechanisms, using sealed bids and/ or electronic auctions. Company

KPIs are also established to monitor the percentage of purchases made from a single supplier, as well as the number of suppliers invited to participate in the Group’s tenders and those considered technically valid who participate in the economic negotiation round. The average number of suppliers invited to bid rose by 6.4% in 2020 compared to the previous year and the number of technically valid suppliers rose by 7.7%.

Periodically, the procurement process is audited internally by the competent unit and by outside firms, and there were no non-conformities detected in this year. Recommendations and areas for improvement arising during these reviews are analysed and implemented to constantly improve the related procedures.

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5. Supplier registration and classification

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Supplier management effectiveness has become an element The global supplier of vital importance enabling constant improvement in the value chain while generating the necessary decision-making management information in the Procurement area. model is the basis Iberdrola’s rapid and profound transformation over recent years has also multiplied our responsibility as a global company, for promoting a placing orders with thousands of suppliers worldwide during comprehensive the year.

The global supplier management model is the foundation on and homogeneous which our comprehensive and uniform corporate responsible corporate supplier management system is based, regardless of a supplier’s location, economic activity and the territorial scope treatment of in which purchases are made. Nonetheless, the Group respects local requirements that may exist in the supplier’s responsible country of origin. supplier One of the essential factors that led to creating this management model is the importance given to facilitating the management registration and classification process for suppliers that:

• Would like to work with Iberdrola • Are participating in a tender • Have been awarded a contract or framework agree- ment to supply equipment and materials or to execute works and services • Have a current service provision contract in and/or outside of Iberdrola’s work centres

The model enables us to standardise and speed up our relationship with suppliers, register them, classify them and share key and updated information with the staff involved in a purchasing process. This clearly results in savings in time, costs and efforts invested in business activities for suppliers and Iberdrola.

It should be highlighted that Iberdrola is responsible for the entire cost of the new Supplier Management System, so suppliers are not required to pay any annual subscriptions. Access to register in the system is open to any company interested on the corporate website, which facilitates the addition of new suppliers to the Group’s supply chain.

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Depending on the criticality of the supplier, Iberdrola will require a certain level of registration and classification on the new platform:

• Elementary Level: Applications from new suppliers • Basic Level: Active, but not critical, suppliers of non- strategic goods and/or services or those which are not technically complex and purchases for minor amounts. Depending on the information provided and internal classification criteria, a supplier can remain at this level or be required to complete a higher level (360º Level). • 360º Level: Active suppliers of strategic and critical products and/or services and purchases for significant sums or a large contracting volume. Purchases under framework arrangements. Registration requires the As of December submission of detailed up-to-date information and 2020, the GoSupply relevant documentation that is used for internal supplier management, sustainability assessment, risk system had 18,800 monitoring and measurement of associated KPIs. suppliers As of December 2020, the GoSupply system had 18,800 suppliers, 5,526 of which were 360 level, 11,699 Basic and 1,575 Elementary. In IBuy 19,165 suppliers had been synchronised with our ERP, 9,006 of which had completed registration (which implies acceptance of the code of ethics, environmental policies and the processing of personal data).

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Factors evaluated when classifying Iberdrola looks suppliers for sustainable, Iberdrola looks for sustainable, transparent, fair and ethical supplies and suppliers. That’s why the Group assesses transparent, suppliers throughout the purchase process, in order to gain an fair and ethical understanding of the potential risks. It checks that their modus operandi is aligned with the Group’s policies, principles and supplies and responsibilities. suppliers The factors evaluated in the classification of suppliers are:

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6. Suppliers and human rights

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In supplier management and during the procurement process, Suppliers are the measures adopted by the Company to protect these rights are based on the Procurement Policy, the Code of Ethics and committed to the the specific clauses regarding social responsibility in the contractual conditions accompanying orders. principles of social

In this way, suppliers commit to the principles of social respon- responsibility and sibility and human rights. During the term of the contract, the supplier must allow Iberdrola to review the degree of com- respect for human pliance with the principles in the contracts and, if breaches rights are detected and remedial plans not adopted, the company reserves the right to cancel the contracts.

Purchases made in countries considered to be at risk because they have not having ratified ILO (International Labour Organization) conventions on forced labour, freedom of trade unions and collective bargaining, and child labour - and countries where, although they have ratified these conventions, observations have been made about weaknesses in their application - are analysed periodically.

In the most recent analysis, at the end of 2020, the percentage of purchases made from suppliers located in risky countries was:

Countries considered at risk of human rights % of purchases violations where purchases have been made9 of total

Brazil 15.1

Mexico 3.7

China 1.6

About 20.4% of general purchases were made in countries where there may be a risk of human rights violations, according to the sources consulted, vs. 23% in 2019.

In the 2020 fiscal year, no human rights issues were detected in our suppliers nor was there evidence of practices that might have violated human rights in the Group’s Procurement area.

9 The criteria used to identify risky countries are the same as those described in the “Protection of Human Rights” section in chapter “III.3. Contribution to the Well-being of our Communities” in the Sustainability Report for the 2020 fiscal year.

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A tour of human rights and your company: Human rights are relevant to businesses because they can have an impact on the human rights of all their stakeholders during the course of their operations.

Iberdrola has prepared an online awareness-raising module on human rights, which is accessible to all suppliers.

We would like to encourage our suppliers to take our virtual awareness-raising tour of human rights and share it with their employees and other stakeholders.

The tour is available on the Human Rights and Business section of the corporate website.

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Alignment of procurement and supplier management with human rights criteria:

Internal mechanisms External Mechanisms with Suppliers

Procurement Encourage rigorous compliance with the Code of Labour Practices: Respect the protection Policy contractual conditions by suppliers, with Ethics of basic human and workers’ rights, as particular attention paid to the principles (Supplier recognised internationally, within their area outlined in the Policy in regard to human Clauses) of influence (forced labour, child labour, etc.) rights

Supplier Acceptance of the Code of Ethics Specific T & Specific contractual clauses relating to the Registration Weighting of the supplier’s status with regard Cs supplier’s social responsibility based on the and to sustainability, labour practices and respect UN Universal Declaration of Human Rights, Classification for human rights ILO Conventions and the principles of the Global Compact

Sanction List Blocking and remedial plan for cases in Traction As a sustainable focused company, we drive Screening which a supplier has been sanctioned or Campaigns suppliers in areas of common interest to there are signs their activities may violate ensure reliable and responsible behaviour human rights throughout the supply chain

Annual New feature: putting in place annual Modern Supplier classification and auditing protocols Improvement improvement goals for the Procurement Slavery adapted to contractual clauses in material Goals Team that are directly linked to improvements Act (United contracts in suppliers’ sustainable development; these Kingdom) are linked to variable remuneration

Sustainable The Procurement Department is a member Sustainability Specific section to assess the supplier’s Development of the Group’s Sustainable Development Assessment CSR and HR performance Committee Committee: guidelines, the objectives set and Model and Plan their KPIs

Transparency Purchase Indicator in risk countries Supplier This promotes supplier commitment and & Reporting Infographic Contribution to Sustainability of the Year improvement and publicly recognises those Annual Procurement and Supplier Award whose performance is outstanding Management Report published on the corporate website

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7. Sustainability in procurement management and supplier relationships

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Iberdrola has the responsibility and the ability to encourage For more than 15 its suppliers to improve their environmental, ethical and social performance through actions that promote excellence in years, Iberdrola sustainability management. has aimed to Commitment to the sustainability of our supply improve the chain at the highest level sustainability of The Procurement Department at Iberdrola has had the goal of improving the sustainability of its suppliers for more than 15 years, its suppliers linked to the team’s variable remuneration. In 2020, this objective was translated into a corporate sustainability objective organised around three fundamental pillars of sustainability that come under the acronym ESG: Environmental, Social and Governance. Iberdrola’s commitment to ESG criteria and its extension to its main suppliers is embodied in the ambitious goal of ensuring that at least 70% of the Group’s main suppliers are subject to sustainable development policies and standards by 2022. This objective is directly reflected in the inclusion of this scale in the evaluation of the Strategic Bond 2020-2022, approved in point sixteen of the resolutions passed at the Iberdrola, S.A. General Shareholders’ Meeting held on April 2, 202010. In particular, the remuneration plan is linked to the increase in the number of suppliers subject to sustainable development policies and standards, such as having a human rights strategy, a code of conduct for its suppliers, health and safety standards (SDG 3) and a global environmental sustainability strategy, including strategies on water (SDG 6), energy (SDG 7) and biodiversity (SDGs 14 and 15).

The objective is supported by a specific assessment model for the supply chain and has been integrated into the new systems implemented by the Procurement Department, both in the supplier classification system and in the purchasing management system itself, incorporating sustainability into decision-making.

10 https://www.iberdrola.com/wcorp/gc/prod/en_US/corporativos/docs/gsm20_Approve- dResolutions2020.pdf

Sustainability assessment model In 2019, the In 2019, the Procurement Department designed and launched Procurement a new sustainability supplier assessment model adapted to the Iberdrola group’s international status and organised around Department the three fundamental pillars of sustainability that come under the acronym ESG: Environmental, Social and Governance. designed and

Supplier evaluation is more detailed and rigorous than launched a new the previous scoring system as it includes the supplier’s supplier evaluation performance in wide-ranging areas: identification of goals linked to the Sustainable Development Goals (“SDGs”), model in terms of management of risks resulting from climate change, circular economy strategy, due diligence in human rights, etc. sustainability

The supplier must provide evidence and supporting documentation for their claims and performance. The model has been agreed upon with internal stakeholders (the Departments of Social Responsibility, Compliance, Sustainability and Environment) and has also been validated by Forética, an external organisation specialising in this area.

For each of the three areas analysed, the following information will be taken into account:

S G RM S GR

nvironmental Policy uman Rights Policies missions iversity SGs iodiversity Management Systems thics and ompliance ater Management ontribution to Society Sanctions ircular conomy Reporting Staeholders Supply hain

The model assesses 43 ESG-related variables using the Go- Supply platform (http://www.mygosupply.com) and is summarised in the KPIs that are part of each supplier. A GoSupply dashboard for a supplier in which risk and sustainability KPIs can be visualised is included in Annex 2 of this report.

Following the analysis, suppliers are classified into two levels: acceptable if their score is over 51 points out of a possible 100 (and at least 30% of the points in each of the ESG axes), and not acceptable in all other cases.

In 2020, 12.376 billion euros, 89.8% of the total amount awarded, was allocated to suppliers that had been evaluated on the basis of this ESG model.

For 2021, improvement targets have been set for the entire Procurement Department related to the percentage of main suppliers that achieve these sustainability levels. The target for 2021 is 65% for the global Procurement Department, with the target being rolled out at the business and country levels.

To monitor this objective, a weekly report has been defined that allows monitoring by business, country and procurement category, as well as identifying suppliers that require an improvement plan. By 2021, the aim is to move to a Business Intelligence tool with daily updates.

Weekly Monitoring Sustainability Supply Chain’s Strategic Objective

The following graph shows the historical evolution of the KPI and the forecast for 2021 and 2022.

Percentage of main suppliers subject to sustainable development policies and standards

70 65

* ** 48 46.6

2019 2020 2021 2022

* In 2019, data based on industry groups, not 100% comparable to later values as the full model was not deployed with the GoSupply platform until November 2019. ** Data based on extrapolating responses obtained before the end of 2020, supplier onboarding year which is ending in 2021.

Suppliers that do not reach the required levels are sent a personalised ESG improvement plan indicating the areas in which they can improve.

Extract from an improvement plan

0.0 ASSESSMENT his score is belo the score that GOBA SCOTTISH POWER considers appropriate for its suppliers in the medium term so to ensure that you 62.5 23.9 can continue to be our supplier e encourage you to analye the areas of improvement that e have identified and propose actions that 17.3 represent improvements in your sustainability profile

This not only acts as an incentive to suppliers to improve their profiles through actions that encourage excellence in business management, but also encourages the Procurement Department, using quantifiable objectives, to select companies that have demonstrated a solid performance in social responsibility or have committed to improving.

In 2020, proposals for improvement plans were sent to 172 suppliers of the Group and, of those contacted in the first half of the year, 61% have managed to improve their sustainability level.

172 ESG Improvement plans in 2020 21 44 26 Of the 38 ESG plans proposed in the 43 first half of 2020, 23 suppliers (61%) 18 have improved their sustainabilit 20 un ul Sep ct ov ec

Promoting diversity in the supply chain Iberdrola’s high volume of yearly purchases means the Group needs to disseminate its principles and ethical values throughout the entire supply chain.

Iberdrola carries out an internal assessment of its main suppliers, based on environmental and social, as well as business and logistical, criteria. Among the areas assessed relating to equality and diversity in the new model adopted in 2019, the following are of particular note:

• Percentage of women hired • The company has a policy to promote equality and diversity • The company has promoted and developed measures to encourage the work-life balance of its workers that go beyond legally-required measures

• The company calculates the salary gap index between men and women • The company actively promotes the inclusion of people with disabilities

To publicly recognise those suppliers who have shown the best performance in these areas, the supplier of the year award includes a Diversity and Equality category. Emissions associated with the supplier chain

In its firm commitment to fight climate change, Iberdrola attempts to extend the effort to comply with emission-reduction objectives to its suppliers. Emissions data from suppliers is obtained via a yearly Iberdrola extends environmental awareness campaign to encourage the reduction of CO2eq emissions in the supply chain. its efforts to meet Through this initiative, we want suppliers to demonstrate the emission their effectiveness in managing, controlling and reducing greenhouse gas (GHG) emissions, while understanding the reduction targets impact of climate change on their businesses and managing to its suppliers the associated risks appropriately.

Emissions proportional to the supplier’s invoicing volume to the Company as a share of the total were taken as corresponding to Iberdrola, based on the replies to the questionnaires.

Emissions Scope 3 (t CO2eq)

Emissions associated with the supply chain11 2020 5,250,951*

2019 1,884,771*

2018 1,392,783*

11 Estimated based on the Campaign to raise awareness and measure greenhouse gas emissions from suppliers that Iberdrola carries out with its suppliers..

Calculation based on a global emission factor in kg CO2e/€ invoiced (the calculation criteria for 2018 and 2019 was based on an emission factor per country). * The calculation method changed in 2020. A country-by-country factor was used to calculate emissions until 2019, whereas in 2020 an average factor was used. This means the data for 2019 and 2020 cannot be compared.

These campaigns also give suppliers the opportunity to tell us about any environmental projects they are working on, or if they have an environmental project that they would like to undertake in partnership with Iberdrola.

With regard to the environmental evaluation of suppliers, purchases from suppliers with an environmental management system accounted for around 63.9% of the total orders issued (general supplies) vs. 73% in 2019. This percentage has been impacted by the fact that the supplier management platform was changed in 2020.

There is a summary of the main mechanisms in place to align procurement and supplier management with regard to the environment and sustainability in the table below.

Alignment of Procurement and Supplier Management with respect for the environment and sustainability:

Internal mechanisms External Mechanisms with Suppliers Procurement This contains the environmental principles Code of Incorporates environmental principles Policy that the supplier must accept and the Ethics The Group’s suppliers must accept it and it is principles of responsible, sustainable (Supplier attached to orders and contracts management in the Iberdrola group supply Clauses) chain Supplier Acceptance of the Code of Ethics Possession Specific T&Cs An environmental clause that the supplier Registration of an environmental certification is weighted must comply with during the term of the and in the supplier's overall assessment contract Classification Tender The environmental assessment of the Traction As a driver company, we proactively promote Process supplier is evaluated in the offer evaluation Campaigns environmental certification among our and award proposal phases of the contract suppliers, supporting them in their pursuit of excellence and generating multiplier effects Annual New feature: putting in place annual Carbon Periodic campaign to measure greenhouse Improvement improvement goals for the Procurement Footprint gases among suppliers Goals In Team that are directly linked to improvements Measurement Procurement in suppliers’ sustainable development; these Team are linked to variable remuneration Global The Procurement Department is a member of Sustainability Includes environmental factors: biodiversity, Environmental the Iberdrola Global Environmental System Assessment circular economy, climate change risks, etc. System Committee, which monitors environmental Model Evaluation of suppliers, quantifying their guidelines, the objectives set and their KPIs. relative position in terms of the management Audits that they carry out Transparency Infographic “Contribution to Sustainability Supplier Environmental category: promoting suppliers’ & Reporting Annual Procurement and Supplier of the Year environmental responsibility and publicly Management Report” published on the Award recognising those who go the extra mile corporate website

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8. Credit risk analysed in Suppliers

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To prevent any potential negative consequences for Iberdrola The Procurement of a supplier’s failure to honour the commitments they have undertaken, the Procurement Department has a credit risk Department management system for the Group’s main suppliers. has a credit risk Applying this system, the Group’s main potential and current suppliers are evaluated and rated based on their financial sol- management vency, their capacity and Iberdrola’s exposure to the risk of breaches of contract. This score is considered when selecting system for the the successful bidders for contracts and when assessing the Group’s main options to safeguard the Group’s position.

The estimated amount of the contract determines whether the suppliers contract must be analysed by the Risk Department, based on the provisions of the Procurement Policy. Mitigation measures, including guarantees or bank guarantees, are established for suppliers with high credit risk.

In 2020, more than 73.4% of the total amount of purchases made above the thresholds established in the purchasing policy were analysed centrally in the new management systems.

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9. Risk of fraud and corruption in suppliers

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Iberdrola has a commitment to the highest standards of business Iberdrola fosters ethics, transparency and integrity. a culture of An example of this commitment was seen in 2012, when the Board of Directors set up the Compliance Unit, whose duties include integrity among the communication of the code of ethics and the development of a preventive culture based on the principle of “zero tolerance” for its professionals crime and fraud. and third parties It is vitally important for the Group to establish the programmes and mechanisms to fight corruption and prevent it in all its manifestations with whom it and to foster a culture of integrity among its professionals and the interacts third parties with whom it is related.

Iberdrola requires in-house professionals as well as any third party working with it or on its behalf in its operations to observe the highest standards of integrity in their business activities and not involve themselves in any situation involving corruption or bribery, or participate in any type of fraudulent conduct or behaviour.

The following measures are implemented in Iberdrola’s purchasing procedure and process as mechanisms to prevent bribery and corruption:

• The Iberdrola group’s Code of Ethics, which forms part of all contracts and orders.

• A policy for preventing corruption and fraud which creates a preventive culture based on the principle of zero tolerance for illegal acts and fraud.

• Screening of all newly registered suppliers and all existing suppliers in IBuy with third party databases for sanctions, adverse media and other risk factors.

• In general and depending on the number of existing suppliers and the nature of the purchase, the tendering process will ensure that a minimum of three valid bids are obtained for each procurement.

• Proposals for awarding orders are released jointly and are endorsed by two duly authorised persons.

• There is separation between purchasing activities (Procure- ment Department), subsequent contract management activities (Business Units) and payment of invoices to suppliers (Administration and Control Department).

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• Payment-invoice-order-tender traceability is In the financial maintained entirely in corporate systems, with the necessary documentary support. year 2020 there • The process is periodically audited and no non- have been no conformities or deviations have been discovered to date. incidents that • Specific section to which the supplier must respond have led to the during the classification process: cancellation - Does your organisation have a specific Code of Ethics or Code of Conduct? of orders or - Does the organisation have a general responsible contracts with purchasing policy? - Does the organisation have a Corporate Social suppliers Responsibility policy? - Has the organisation signed the United Nations Global Compact? This Compact includes an anti- corruption principle.

Moreover, the latest version of the contract clauses includes specific sections on this topic.

Following the passing of the Bribery Act in the United Kingdom, a series of measures were introduced into the tendering process, to assess the risk of corruption associated with the contract when a new relationship is established or an existing contract with a supplier is renewed.

In the 2020 fiscal year, no incidents leading to orders or supplier contracts being cancelled were recorded through the established channels, nor were judicial resolutions issued in this regard.

Analysis of purchases in countries where there is risk of corruption To carry out corruption risk analysis in procurement in 2020, the company has used the 2020 Corruption Index published by Transparency International (TI CPI 2020) to classify countries according to their risk level.

In accordance with this Index, the volumes of purchases made, classified by corruption-risk levels, are shown in the following table:

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% of 2020 purchases of general supplies % of 2019 purchases of general supplies Corruption risk12 in countries according to the 2020 CPI in countries according to the 2019 CPI index index

Low 78.9 76.3

Medium 0.4 0.3

High 20.7 23.4

The countries considered to have a high risk of corruption according to the above-mentioned TI CPI 2020, in which Iberdrola has purchases have been made from suppliers registered in those not canceled countries, are Brazil and Mexico. any contract or The volume of purchases is directly related to Iberdrola’s presence and investment efforts in those countries. order for reasons Similarly, Iberdrola has not made any significant general related to human supply purchases from suppliers located in tax havens. rights, corruption, Supplier audits labor practices or At least 140 supplier audits were carried out during the fiscal environmental year. Suppliers with non-conformities in the process have a deadline to correct any deficiencies found. practices

The aim of audits is to ensure that the supplier has met all the requirements for minimising the risk, as appropriate, of the areas of human resources, environment, quality, occupational hazards and corporate social responsibility.

In addition, in 2020, more than 78,000 periodic field inspections were carried out where suppliers are assessed, as appropriate, on environmental, quality and occupational hazard prevention aspects.

In 2020, the company did not receive any external complaints via the appropriate channels in relation to its supply chain, and no contract or order was cancelled for reasons associated with human rights, corruption, labour practices or environmental practices.

12 Low risk: country index ≥ 60 / Medium risk: 59-50 / High risk: <50 on a scale of 0 (perception of high levels of corruption) to 100 (perception of low levels of corruption).

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10. Dialogue with suppliers

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Iberdrola has a responsible and sustainable business model, which places the group’s stakeholders at the centre of its strategy. As part of this, the company aims to build trust- based relationships with its different stakeholders, as well as to deepen their participation, involvement and sense of belonging to Iberdrola. Among the most relevant stakeholders are the suppliers with whom the Group engages on an ongoing basis.

Stakeholder Relevant dialogue and communication channels

• Supplier portal at www.Iberdrola.com/suppliers

• Supplier Service Centre

• Satisfaction surveys

• Supplier of the Year Awards

Suppliers • Supplier registration, assessment and classification platform

• IBuy tender management platform

• Supplier traction campaigns

• Participation in events

• Suppliers’ ethics mailbox

The model that Iberdrola has been developing and improving to manage its relationships with suppliers, as well as the broad Iberdrola’s range of channels for dialogue and communication for these purpose groups, are summarised in the above table. is to build Supplier survey relationships A further example of the efforts that Iberdrola has made to of trust with understand the satisfaction levels and expectations of its stakeholders — with suppliers being a key stakeholder — is the different a regular Supplier Satisfaction Survey to enable the Procure- ment Department to understand suppliers’ expectations and Stakeholders perceptions with regard to the purchasing process and the Company.

Understanding suppliers’ opinions is essential for including new continuous improvement actions in the Sustainable Development Plan (in which the Procurement and Insurance Department of the Iberdrola group participates).

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In 2020, the 7th Supplier Satisfaction Survey was sent out and the result obtained was a value of 8.45 (out of 10), exceeding that of previous years.

VII Edition VI Edition V Edition IV Edition III Edition

Results of the supplier satisfaction surveys

This 7th edition also saw a significant increase in the participation of suppliers in all geographical areas, with more than 2,000 responses received vs. 1,200 in the previous year (2018). The largest increases compared to previous years were in Mexico, Brazil and the US.

There is no target result, since the survey is to collect the opinion of suppliers to then use it as a source for improvements. The aim is to obtain a participation rate of around 40% (41.8% in 2020, similar to 2018, which was 43.1%) and to maintain a high number of responses (69%+ responses than in 2018).

Suppliers surveyed 4,893

Suppliers surveyed 2,812

69% Responses 41.8% Responses 1,213 2,046 43.1% 2018 2020

nsers received nansered

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In general, suppliers rated Iberdrola’s ethics and reputation, Suppliers have the brand and the trust it inspires very positively. Our suppliers also said that working with the Group helps to preserve jobs. highly valued On the other hand, suppliers also pointed out opportunities for Iberdrola’s ethics improvement, such as increasing feedback on the outcome of the tender processes in which they have participated, as well and reputation as giving more weight to the technical and quality aspects of their proposals in the final assessment of their bids.

In addition to the sections from previous years, a section has been included to analyse the alignment of suppliers with the Sustainable Development Goals (SDGs) and the initiatives they are developing.

This edition also included several questions to assess the impact of the COVID-19 crisis on our suppliers. Our suppliers rated the actions undertaken by the Iberdrola group in response to the COVID-19 crisis very positively (7.91 out of 10).

The 8th edition will be carried out in 2022.

Traction with suppliers Because of Iberdrola’s size, sector and geographical associations, the diversity of its current and potential group of suppliers means that it needs flexible policies that adapt to the local and global market at all times.

Engagement activities in quality, the environment and occupational risk prevention are well established practices in major suppliers that do not have a management system certified by a third party.

Each of our major suppliers was contacted individually and informed that their certification in these areas would be valued positively, since Iberdrola’s objectives include having key suppliers with certified management systems, like the Company’s corporate units and business areas, to ensure reliable and responsible conduct throughout the supply chain.

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11. Commitment to continuous improvement

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Objectives in the period • Setting objectives is essential for improving processes and the pursuit of excellence in management.

Comparing results to objectives is fundamental to progress towards excellence.

• Iberdrola’s Management by Objectives System is designed to help achieve the objectives derived from the strategic lines and contribute to creating value.

• The Procurement Department is an active member of the Sustainable Development Committee and is partic- ularly attuned to the demands and interests of suppliers as strategic stakeholders.

To continually improve in this group, annual goals have been defined linked to the Procurement Department‘s compensation and focused on improving supplier profiles, within the context of corporate social responsibility.

• Not only is the supplier motivated to improve its profile through actions that encourage excellence in business management, as seen in the section on Dialogue with Suppliers, but Procurement is encouraged to choose companies with good performance in the areas that should be developed throughout the process, through quantifiable objective.

The setting of objectives is essential for the improvement of processes and the search for excellence in management

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12. Supplier diversity programme

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In the United States, AVANGRID has a “Supplier Diversity Iberdrola’s Program”, through which it endeavors to add to the network of suppliers and increase purchases from: Procurement • Minority Business Enterprises (MBE) Department has • Women’s Business Enterprises (WBE) • LGBT Business Enterprises (LGBTBE) been working • Veteran Business Enterprises (VET) over recent years • Service Disability Business Enterprises (SDVET) to incorporate • Small Disadvantaged Businesses (SDB) • Historically Underutilized Business Zones (HUBZone) Special • Alaska Native Corporation Employment • Indian Tribes Centers into This additional business development programme was created to help disadvantaged small enterprises (referred to as SBs or the network of SBEs “small businesses” or “small business enterprises”) be competitive and gain access to federal contracting. suppliers

In 2020, the volume contracted from these groups was around €141 million.

In Iberdrola’s Procurement Department, work has been done over the last few years to incorporate Special Employment Centres into the network of regular suppliers. A total of €2.4 million was under contract with Special Employment Centres in Spain in 2020 to provide help for and work with disabled people.

Having a varied base of suppliers benefits the businesses and the Company. It allows it to obtain the goods and services that it needs while enabling small enterprises and minority owned companies to grow and prosper.

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13. SDG awareness-raising actions

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Iberdrola is a company committed to achieving the United Na- tions Sustainable Development Goals (SDGs). It is working to communicate and raise awareness of the importance of these goals among its suppliers.

An example of this is the design and launch in 2019 of the new supplier assessment model for sustainability, as mentioned in section 7 of this report.

Supplier assessment takes into account a supplier’s performance in wide-ranging areas, such as the writing of an annual sustainability report, their inclusion in a sustainability index, having signed the United Nations Global Compact, the identification of goals (both financial and non-financial) linked to the Sustainable Development Goals (SDGs), the management of risks resulting from climate change, a circular economy strategy, due diligence in human rights, etc.

In addition, the supplier satisfaction survey included a section relating to involvement in the different SDGs. In previous years, this information had been in a separate survey.

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Main SDGs Direct SDGs Indirect SDGs

Of the responses received, the most relevant SDG for the 1,960 suppliers of the Iberdrola group that responded to this section is SDG 8 “Decent work and economic growth” with 10.5% of the responses. Goal 9, considered by Iberdrola as a direct contribution SDG, was in second place: “Build resilient infrastructure, promote sustainable industrialisation and foster innovation”. Also within the top five places were SDG 7 “En- sure access to affordable, reliable, sustainable and modern energy” and 13: “Take urgent action to combat climate change and its impacts” which are Iberdrola’s top two SDGs.

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14. Supplier innovation programme

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In 2020, Iberdrola invested a total of 293 million euros in Research, Development and Innovation (R&D&I), 4% more than in 2019. The Iberdrola group’s R&D&I efforts are aligned with the driving forces of the transformation of the energy sector, decarbonisation and electrification of the economy. Iberdrola runs a Supplier Innovation Programme to promote and accelerate the development of new products and services that provide solutions for the Company’s future needs while responding to the challenges facing the sector. The programme has three central concepts: • To help suppliers access financing mechanisms • To promote joint ventures (supplier spin-offs) through the Perseo fund • Innovative purchasing of the products or services developed

RR SS SP G PRGRMM PRS

Its innovative strategy for management and technology deployed over the last decade has made Iberdrola a global leader and benchmark company in the area of Research, Development and Innovation (R&D&I) by: • Implementing a common model in all areas

• Collaborating with technology providers

• Fostering a culture of innovation

The Company’s unwavering commitment to R&D&I is also evident in its support for technological entrepreneurs and start-ups through its Perseo venture capital scheme. More information on the R&D&I projects in which the Iberdrola group is participating can be found on the Innovation section of the website.

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15. Supplier of the Year Awards

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The goal of Iberdrola’s supplier awards is to promote, In 2021 the recognise and provide an incentive for excellence, sustainable development, quality, internationalisation, innovation, Iberdrola RETO corporate social responsibility, job creation and occupational risk prevention. Awards will be The awards were created as a tool and mechanism to thank awarded suppliers for their contribution to achieving the Group’s objectives.

In 2020, global awards were to be presented to the Group’s suppliers “United by our values”; but due to the exceptional global situation generated by the COVID-19 pandemic, the decision was made to hold a special ceremony in 2021 where the Iberdrola RETO Awards will be presented to the suppliers, with a focus on Recovery, Clean Energy, Energy Transition and the Sustainable Development Goals (SDGs), as well as to recognise the suppliers who collaborated with Iberdrola to supply health material that was donated by the company to support during the most critical moments of the pandemic. The awards will be held in conjunction with the inauguration by Their Majesties the King and Queen of Spain at the Iberdrola Training Campus in San Agustín del Guadalix, Madrid.

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16. Main benefits for suppliers

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Actions of this sort being developed by the Procurement De- partment to foster social, ethical, economic and environmental progress in our suppliers have generated progressive conver- gence of suppliers and supplies toward the sustainability pa- rameters required by the company; this is causing a multiplier effect throughout the supply chain, as what is being requested from top-level suppliers today will gradually spread to the entire supply chain. Acting as an economic driving force, because of our high annual purchasing volume, and: • Creating an integral, ethical and transparent business model that favours the development of these values and commitments in the market in which it operates • Encouraging internationalisation • Injecting liquidity into suppliers • Providing highly qualified employment • Driving investments in R&D • Rewarding the supplier’s contribution to the Company’s strategic objectives

Among other things, Iberdrola has contributed to ensuring that supplier companies that were initially only local, had no management systems, or were focused on a single activity, etc, were able to access new markets and clients, become involved in R&D projects and become more competitive by developing an international presence, allowing them to become leading firms in their own sectors (such as renewable energies, industrial facility maintenance, power facility construction, global services, etc.).

In addition to purely economic wealth, from a sustainable and responsible perspective the Group acts as a powerful driver in the market, encouraging suppliers to improve their environmental, ethical and social profile through activities that promote excellence in management.

In their responses to the 2020 satisfaction survey, the suppliers highlighted the following (in order of rating) as the most positive aspects of working with Iberdrola:

• It helps to maintain jobs • It promotes the continuous improvement of my processes • It encourages investment in R&D • It helps them to win new customers • It encourages them to internationalise

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17. Awards

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Once again this year, Iberdrola and its strategy of commitment to its supply chain has been recognised by CDP Supply- Chain, who have chosen it as their CDP Supplier Engagement Leader in recognition of the company’s commitment to the UN’s Sustainable Development Goals.

Leading companies such as Iberdrola are characterised by their work in raising awareness among their suppliers of the importance of reducing their impact or changing their surroundings to produce more sustainable products and services.

These leading companies develop social initiatives which help CDP Supply-Chain Index 2020 to create a sustainable environment, as well as encouraging partnerships with suppliers and complying with minimum Iberdrola renewed purchasing requirements. its participation Iberdrola renewed its participation in the Dow Jones Sustainability Index and has been the only European in the Dow Jones electricity company selected in all 21 editions. In the Supply Chain Management section, Iberdrola obtained a score of 96 Sustainability Index, points, maintaining a score of over 90 points in recent years in positions very close to “best in class”. In 2020, Iberdrola being the only obtained the highest rating in all sections except ‘Transparency European electricity & Reporting’, and this is an area for improvement set for 2021. company selected in the 21 editions

berdrola est in class Sector average

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Iberdrola’s Procurement division is committed to continuous Dow Jones improvement and external recognition. The Group considers the Dow Jones Sustainability Index (DJSI) to be one of the Sustainability best indices for measuring our activity. Index (DJSI) Iberdrola’s goal is to maintain a rating above 90 points in 2021, despite the DJSI’s increasing demands. Every year, the is one of the feedback received is analysed and an action plan established if the target is not met. best indices to measure our activity

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18. COVID

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This year mention must be made of the extraordinary actions Suppliers highly that Iberdrola and its suppliers have had to take to deal with the global pandemic caused by the COVID-19 virus. valued the actions In this regard, following the declaration of the pandemic, developed by the the Iberdrola group made an effort to keep the supply chain operational during the health emergency, awarding orders Iberdrola group in early to more than 10,000 suppliers for 7 billion euros in the first half of the year. response to the

Suppliers rated the actions taken by the Iberdrola group in COVID-19 crisis response to the COVID-19 crisis very positively, as shown in the 2020 Supplier Survey, in which the average score given to Iberdrola’s response to the healthcare crisis was 7.91 out of 10. In this survey, Iberdrola’s suppliers were also asked to respond to the impact that the pandemic was having on their activity, specifically in areas such as employment, problems in the supply chain, financing and impacts on their business models.

Power supply, which is critical to maintaining the activity of the various countries in which the Group operates, was maintained thanks to the efforts made by our suppliers and by the Procurement Division itself during the first months of the pandemic in managing advance payments related to orders, together with prior meetings with contractors and suppliers to confirm activity would continue.

Iberdrola placed its capacity for global access to supplies at the service of the Spanish Government Administration and the rest of the countries in which it operates, with a donation of 22 million euros worth of medical equipment. Some of the suppliers (AMARA, ITURRI, DSV, ORMAZABAL and WOTTOLINE) actively collaborated in processing and transporting these materials (breathing apparatuses, masks, coveralls and goggles, etc.). Iberdrola plans to recognise these suppliers in the next edition of the Global Supplier of the Year Award - Iberdrola RETO Award, with a focus on Recovery, Clean Energy, Energy Transition and the Sustainable Development Goals (SDGs).

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19. Short and medium-term priorities and objectives

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Challenges for 2020 and their progress: Implementation of a new IBuy tendering tool based on SAP-ARIBA in the cloud.

Design, testing and launch of a new supplier sustainability assessment model, replacing the previous CSR Scoring.

Implementation of the new Supplier Management Sys- tem through a new global platform managed by the company GoSupply.

Extending to suppliers the personalised online awareness-raising module on respect for human rights, accessible to all suppliers.

Carrying out of the 7th Supplier Satisfaction Survey.

Medium-term objectives As well as continuing the supplier management and purchasing actions presented in this report, the main priorities and objectives in the short and medium terms are to: OBJECTIVES (the short and medium terms)

Increase the number of main suppliers subject to sustainable development policies and standards.

Prepare a new protocol for company social auditing at the first level of contracting.

Further integrate with other third-party risk measurement systems such as those being proposed by the Risk and Compliance divisions.

Analyse the possibility of certifying the procurement process with ISO 20400 for Sustainable Procurement.

Carry out the VIII edition of the supplier satisfaction survey (year 2022) and obtain a satisfaction index higher than 8.00 points. In case of obtaining a lower rating, adopt the appropriate measures to improve in the next edition.

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Challenges in 2021 Iberdrola’s procurement model is constantly being reviewed, based on continuous incremental improvements to adapt it to Iberdrola’s our service needs and ongoing pursuit of efficiency. purchasing The market points to a shift towards advanced management models supported by disruptive technology, much of which model is subject is available today. In addition, our businesses and corporate to permanent areas and our internal clients move in increasingly competitive, changing, global, and efficient environments that require rapid review based responses, where technology and innovation will be the keys to success. on continuous

Of the activities planned for 2021, the following are of particular improvements note:

• Continue the digital transformation and the change of model initiated in 2019 by analysing the possibility of implementing Robotic Process Automation (RPA) in processes and improving Business Intelligence by making better use of available data. • Deliver the RETO Global Awards to Iberdrola’s suppliers. • Improve the generation of ESG improvement plans for suppliers, including support material that enables Iberdrola’s stakeholders to implement best practices in sustainability. The goal is that at least 80% of suppliers that do not meet the established requirements receive a proposal for an improvement plan. • Incorporate other supplier risks and values into Go- Supply, such as cybersecurity risk and emissions measurement.

“Procurement as a driver and leader of sustainable change”

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Annex 1: Detailed local information for listed subsidiaries: Neoenergia and Avangrid

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This report’s content applies to all Iberdrola’s subsidiaries that Avangrid and use the same systems for purchasing and managing suppliers, although the Iberdrola group’s subsidiaries that are listed in Neoenergia stock markets each have their own Procurement Policies, that are totally aligned with the Group’s. approve their In this sense, this annex details some of the information own purchasing provided in the report for the following 2 subsidiaries of which Iberdrola is the main shareholder: policies that are

• Neoenergía: Listed in the B3 stock Exchange in São fully consistent Paulo with those of the • Avangrid: Listed in the New York Stock Exchange Group Procurement organization The purchasing organizations of Neoenegia and Avangrid follow the same principles established for the Iberdrola group: focused on categories and grouped by business.

Procurement Staff Dec 31 2020

Neoenergia 59

Avangrid 36

Procurement Priorities The priorities for the Procurement departments of Neoenergia and Avangrid are the same as those set at the Iberdrola group: Competitiveness, Efficiency, Sustainability, Internal Customer Satisfaction, Digital Transformation, Governance and Compli- ance and Supply Chain Development.

Key figures: volumes, countries, supplies, suppliers In 2020, Neoenergia’s and Avangrid’s invoiced volume for purchases of equipment, materials, and contracting of works and services, and its geographical breakdown for the 2020 fiscal year:

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General supply of equipment, materials, works and 2020 2019 2018 services (€ million) Avangrid 2,790 2,583 1,945

Neoenergia 1,283 1,622 1,335

Number of tenders managed in 2020 and the number of suppliers with one or more orders during the year for Avangrid and Neoenergia:

Tenders managed in the year Suppliers with one or more orders during the year

Avangrid 1,600 4,840

Neoenergia 1,720 5,766

Distribution of purchases by supply type in 2020 for Avangrid and Neoenergia:

Equipment and Works and Services Materials

Avangrid 64% 36%

Neoenergia 74% 26%

Purchases from local suppliers made by Avangrid and Neoenergia in 2020:

% of general supplies purchased from local suppliers 2020 2019 2018

Avangrid 97 98 97

Neoenergia 100 99 100

Systems supporting the Procurement activity Both Avangrid and Neoenergia support their purchasing and tendering processes in IBuy and their supplier management in GoSupply.

Neoenergia, additionally and in order to comply with local requirements, uses a local platform (Websupply) to control supplier compliance with administrative requirements in Brazil.

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Critical suppliers Both Neoenergia Neoenergia’s and Avangrid’s Policies also determine levels and Avangrid of criticality of supply based on difficulty to find a substitute, the existence of alternative sources of supply and purchasing consider critical volume. suppliers In general, Avangrid and Neoenergia consider critical suppliers to be those suppliers that, in cumulative value for the year, those who, in receive orders for an amount equal to or greater than 400,000 euros. accumulated value in the year, Number of suppliers % invoices (in €) receive orders for Critical Non-critical Critical Non-critical Suppliers suppliers Suppliers suppliers an amount equal Avangrid 491 4,349 94.79% 5.21%

Neoenergia 349 5,417 92.25% 7.75% to or greater than 400,000 euros.

Suppliers and human rights Purchases made in countries considered to be at risk because they have not having ratified ILO conventions on forced labour, freedom of trade unions and collective bargaining, and child labour - and countries where, although they have ratified these conventions, observations have been made about weaknesses in their application - are analysed periodically.

In the most recent analysis, at the end of 2020, the percentage of purchases made from suppliers located in risky countries was:

Countries considered at risk of human % of purchases of total rights violations where purchases have been made7 Avangrid Neoenergia

Brazil - 99.6

Mexico - -

China - -

7. The criteria used to identify risky countries are the same as those described in the “Protection of Human Rights” section in chapter “III.3. Contribution to the Well-being of our Communities” in the Sustainability Report for the 2020 fiscal year.

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Purchases made by Neoenergia in Brazil are considered The Iberdrola totally in line with its activity in the country. group’s Sustainability in purchasing management sustainability and supplier relationships. assessment model The supplier sustainability evaluation model defined by the Iberdrola group is also applied in Neoenergia and Avangrid is also applied using the same criteria. at Avangrid and The following graphs show the historical evolution of the KPI and the forecast for 2021 and 2022. Neoenergia

Avangrid Neoenergia

**** 5050 6060 6060

** 3232 29.129.1 36.636.6 **

202020202021 20212022 2022 20202020 20212021 20222022

* Data based on extrapolating responses obtained before the end of 2020, supplier onboarding year which is ending in 2021. ** Estimated figure. Final target being defined.

Risk of fraud and corruption in suppliers To carry out corruption risk analysis in procurement in 2020, Iberdrola group has used the 2020 Corruption Index published by Transparency International (TI CPI 2020) to classify countries according to their risk level.

In accordance with this Index, the volumes of purchases made, classified by corruption-risk levels, are shown in the following table:

% of 2020 purchases of general supplies in countries according to the 2020 CPI index Corruption risk8 Avangrid Neoenergia Low 100.0 0.4 Medium - - High - 99.6 8. Low risk: country index ≥ 60 / Medium risk: 59-50 / High risk: <50 on a scale of 0 (perception of high levels of corruption) to 100 (perception of low levels of corruption).

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Purchases made by Neoenergia in Brazil are considered It is an totally in line with its activity in the country. objective in Supplier survey itself to collect In 2020, the 7th Supplier Satisfaction Survey was sent out and the opinion of the result obtained exceeds that of previous years both for Avangrid and Neoenergia. the suppliers

Average (0 min/10 max) and to be 2018 8.63 a source of Neoenergia 2020 8.87

Δ 2.7% improvement

2018 7.42

Avangrid 2020 7.73

Δ 4.1%

There is no target result, since the survey is to collect the opinion of suppliers to then use it as a source for improvements. The aim is to obtain a participation rate of around 40% (41.3% for Neoenergia and 38.4% for Avangrid) and to maintain a high number of responses (+90% responses received vs 2018 in Neoenergia and +212% in Avangrid).

Although Avangrid’s participation hasn’t reached 40%, it’s considered reasonable given the high rise in the number of suppliers involved.

Suppliers Surveyed Responses Participation(%)

2018 685 251 36.6%

Neoenergia 2020 1155 477 41,3%

Δ +68.6% +90.0% +12.7%

2018 316 120 38.0%

Avangrid 2020 975 374 38.4%

Δ +208.5% +211.7% +1.0%

Supplier diversity programme In the United States, Avangrid has a Supplier Diversity Program, through which it endeavors to add to the network of suppliers and increase purchases from:

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• Minority Business Enterprises (MBE) • Women’s Business Enterprises (WBE) • LGBT Business Enterprises (LGBTBE) • Veteran Business Enterprises (VET) • Service Disability Business Enterprises (SDVET) • Small Disadvantaged Businesses (SDB) • Historically Underutilized Business Zones (HUBZone) • Alaska Native Corporation Avangrid has • Indian Tribes a business The volume contracted from these groups in the past two years was: development

Avangrid 2019 2020 program Volume purchased from Diverse Suppliers (Million euros) 93.0 141.1 created to This additional business development programme was created help small to help disadvantaged small enterprises (referred to as SBs or SBEs “small businesses” or “small business enterprises”) be businesses competitive and gain access to federal contracting. compete and

Awards gain access Not only does Iberdrola take part in the Dow Jones Sustain- to the federal ability Index, but Avangrid and Neoenergia also take part. The evaluation obtained in the Supply Chain area in the last years procurement is presented below: market

DJSI: Supply Chain Management 2019 2020

Avangrid 89 87

Neoenergia N/A 70

Iberdrola’s Procurement division is committed to continuous improvement and external recognition. The Group considers the Dow Jones Sustainability Index (DJSI) to be one of the best indices for measuring our activity. Avangrid’s goal is to maintain a rating above 85 points in 2021 and Neoen- ergia’s to be above 70, despite the DJSI’s increasing demands. Every year, the feedback received is analysed and an action plan established if the target is not met.

We consider Dow Jones Sustainability Index (DJSI) one of the best indices to measure our activity

Report of activities on Procurement and Supplier Management www.iberdrola.com and their contribution to the Group’s Sustainability | Annex 2 84 Annex 2: Example of a Supplier Risk Scorecard in GoSupply:

Annex 2: Example of a Supplier Risk Scorecard in GoSupply:

The information has been anonymised to comply with how confidential data must be processed.

The GoSupply Dashboard captures Credit Risk, Occupational Hazard Prevention Risk and ESG KPIs. These KPIs are transferred to IBuy where the purchasing manager can access this information during the tendering process.

The platform allows access to all detailed information and documentation. It also contains up-to-date news about the supplier.

Report of activities on Procurement and Supplier Management www.iberdrola.com and their contribution to the Group’s Sustainability