Integrity built-in. Devices Sustainability Report FY20 Executive Summary Message from , Chief Product Officer 2

Our mission is to empower every We are committed to driving innovation that This includes our growing efforts to reduce person and every organization on helps people accomplish more and fosters carbon emissions, design waste out of our the planet to achieve more. a more sustainable future together with our products, use renewable resources, hold What does integrity customers, suppliers, and partners. suppliers to higher ethical standards in our sourcing, and expand protocols to ensure It depends on continuously pushing the Earlier this year, Microsoft made a workers’ health and safety. built-in mean to me? boundaries of technology in almost every commitment to become carbon negative facet of the product and processes we use, by 2030. To contribute towards achieving We know that we have only just begun “The integrity we build into and more importantly, in the ways we can this goal, integrity must be built into every our journey with much to learn. With sustain a healthy planet. our products is the reason product we make. That means our design every challenge, we find opportunities We believe that our products reflect the process integrates our focus on the customer to learn, adapt, and aspire to bigger goals. we share them with the world. people that make them and that use them. and building products of the highest quality, The passion and commitment you all have We believe in these products That’s why we continue to push ourselves with a responsible supply chain that meets for sustainability will help us further to set higher standards and goals to further higher ethical and environmental standards. our efforts and enable us to set higher 100%. If we don’t believe in reduce the impact our products have on standards year on year. them, then why should the the world around us. Thank you for grabbing an oar with us. world believe in them?” During the last year, we’ve seen our Windows Together we’ll continue to collaborate and Devices business continue to grow as on the policies, practices, and products people use our products to safely connect, for our customers and a sustainable future. work, and learn. From frontline healthcare workers developing new tele-health protocols with patients, to communities collaborating on social justice, to students using our products to continue learning remotely from home… our customers Panos Panay, Chief Product Officer inspire us every day.

Download our Sustainability Report FY20

The Pro X is the most efficient Pro Microsoft has made when using the ENERGY STAR Computer Specification version 8.0 test method.

Microsoft Devices Sustainability Report FY20 Executive Summary This FY20 report details our progress and efforts, including the following key results and goals: 3

Product design Responsible sourcing Product use Climate and environment Key results and goals Key results Key results and goals Key results and goals * 37 % * % % of units fulfilled by carbon neutral % fulfillment centers by 2021 100recyclable packaging 99.5 of audited factories 91 Surface 3 assessed and Surface devices in China have access to be 91% recyclable by 2030 to the Workers’ Voice k Hotline for grievance 825 reporting consoles obtained Carbon Neutral® certification 20 %* 100% b 2030 post-consumer recycled content new suppliers are qualified and 1 Microsoft carbon negative in new Surface Dock 2 reviewed prior to onboarding powering 1 billion active devices %* k monthly 2x 10 5.4 7 and packaging contain Pilot project to develop new material factory workers were reimbursed more than 2x the average global containing 10% ocean plastic $275k in recruitment fees and circular resources insufficient payments

6 Find out more 7 Find out more 8 Find out more 9 Find out more

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Microsoft Devices Sustainability Report FY20 Executive Summary About Microsoft Devices 4

Our mission: Build extraordinary products Our products How are we doing? Our products include Windows, Surface computers, Surface accessories, that create and complete magical Xbox, other intelligent devices and PC accessories. # experiences to empower every person 3 Forbes World’s Most Reputable and every organization on the planet Companies for Corporate to achieve more. 2. Responsibility 2019 # Our organization 6 We are responsible for the ideation, Corporate Responsibility Magazine’s compliance, design, development, sourcing, 100 Best Corporate Citizens 2019 manufacturing, packaging and distribution 100+ countries of operation of Microsoft’s hardware, packaging and # related software products. 1 Devices is committed to increasing the Responsible Sourcing Network sustainability of Microsoft’s products and Mining the Disclosures 2019: supply chain. Our mission pushes us to 2,748 Application Software category create technologies that unlock potential employees 3. for people, the planet and organizations.

Find out more about the journey of our products on page 8 of our Sustainability Report FY20 A List for corporate Climate Action, CDP 418 1. directly contracted supplier factories

1. 2. HoloLens 3. Built for web-first An untethered mixed Slim, light and ready experiences, ultra-thin reality device with to travel. and always connected, apps and solutions that 94 1 different products shipped combining blazing-fast enhance collaboration. LTE with 2-in-1 versatility.

1 Excluding variants and SKU bundles.

Microsoft Devices Sustainability Report FY20 Executive Summary Our sustainability strategy 5

We’ve launched new targets to reduce Our Sustainability 2030 ambitions We’re launching an ambitious new hazardous substances and increase strategy for 2030 and raising our level repairability, recyclability and circularity. Healthy Design of commitment to have a positive impact Healthy Planet Our Healthy Planet strategy addresses carbon Sustainable design on people, the planet and organizations. emissions, waste and water across the product Increase recycled content Incorporate 100% recycled, lifecycle – from sourcing to end-of-life. and renewable materials renewable or responsibly sourced across the portfolio content in packaging As we reach the end of our 2020 Sustainability In FY19, we set a science-based target for Microsoft’s bold environmental Goals, we are setting our sights on a bold new Scope 3 carbon reductions to be achieved commitments for 2030 environmental sustainability strategy and by 2030. Approved by the Science Based targets for 2030, while continuing to deliver Targets initiative (SBTi), in September 2019, Reduce hazardous substances In 2020, Microsoft announced three our Responsible Sourcing commitments. our target establishes how we will help Replace brominated flame Eliminate beryllium Reduce volatile organic bold commitments: tackle the climate crisis by reducing Healthy Design, Healthy Planet is how retardants in resins from metal alloys compounds in coatings emissions across our value and supply • To be carbon negative by 2030 and, by Devices will deliver Microsoft’s environmental chains, in line with what is needed to 2050, to remove from the environment sustainability commitments beyond 2020. keep global warming below 2°C from all the carbon the company has emitted pre-industrial levels. either directly or by electrical consumption Healthy Design Healthy Planet since it was founded in 1975. Our Healthy Design strategy embeds We’ve also set a 2030 “zero waste” goal for Surface devices and packaging and we • To preserve and protect the species, sustainability into product and packaging Carbon negative biodiversity and ecosystems that are design and development. Healthy Design have committed to expand our consumer vital to the planet’s health. drives innovation to reduce environmental mail-back program for hardware and Reduce Scope 3 carbon emissions • Achieve zero waste for Microsoft’s direct impacts and address challenges across packaging worldwide. by 30% and aspire to reduce carbon emissions by more than half operations, products and packaging the value chain – from extraction of raw Read more about our strategy and Microsoft’s by 2030.1 materials to production, distribution, bold, new environmental commitments on product use and end-of-life. page 11 of our Sustainability Report FY20 As a business group within Microsoft, We use ecodesign to guide our approach Zero waste products and packaging we are aligning our strategy and goals and product environmental lifecycle to support these commitments. Achieve Accomplish Expand mail-back Increase assessments to inform our decisions, We will announce more 100% recyclable 100% recyclable program for Microsoft the circularity 1 Microsoft commits to achieve ‘zero waste’ goals by 2030 from concept to manufacturing. Surface devices packaging branded electronics of our products https://blogs.microsoft.com/blog/2020/08/04/microsoft-direct- Sustainability 2030 goals operations-products-and-packaging-to-be-zero-waste-by-2030/ and packaging and packaging Healthy Design shapes our customer throughout FY21, bringing our worldwide solutions, such as finding ways to bring repair closer to the customer. ambitions to life with measurable targets and commitments.

Microsoft Devices Sustainability Report FY20 Executive Summary Product design 6

The sustainability of our products Using ocean plastics Key outcomes in FY20 and packaging begins with their in consumer products Why does sustainability design. We focus as much of our innovation effort on what our % Every year, about eight million metric devices are made of, and how tons of plastic ends up in the ocean. This 58 start with design? recycled content in our packaging, could nearly triple by 2040.1 The enormity they are made, as on what they up 5.6% on FY19 “From choosing the right materials to can do for our customers. of the issue requires urgent action. We set out to see how plastic waste could Our approach focuses on three key areas: designing out waste, the design decisions be recovered from oceans, waterways %* we make determine the impact of a product increasing recycled content, selecting and beaches (mainly PET) can be processed recyclable materials and designing out and used in consumer products. We’ve 20 Surface Dock 2 containing 20% across its lifecycle.” waste; reducing hazardous materials; been working with suppliers to develop post-consumer resin (PCR) material and extending product life. a material that is made of at least 10% Patrick Gaule, Lead Product Designer Find out more about our approach ocean plastic, which can pass the to design for sustainability on page 22 mechanical and chemical reliability tests * of our Sustainability Report FY20 required for our devices. The initial results % Read a Q&A with a Lead Product look promising. We’ve committed to make 91 Designer on page 24 of our Sustainability any material that results from the research 3 assessed to be 91% recyclable. Report FY20 available through our suppliers to any other organization that wishes to use it. Get the full story on page 27 Next steps of our Sustainability Report FY20 We will maintain our focus on improving material efficiency and selecting materials that are suitable for recycling and circularity. We’ll also continue to find ways to reduce hazardous substances used in our products.

1 https://www.pewtrusts.org/en/about/news-room/press-releases- and-statements/2020/07/23/research-finds-plastic-flows-into- the-ocean-expected-to-triple-by-2040 * (w/w)

Microsoft Devices Sustainability Report FY20 Executive Summary Responsible sourcing 7

Our values of integrity, accountability Ensuring workers’ voices Key outcomes in FY20 and respect provide the foundation are heard How do you continue for responsible sourcing. We don’t compromise when it comes to high standards of safety and treating 648 raising standards in your audits and assessments workers in our supply chain fairly of 418 supplier factories supply chain? and with dignity. We have relationships with thousands of “Achieving meaningful change means sharing suppliers – from raw materials suppliers to % the factories that make our devices. We set 100 problems and finding solutions together – high standards for all our suppliers and we of reported Hotline allegations we have to keep learning to understand and work with them to support their people and mitigated or under investigation manage the risks. This is how we build trusting improve their operations. During the COVID-19 outbreak, we worked % relationships with our suppliers.” with our supplier factories to ensure worker safety and compliance with our human 96 Ephi Banaynal dela Cruz, Senior Director, Responsible Sourcing The Microsoft Workers’ Voice Hotline Conflict Minerals smelter rights and labor standards. We also provides an external channel through compliance, up from 85% in FY19 partnered with the Initiative for Responsible which workers in our supply chain can Mining Assurance (IRMA) to maintain report concerns anonymously and transparency of mining supply chains. without fear of retaliation. Next steps We’ve extended the hotline to 188 Find out more on our We’ll continue to contribute technology Responsible Sourcing website factories, including 99.5% of audited and support industry-wide partnerships factories in China. This means it is available to 300,334 workers, up 24.5% on last year. to enhance due diligence and drive positive We received 160 inquiries and resolved change in global supply chains. At the same 156 issues in FY20, with four cases still time, we’re increasing our touchpoints with under investigation. suppliers and increasing transparency by publishing the results of audits on our Get the full story on page 42 of our Sustainability Report FY20 interactive Power BI dashboard.

Microsoft Devices Sustainability Report FY20 Executive Summary Product use 8

Microsoft’s high performance Energy efficiency Key outcomes in FY20 technology has transformed the improvements in the What are you doing way people work, play and connect. Our customers expect high standards Surface Pro X % of durability, safety, security, 28 about the energy Launched in 2019, the Surface Pro X reduction in estimated total annual accessibility and energy efficiency combines the computing power energy consumption of the Surface Pro X when they use our devices. of the Surface Pro line with the energy compared with the efficiency of your efficiency of modern mobile devices. Improving energy efficiency is one of the best ways we can help tackle climate The total energy consumption for the products? change while our products are in use. Surface Pro X is estimated at 13.1 kWh/ year, a 28% reduction compared with the We’re also advancing the safety and 2 825,000 Surface Pro 6. This is made possible by the ® “We are constantly improving the security of our Surface devices, along with Xbox consoles certified as CarbonNeutral , innovation of Windows 10 for mobile ARM saving 616,000 tons of CO2e a year energy efficiency of our products , and applying the Microsoft devices and Universal Windows Platform Inclusive Design Principles to ensure (UWP). These platforms allow users of by embedding energy-saving they are accessible. energy-saving ARM-powered devices to run Windows wherever they go, using features in our hardware and Find out what we are doing to make Gaming more sustainable on page 51 a cellular data connection. 7,000+ software – helping customers to of our Sustainability Report FY20 visitors to our Inclusive Tech Lab Find out more on page 49 save energy while they use them.” Read about how we are enabling repair of our Sustainability Report FY20 and refurbishment of devices on page 53 Ted Eckert, Principal Engineer of our Sustainability Report FY20 Next steps We’ve set a target to reduce the energy consumption of our Surface portfolio by 3% by 2030. In FY21, we’ll focus on reducing the energy consumption of the top 20 most used Windows experiences, which together represent 90% of active Windows energy usage, as part of the Windows Software Sustainability initiative.

2 Based on ENERGY STAR Computer Specification 8.0 measurements at 115 VAC, 60 Hz.

Microsoft Devices Sustainability Report FY20 Executive Summary Climate and environment 9

A healthy society requires a healthy Developing circular Key outcomes in FY20 planet. Our Healthy Planet strategy processes for recycling How will you meet your addresses two of the most pervasive challenges facing society: climate aluminum % change and waste. 8.9 goal of being carbon Achieving the premium finish of reduction in Scope 3 carbon emissions We can have a significant positive Microsoft’s Pro and Laptop aluminum (-524k mTCO2e) from a 2017 base year environmental impact by reducing end-to- enclosures requires a very precise process negative by 2030? that generates a lot of waste. end carbon emissions and waste across * “It’s an ambitious goal and we the lifecycle of our products. While every We’ve launched a project to develop % stage of a product’s lifecycle contributes a closed-loop recycling process for 88 don’t yet have all the answers. to carbon emissions, manufacturing aluminum waste. Initial proof-of-concept of our packaging portfolio is recyclable represents the highest carbon emissions studies have shown the recycled alloy We’ll be analyzing every area of in the Surface product lifecycle – and this passes our quality requirements. The next our business, from working with is where we are focusing our efforts. steps will be to qualify the process and material and then to apply it to our Next steps suppliers to set science-based At the same time, electrical and electronic product portfolio. We have committed to achieve 100% equipment (EEE) waste has become one recyclable Surface devices and packaging targets to improving the energy Get the full story on page 65 of the most critical waste challenges facing of our Sustainability Report FY20 by 2030, and to stop using single use efficiency of our portfolio.” society. Waste prevention and recycling plastics by 2025. By the end of FY21, two offer huge potential for reducing emissions. Elizabeth Willmott, Carbon Program Manager of our largest fulfillment centers, covering 37% of units fulfilled, will be carbon neutral. Read more about smarter fulfillment and logistics on page 63 of our Sustainability Report FY20

Find out more about our circular transition on page 64 of our Sustainability Report FY20

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