Engagement Report

2017 Panorama of our 2017 engagement

Engagement Ongoing Engagement for influence engagement through voting

25 companies 193 companies 233 concerned met pre-meeting dialogue Panorama of our 2017 engagement

Engagement Ongoing Engagement for influence engagement through voting

25 companies 193 companies 233 concerned met pre-meeting dialogue Engagement for influence

Engagement for influence revolves around themes common to several sectors, aiming to understand existing practices, promote the best, recommend improvements, and measure progress. 83 7 companies met, topics since 2013 addressed

Access to food and fight against food waste 20% Lobbying 19%

Coal 17%

Living wage 17%

Human rights 11%

Child labour 9%

Conflict minerals 6%

Our 2017 thematics aligned with Sustainable Development Goals (SDGs)

THE LIVING WAGE CHILD LABOUR in the textile, food and in the tobacco semiconductor sectors and cocoa production sectors

ACCESS TO FOOD AND FIGHT AGAINST FOOD WASTE in the food and food retail sectors Engagement for influence

Engagement for influence revolves around themes common to several sectors, aiming to understand existing practices, promote the best, recommend improvements, and measure progress. 83 7 companies met, topics since 2013 addressed

Access to food and fight against food waste 20% Lobbying 19%

Coal 17%

Living wage 17%

Human rights 11%

Child labour 9%

Conflict minerals 6%

Our 2017 thematics aligned with Sustainable Development Goals (SDGs)

THE LIVING WAGE CHILD LABOUR in the textile, food and in the tobacco semiconductor sectors and cocoa production sectors

ACCESS TO FOOD AND FIGHT AGAINST FOOD WASTE in the food and food retail sectors

Ongoing engagement

Ongoing engagement has a dual purpose: • improve our analysis of the risks and opportunities that businesses face • support companies in the continuous improvement of their sustainable development policy through interviews with management teams.

193 777 interviews topics covered

France ...... 36% Euro ...... 28% Europe ex Euro ...... 13% Others ...... 11% North America ...... 8% Japan ...... 4%

Subjects addressed by criterion in 2017

Energy consumption & Greenhouse gas ENVIRONMENT 33% 13% emissions 12% Environmental strategy 5% Biodiversity, pollution & waste 3% Water

SOCIAL 40% 13% Customer-supplier relationship 10% Labour relations & Human resources 10% Product responsability 7% Local communities

GOVERNANCE 27% 10% ESG strategy 7% Ethics 5% Board structure & control 3% Remuneration 2% Shareholders right Engagement through voting

The 2017 voting season was again marked by the issue of remuneration, as well as by the development of direct dialogue with Boards of Directors and by shareholders’ engagement on climate issues.

Engagement with more Votes in more than 2,500 than annual general meetings worldwide 300 companies

2,540 GENERAL MEETINGS AT WHICH WE VOTED 32,443 RESOLUTIONS

Europe 46%

North America 26% Asia 18%

Africa + Oceania 4%

South America 6%

233 PRE-GENERAL MEETINGS ENGAGEMENTS Pre-GM alerts ...... 37% Issuer initiatives ...... 63%

15% VOTES AGAINST RESOLUTIONS Structure of the Board ...... 38% Remuneration ...... 27% Capital transaction ...... 19% Other ...... 10% Shareholder resolutions ...... 6% Engagement through voting

The 2017 voting season was again marked by the issue of remuneration, as well as by the development of direct dialogue with Boards of Directors and by shareholders’ engagement on climate issues.

Engagement with more Votes in more than 2,500 than annual general meetings worldwide 300 companies

2,540 GENERAL MEETINGS AT WHICH WE VOTED 32,443 RESOLUTIONS

Europe 46%

North America 26% Asia 18%

Africa + Oceania 4%

South America 6%

233 PRE-GENERAL MEETINGS ENGAGEMENTS Pre-GM alerts ...... 37% Issuer initiatives ...... 63%

15% VOTES AGAINST RESOLUTIONS Structure of the Board ...... 38% Remuneration ...... 27% Capital transaction ...... 19% Other ...... 10% Shareholder resolutions ...... 6%

Responsible investment is clearly continuing to gain traction. These last months have been marked by new highlights that mobilised investors, asset managers and international institutions. The success of the One Planet Summit in December 2017, two years after the signature of the Paris Climate Agreement, reaffirmed the mobilisation of players in both public and private finance to accelerate the fight against climate change. The European Commission Action Plan on financing sustainable growth, announced in March 2018, testifies to Europe’s will to reorient financial markets towards a more responsible economy. For there to be sustainable investments, there must obviously be responsible investors, but also issuers engaged in an approach of continuous improvement, aware of the value placed on environmental, social and governance (ESG) criteria. We thus intend to mainstream the consideration of these issues in all of our investment strategies. A broader integration of ESG in investment processes should encourage companies to improve their behaviour and thus their extra- financial ratings. Alongside credit and financial ratings, an issuer’s ESG rating has become a key element in investment decisions. That said, the rating process cannot be reduced to an analysis of metrics. Engagement, combined with a “best-in-class” approach, is often a highly effective catalyst for change and progress. While divestment can sometimes be a necessary solution, it should be used with caution. This 5th edition of the engagement report marks the continuity of Amundi’s active work as part of its responsible investment policy. It reports on the results of our actions to influence issuers. Since 2013, three quarters of the companies met have agreed to be quoted in the report, bearing witness to the trust-based relationship that we have formed with them and to their recognition of the importance of ESG issues for their corporate plan. We also present the results of our voting policy and shareholder dialogue, covering more than 2,500 issuers around the world. Lastly, in this report, we look back on the many collective initiatives with which we are associated. In 2017, Amundi joined the Climate Action 100+ initiative, which aims to enhance financial disclosure and governance in terms of climate, and to limit the emissions of the world’s biggest polluters. We also continued our engagement with the Green Bond Principles, of which we joined the Executive Committee in 2017. In 2017, we also conducted an engagement action with the CDP to encourage companies to respond to the CDP programmes on environmental risk management. As the leading European asset manager, with more than €1,400 billion in assets under management, Amundi intends to continue acting as a driving force to change issuer practices, in response to growing demand from investors and more generally the civil society.

Pascal Blanqué Chief Investment Officer Table of contents

05 ENGAGEMENT: REMINDER OF OUR PHILOSOPHY AND OUR PROCESS 06 Our Philosophy 07 Our engagement process 07 Engagement for influence 07 Ongoing Engagement 07 Voting at general shareholders' meetings and pre-meeting dialogue

09 ENGAGEMENT FOR INFLUENCE 11 Engagement for influence 12 The living wage in the textile, food and semiconductor sectors 12 Fighting worker poverty despite the lack of a legal framework 13 The living wage in international conventions 13 The poverty trap: one of the risks of maintaining a low salary level 14 No methodological consensus: an obstacle to the living wage becoming widespread 15 Barriers to the introduction of the living wage 16 Analysis criteria 17 Examples of good practices 19 Trend and areas for improvement 20 Detailed fact sheets 35 Summary ratings table 36 Child labour in the tobacco and cocoa production sectors 36 A vicious cycle that is complicated to break 37 Sectors reviewed 37 Legislation and international initiatives 38 Main analysis criteria 39 Main recommendations made in 2016 and their level of maturity 40 Good practices identified in 2016 41 Summary table of 2016 ratings 42 Focus on the Modern Slavery Act, the anti-slavery law adopted by the United Kingdom in 2015 42 Inventory of changes in practices: four findings 43 Significant progress, but a slowdown that calls for a massive intensification of efforts to combat child labour 44 Examples of companies in our sample that have changed their practices since 2016 51 Access to food and fight against food waste in the food and food retail sectors ENGAGEMENT: REMINDER OF OUR PHILOSOPHY AND OUR PROCESS 05 51 The role played by the food sector in the nutritional quality of products, access to food and fighting food waste 06 Our Philosophy 52 Main recommendations made in 2013 and 2015 and their level of maturity 07 Our engagement process 53 Reminder of good practices identified 07 Engagement for influence 53 Summary table of 2015 ratings 07 Ongoing Engagement 54 Developments in corporate practices & closing of the theme 07 Voting at general shareholders' meetings and pre-meeting dialogue 55 Exclusions 57 Collective initiatives 09 ENGAGEMENT FOR INFLUENCE 11 Engagement for influence 59 ONGOING ENGAGEMENT 12 The living wage in the textile, food and semiconductor sectors 61 12 Fighting worker poverty despite the lack of a legal framework Ongoing engagement Philosophy 13 The living wage in international conventions 61 Results 13 The poverty trap: one of the risks of maintaining a low salary level 61 14 No methodological consensus: an obstacle to the living wage becoming widespread 63 Thematic studies conducted in 2017 15 Barriers to the introduction of the living wage 63 Aggressive tax optimisation: what is the best ESG approach? 16 Analysis criteria 64 The food challenge: how can one achieve greater transparency? 17 Examples of good practices 65 Opportunities of deep-sea mining and ESG risks 19 Trend and areas for improvement 67 ESG development in Japan 20 Detailed fact sheets 69 2017 figures 35 Summary ratings table 36 Child labour in the tobacco and cocoa production sectors ENGAGEMENT THROUGH VOTING 36 A vicious cycle that is complicated to break 71 37 Sectors reviewed 73 Voting at general shareholders' meetings and pre-meeting dialogue Philosophy 37 Legislation and international initiatives 73 2017 voting season 38 Main analysis criteria 73 Results 39 Main recommendations made in 2016 and their level of maturity 74 Examples of votes in 2017 40 Good practices identified in 2016 75 41 Summary table of 2016 ratings 42 Focus on the Modern Slavery Act, the anti-slavery law adopted by the United Kingdom in 2015 APPENDICES 42 Inventory of changes in practices: four findings 77 Appendix 1: Glossary 43 Significant progress, but a slowdown that calls for a massive intensification of efforts 78 to combat child labour 85 Appendix 2: Breakdown of topics addressed by sector and by region 44 Examples of companies in our sample that have changed their practices since 2016 86 Appendix 3: Companies met in 2017 A ENGAGEMENT : REMINDER OF OUR PHILOSOPHY AND OUR PROCESS

06 Our Philosophy 07 Our engagement process 6 Engagement Report 2017

Our Philosophy

Our investment strategies are based on several principles: promoting respect for international conventions on human rights, the International Labor Organization (ILO) and the environment, as well as advocating a model for responsible and sustainable social development.

The first application of these principles consisted in However, excluding stocks from funds must remain an excluding from our investment strategies companies exception. It is often an inadequate response. We have and countries with unacceptable behaviors : noticed two things : ƒƒCompanies that violate these conventions repeatedly, ƒƒCompanies change their environment lastingly and without implementing suitable corrective measures. sometimes have to deal with contradictory interests. ƒƒCompanies involved in the production or sale of In these circumstances, they can face more or less anti-personnel mines and cluster bombs (exclusions serious controversy. Exclusion must therefore be resulting from France's ratification of the Ottawa applied only in extreme cases. and Oslo treaties) as well as chemical, biological and ƒƒNo longer being a shareholder means losing influence depleted uranium weapons. on the company. ƒƒCountries that systematically and willfully violate We prefer to focus on dialogue with companies human rights and make themselves guilty of through an engagement process. the worst crimes: war crimes and crimes against This engagement process comes within the broader humanity. scope of integrating ESG criteria in Amundi's investment ƒƒCompanies that generate more than 30% of their management. Details on this policy are provided in sales from coal extraction. the document: “ESG Integration – Governance, Policy & Strategy”. Finally, a charter describing the principles of dialogue on ESG issues was sent to a broad base of issuers. Engagement Report 2017 7

Our engagement process

Engagement with companies takes three forms:

ENGAGEMENT FOR INFLUENCE VOTING AT GENERAL SHAREHOLDERS' MEETINGS AND PRE-MEETING DIALOGUE This consists in meetings with companies intended to influence their practices. Recommendations made ƒƒVoting: The corporate governance team at company meetings concern cross-cutting themes systematically votes at the general meetings of common to a company's business sector. They highlight French companies or of companies in which Amundi best practices and measure companies' progress based holds more than 0.05% of the capital, i.e. more than on a grid of success indicators set up by the ESG analyst. 2,500 general meetings a year. ƒƒPre-meeting dialogue: Amundi has implemented a formalised dialogue system to inform the companies ONGOING ENGAGEMENT in which it holds its largest positions of its voting Within this scope, company meetings are aimed at intentions, to initiate a dialogue and contribute to finetuning their ESG rating. the improvement of their practices. As well as this With the support of eight suppliers of extra-financial proactive approach, Amundi is open to all meetings data, Amundi awards Environmental, Social and requested by issuers to discuss general meeting or, Governance (ESG) ratings to more than 5,000 issuers. more generally, governance themes. This second The 2017 report presents the key statistics relating to element is tending to increase in importance as it meetings with companies for rating purposes. enables upstream and more constructive dialogue. A

aa ENGAGEMENT FOR INFLUENCE

11 Engagement for influence 12 The living wage in the textile, food and semiconductor sectors 36 Child labour in the tobacco and cocoa production sectors 51 Access to food and the fight against food waste in the food and food retail sectors 55 Exclusions 57 Collective initiatives 10 Engagement Report 2017 Engagement Report 2017 11

Engagement for influence

Since 2013, of the 83 companies met, 62 agreed to be specifically mentioned.

Driven by our constant determination to METHODOLOGY RATING encourage companies to adopt a progressive In order to enable the companies analysed to know approach, our engagement for influence once where they stand, we assessed the positioning of each again revolved around three complementary one in relation to best practices. lines of work this year : For the sake of clarity, we opted for a three-tier ƒƒThe launch of a new theme : “The living wage in the assessment: , and ( representing textile, food and semiconductor sectors”. the best practices) reflecting how the company's ƒƒAn interim evaluation of the theme : “Eliminate child approach matches up to best sector practices. In order labor in the supply chains of tobacco and cocoa to highlight the corrective actions to be implemented sectors” launched in 2016. in priority, an assessment different from may, in ƒƒAn exhaustive analysis of changes in the performance certain cases, not give rise to a recommendation for of companies with whom we have been exchanging 2018, but will be kept under review. since 2014 on the theme of “the fight against food waste”. 12 Engagement Report 2017

Engagement for influence

The living wage in the textile, food and semiconductor sectors

FIGHTING WORKER POVERTY DESPITE THE LACK OF A LEGAL FRAMEWORK

In many sectors, particularly in emerging countries, the wage level of less-skilled jobs is kept extremely low. Living wage: level of income that allows an One of the reasons for this is that companies seek individual to meet his basic needs and those of to achieve the lowest possible production costs and his family. governments want local labour to remain attractive. 780 million men and women working in the However, the increase in wages is still one of the main world earn less than $2 a day. social demands of workers and access to a decent wage is a major issue for many workers. Sectors reviewed: textile, food, semiconductors. The notion of living wage and decent work goes back to the early twentieth century, with the creation of 19 companies interviewed of which: the International Labour Organization (ILO) in 1919. • 4 refused to appear and, For the ILO, “Decent work sums up the aspirations of • 4 preferred to remain anonymous. people in their working lives. It involves opportunities for work that is productive and delivers a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration, freedom for people to express their concerns, organize and participate in the decisions that affect their lives and equality of opportunity and treatment for all women and men.” It is easy to see that the living wage is an integral part of the concept of decent work. It is defined as a level of income that allows an individual to meet his basic needs and those of his family (food, housing, education, health, etc.). However, even though the United Nations (UN) considers that failing to remunerate work with a decent salary is a violation of human rights, the lack of consensus on the choice of a calculation method makes sanctions impossible. In light of the absence of legal framework, notwithstanding the need for a decent remuneration for work, we decided to initiate a dialogue of engagement with some of the companies most concerned in order to raise awareness of this issue, encourage them to Engagement Report 2017 13

establish a living wage policy and to go beyond the Finally, at the General Assembly of the United Nations simple regulatory implementation of the minimum in September 2015, decent work and the four pillars of wage for both their employees and their subcontractors. the agenda for decent work – employment creation and enterprise development, social protection, standards We decided to focus on the sectors most exposed and rights at work, and social dialogue – became central to this issue given the very low levels of workers’ elements of the new 2030 Agenda for Sustainable wages. The sectors concerned are textile, retail, Development (source: ILO)3. semiconductors, telecom equipment, construction and food products. Furthermore, our sample consists solely of companies involved directly or indirectly in emerging THE POVERTY TRAP: ONE OF THE RISKS OF countries, where the living wage issue is more acute, in MAINTAINING A LOW SALARY LEVEL our opinion, than in developed countries, even though In addition to the negative impact on employees’ there are distortions within the latter. quality of life, maintaining low remuneration The sectors and companies that we studied have very levels can have a negative impact on companies heterogeneous levels of maturity. For some sectors, and countries. such as textile, there are high-quality initiatives related Excessively low wages slow consumption and the to the living wage; for others, such as construction, growth of companies in a given country. In addition, sector initiatives are more global and generally deal with the lack of savings prevents firms from investing in human rights, for instance. At company level, strategies production factors. The country stagnates and the and good practices may take on very different aspects poverty trap appears4. as they adapt to the business’s specificities. Maintaining low wages can also have significant operational consequences. In some countries, workers can be encouraged to organise demonstrations against THE LIVING WAGE IN INTERNATIONAL CONVENTIONS the local authorities and their employers in order to press for better wages. Strikes, demonstrations, staff retention The ILO was founded in 1919 with the idea that can have major implications for productivity. universal and lasting peace could be established only if it is based upon social justice1. In its preamble, the 1919 ILO Constitution already referred to the concept of living wage (the improvement of conditions of labour included “the provision of an adequate living wage”). In 1948, article 23 (3) of the Universal Declaration of Human Rights2 stipulated that “Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection”. Since then, the notion of living wage was taken up in 2006 and 2008, respectively, in the Tripartite 1. http://www.ilo.org/global/about-the-ilo/history/lang--en/index.htm 2 http://www.ohchr.org/EN/UDHR/Documents/UDHR_Translations/ Declaration of Principles concerning Multinational eng.pdf Enterprises and Social Policy and the ILO Declaration on 3 http://www.ilo.org/global/topics/decent-work/lang--en/index.htm 4 Impossibility to improve one’s income below a certain threshold of Social Justice for a Fair Globalization. wealth 14 Engagement Report 2017

Engagement for influence The living wage in the textile, food and semiconductor sectors

NO METHODOLOGICAL CONSENSUS: AN OBSTACLE TO THE LIVING WAGE BECOMING WIDESPREAD The lack of methodological consensus hampers the widespread implementation of living wage strategies within companies and also at country level. There are several calculation methods5 that lead to sometimes substantially different results, due notably to the assumptions used for the calculations.

Number of Name Expenditures included Household size full-time Comments workers Social Accountability  Food (location - or Average household size 2  Food costs based on model diet International (SAI) country -specific %) (estimated for each locality) with 2.100 calories per person, which is a global non-  Non-food (100% - % food) is reasonable. No suggestion on composition of diet governmental organization  + Savings (10% added) founded in 1997. SAI’s  Living wage must be earned in normal vision is of decent work working hours everywhere – sustained  Non food needs/costs mentioned by an understanding include clean water, clothes, shelter, that socially responsible transport, education and discretionary workplaces benefit business income. But not known if non-food basic while securing basic human needs are met rights. The Asian Floor Wage  Food (50%) 4 (2 adults et 2 children) 1  Model diet uses 3.000 calories per Alliance (AFWA)  Non-food (50%) adult equivalent is an international alliance  No country specificities of trade unions and  Living wage must be earned in legal labour rights activist who hours and at most 48 hours are working together to demand garment workers are paid a living wage. It began in 2005 when trade unions and labour rights activists from across Asia came together to agree a strategy for improving the lives of garment workers. Institute of Labour Science  Food (30-50% depending 4 (2 adults et 2 children) 2  Calories per day set at 2.300 for adults and Social Policy and on location) and 1.600 for children aged 4 to 6 World Bank  Non-Food (50-70%)  Cost of diet estimated using observed food prices Richard et Martha Anker  Food (percentage varies Average completed family Average  Available Data with level of development) size for couples number of full-  Model diet is low cost; includes 11 food  Non-food (100% - % food) time workers items; includes acceptable number of per couple  Emergencies (10%) calories, proteins, fats and carbohydrates according to WHO recommendations; and consistent with national food preferences World of Good 8 expenditure groups Not indicated Not indicated  Simplistic methodology (e.g. too few Development Organization (housing, food, electricity, items included), based on unknown and (ONG focused on improving cooking fuel, transport, unrepresentative self-reporting the lives of workers in global medical, school, clothes) supply chains) Engagement Report 2017 15

The most widely-used methods are the Asia Floor BARRIERS TO THE INTRODUCTION OF THE LIVING Wage Alliance (AFWA) and Anker. The data obtained WAGE 6 with this method are also easily accessible and usable . There are several barriers to the implementation The AFWA developed a methodology that takes into of a living wage. account food needs (50%) and non-food needs (50% - clothing, rent, health, social protection, education, First of all, the low productivity of low-skilled workers is savings). a barrier for companies to increase their remuneration. In order to improve productivity, companies (notably For companies seeking to assess the impact of the living sub-contractors) need to improve their production tool, wage’s implementation, some organisations such as the train workers, and also organise work differently (better Fair Wear Foundation provide analytical tools. Some layout of workshops, better management of human companies also use proprietary methods, which we will resources in order to limit turnover, etc.). Principals can examine in more detail in the second part of our study. also support their subcontractors financially and/or All of these methods clearly reflect the significant operationally and give them better visibility in terms of distortions between the minimum wage and the living business. wage levels, with differences from one country to Another issue is the structure of sub-contracting. In another. most cases, sub-contractors work for many principals, with each one representing a small share of the Minimum wage / Living wage http://www.wageindicator.org/ subcontractor’s revenue. Ideally, all the principals would need to get together and agree on a level of salary for all the workers in a factory. This is difficult to implement, as many brands are reluctant to cooperate for fear of breaking competition laws. However, multiple sector initiatives (to which more and more companies are signing up) have emerged in recent years. Some focus exclusively on the notion of living wage (ACT via IndustriALL*, Fair Wear Foundation*), others on working conditions in the broad sense (ETI – Ethical Trading Initiative*, FLA - Fair Labor Association*), and others on several aspects of a specific sector, but with criteria relating to the living wage (RSPO* in the palm oil sector, for instance). In addition, the companies placing orders use many different subcontractors in different countries and calculating the living wage for each of their entities is a very costly process. Implementation can only take place gradually. Furthermore, given the short delivery times and last minute orders that factories have to cope with, they sometimes have no choice but to outsource in turn to other suppliers that the principal does not know. 5. http://www.ilo.int/wcmsp5/groups/public/---ed_protect/---protra- v/---travail/documents/publication/wcms_162117.pdf (Table16) Finally, in many countries, the level of social dialogue is 6. http://www.wageindicator.org/ * See Appendix 1 very poor, making wage negotiations difficult. 16 Engagement Report 2017

Engagement for influence The living wage in the textile, food and semiconductor sectors

In Turkey, for example, the law requires that a trade The assessment model includes 3 pillars: union represent 50% of the workforce before collective ƒƒPolicy & Strategy: bargaining can start. But in order to join a union, workers must first apply to a government office. The idea is to assess the level of maturity of Generally speaking, workers are poorly represented in companies’ living wage strategy: the textile sector. According to IndustriALL*, more than - Level of knowledge of the supplier chain 90% of workers in the textile industry have no possibility - Mention of the concept of living wage in the code of of negotiating their salaries and working conditions. conduct - Coherence with national and international standards

ANALYSIS CRITERIA - Existence of a living wage strategy and main pillars - Existence of a living wage calculation methodology Our analysis is based on the assessment of ƒƒStrategy implementation: exposure to the “living wage” risk and compa­ nies’ ability to manage this risk. In order to analyse the deployment of the strategy, several criteria are analysed: The risk model is based on several criteria: - Mapping of the gaps between the living wage ƒƒWe wanted to take account of labour conditions by and observed wages (own employees and country and therefore applied quantitative criteria subcontractors) relating to freedom of association, based on the - Integration of the concept of living wage in International Trade Union Confederation’s (ITUC)* subcontracting contracts country scoring. - Education of employees and contractors to improve ƒƒWe took into account the gap between the living productivity wage and the minimum wage in each country. - Support of employees and subcontractors in ƒƒA brand’s reputation is a big part of its exposure collective bargaining to risk. The greater the reputation of its brand, the - Cooperation with NGOs, governments more the company is exposed to the reputation - Cooperation with competitors and membership of risk in particular. To measure this risk, we used the sector initiatives Interbrand* ranking of the 100 best global brands. - Control measures put in place and procedure in case To appear on the list, brands must have a significant of non-compliance presence in Europe, Asia and North America and achieve at least 30% of their revenue outside of their ƒƒPerformance monitoring: home country. In order to evaluate the strategy, the company must ƒƒWe also based ourselves on the percentage of define performance indicators, communicate them and production outsourced or produced in emerging take the measures that are necessary in case of bad countries and its breakdown. results. ƒƒLastly, we calculated a controversy indicator (source: In addition, we take into account controversies related www.RepRisk.com ) by company, taking into account to the living wage and the mechanisms put in place to the activity and location of said activity for each address these controversies. company.

* See Appendix 1 Engagement Report 2017 17

EXAMPLES OF GOOD PRACTICES

Key Points Best Practices

POLICIES The company has complete knowledge of the supplier structure (primary suppliers, third-party suppliers, geographical & STRATEGIES locations & percentage of production at the company level) The company publishes the suppliers map and the entire list of suppliers working for the company Long-term relationships with suppliers facilitating company's ability to reflect work practices at the facilities Defined criteria for selection of suppliers requires wage compliance or payment of living wages. The company explicitly recognizes the mandate to pay every worker a 'living wage' in its Code of Conduct or Responsible Sourcing Guidelines All national, international labor laws and prevailing industrial standards are incorporated in the computation of wages at the company level. The company defines 'Living Wages' or clarifies that 'fair wages' defined at the company level amounts to living wages for all employees and workers along the supply chain. The company has an internal methodology to compute the living wage to be paid to the workers The company proactively engages with the workers and suppliers to enable workers to exercise their rights of collective bargaining and freedom of association to arrive to an agreement on wages. The company supports industrial bargaining to push for the implementation of the living wage in the sector. All strategies implemented by the company are country-specific as the company recognizes that the amount of living wage varies across regions and in different local contexts. Employees skill and productivity are an essential component in the company's process of computing living wages. The company has a collaborative-capacity driven approach to implement living wage IMPLEMENTATION The company actively maps and publishes the salary gaps in each sourcing country to assess risk exposure or measure performance Clauses mandating payment of living wages or fair wages are integrated in all supplier contracts either as a part of the Supplier Code of Conduct or separately The company conducts training and development programs to educate the suppliers and workers on the company's wage commitments. The company imparts periodic tailor made training and development programs for suppliers and workers to increase the efficiency and productivity of workers. Training and Development programs are conducted to empower worker and make them aware of their rights of collective bargaining and freedom of association. The company takes proactive measures to empower workers and implement their rights of collective bargaining and freedom of association. These measures can include: - Integrate these rights of the workers in the wage management systems at the supplier facilities - Open Dialogue between employees and management - Costs borne by the company for support to suppliers - Support to form unions and enter into negotiations The company supports the workers rights through industry-level initiatives or standard collective bargaining agreements. The company works with the civil society (associations, NGOs and institutions) and the international organizations/local governments in a country to compute and implement living wages at both the company levela nd industrial level. The company collaborates with competitors through industry-level initiatives like ACT*, IndustriALL*, ETI* , FLA*, EICC*, 21CC and other formal/informal international networks on wages. The company proactively engages with workers on-sites through workers interviews, surveys, document review etc. The company conducts risk assessments in each sourcing country to assess exposure on wages issues in the supply chains The company has local auditors and centralized teams to conduct audits across facilities The company has defined Social KPIs for data collection on wages 18 Engagement Report 2017

Engagement for influence The living wage in the textile, food and semiconductor sectors

Key Points Best Practices The company has established Work Councils at Production Sites for consultation on wages followed by disclosure on consultation outcomes The company categorizes non-compliance to living wage as a zero-tolerance issue for audit compliance and a ground for termination of suppliers or reduction of business volume The company collaborates with the suppliers and works with them to implement corrective actions The company has a comprehensive Corrective Action System in place The company conducts follow-up audits to ensure the implementation of corrective actions by the supplier The company rates suppliers on the basis of the audit results The company's monitoring frameworks extends to sub-contractors or Tier-2 suppliers The company implements multiple transparent and accessible grievance mechanisms for workers in local languages. This can include confidential and anonymous worker's hotline, and mobile apps ASSESSMENT The company has been an active crusader for the payment of living wage/'fair wages' through its company level policies and initiatives at an industrial level. The company has defined specific indicators to measure the supplier performance on the implementation of living wages in sourcing countries The company publishes a breakdown of audits conducted geographically, the bifurcated areas of non-compliance including the topic of wages, assessed areas of improvement and determined corrective actions The company uses the audit results as a performance metric take immediate corrective actions, to establish baselines, to design strategies or to implement a rewards and incentive system for suppliers The company has no wage-related controversies The company has a robust and transparent internal mechanism to address controversies if and when they arise Engagement Report 2017 19

TREND AND AREAS FOR IMPROVEMENT wage policy as a first step or expand the general provision on wages and benefits by including and Sectoral specificities : progress of the textile sector defining the living wage, develop a coherent internal Companies in our sample group do not take the same methodology to calculate the living wage, support approach to the subject of the living wage and the workers’ rights to freedom of association and collective maturity level of strategies depends very much on the bargaining, develop a coherent internal methodology to sector. calculate the living wage. For instance, all of the companies in our sample that are ƒƒStrategy implementation: in the textile sector refer to the living wage in their code Map and publish salary differentials to assess the of conduct, which is not the case for businesses in the exposure to risk and/or measure performance, construction, technology and food sectors. Furthermore, incorporate a clause on wages and benefits in supplier this sector is the most advanced. contracts as a first step towards the implementation However, even in textile-related sectors, the depth of of the living wage by suppliers, implement training strategies differs. Only 10% of the companies in our and development programmes to increase suppliers’ sample have a really solid strategy (definition of the efficiency and productivity, engage with civil society living wage, support for collective bargaining, integration and national institutions in the countries of origin to of the concept of living wage in subcontractors’ calculate, implement and check the living wage at contracts, use of a living wage calculation methodology). company level, join a sector initiative on the living wage, All of them belong to the textile sector (37.5% of the take a proactive role in the implementation of the living textile sample). wage in the sector, set up transparent, anonymous, In terms of implementing the strategies, 10% of confidential complaint mechanisms in local languages. companies calculate the gap between the living wage ƒƒPerformance monitoring: and wage levels in the different entities clearly, providing Develop indicators to assess the effectiveness of an idea of the level of exposure to this risk. On the other the wage policies of the company and its suppliers, hand, more than one quarter of respondents have an communicate audit results, including on the living wage, employee training policy for the purpose of improving and define areas for improvement, publish corrective productivity and supporting social dialogue. Many measures taken, use audit results to take corrective companies in our panel consider that increasing wages action, to establish a baseline for workers’ performance requires employee awareness. Their living wage strategy and/or to set up an incentive system to reward suppliers therefore involves, at least in the short term, educating for their performance, have internal controversy workers to defend their rights. monitoring mechanisms, in particular wage-related Finally, only 10% of our panel has defined clear controversy, in order to assess their credibility and performance monitoring criteria, which makes it difficult quickly take appropriate measures. to assess their results. Of the 19 companies we met, 11 agreed to be Looking for a consistent methodology mentioned by name, 4 wished to remain anonymous Whatever the sector, there are areas for improvement. and 4 did not want to sign up to an engagement approach. ƒƒPolicy & Strategy: Publish a list of suppliers and their geographical distribution, integrate wage issues in the supplier selection process as a first step towards establishing a living wage or indicate the living wage as a criteria for supplier selection, include a provision on wages and benefits in the Code of Conduct as a first step towards establishing a living wage or explicitly include the obligation to pay the living wage, define the company’s 20 Engagement Report 2017

Engagement for influence The living wage in the textile, food and semiconductor sectors

DETAILED FACT SHEETS

ADIDAS

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES Adidas outsources almost 100% of its production and publishes the supplier breakdown. The Group’s & STRATEGIES Workplace Standards govern its long-term relationships with suppliers and contain clauses on fair wages consistent with all domestic and international labour laws and industrial standards. The labour charter stipulates the right of employees to fair compensation and benefits, and standard operating procedures include policies regulating factory approval, external monitoring and termination. Adidas’s ‘fair compensation practices’ are based on benchmarking if the wages include the legal minimum, allow decent living standards, reflect workers’ performance & skills, reward overtime, follow the price increase of products, are linked to the employer’s profits, reflect changes in work technology, are negotiated individually or collectively, and are formally communicated to workers. The internal methodology involves transparent wage-setting mechanisms, consideration of the impact of living costs on the employee’s well-being, and measurement of wage influencers. The Fair Compensation Strategy revolves around 3 pillars -Respect, Remedy and Protect, and Adidas works with the Fair Labor Association (FLA)* to ensure its consistency with the fair wage strategy. The company conducts due diligence and acts on non-compliance with wage setting standards (responsible sourcing practices, execution of monitoring, corrective action and enforcement, and preparation and support of suppliers’ compliance with self-governance.) The Group’s team of 70 experts, familiar with the local culture, works actively with supplier factories in key sourcing countries. IMPLEMENTATION The Workplace Standards provide for fair wages and form an integral part of all supplier contracts. Adidas  Disclose gaps between benchmarks these wages paid on national wage scales. the wages paid and Adidas focuses on improving workers' productivity to help them attain new salary levels. Frequent training minimum wages in each programmes are conducted for employees under the Manufacturing Excellence Programme on different sourcing country technologies and process improvement. The company’s Social Environmental Affairs (SEA) capacity building programme at factories promotes supplier self-governance and builds monitoring and enforcement capacity on elements related to fair wages. Adidas strives to ensure that wages are paid through a collective bargaining process. The company is committed to promoting , constructive dialogue between suppliers’ management teams and their workers and, where applicable, their representatives. In locations where representatives are not appointed, open communication between employees and management is promoted. Adidas proactively engages with governments on minimum wages and freedom of association, and also partners with NGOs and specialized institutions for technical insights on wage influencers. The company works with industry peers as a member of FLA*. Adidas conducts initial assessments for new-entry factories, evaluates existing suppliers and works with them to address issues, and make improvements. It also conducts surveys to get insight into the workplace environment on topics like wage fairness. The company’s risk-based monitoring coverage extends to Tier 1 and Tier 2 suppliers and also to subcontractors. Results are analysed for each factory followed by group discussions to assign a supplier rating and develop relevant training content. Adidas has a grievance mechanism for all employees and workers. The company has a Third Party complaint process for breaches of workplace standards and violation of international labour standards. This includes worker hotlines in local languages and written complaints. ASSESSMENT Broad indicators to measure supplier performance on fair wage include: impact of living costs on employees’  Define specific indicators well-being, worker turnover, retention levels, and full remuneration of workers. Other indicators are to measure supplier documented internally for use by suppliers. performance on payment Adidas uses the audit results to establish a baseline of workers’ workplace life and determine follow-up of fair wages approaches. Findings of wage analysis in strategic supply chains help suppliers identify strengths and weaknesses of the wage fixing system, highlighting important links between pay and skills, pay and company performance, and the need for effective workplace dialogue. Adidas has faced controversies on wage-related issues. The company’s Stakeholder Relations Guidelines stipulates the mechanism of checks and balances to address them. Engagement Report 2017 21

ASML

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES ASML is a part of the Electronic Industry Citizen Coalition (EICC)* and complies with the EICC* Code  Develop an internal & STRATEGIES on wages and benefits. These are in alignment with the UN Guiding Principles on Business and Human methodology to define, Rights, as well as key international human rights standards including the ILO Declaration on Fundamental compute and implement Principles and Rights at Work and the UN Universal Declaration of Human Rights. living wages in all ASML does not define “living wages” but consistent with the EICC* Code, the compensation paid to all operations workers and employees is expected to comply with all applicable wage laws, including those relating to minimum wages, overtime and legally mandated benefits. The company believes in paying more to retain highly-skilled employees and at the same time, constantly reviews how its remuneration compares to the market benchmark for technology professionals in every region of operation. The terms “minimum wage” standard and “Living Wage” (Fair Remuneration) are mentioned but not defined in the company’s HR Policy. The policy talks about fair and balanced salaries and benefits and the company's support to the “living wage” concept whereby employees should earn salaries sufficient to meet their basic needs. There is, however, no active metric for the computation of living wages as there is low risk and low applicability. In terms of supply structure, the company does not operate a lot in emerging countries as the risk is too high. Most of its supply chain is based in developed countries where high technical standards apply. ASML works with partners in the supply chain to meet or exceed requirements for corporate responsibility set out in the Suppliers Code. On average, the company’s relationship with the vast majority of suppliers exceeds five years. IMPLEMENTATION ASML computes the mean employee compensation for both its female and male employees every year.  CMap salary gaps in The requirement of compliance to the EICC* Code of Conduct is included in all the supplier agreements. sourcing countries The company frequently organizes cross-functional teams and global knowledge-sharing meetings  Support workers’ in the pursuance of training and development programmes. ASML also supports the employee’s right rights of collective to organize in unions and to collectively negotiate fair wages and working conditions at all company bargaining and freedom of locations worldwide. association As a member of EICC*, ASML works with industry peers to achieve responsible labour conditions in the  Work proactively as a electronics industry supply chain. As a member of 21CC, the company works with the leading companies member of initiatives like in the industry to improve efficiency and social responsibility in the global supply chain. EICC & 21CC to push for ASML conducts yearly risk assessments and uses the QLTCS (Quality, Logistics, Technology, Costs living wages in the sector & Sustainability) matrix scorecard to follow, monitor key suppliers, and in case of non-compliance, take corrective actions. The company asks its own suppliers to cascade the same approach down their supply chain. ASML also conducts annual Supplier Relationship Surveys to identify areas of improvement. A Speak-up policy at company level provides everyone working for, or on behalf of ASML with the opportunity to raise a concern about suspected misconduct without the fear of retaliation. ASSESSMENT The company hasn't received any complaints on wage-related issues, nor has it been involved in any  Define indicators to controversy related to wage payment. measure effectiveness ASML does not conduct separate assessments of suppliers on wage compliance. of wage policies for both employees and workers

A three-tier assessment: , and ( representing the best practices) * See Appendix 1 22 Engagement Report 2017

Engagement for influence The living wage in the textile, food and semiconductor sectors

DETAILED FACT SHEETS

BURBERRY

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES Burberry’s Ethical Trading Code of Conduct sets the company’s standard on living wages and requires  Publish the supplier & STRATEGIES it to be upheld for both its employees and the employees in its extended supply chain. Compliance is breakdown also required with all local and international labour laws and the Responsible Business Principles. New factories who do not comply with Burberry’s minimum standards are not accepted into the company's supply chain. Burberry has long-term supplier relationships, averaging 10 years. The company has some key suppliers and other small and big suppliers. Sub-contractors of suppliers are subject to the same audit and management by the company’s internal team. The company-level strategy on living wages is to implement measures to pay wages and benefits that meet minimum national legal standards or industry benchmark standards, whichever is higher. The wages have to be sufficient to cover basic needs and provide some discretionary income. Burberry uses the Fair Wage Network as an intermediary tool to look at a region or country to determine the benchmark wage that needs to be paid. The internal methodology of the company is to adopt a collaborative capacity-building approach and use the wage benchmark in a country to enable the supplier partners to compare and adjust the wages paid at the facilities. IMPLEMENTATION Burberry requires agreement to its Ethical Trading Code of Conduct from all parties involved in its  Disclose the gaps extended supply chain. The company uses the Fair Wage Network Living Wage Database tool to between the wages paid understand the differences between the living wage and the legal minimum wage. and minimum wages in In 2016, Burberry joined the steering group of the Global Living Wage Initiative as part of a unified, global each sourcing country approach with multi-stakeholder participation. The company is the principal partner of the Living Wage  Work with international Foundation and also an active participant in ETI*. Many of Burberry’s facilities are covered by Collective organisations, local Bargaining Agreements. All employees and the employees of the company’s supply chain partners are governments, and industry entitled to the right to collective bargaining and freedom of association under the company’s Ethical peers to define the living Trading Code of Conduct and Human Rights Policy. wage for the sector Burberry focuses on training and engagement activities to empower partners to take ownership of the sustainability challenges and promote responsibility further down the supply chain. Factories in the supply chain are supported through activities and programmes to develop and implement stronger human resource management systems, reduced working hours, sustained and enhanced unique knowledge, skills and expertise, and access to confidential grievance mechanisms. The programmes are determined on the basis of actual visits, follow-up visits and individual assessment of what is required at the facilities. Most programmes focus on a particular supplier need. Burberry carries out audits of its supply chain partners under its “Ethical Trading” Program. Grievance mechanisms are provided for the company’s global employees, and confidential hotlines are provided. In the supply chain, where local labour laws are weak, absent or poorly enforced or where access to grievance mechanisms is a particular challenge, hotlines run by NGOs provide confidential support. ASSESSMENT Burberry uses its audit results to work with the suppliers to identify areas of improvement, implement  Define indicators initiatives and monitor progress. to measure supplier The company has faced very few wage-related controversies. performance on living wage  Communicate Audit Results Engagement Report 2017 23

H&M

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES H&M’s Global Fair Living Wage strategy defines living wage as a wage that satisfies the basic needs of & STRATEGIES employees and provides some discretionary income. The strategy is spread across four levels: Government, Factory Employees, Factory owners, and Brand, and is built upon the company’s belief that well-functioning industrial relations including collective/sectoral bargaining are key to achieving living wages and improved working conditions. The wages and benefits paid for a standard working week at an H&M supplier factory meet, at the very least, the national legal level, industry level, or collective bargaining agreement, whichever is higher. H&M aims to bring about a systemic change by focusing on purchase practices, industry collective agreements and increased investing in manufacturing to ensure modernization, productivity and efficiency at facilities. The company’s operating Sustainability Commitment (Code of Conduct) sets clear expectations on fair living wages and requires all suppliers and subcontractors to comply with it. H&M is transparent on its entire supply chain and relies on the HIGG Index* for the selection of all its suppliers and their rating. The company has recently implemented the 100% Fair Equal programme and aims to implement wage management systems for all critical suppliers by 2018. The company’s wage policies are consistent with all applicable UN & ILO Conventions (131, 183, ILO Recommendation 135) and national legislations. In the event of any discrepancy, preference is given to whichever offers the greatest protection for workers. IMPLEMENTATION In its Sustainability Report, H&M publishes the average wage paid by the suppliers in relation to the minimum  Implement capacity- wage in its most critical production centres. building programmes for H&M is the founding member of ACT* and works in close collaboration with the ILO, national governments, workers at suppliers to and companies at the industrial level to create well-functioning dialogue between suppliers and local trade increase their productivity unions to create improvement in working conditions, including fair living wages.  Categorize non- 100% of H&M’s suppliers have signed the company’s Sustainability Commitment, agreeing to the living wage compliance with living mandate. The company provides industrial training and closely engages with its suppliers to create awareness wages as a zero-tolerance and provide support. H&M’s own employees are given regular feedback on performance and results achieved issue for suppliers and the company actively works with them on individual development plans. This, however, does not extend  Implement accessible to the suppliers’ employees. grievance mechanisms for Under its Sustainable Impact Partnership Program (SIPP), based on Sustainable Apparel Coalition (SAC)’s workers in the supply chain HIGG Facility Module*, H&M assesses the sustainability performance of its business partners and provides at the company level capacity building, workshops, training and management for the gaps identified. The scope of audits includes the issue of wages and extends to the company’s subcontractors. One of the outputs of this assessment is the company’s Sustainability Index (SI) which is used to score and rank factories on their environmental and social sustainability performance. H&M has implemented two complementary programmes, Workplace Dialogue Program and Wage Management System, to facilitate effective wage management practices in facilities. In 2016, H&M put in place a global grievance mechanism for its employees to report any breaches of social policy standards. Grievance channels for workers in the supply chain, however, are directed towards National Monitoring Committees under the company’s 3Global Framework Agreement (GFA)3 with IndustriALL* and IF Metal. ASSESSMENT Indicators identified by H&M to measure supplier performance on living wage include: the number of  Communicate Audit factories with wage management systems, and the proportion of critical suppliers using the fair wage Results & Corrective method as a percentage of total production volume. In 2016, 140 factories were enrolled in Fair Wage Method Actions implementation, constituting 29% of production volume. An additional 91 factories were enrolled in 2017.  Develop a robust Under SIPP, H&M has a rewards and incentive system to reward suppliers demonstrating good sustainability management system performance, with long strategic partnerships. to address related controversies

A three-tier assessment: , and ( representing the best practices) * See Appendix 1 24 Engagement Report 2017

Engagement for influence The living wage in the textile, food and semiconductor sectors

DETAILED FACT SHEETS

NEXT

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES NEXT’s Code of Practice (COP) defines wages as having to meet or exceed national leading standards or  Develop an internal & STRATEGIES the industry benchmark standards, whichever is higher, and at least sufficient to meet basic needs and methodology at company provide some discretionary income. The standard is aligned with the Ethical Trading Initiative (ETI) Base level to define and Code and reflects the most relevant international standards with respect to labour practices as set out in integrate “living wages” the ILO Conventions. The global COP Team is made up of 47 employees based in key sourcing locations. requirement in the COP The company’s internal methodology is to define wages at country level based on first-hand knowledge  Publish supplier of suppliers. breakdown More than 90% of NEXT’s products are sourced from emerging markets while almost 40% of the Brand Stock from the company’s global supplier base is provided by NEXT’s wholly-owned subsidiary, NEXT Sourcing. IMPLEMENTATION NEXT’s COP is an integral part of its business and sets out the minimum standards and requirements  Map and disclose gaps inclusive of the wage component that have to be complied with by all product suppliers for their workers. between wages paid and The company’s dedicated COP team works with both new and existing suppliers and factories to ensure minimum wages in each that they understand the requirements of auditing standards and take responsibility for maintaining sourcing country compliance at all their production locations. The teams in sourcing countries offer one-to-one meetings,  Support workers’ training and support. NEXT also implements sustainable programmes and initiatives to improve supplier rights of collective capacity and ability to deliver on ethical requirements. In countries like Cambodia, Turkey and Bangladesh, bargaining and freedom of NEXT is pushing for shareholders to come together to model risks in order to get support for increased association investment in worker productivity and efficiency.  Implement accessible The COP team conducts factory audits, most of which are unannounced, and works directly with the grievance mechanisms for suppliers to identify non-compliance issues. This includes engagement with the factory management, workers worker interviews, review of employment records and visual assessment of working conditions. NEXT has on-the-ground touchpoints and emphasis is placed on having local auditors who speak the workers’ language. The audit process is used to assign an audit rating to the factory. The company undergoes auditing by third parties to endorse and validate its results. It also defines areas where corrective action is required, with timescales based on the findings for each factory. Where there is no willingness to comply with the COP for the provision on wages, the company disengages from the supplier. NEXT is the founding member of ACT* and works with 17 other partner brands to improve wages in the industry. This includes establishing industry-led freedom and collective bargaining in key sourcing countries. NEXT is also a signatory to the Bangladesh accord. The company also cooperates with governments, trade unions, and NGOs. NEXT has joined the Business Learning Program (BLP) by SHIFT* for the implementation of UNGP through training workshops and to develop a company-level Human Rights and Modern Slavery Policy. ASSESSMENT Audit results are used internally by NEXT as a metric to choose factories as well as retain performance  Define indicators to levels. assess effectiveness of The company has limited wage-related controversies. wage policies for both employees and workers Engagement Report 2017 25

PANDORA

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES Pandora is a certified member of the Responsible Jewellery Council (RJC) whereby wage compliance is  Publish supplier & STRATEGIES a minimum requirement. The commitment along the entire supply chain is to pay a wage higher than the breakdown minimum legal wage and the prevailing industrial rate along with statutory benefits.  Develop an internal Pandora has long-term supplier relationships, the duration exceeding 5 years for most of its critical methodology to define, suppliers. Adherence to minimum wages and industrial standards are criteria for supplier selection. compute and implement Pandora’s human rights policy, suppliers code of conduct and standards are consistent with international living wages across all laws and conventions. The internal Code of Ethics stipulates the rights, duties and expectations within operations areas such as human and workers’ rights. The internal methodology is to compute wages at production facilities. The Anker methodology is a starting point, but pay is in comparison to the average income in a particular region. Focus is on paying a higher wage to retain talent; most suppliers pay the prevailing industrial rate plus benefits far above the minimum wage. Pandora works with National Statistic Offices to determine expenses and wages paid in regions of operation. IMPLEMENTATION The Supplier Code of Conduct is an enforced part of contracts with third party suppliers, including  Disclose the gaps subcontractors. Pandora maps wage gaps as a part of its audit set-up. On average, the wage paid by between the wages paid Pandora is 14% above the base salary including overtime pay but without benefits. and minimum wages in Supplier training is part of the Responsible Supplier Program and is followed by collaborative corrective each sourcing country in actions to enable suppliers to remediate identified issues. The company also runs multiple training annual report programmes along with on-the-job mentoring and coaching to develop the skills of employees and partners who are a part of the value chain. Pandora is a member of the executive committee of RJC* and also the Chair of the Standards Setting Committee. The company has partnered with ITA and has also started a dialogue with the Global Living Wage Initiative to define ‘living wage’. The company is a member of the Nordic Business Centre of Human Rights and also an active member of the Danish Business Network for Human rights, Danish chapter of the UN Global Compact. Pandora is audited for RJC* by an external auditor. Standard audits comprise production site walk- through, document review & worker interviews. The audits make sure that employees have freedom of association, and can elect a representative from their own group to facilitate communication with senior management. Suppliers’ self-assessments on wages is followed by visits to facilities by the company’s local audit committee. Pandora trains its suppliers in best practices for corrective actions in case of non- compliance. A supplier’s unwillingness to change can lead to termination by the Ethics Committee. Pandora has an Ethics hotline to enable people to raise concerns in their own language via internet or a global toll-free phone service. ASSESSMENT KPIs identified to assess implementation of wage levels include the employee retention rate, and ability  Define specific indicators of the company to attract skilled workforce in Bangkok. A key performance sourcing indicator is the on wage components targeted 85% total sourcing value from suppliers who are either audited by third party auditors or certified to measure supplier members of the Responsible Jewellery Council (RJC). performance on living The company has not been involved in any wage-related controversy. wage  Communicate Audit Results

A three-tier assessment: , and ( representing the best practices) * See Appendix 1 26 Engagement Report 2017

Engagement for influence The living wage in the textile, food and semiconductor sectors

DETAILED FACT SHEETS

PUMA

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES PUMA's Code of Conduct, consistent with the Ruggie Framework, stipulates payment of Fair & STRATEGIES Compensation whereby every worker has a right to compensation that is sufficient to meet the basic needs and provide some discretionary income. PUMA publishes the geographic breakdown of its suppliers and annually updates its entire supplier list. The average duration of a supplier relationship is more than 10 years. Selection of the suppliers is based on audits and even subcontractors have to be approved by the central team. PUMA has adopted the Fair Labor Association’s Fair Compensation Strategy. Employees have to be paid at least the minimum wage by the local law or the prevailing industrial wage, whichever is higher, and any other benefits required by law or contract. In the absence of this information, the contracted wage serves as the “basic” wage. Where compensation is not “fair”, each employer is required to work with relevant stakeholders to define new levels. Fair Wage has been identified by PUMA as a material aspect in its 10FOR20 Sustainability Targets. IMPLEMENTATION The Code of Conduct is an integral part of PUMA’s supplier contracts. PUMA publishes the salary and  Work globally with local payment above minimum wage in every sourcing country. The margin, on average, is 20% excluding governments in sourcing overtime and benefits and around 80% when including them. countries to define living PUMA holds annual supplier roundtable meetings to talk about compliance related issues. Handbooks are wages for the sector issued on the company’s social standards, and capacity building programmes are organised to strengthen knowledge, abilities, skills and behaviour of the suppliers. PUMA is enrolled in the ILO/IFC Better Work Program, and workers are trained on topics like freedom of association, collective bargaining, national labour law regulations, contract and workplace relations. PUMA works with IFC, FLA* and the Better Work Program of the ILO for supplier compliance to labour standards. As an accredited member of FLA*, the company works with other brands to implement a national minimum wage policy. PUMA is a stakeholder in the work of the Sustainable Apparel Coalition and also a member of the Bangladesh Accord. The company also works with UNHCR and relevant local authorities on an as needs basis. PUMA actively supports civil society organisations to support freedom of association, and wage negotiations in countries like Cambodia and Bangladesh. Audits are performed by PUMA SAFE (Safe Accountability and Fundamental Environmental Standards) and include self-assessment by suppliers, factory visits, awareness programmes, worker interviews, document review, engagement with worker representatives and the closing meeting defining the corrective actions. Audit ratings are assigned to suppliers. Payment below minimum wages is grounds for termination. PUMA has a functional grievance mechanism for workers in all major sourcing regions comprising a confidential worker/third-party complaints management process. A pilot mobile phone app allows workers to submit grievances. Third parties can also file complaints with theFLA* . ASSESSMENT PUMA publishes its audit results.  Communicate corrective Social KPIs defined to track supplier performance include gross wage paid above minimum wage actions taken to address excluding overtime and bonuses, gross wage paid above minimum wage including overtime and audit results on fair wages bonuses, workers covered by social insurance, overtime work, workers covered by a collective bargaining  Develop and document agreement, among others. in company policy a Global evaluation of Social KPIs is used to reveal country-specific needs, to benchmark the company's robust management suppliers and drive performance over time. system to address related controversies Puma has faced several wage-related controversies in the past. These were always closely followed up in a timely manner and eventually resolved. Engagement Report 2017 27

TSMC

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES TSMC does not have a company policy on “living wage”. It adheres to the wage and benefits provision  Develop an internal & STRATEGIES in the EICC* Code, which is in alignment with key international labour and human rights standards. The methodology to define, TSMC Suppliers Code of Conduct provides for the payment of worker wages no lower than applicable compute and implement minimum wages. living wages for all TSMC’s wage strategy is to provide competitive compensation packages, above the industry average, employees and workers to attract and retain the best talent, rewarding employees’ performance and encouraging their long-  Formalize existing wage term contribution. The competitive compensation is assessed via annual benchmarking studies. The total practices and extend them compensation for an employee includes base salary, allowance, employees' cash bonus and profit sharing, to suppliers job responsibility, performance, commitment, and the company's operational achievement. To maintain competitiveness, salaries are adjusted annually on the basis of global salary surveys, market salary scales, and economic indices. The design and review of compensation policies at TSMC covers all job levels, including blue-collar workers. The company has long-term relationships with most of its suppliers, with many exceeding 5 years. The supplier selection process is aligned with the audit protocol prescribed by the EICC* Code and requires compensation paid to the workers to be compliant with all applicable wage laws. TSMC engages in supplier risk assessment processes and its supplier counselling team ensures supplier compliance with the Code. IMPLEMENTATION In 2016, TSMC’s average employee income was about 3 times the average employee income of the entire  Collaborate with country. It is not clear if the same is true for workers’ wages. governments, NGOs, and All suppliers agree to be bound by the Code of Conduct, requiring the same of their sub-suppliers, peers to define living wage contractors, and service providers. for the sector TSMC respects employees’ rights to form a labour union and freedom of association.  Play a proactive role in industry initiatives like The company is a member of EICC but has no other existing collaborations on wages. The company EICC to implement living leverages the services of Willis Tower Watson and Radford to benchmark its compensation programme wage with leading sector companies. TSMC has a Supplier CSR training programme that is based on the Code of Conduct and covers wage issues. The company also has an elaborate employee learning development and personal development plan. The company integrates internal and external training resources to provide general training, professional training, functional training and management training, systematically together with customized individual training. TSMC carries out internal audits and these are tracked closely through TSMC Supply Online. The company conducts risk assessments, on-site audits and also allows occasional audits by government authorities or independent third-party auditors. This consists of planned inspections, document reviews and interviews with management and employees. TSMC’s Correction Action Request (CAR) System lays down a step-by-step response by the company on non-compliance. The company reduces business value or terminates business relationships with suppliers for significant negative effects of non-compliance on topics including living wages. TSMC ensures through impartial mechanisms, including quarterly labour-management, that employees' opinions and voices are heard, and their issues are addressed effectively. The employee grievance mechanism guarantees anonymity. ASSESSMENT TSMC discloses the “Supplier Non-Compliance Management Flow” in its CSR Report.  Define indicators to The audit results and closure rate of non-compliance issues are used as a metric by the company to measure the effectiveness monitor the supplier performance & appraisal. of wage policies The company has not been involved in any wage-related controversy.  Communicate Audit Results

A three-tier assessment: , and ( representing the best practices) * See Appendix 1 28 Engagement Report 2017

Engagement for influence The living wage in the textile, food and semiconductor sectors

DETAILED FACT SHEETS

MUJI

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES Muji’s “Code of Conduct for Business Partners: Environment, Labour, and Safety Management” requires  Develop an internal & STRATEGIES suppliers to respect human rights and provide a sound working environment for all individuals who work methodology to define, in the company’s supply chain. The Code covers business in and outside Japan. In addition, the company’s compute and implement “Environment, Labour and Safety Standards” are based on the UNGC and the Core Labour Standards of living wage across ILO, to which all suppliers are required to adhere. company’s operations The company acts in coherence with standards defined by national and international authorities such globally as the ILO (conventions related to Minimum Wage Fixing (1970), Tripartite Declaration of Principles Disclose breakdown of key concerning Multinational Enterprises and Social Policy and the Declaration on Social Justice for a Fair suppliers Globalization), The Universal Declaration of Human Rights (article 23 (3), Global Compact). Muji is also a signatory of the UNGC. The company has long-term relationships, of over five years, with half of subcontracted factories (mainly Japanese). Only 20% of factories are replaced every year. Roughly 70% of procurement comes from outside Japan. Muji conducts audits on every new contracting manufacturer proposed by suppliers, such as trading houses, before granting it certified factory status. Contracts include clauses on minimum wage but not on living wage. Muji has no existing strategy on Living Wages. IMPLEMENTATION Muji conducts annual auditing for important subcontracted factories (30-40%) but not all. The company  Map the gaps between is now considering introducing external auditing so as to set standards. the salary paid and Muji does not concern itself with wages paid at subcontracted factories as the contract is not an open the minimum wages in book and pricing negotiations with suppliers only start from FOB. sourcing countries Muji participates in the Better Work Programme, a collaboration between ILO and IFC since 2016, and  Support workers’ entrusts it with supplier audits related to apparel factories. The company is considering expanding the rights of collective scope of auditing to household goods. bargaining and freedom of association The company educates suppliers to improve product quality.  Work globally with local governments and industry peers in sourcing countries to define living wages at the industrial level  Implement accessible grievance mechanisms for all employees and workers ASSESSMENT Muji does not assess its suppliers on living wages.  Define indicators to The company has faced controversies in the past but not related to wages (living or minimum). measure effectiveness of the company’s wage policies Engagement Report 2017 29

NIDEC

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES NIDEC established the “CSR Charter” for the group, based on the UNGC and EICC, in 2008, and defined  Develop an internal & STRATEGIES CSR Regulations to implement the Charter. The Charter requires respecting human rights and ensuring methodology to define, workplace safety and good health to establish a work environment that brings out the best in each compute and implement individual. living wage across the NIDIC operates a comprehensive EICC*-based CSR management programme that covers five regions: supply chain Japan, China, Asia, the Americas and Europe (including the Middle East and Africa). Along with global expansion of its businesses, the company has been extending the scope of its coverage. The company acts in coherence with standards defined by national and international authorities such as the ILO (conventions related to Minimum Wage Fixing (1970), Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy and the Declaration on Social Justice for a Fair Globalization), The Universal Declaration of Human Rights (article 23 (3), Global Compact) and EICC*. The company is a UNGC signatory. The company states in the CSR guideline that regarding fair wages, it guarantees payment of minimum wages, overwork payment and all other legislative requirements regarding wages for all employees, and requests suppliers to adhere to the CSR guideline. IMPLEMENTATION In the CSR guideline, NIDEC states that the company respects rights of collective bargaining and  Map gaps between the freedom of association and guarantees an environment in which employees or their representatives can salaries and minimum communicate with the management about working conditions without being subjected to any adverse wages in sourcing treatment. countries NIDEC introduced a system in 2014 for a certification authority to evaluate its compliance with theEICC*  Take proactive measures and implemented a PDCA programme including external audit, risk assessment and training provided by to implement these rights an international certification authority. According to a second-party audit held jointly with a certification in the workplace authority, the Standard Conformity Ratio, based on EICC* Audit Results at 21 major production sites  Collaborate employing more than 100 workers in China and in Asia, was 69% for Labour and 70% for Health and with international Safety. organisations, local NIDEC started the EICC* monitoring of suppliers in 1998. Out of 6,000 suppliers, 2,500 names are in the governments, industry EICC* database. External procurement accounts for 90%, of which roughly 60% in China, 20% in Asia peers and civil society to (Thailand, Vietnam, and Philippine) and 20% in the Americas/Europe. define living wage for the NIDEC conducts CSR procurement checks by sending questionnaires to its 200 largest suppliers. Based sector on their reply to the advance-survey sheet, the company conducted on-site monitoring for 61 supply  Implement transparent chain partner companies in 2016. and accessible grievance NIDEC holds CSR procurement seminars for major supply chain partners globally. mechanisms ASSESSMENT The company does not assess its suppliers on living wages.  Define indicators to measure company and supplier performance on the wage policies

A three-tier assessment: , and ( representing the best practices) * See Appendix 1 30 Engagement Report 2017

Engagement for influence The living wage in the textile, food and semiconductor sectors

DETAILED FACT SHEETS

VINCI

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES Vinci is in favour of keeping skills in-house, but some projects require the use of local contractors  Define the concept of & STRATEGIES (20%). The living wage is therefore a factor to be taken into account for Vinci employees as well as for living wage and a strategy subcontractors. consistent with the Vinci is aware of the risks inherent in outsourcing. Suppliers are assessed on the basis of social and company’s structure environmental criteria and must sign the Group’s supplier performance charter. In 2017, Vinci published a guide to human rights that refers to remuneration issues but not explicitly to the living wage. This concept is not mentioned either in the supplier charter. Vinci is working on developing an internal methodology. As part of the task force on human rights, Vinci began to study this theme in 2017 and will take this reflection forward in 2018. The goal is to define the concept of living wage and reflect on its integration within the group. Vinci is a signatory of the Global Compact and refers to the UNIVERSAL DECLARATION OF HUMAN RIGHTS (UDHR), the International Covenant on Civil and Political Rights (ICCPR), the International Covenant on Economic, Social and Cultural Rights (ICESCR), fundamental ILO conventions*, OECD guidelines* and the UN Guiding Principles on Business and Human Rights*. IMPLEMENTATION Vinci works in collaboration with several consultants on topics related to human rights (notably as part  Draw up a state of play of sector initiatives) but most of the documents are produced internally and reviewed by consultants. of wage levels in countries The living wage is a topic under study in the group but has not yet been precisely formalised (state of where Vinci has operations play, methodology, means for action, etc.). and the level of living wage in order to assess However, a large proportion of Vinci employees (more than 85% of the activity is carried out in OECD exposure to this issue countries) enjoy social benefits (insurance against sickness and death, etc.) and the group is currently contemplating generalising this practice.  Generalise social benefits to all employees The development of skills through training can also be taken into account: a better-trained employee may then claim a higher salary.  Support social dialogue at the level of Subcontractors are not affected by these measures. subcontractors Vinci collaborates with initiatives related to human rights (global and/or sectoral) but so far, none of them  Raise awareness among have committed to work on this issue. In November 2017, Vinci joined the Global Deal initiative, which aims governments and clients to contribute to decent work, including the living wage. about living wage issues in tender procedures  Promote the subject of decent wages in internal and external human rights initiatives ASSESSMENT The policy is not yet formalised and there are no follow-up indicators concerning this issue for the time  Communicate on the being. actions implemented and The group has not been involved in any wage-related controversy. follow-up indicators Engagement Report 2017 31

COMPANY A

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES The company’s Code of Conduct provides for ‘living wages’ for all employees (permanent, temporary,  Formally document & STRATEGIES apprentices & contract workers) and stipulates the payment of fair compensation meeting or exceeding living wage policy and the local legal and industry minimum standards, for regular as well as overtime work. The company and methodology adopted to contracted suppliers are required to provide employees and workers with benefits to reward contributions, compute it skills and behaviour considered vital to success. Over half of the company’s production is outsourced and the company publishes the supplier map in its People & Planet Sustainability Report. The company has long-term relationships with most of its suppliers and requires all of them to comply with the robust Supplier Requirements consisting of the Code of Conduct and related policies on ethics and human rights, and including clauses on fair compensation and the living wage. The selection criteria of sub-suppliers are aligned with these requirements. Transparency is sought on all subcontractors. The strategy to compute and structure wages is country-driven and varies with events. For instance, supplementary allowance may be provided in addition to the base compensation if a country is in a situation of de-stabilization. For wage calculations, the company hires auditors on the ground when required, and relies on third party reports and briefings for each country to determine appropriate compensation levels. The company also looks into the nature of employment contracts as well as work hours to determine proportionate compensation. IMPLEMENTATION The wages paid by the company generally significantly exceed the minimum wage. The benefits  Support workers’ right of component of the base salary is country-driven while the support to the employees is market-driven. collective bargaining and The Supplier Requirements consisting of the Code of Conduct form an integral part of the company’s freedom of association contractual agreements with the suppliers and outline labour management requirements, including fair  Collaborate with local compensation and living wage. governments and industry The company conducts on-site supplier workshops in high-risk countries in the presence of top peers to define living wage management HR and accounting personnel, and addresses the issue of living wages, amongst others. for the sector The company also conducts Working Group discussions. The company’s Edu software provides training  Implement accessible to employees to address skill gaps, and to customers and suppliers on products and overall technology grievance mechanisms learning. and set up a corrective The company is collaborating with the Joint Audit Co-operation (JAC)* initiative, as part of which action system wage issues are addressed at telecom industry level. The company has partnered with EcoVadis for sustainability assessments which include a review of its suppliers’ labour practices. The company also collaborates with customers to identify the risks related to working conditions through joint audits. The company also engages with suppliers’ workers through on-site audits during which random worker interviews and surveys are conducted in addition to those by the JAC* initiative. Employee wages are audited and the information retrieved is structured based on SA800 standards. A question on pay satisfaction is also being sent to the workforce through mobile surveys. ASSESSMENT Broad indicators defined by the company to measure supplier performance on living wage include:  Define specific indicators supplier awareness of the legal minimum wage, notification of changes in wages to contractors, disclosure on the components of of change in the salary structure to the employees, and evidence of changes being implemented including wage paid (salary gaps, salary slips. overtime hours, etc.) to The company has not been involved in any wage-related controversy. measure performance for both employees and workers  Communicate Audit Results

A three-tier assessment: , and ( representing the best practices) * See Appendix 1 32 Engagement Report 2017

Engagement for influence The living wage in the textile, food and semiconductor sectors

DETAILED FACT SHEETS

COMPANY B

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES The company’s values and approach to human rights compliance throughout its operations, supply chains  Develop an internal & STRATEGIES and communities are guided by the Universal Declaration of Human Rights, the United Nations (UN) methodology to define, Guiding Principles on Business and Human Rights and the UN Global Compact Principles. compute and implement The company requires compliance of all its suppliers with the EICC* Code that stipulates labour conditions living wage for employees inclusive of wages and benefits. This includes minimum wage, overtime hours and benefits for all workers. and suppliers The company’s Code of Business Conduct upholds the rights of employees consistent with all applicable wage and hour laws in all its operations. For the company, the living wage risk along the supply chain is very low as the vast majority are skilled workforce. The company does not have an internal methodology beyond the Code to define living wages. The company outsources most of its production to independent third-party suppliers who perform the manufacturing and assembling of integrated circuits. The company has long-term relationships with all its primary suppliers. Furthermore, suppliers are not allowed to subcontract. The company’s supplier structure is expected to significantly change post its merger with NXP Semi- Conductors. IMPLEMENTATION The company provides training to its workforce and suppliers on the EICC* standards. The company  Support workers’ offers domestic and international employees development opportunities in professional, technical, rights of collective management and leadership skills through its Learning Centre and regional programmes. There is no bargaining and freedom of information on any similar programmes also being implemented for suppliers and workers to increase association their productivity.  Collaborate with local In addition to being a member of EICC*, the company has collaborated with the KnowTheChain governments and civil organisation on pilot research and an ICT benchmarking study of transparency in the electronics industry society in countries of supply chain on forced labour, which includes 'workers’ voice' as a key theme. operation to define living The company conducts Human Rights Impact Assessments which help it identify risks in three priority wage areas: working conditions in the supply chain, equal opportunity and pay for employees, and product  Implement accessible manipulation. Consistent with the EICC* guidelines, suppliers are required to complete a self-assessment grievance mechanisms questionnaire to identify greatest risks. The company also conducts in-person audits to prioritise suppliers and set up a corrective located in higher risk countries and assess which suppliers have strong management systems. The action system company has a collaborative approach to ensure suppliers’ compliance with the EICC* Code. ASSESSMENT Audits are conducted but the results of the engagement processes are not disclosed.  Define indicators to assess effectiveness of wage policies for both employees and workers  Communicate Audit Results Engagement Report 2017 33

COMPANY C

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES The company's Code of Conduct prescribes the payment of living wages across its global operations and & STRATEGIES requires compliance from anyone working for the company. Manufacturers and suppliers are required to pay wages that meet at least the legal minimum or collectively bargained agreement, should the latter be higher. All aspects related to the payment of wages are governed by ILO Conventions 26 and 131*. The living wage is a fundamental right at work and is defined as adequate remuneration that allows workers to cover their basic needs and those of their families. The methodological principle used is to empower local workers to be represented in trade unions and through negotiations and collective bargaining. The company’s strategy combines promotion of collective bargaining with responsible purchasing, improved working conditions and systems, collaboration with stakeholders and support of campaigns. In practice, wages are computed based on the market requirements of a geographical location. The majority of the company’s production is sourced worldwide and the supply chain is structured in 13 clusters. The company publishes the supplier breakdown by production volume, country traceability in supplier clusters, and the duration of supplier relations, distinguishing between those in compliance with the code of conduct and those that are not. All suppliers and authorised subcontractors are audited by internal or external auditors. IMPLEMENTATION The Code of Conduct is an integral part of the Minimum Requirements that are signed by the suppliers  Conduct risk as a prerequisite to joining the company's supply chain. assessments in sourcing The company conducts social audits and non-compliance triggers immediate implementation of a countries to assess where Corrective Action Plan. Monitoring and follow-ups are stricter and time-bound when non-compliance the issue of payment concerns sensitive issues. This is followed by a new social audit for verification. The company has a red of living wages is most line for unauthorised and illegal sourcing by suppliers, including the termination of relationships. critical Buyers at the company are trained in responsible purchasing, enabling them to use it as a tool to pressure  Set up Supplier Rating suppliers into adopting responsible practices. To increase the productivity and efficiency of workers, Index as an indicator the company disseminates its best practices across the supply chain. The company runs a supply chain of supplier factory programme dedicated to living wages and the right to equitable and satisfactory remuneration in performance countries like Spain, Turkey, Bangladesh & China.  Extend monitoring The company was one of the first in the industry to sign up to IndustriALL* and its commitment to frameworks to collective bargaining is global. The issue of wage improvement at the company is related to the promotion subcontractors of workers’ rights to hold free elections, choose their representatives, and enjoy freedom of association. The company is a part of ACT* and 30 of its factories are registered with the ILO Better Factories programme to improve working conditions. The company works closely with national and international unions and trade associations to promote opportunities for wage negotiation. There are existing collaborations with local governments and industry peers in countries like Cambodia, where the company pushes for workers’ rights of collective bargaining and negotiations. ASSESSMENT For each country, the company publishes the percentage of active factories compliant with the Code of  Define indicators Conduct. Compliance on the issue of wages has evolved from 72.4% in 2014 to 75% in 2016. to measure supplier The company has faced several wage-related controversies. performance on living wage  Develop a robust management system to address related controversies

A three-tier assessment: , and ( representing the best practices) * See Appendix 1 34 Engagement Report 2017

Engagement for influence The living wage in the textile, food and semiconductor sectors

DETAILED FACT SHEETS

COMPANY D

Thematic: living wage

Level Themes Analysis Recommendations (1 to 3) POLICIES The company’s commitment under its Responsible Agriculture Chapter and Human Rights Chapter is  Publish a list of major & STRATEGIES to provide favorable and decent working conditions, consisting of fair wages and access to basic needs suppliers for all its employees and workers. The company complies with the RSPO* principles and internationally  Formalise existing wage recognised labour standards, subject to constitutional constraints and national and/state legislations, practices and develop an decrees, orders, regulations and policies. internal methodology to The company’s internal methodology is to pay a salary at a rate prescribed by binding collective labour define and implement agreements and in accordance with the legal minimum wage in every operating country and region. living wages along the On top of this, the company provides other in-kind benefits such as housing, rice, etc. [depending on supply chain the country]. The company, unlike other palm oil companies, operates along the entire palm oil supply chain. A major percentage of fruits are sourced from its own estates; purchases from external suppliers are only to top up shortfalls in mill utilisation. The company has long-term relationships with smallholders in countries such as Indonesia, PNG and the Solomon Islands. Sourcing from third parties in Malaysia is an exception due to the context of the industry in that country, where supplier engagements are on an opportunistic basis. The company’s Responsible Sourcing Guidelines consist of legal, environmental and social requirements, which all suppliers are required to sign. This involves risk assessments, engagement with suppliers and field audits of high-risk suppliers. IMPLEMENTATION The company focuses on improving its workers’ efficiency and performance through tailored talent  Map and disclose gaps development & learning programmes. The company engages in awareness-building on the topics of between wages paid and sustainable palm oil production, which includes labour standards for both internal workers and external minimum wages in each suppliers. sourcing country The company engages with the unions in most of its sourcing areas to reach collective wage agreements. At present, employees of the company are represented through formal bargaining agreements in 9 countries: Malaysia, Indonesia, Australia, Singapore, Liberia, Vietnam, South Africa, the Netherlands & Papua New Guinea. In locations where official trade unions do not exist, the company provides a platform for consultation, grievances and collective agreements through focus groups and dialogue. The company is engaged in the RSPO* study to develop living wage guidelines, which is planned to be included in the next revision of the Principles and Criteria. The company partners with local communities on a case-by-case basis; for instance, in Liberia, the Sustainability Partnership Initiative was set up to discuss matters concerning the community such as job creation and land rights, amongst others. As part of the Malaysian Palm Oil Association, the company engages on wages at the industrial level. The company conducts selected field audits and if the supplier is non-compliant, prioritises education followed by capacity-building over exclusion. Periodic reviews ensure employees’ access to adequate housing, healthcare and other amenities. The company works with SHIFT* to conduct human rights assessments of company practices on the salient human rights risks within the operations. The company has multiple grievance procedures and whistleblowing channels (anonymous and in multiple languages) for employees to report on potential ethical, human rights, legal or regulatory violations. ASSESSMENT The company is committed to investigating all reported incidents and taking appropriate action where  Define indicators to violations have been proven. measure effectiveness of The company has not been involved in any wage-related controversy. wage policies  Communicate Audit Results

A three-tier assessment: , and ( representing the best practices) * See Appendix 1 Engagement Report 2017 35

SUMMARY RATINGS TABLE

Policies & Strategies Implementation Evaluation Adidas ASML Burberry H&M Next Pandora Puma TSMC Muji Nidec Vinci Company A Company B Company C Company D 36 Engagement Report 2017

Engagement for influence

Child labour in the tobacco and cocoa production sectors

We initiated engagement on this theme in 2016. Companies cooperate with NGOs and governments on this subject. Despite improvements at some companies in terms Child labour: all activities that deprive children of reporting and transparency, these same of their childhood, potential and dignity, companies are still subject to controversy, and adversely affect their education, health, especially in the cocoa sector. physical and mental development.

152 million children forced to work in the A VICIOUS CYCLE THAT IS COMPLICATED TO world: BREAK - Around half are located in Africa In 2015, 193 countries agreed upon the target 8.7 of the - 70% in the agricultural sector United Nations Sustainable Development Goals (SDG) Sectors reviewed: tobacco and cocoa which calls to “take immediate and effective measures to […] secure the prohibition and elimination of the 8 companies interviewed worst forms of child labour, including the recruitment and use of child soldiers, and by 2025 end child labour in all forms”. This citation depicts the global agreement about the urgent need to end child labour. Latest numbers from the International Labour Organisation (2013) suggest that worldwide around 168 million children are engaged in child labour. This absolute count translates into a 10% prevalence rate in the Asia Pacific region and an even more striking incidence rate in Sub-Saharan Africa, where almost every fourth child is engaged in child labour (21.4%). The roots of child labour are diverse and complex. In an attempt to decrypt the underlying causes, it can be stated that the main reason to push children to enter the working world is the poverty of households. Economic inequality, insufficient access to schooling or a lack of quality employment opportunities may further perpetuate the vicious circle of poverty that spurs the occurrence of child labour. Another factor that increases the complexity of the issue of child labour is the broad variety of forms in Engagement Report 2017 37

which child labour can occur. While major international Tobacco guidelines determine the broad definition of child labour, During the process of tobacco leaf harvesting, the forms of child labour found depend not only on the children that work on tobacco farms are engaged country and local laws but also on the sector of activity. in different forms of hazardous work, particularly In recent years, the international press as well as Non- due to the exposure to the Green Tobacco Sickness Governmental Organisations increasingly reported on (GES). GES is a form of nicotine poisoning inherent incidences of child labour within global value chains. to the cultivation of tobacco, which is caused by an With 60%, the majority of children implicated in child ongoing absorption of nicotine through the skin into labour are said to work in agriculture (60%), one of the the blood stream. Fainting, dizziness, nausea, vomiting, most dangerous sectors in terms of its high incidence abdominal cramps, diarrhoea, increased heart rate and rate of work related fatalities. Unfortunately, the transpiration are the illness’ symptoms. Children are complexity of multinational’s agricultural supply chains particularly exposed to GES since their bodies have not increases the difficulty of establishing the duty of care yet built up any tolerance against nicotine. from parent companies for issues such as child labour.

LEGISLATION AND INTERNATIONAL INITIATIVES SECTORS REVIEWED The ILO Convention Number 138 was adopted in Two of the most controversial agricultural sectors in 1973 and defines all forms of labour that are likely to relation to child labour are the production of cocoa compromise the (i) health, (ii) safety (iii) or moral and tobacco: integrity of a child as hazardous work that should not be executed by children younger than 18 years old. Cocoa About 26 years later, in 1999, the ILO adopted the Ghana and the Ivory Coast are the world’s leading cocoa Convention Number 182 which defines the worst forms producers (60% of global cocoa supply) as well as the of child labour according to four major pillars. These two two cocoa producing countries that are most at risk conventions outline the scope of economic activities when it comes to child labour. In 2015, approximately for children that fall under the realm of child labour and 2.12 million children were implicated in child labour define the age limitations for said activities. which constitutes an increase of 21% since 2009. Apart from these international standards, during the Furthermore, many of the activities related to cocoa past decade, collaborative private sector initiatives have farming fall under the category of the worst forms of started to emerge that should help increased the duty child labour. For instance, practices that are “likely to of care of parent companies. Concerning the cocoa and harm the health, safety, or morals of children” such as tobacco industry, two prominent initiatives that bring working with agrochemicals or the use of “hazardous together private sector companies and public sector tools” like bush knives to cut the cocoa pods from the actors to combat child labour in supply chains are the trees (ILO Convention No. 182). Harkin-Engel Protocol and the Eliminating Child Labour in Tobacco Growing Foundation. While both initiatives have gained the support of international organisations and government officials, it remains unclear to what extent private sector companies act as executor of the terms defined within these initiatives. 38 Engagement Report 2017

Engagement for influence Child labour in the tobacco and cocoa production sectors

Examples of initiatives against child labour in the cocoa and tobacco industries:

Name Date Description

CocoaAction Initiative 2014 An initiative launched by companies from the cocoa industry that constitutes a voluntary industry-wide strategy aiming at the development of partnerships between governments, cocoa farmers and the cocoa industry to help increase farmer's productivity and to strengthen community development in the Ivory Coast and Ghana. International Cocoa Initiative 2002 The ICI* is an organisation promoting child protection in cocoa-growing communities. It facilitates the collaboration between the cocoa industry, civil society and national governments in cocoa-producing countries to ensure the elimination of child labour. Harkin-Engel Protocol 2001 A protocol established by US Senator Tom Harkin and Representative Eliot Engel with private sector representatives. It aims at eliminating the worst forms of child labour in the cocoa industry through the development of industry-wide standards and independent monitoring, reporting, and public certification programmes and includes a commitment to a time-bound solving approach implemented in the Ivory Coast and Ghana. The Tulane Report serves as independent assessment of the improvements achieved. In 2010, the Declaration and the Framework of Joint Action to Support the Implementation of the Harking-Engel Protocol were established in order to recall the pledge made in 2001 and to elaborate on concrete activities necessary in order to achieve the new aim of reducing the worst forms of child labour by 70% until 2020. Eliminating Child Labour in 2000 The foundation aims at preventing child labour and at protecting and improving the Tobacco Foundation lives of children in tobacco growing areas. Through community projects, research and policy negotiation the ECLT* wants to allow children in tobacco growing communities to have access to a healthy, educated and safe life.

MAIN ANALYSIS CRITERIA

Strategy & policies assessment with adequate reach and frequency, In order to evaluate the policies of companies we analysed the implementation of monitoring and performance if the strategy outlined by the firms is based on the ILO measurement indicators on the incidence of child Conventions No. 182 and 138. Furthermore it was inquired labour and on the scope and results of the farming and if the policy includes qualitative and quantitative goals, awareness raising programmes as well as a high level of if it the scope of the policy is accurate and if the firm transparency on areas for improvement. established a special policy against child trafficking, an In case of non-compliance adequate policy scope. Companies’ performances in the case of non- Implementation compliance was evaluated by analysing if the firms have The focus to analyse the quality of the implementation implemented a grievance and remediation system and lied on five particular aspects: (i) collaboration with how transparent they are on the results and reach of the local entities to increase the efficiency and reach of the mechanisms. policy; (ii) an outline of the supply chain including a risk assessment; (iii) farming training to increase the yields; (iv) awareness raising about the issue of child labour and on how to prevent its occurrence for farmers and community members.

Assessment Evaluating the implementation activities and its results is a crucial aspect to increase transparency and credibility. It should include an internal and external * See Appendix 1 Engagement Report 2017 39

MAIN RECOMMENDATIONS MADE IN 2016 AND at improving their yields and a majority of firms has put THEIR LEVEL OF MATURITY in place initiatives to educate farmers and community The results of our analysis show that the companies members about the dangers and possibilities to prevent from both sectors have dedicated policies based on child labour. the ILO Convention No. 182 and 138 that aim at the In view of high public pressure, in recent years, a elimination of child labour within their supply chains. number of firms have started increasing their level of Nonetheless, for most of the actors the policies remain transparency on their child labour performance through rather broadly formulated. frequent independent assessments whose results are Furthermore, cocoa and tobacco firms collaborate with publicly communicated. For most parts, the indicators local actors to implement actions against child labour. used to communicate the performances remain rather In particular, all the companies interviewed provide broad but the overall level of transparency is improving. farmers with technical support and training that aims

Issues Main points for improvement

Strategy & Policies Enhancing the quality of policies by incorporating a set of qualitative and quantitative goals in the strategy outline; formalise a policy on child trafficking. Implementation Streamline initiatives for the education of farmers and community members on the issue and the prevention of child labour; increase scope of farming and awareness raising programmes implemented to a higher percentage of the supply chain; map out the supply chain in detail and identify risk areas in relation to child labour. Assessment Improve the reach and frequency of external assessments to an adequate level; communicate on a broad set of detailed and informative performance measurement indicators that allow for a higher level of transparency and the identification of areas of improvement. In case of non- Put in place a grievance mechanism that is accessible at a farm level; streamline a remediation system with compliance adequate case-by-case action plans; increase transparency on number and type of complaints and remediation activities. 40 Engagement Report 2017

Engagement for influence Child labour in the tobacco and cocoa production sectors

GOOD PRACTICES IDENTIFIED IN 2016

Key points Best practices

Policy & Strategy  Precise policy to combat child labour, including qualitative ( e.g. targeted populations) and quantitative objectives (e.g. budget size allocated to combat child labour should be in relation to the country risk and the size of the company).  Establishment of a Supplier Code of Conduct.  Coherence with standards defined by national and international authorities such as the ILO Convention No. 182 on the worst forms of child labour and the ILO Convention No. 138 on the minimum age for admission to employment and work.  Implementation of a special policy and operational plan against child trafficking. Implementation  Collaboration with governments, institutions and NGO’s to gain understanding of the context on the ground and to increase the efficiency of child the labour strategy.  Mapping of entire supply chain including stakeholders and identification of associated risks.  Clearly defined structure of representation & support on the ground.  Education on issue of child labour for local communities and staff members (farmers, traders, suppliers, families, teachers).  Training and support for farmers on methods that help create higher returns without hiring child labour. Assessment  Performance tracking via internal and independent external assessment.  Active communication on results, objectives and areas for improvement of the activities to fight child labour.  Adjustments of policies, indicators and objectives according to the audit results.  Formulation of monitoring and performance measurement indicators.  Active communication on scope and results of the training/education workshops (qualitative and quantitative). In case of non-  Implementation of an efficient mechanism through which farmers, workers and contractors can report child compliance labour incidences.  Active communication on number and reach of complaints.  Streamline and systematise remediation system at operational level.  Active communication on scope and result of the remediation system (e.g. Scope: mechanism of control to ensure child labourer found are in possession of their birth certificates; Result: number of children reintegrated in school etc.). Engagement Report 2017 41

SUMMARY TABLE OF 2016 RATINGS

Policies In case of non- & Strategies Implementation Assessment compliance TOBACCO British American Tobacco

Imperial Brands

Japan Tobacco

Philip Morris International

Swedish Match COCOA Lindt & Sprüngli

Nestlé

Olam

A three-tier assessment: , and ( representing the best practices) 42 Engagement Report 2017

Engagement for influence Child labour in the tobacco and cocoa production sectors

Focus on the Modern Slavery Act, the anti-slavery law adopted by the United Kingdom in 2015

The UK’s Modern Slavery Act 2015 requires However, in a report published by British NGO companies with revenues of more than £36 million CORE Coalition, it is stated that this year, only 3,000 to publish by 30 September 2017 a statement companies on the 9,000 to 11,000 companies testifying to their efforts in the fight against modern concerned issued their statement, which must slavery in supply chains. Section 54 of this Act describe the steps taken by the company to ensure concerns companies regardless of their country that its subcontractors and supply chains are of incorporation and therefore applies to foreign free of any practice related to slavery and human companies operating in the United Kingdom. trafficking. According to CORE, the cocoa market is one of the markets most likely to be involved in While the purpose of this law is both broader than abuses in terms of forced labour. our theme of engagement, in the sense that it is not confined to child labour, and more limited, since This progress report on the application of this its scope is limited to slavery, we believe that in law underscores companies’ lack of maturity and spirit, its application - whether effective or not - is highlights the vigilance that investors must have on revealing when it comes to companies’ practices in the subject. the management of their supply chain in terms of labour law, children included.

INVENTORY OF CHANGES IN PRACTICES: FOUR FINDINGS More specifically, when it comes to child labour in the child labour, in collaboration with the ICI (International tobacco and cocoa supply chains and the companies Cocoa Initiative*), a foundation dedicated to protecting in our panel, 2017 was marked by four lessons: children in cocoa communities). This report presents the company’s programme to train farmers in better 1. significant progress in transparency, particularly on production practices, promote gender equality, build the part of one specific player in the cocoa sector; schools and better understand child labour. It also and 2. increased coverage of aid programmes in the two especially makes it possible to assess the effectiveness sectors, also translating into an increased number of the company’s efforts, which provides information of audits; on the percentage of reduction in the number of 3. an effort to define corporate strategies in children working in its supply chains. This report also the tobacco sector; discloses the budget devoted to the fight against 4. considerable room for improvement in light child labour and can serve as a benchmark for other of the stakes. companies in the two sectors. Almost all the companies confirmed to us they had Already in 2016, when we initiated this theme, expanded the scope of their programme to better we noted that some companies had improved their manage their supply chain, one way or another: either level of transparency regarding their results related by increasing the number of farmers trained in a given to child labour, given the heightened social pressure country, or by admitting new countries in the scope of in recent years. their programme. This trend was confirmed in 2017. One of the companies covered issued a report dedicated to the fight against * See Appendix 1 Engagement Report 2017 43

In fact, the number of internal or external assessments SIGNIFICANT PROGRESS, BUT A SLOWDOWN have also increased significantly for some players. THAT CALLS FOR A MASSIVE INTENSIFICATION OF EFFORTS TO COMBAT CHILD LABOUR Three companies in the tobacco industry told us they had changed their strategy: While there is tangible progress, much still needs to be done. According to the ILO in its report “Global ƒƒone of them set up a partnership with an external Estimates of Child Labour: Results and trends, 2012- audit firm to better understand the social impacts of 2016”, published in February 2017: “The 2016 estimates its programme, tell a story both of real progress and of a job unfinished. ƒƒanother performed an in-depth assessment of the They show a dramatic decline in child labour over the social impacts to better identify the risks of child labour 16 years since the ILO began monitoring child labour in and establish specific targets and indicators and has 2000. But the estimates also indicate that the pace of undertaken to publish them in its 2017 annual report, decline has slowed considerably in the last four years.” ƒƒthe last admitted not having quantitative objectives Among the 152 million children who are still in child to date, but is defining a number of goals to be met labour, 70.9% are in agriculture and 19.6% are in Africa. by 2025. Our panel companies are therefore concerned first and foremost. 44 Engagement Report 2017

Engagement for influence Child labour in the tobacco and cocoa production sectors

EXAMPLES OF COMPANIES IN OUR SAMPLE THAT HAVE CHANGED THEIR PRACTICES SINCE 2016

IMPERIAL BRANDS

Thematic: child labour

Themes Recommendations 2016 Your Initiatives & progress 2017

POLICIES  Set up quantitative and Qualitative Objectives as part of Imperial’s Child Labour Strategy are: & STRATEGIES qualitative objectives - To promote a range of Leaf Partnership projects that support farmer livelihoods in specific tobacco- comprising the child labour growing communities, helping to mitigate the risk of child labour, with a budget of around £1.1 million strategy per annum. - To actively support the Eliminating Child Labour in Tobacco Growing Foundation and to demonstrate that the Pledge of Commitment is being advanced in the leaf supply chain. - To ensure application of the Sustainable Tobacco Production (STP) Programme* with all tobacco suppliers as a tool to improve standards and focus dialogue on the issue of child labour. So far, Imperial has no quantitative objectives, but the company is currently: - determining baselines and performance requirements out to 2025 following introduction and normalisation of the new STP. The company will then be able to focus on the most relevant criteria to child labour and set targets. - setting a target for the number of direct beneficiaries to be assisted through leaf partnerships out to 2025. IMPLEMENTATION  Specify how the STP will The Sustainable Tobacco Programme (STP)* was introduced in 2016. be implemented and to what The criteria that are relevant to labour practices are part of the specific ‘People’ pillar, which details extent the programme contains requirements relating to child labour (employment of children on farms, exposure of children under 18 to actions to fight against child farm hazards, children on family farms). labour The company recognises increasing stakeholder interest for further details and good disclosure practices.  Communicate on indicators Imperial Brands will enhance and improve disclosures relating to STP* as part of its Imperial Brands that exhibit the frequency, Sustainability Report in December 2017. scope and results of the programmes undertaken under Education on child labour is undertaken primarily by the suppliers. The approach varies depending on the the STP sourcing origin in terms of what is appropriate. Imperial Brands will include a relevant child labour case study on its website at the next update in December 2017.  Communicate on the scope of the training on child labour issues ASSESSMENT  Set up indicators and The set-up of indicators forms an integral part of the previously detailed strategy. performance measurement Under the new STP* programme, the frequency of external assessment has been increased from a 4-year indicators for child labour cycle to a 3-year cycle.  Increase the frequency of the The scope and result of internal and external assessment will be part of the next Corporate Reporting in external assessment December 2017. A new STP page with greater detail will be available in the Responsibility section of Imperial  Communicate on the scope Brands’ corporate website. and results of internal and external assessment IN CASE OF NON-  Implementation of a Imperial Brands is working on a new Code of Conduct specifically for suppliers that is to be finalised for COMPLIANCE grievance mechanism implementation in 2018 and highlights concern reporting and Public Interest Disclosure. This will follow on from the Company Code of Conduct that is already referenced in supplier contracts. The company recognises that grievance mechanisms should ideally be more localised for farmers and workers and present greater challenges given their lack of vertical integration and the complexity of their leaf supply chain. They have raised the issue with their suppliers and some pilot work is being undertaken.

* See Appendix 1 Engagement Report 2017 45

JAPAN TABACCO GROUP (JT GROUP)

Thematic: child labour

Themes Recommendations 2016 Your Initiatives & progress 2017

POLICIES  Set up overall quantitative and “JT Group’s Agricultural Labor Practices” (ALP) is a tool that brings transparency to the issues in the group’s & STRATEGIES qualitative objectives comprising leaf supply chain, including child labour. The company’s Leaf Technicians, who interact with the growers on a the child labour strategy continuous basis, have a deep knowledge of ALP which helps them address challenges on the farm. Information  Include an operational plan about ALP can be found in the ALP 2017 booklet or in the group’s sustainability report. against child trafficking in the ALP has set targets to cover 100% of its direct and indirect leaf suppliers by 2019. policy outline The ARISE* programme sets annual quantitative targets for the number of children withdrawn from child labour and the number of children prevented from being engaged in child labour. These targets are monitored quarterly and annually. In 2016, 9,742 children had been placed into formal education in four countries: Brazil, Malawi, Zambia and Tanzania. Other KPIs that ARISE* uses are: the number of community members educated in child labour elimination, the number of households with improved incomes and the number of government policies and plans developed with our input. These numbers are available in the group’s ARISE* Annual Reviews as well as in the group’s sustainability report. This year 2017, ARISE* has partnered with PWC to better understand the programme’s social return on investment. JTG has not yet encountered cases of child trafficking in tobacco farming. Commitment to upholding human rights throughout its business has been formalised in the JT Group Human Rights Policy. The policy is aligned with the United Nations Guiding Principles on Business and Human Rights. JTG also has a wide range of measures that ensure the group adheres to business principles and ethical standards, which can be found in the company’s Code of Conduct. IMPLEMENTATION  Continue to implement the Japan Tobacco launched ARISE* in Tanzania in 2016. Out of 8 countries from which Japan Tobacco sources tobacco ARISE programme in other directly (Brazil, USA, Italy, Serbia, Turkey, Malawi, Tanzania and Zambia), ARISE is present in four (Brazil, Malawi, countries Tanzania and Zambia). The Group is entering a new phase and assessments will be undertaken to decide whether  Define risk areas for child labour it expands into new countries and other parts of the business. Japan Tobacco applies risk maps developed by the foundation “Eliminating Child Labour in Tobacco” to understand where risk areas for child labour exist. ALP  Introduce child labour confirms the risks identified byECLT* and ARISE* adapts to the context of the country in which the group operates. awareness programmes to Education and awareness raising is one of the three pillars of ARISE*. There are tailored activities to raise awareness educate farmers and communities and educate communities, farmers, families, teachers and children about the issue of child labour. Meetings are on the issue of child labour and organised for local communities aimed at targeted audiences, such as mothers of school-age children. School- communicate on it with adequate based anti-child labour clubs are formed to raise awareness about child labour among children and community indicators about the scope and members. results As part of JTG’s approach to leaf supply chain management, the Leaf Technicians work with the farmers and help them understand the requirements of the Agricultural Labor Practices (ALP), which include child labour standards based on ILO conventions. ASSESSMENT  Establish an independent The ILO has also been contracted to design an impact assessment framework that will support JT Group in verifying external assessment mechanism the ALP process of observations, recording, prioritising and improving.  Increase the number of quality ALP is using the same criteria as last year. indicators on child labour In 2016, 21% of directly-contracted farmers underwent an internal assessment (7% in 2015). Japan Tobacco is willing  Communicate in depth on audit to increase its external communication by presenting efforts and progress in the area. findings and frequency IN CASE OF NON-  Ensure accessibility of grievance There are multiple communication channels through which employees and business partners can confidentially COMPLIANCE mechanism raise concerns, one of which is the Reporting Concerns Mechanisms (RCM). The group does not have a grievance mechanism in place for growers or workers, as its experience in Africa so far has been that this type of mechanism does not deliver the value needed. The group is willing to put in place a system that is meaningful. At the moment, ALP (which covers 100% of farms) serves as a tool to receive feedback from farmers through JT Group local farming experts. They visit the farms on a regular basis and act as the key point of contact between the JT Group and the farmers. Depending on the location, farmers raise their concerns through further channels, e.g. primary society in Tanzania, traditional leaders in Malawi and Zambia, unions in Brazil. These external structures present the issues to JT Group collectively and they look for solutions together. 46 Engagement Report 2017

Engagement for influence Child labour in the tobacco and cocoa production sectors

EXAMPLES OF COMPANIES IN OUR SAMPLE THAT HAVE CHANGED THEIR PRACTICES SINCE 2016

LINDT

Thematic: child labour

Themes Recommendations 2016 Your Initiatives & progress 2017

POLICIES  Set up overall quantitative Lindt set a target for 100% of the cocoa beans volume purchased from West Africa (i.e. only Ghana) to be & STRATEGIES and qualitative objectives covered by the CLMRS (Child Labor Monitoring and Remediation System.). comprising the child labour 100% of districts in Ghana, from where the company buys its cocoa beans, are covered by a “CLMRS”. strategy IMPLEMENTATION The Lindt & Sprüngli Farming Program continuously expands its range of activities with the aim to improve the livelihoods of farmers and their families. One example is the company’s income diversification activities to improve the income of cocoa smallholders and sustainably lower their dependency on income from cocoa production. This includes the one-week farmer business school (in collaboration with the Deutsche Gesellschaft für Internationale Zusammenarbeit), smallholders’ support in establishing additional income-generating activities (most important during the lean cocoa season), e.g. support in setting up entrepreneurial farm shops, snail farming or crop diversification with, for example, cassava or chili farming. ASSESSMENT  Communicate on a set of In 2016, The Forest Trust (TFT)* conducted external assessments of the Farming Program in Ghana, Ecuador indicators to assess child labour and Madagascar. monitoring results and the For the first time, a summary of their assessment results is published on their transparency hub. scope and progress of initiatives implemented In 2015, 48,000 farmers from 34 districts (1,048 companies) were registered in the Lindt & Sprüngli Farming Program in Ghana. TFT* visited 9 companies in 5 districts during their assessment. In 2016, 52,757 farmers from 43 districts (1,421 companies) were registered in the Lindt & Sprüngli Farming Program in Ghana. TFT* visited 9 companies in 19 districts during their assessment. In 2017, around 60,000 farmers were registered in the Lindt & Sprüngli Farming Program in Ghana. This year (2017), during child labour monitoring activities, the school infrastructure in the Lindt & Sprüngli Cocoa Farming Program districts was also assessed. 29 schools were recommended for rehabilitation and Lindt & Sprüngli confirmed they will be rehabilitated in 2018 as a measure for the elimination of child labour. IN CASE OF NON-  Implement a complaints The TFT* report confirms that establishing a grievance and feedback management system to feed the COMPLIANCE system continuous improvement process would be useful. Engagement Report 2017 47

NESTLÉ

Thematic: child labour

Themes Recommendations 2016 Your Initiatives & progress 2017

IMPLEMENTATION  Communicate on indicators In the CSR report dated 2016, Nestlé communicated for the first time two new indicators to assess child to estimate the efficiency of labour in Côte d’Ivoire. the NCP - Number and % of children participating in child labour (2015: 5,135; 19% and 2016: 6,065; 16%). - Number and % of child labour cases assisted (2015: 3,591; 70% and 2,016: 4680; 77%). - Data for Ghana will be available next year. October 2017: Nestlé’s first report on tackling child labour in the cocoa sector. The report is published in partnership with the International Cocoa Initiative (ICI)*, and looks for the first time at the effectiveness of the Child Labour Monitoring and Remediation System (CLMRS). - 40,728 5-17 year olds are currently being monitored by the Nestlé Cocoa Plan CLMRS with plans of continuing the scale-up. - 5,232 children to date are being helped in the upstream supply chain by the Nestlé Cocoa Plan CLMRS. - 7,002 children have been identified as working on farms or in communities covered by the Nestlé Cocoa Plan. ASSESSMENT  Increase reach of internal and Internal and external assessment cover farms under the NCP only. external assessment The volume of cocoa sourced through the Nestlé Cocoa Plan is increasing. - 2014: 91,801 tonnes (23%). - 2015: 121,481 tonnes (30%). - 2016: 140,933 tonnes (34%). - Objective for 2020: 230,000 tonnes (57%). In 2016, 1,246 Community Liaison people engaged with communities throughout Côte d’Ivoire, supported by 75 Child Labour Agents under the Cocoa Plan (versus 53 child labour agents and 917 Community liaison people in 2015). CHF 5.5m spent on tackling child labour in 2016, covering the CLMRS and school building. IN CASE OF NON-  Continue to broaden the The grievance mechanism is a continuing challenge for Nestlé. A toll-free phone number is printed on the COMPLIANCE scope of the grievance company’s illustrated supplier code. Nestlé has printed over 50,000 copies for farmers and their workers. mechanism They are distributed through the coop network. Due to workers’ mobility, it is difficult to keep track of seasonal and daily labour.

* See Appendix 1 48 Engagement Report 2017

Engagement for influence Child labour in the tobacco and cocoa production sectors

EXAMPLES OF COMPANIES IN OUR SAMPLE THAT HAVE CHANGED THEIR PRACTICES SINCE 2016

OLAM

Thematic: child labour

Themes Recommendations 2016 Your Initiatives & progress 2017

POLICIES  Set up overall quantitative During the last reporting period, Olam continued to: & STRATEGIES and qualitative objectives - measure both quantitative and qualitative objectives, comprising the child labour strategy - develop its approach with its own knowledge and industry best practice, - establish CLMRS as the best practice tool to eradicate all forms of child labour within its supply chain. In 2016/17, 82,400 cocoa farmers were trained in good labour practices. However, Olam also recognises that just training farmers is not enough and therefore applies a host of additional metrics to help them understand how to apply the company’s resources to communities. In order to support and embed its strategy, Olam is financing the salaries of the Group Administrator, CLMRS personal and Farmer Trainers at 110 Cooperatives, covering around 50,000 farmers and their families / communities. IMPLEMENTATION  Extend coverage of CLEAR Following the implementation of the CLEAR project with FLA (Fair Labor Association)* in 2015, Olam project to other cooperatives has started duplicating the training and the lessons dispensed to all cooperatives in its supply chain.  Communicate on indicators In the 2015/2016 season, 72 cooperatives received additional training on establishing the CLMRS. to estimate the efficiency By last season, 2016/2017, 153 cooperatives had established the CLMRS, 85% of cooperatives in their of the CLEAR programme certified & sustainable programmes. and the Livelihood Charter Programme Olam CLMRS efficiency indicators include: Modular training and awareness-raising for farmers, under the ICI* methodology: 1. Farmer and worker household profiling: recording a. of school age children, those attending school, of those who are not and the reasons why, b. of those having birth certificates and those who have none, c. The farm activities children are involved in. 2. Awareness building through household visits. 3. Training and awareness-raising for farmers, their workers, and family members. 4. Farm inspections to identify children at work in the cocoa farms, % increase in the minimum number of 2 visits. On a yearly basis, the FLA* provides training on social standards and the FLA code of conduct to OLAM regional representatives and CSR & HR management teams. ASSESSMENT  Establish monitoring 30,500 farmers and family members, representing about 35% of farmers, were profiled in the 16/17 indicators to increase season. transparency on scope and 15 randomly-selected cooperatives were audited by the FLA*’s Social Compliance Initiative team. Results quality of programmes of all audits are published by the FLA*.  Increase coverage of external Additionally, all the cooperatives in the company’s sustainable sourcing programmes are independently audit and communicate the certified or verified every year to ensure compliance with national and international labour laws on child frequency of internal audits labour and human trafficking. IN CASE OF NON-  Establish a grievance This year, a “hotline” was set up and featured on the revised illustrated Olam Supplier Code leaflet COMPLIANCE mechanism and increase distributed to all farmers, so as to record any grievance and request for assistance & remediation. coherence of remediation Where cases of child labour are identified, Olam ensures the conduct of appropriate awareness raising efforts and remediation, namely facilitation in obtaining birth certificates, payment of school fees, distribution of school kits, and alternative Income Generating Activities (IGA) for families, in order to provide the best conditions to avoid reoccurrence. Remediation activities are now being taken on by the cooperatives. Olam requests that 30% of the certification premium received by the cooperatives be spent on social actions to provide the necessary remediation. Engagement Report 2017 49

PHILIP MORRIS INTERNATIONAL (PMI)

Thematic: child labour

Themes Recommendations 2016 Your Initiatives & progress 2017

ASSESSMENT  Communicate on frequency In 2016, on average, field technicians visited each farm six times per crop season. of assessments and field However, PMI underlines that monitoring labour practices and how they relate to the 32 measurable technician visits standards of the ALP Program on a farm-by-farm basis for nearly 400,000 farms spread over approximately  Continue increasing the scope 30 countries is a huge and complex undertaking. of the external auditing system In 2016, PMI and its suppliers employed over 2,800 Field Technicians, each supporting on average 138 farmers. The field technician-to-farmer ratio and, consequently, the number of visits throughout the season depends on a number of factors, including geographic conditions and distances between farms, farmer’s experience with the crop and relation with the company, and degree of sophistication of the farm operation. For example: - while in Asia each farmer received on average 7 visits during the crop season, in Indonesia, field technicians visited each farm 11 times. In 2016, PMI issued six Control Union third-party assessment reports with detailed action plans, covering six countries (Colombia, Indonesia, Mozambique, Poland, Tanzania – 2 suppliers, and Turkey – 2 suppliers). In 2017, PMIS released CU third-party assessment reports and action plans of their suppliers in Greece and South Africa. By the year-end, PMI expects to release several other assessments conducted in different regions. By the end of 2016, CU had conducted 21 ALP assessments in 15 countries, covering nearly 67,000 farms. Control Union auditors interviewed farmers, workers, and family members in over 1,000 contracted farms. PMI’s Communication on Progress to the UNGC also includes specific metrics for the PMI tobacco supply chain: - % of tobacco purchased by direct contract (by PMI’s affiliates or suppliers): 87% in 2014 and 88% in 2015 and 2016. - % of systematic monitoring of labour practices on farms (tobacco farmers supplying PMI affiliates or suppliers via direct contract): 32.5% in 2015 versus 72% in 2016. - Number of contracted farms within the scope of external assessment by year: 23,870 in 2014, 11,043 in 2015 and 7,508 in 2016. (The number of farms within the scope of assessment varies according to the crop size and number of contracts in a given supplier location. The initial focus of this external assessment programme was on countries with larger crops and locations, where PMI or its suppliers had a bigger number of contracts. This explains the relatively lower number of farms in the scope of assessments conducted in 2016). In addition to the release of CU third-party assessment reports, PMI also discloses stand-alone detailed progress reports on the implementation of the ALP Program. The third ALP progress report, which will cover 2016 and 2017, is due in early 2018. PMI also participates in the industry-wide Sustainable Tobacco Program (STP)*, developed from the collaboration between PMI (through the Good Agricultural Practices, or GAP, programme) and the Tobacco Manufacturers participating in the Social Responsibility in Tobacco Production (SRTP) programme. Managed by AB Sustain*, STP includes suppliers’ annual self-assessments and third-party STP Assessments in all supplier locations (countries) over three years. In 2016, AB Sustain* assessed 17 suppliers in eight countries and by the end of 2017, an additional 15 suppliers in eight countries will have received an AB Sustain* STP Assessment. IN CASE OF NON-  Continue to improve Through the implementation of the ALP Program, PMI affiliates and suppliers are working to provide COMPLIANCE and implement grievance farmers and workers with access to grievance mechanisms tailored to local circumstances. mechanism and communicate PMI will disclose detailed information about the company’s efforts in this area in their fourth ALP Progress on it Report, covering 2016 and 2017, due in early 2018.

* See Appendix 1 50 Engagement Report 2017

Engagement for influence Child labour in the tobacco and cocoa production sectors

EXAMPLES OF COMPANIES IN OUR SAMPLE THAT HAVE CHANGED THEIR PRACTICES SINCE 2016

SWEDICH MATCH

Thematic: child labour

Themes Recommendations 2016 Your Initiatives & progress 2017

POLICIES  Set up overall quantitative Swedish Match has identified six focus areas to which the company devotes most of its efforts and & STRATEGIES and qualitative objectives communication. Eliminating child labour is one of them. comprising the child labour In 2017, Swedish Match will refine its strategy with specific targets and actions to reach the overall goals, strategy and define KPIs to track progress. This will be communicated in the 2017 Annual Report.  Include an operational plan In the 2016 Amundi engagement report, it was mentioned that Swedish Match had not integrated a special against child trafficking in the policy against child trafficking in its strategy. So far, the group has not extended its policy. policy outline IMPLEMENTATION  Increase transparency on Apart from continuously working to improve and enhance its own due diligence and dialogue with suppliers, initiatives supported by the Swedish Match is involved in a community-project related to child labour. This will be communicated in the company and the role that the 2017 Annual Report. company takes within such The Group is continuously assessing risks related to human rights as part of its due diligence of raw initiatives tobacco suppliers, identified and regarded as high risk within this area. In 2016, the Group sought external  Create a risk assessment of expertise to advance the general risk assessment of human rights and in particular child labour. The major the supply chain to channel risk landscape in relation to all suppliers of direct materials was reassessed (based on the manufacturing resources efficiently to specific country or origin of raw material, known category and industry risks). points of intervention A more in-depth social impact assessment at industry level has been undertaken to identify potential and specific human and labour rights risks. Child labour and woman and child risks are rated as the top human rights risks, followed by forced labour/debt bondage, hazardous exposure to chemicals and limited access to safe drinking water/sanitation, for the tobacco category. This risk assessment forms the basis for the company’s efforts to assess and mitigate specific risks in dialogue with prioritised suppliers in 2017. ASSESSMENT  Increase scope of internal The results of the work show that 56 suppliers of direct material may be classified as high risk based on assessment industry risk and country of origin. The vast majority are raw tobacco suppliers.  Communicate on results and These results confirm the initial focus on suppliers of raw tobacco in the group’s efforts to sustainably scope of external and internal manage its supply chain: child labour and women and child risks are rated as the top human rights risks, assessments of the whole followed by forced labour/debt bondage, hazardous exposure to chemicals and limited access to safe supply chain; use results to drinking water/sanitation, for the tobacco category. These specific risks are a priority in the dialogue with develop improvement plans suppliers. IN CASE OF NON-  Establish a grievance The Group has a whistleblower mechanism to report on non-compliance and it is available to all employees. COMPLIANCE mechanism to report non- Grievance mechanism for the suppliers and sub-suppliers is addressed in the company’s supplier due compliance diligence.  Communicate on workings and results of remediation system Engagement Report 2017 51

Engagement for influence

Access to food and fight against food waste in the food and food retail sectors

We initiated engagement on this theme in 2013. Every year until 2017, we reviewed the practices of the companies that we met.

Food waste: food loss is defined as “the Our approach was therefore ahead of that of decrease in quantity or quality of food”. The the Consumer Good Forum in 2015, as well as part of food loss called "food waste" refers the implementation of the French Law of 2016 to food that is healthy and nutritious. Each on the fight against food waste. year, around one-third of all food produced The companies we monitored have improved for human consumption worldwide is lost or their practices and implemented performance wasted. indicators, a progress compared with 2013 Sectors reviewed: food and food retail. when most of them lacked transparency on the subject. 9 companies reviewed

THE ROLE PLAYED BY THE FOOD SECTOR IN THE NUTRITIONAL QUALITY OF PRODUCTS, ACCESS TO FOOD AND FIGHTING FOOD WASTE 2.3 billion people worldwide suffer from obesity, malnutrition or chronic food-related diseases, i.e. almost one third of the world population. This affects both emerging and developing countries, with significant economic and social consequences. Against this backdrop, food companies and large retailers play an important role in the nutritional quality of the products they offer in the different markets, by adapting their products to local nutritional needs and making them more accessible to all populations, including the most disadvantaged. By developing healthy and safe products with nutritional profiles meeting the highest standards, these companies also improve their reputation and nurture a strong brand image.

Amundi's engagement aims at better understanding corporate health and nutrition strategies, access to products, notably for disadvantaged populations, and prompting companies to improve their practices. 52 Engagement Report 2017

Engagement for influence Access to food and fight against food waste in the food and food retail sectors

Concerning food waste, companies must implement By contrast, we note that access to food is one of tools to reduce their own waste and waste in the food the areas with the greatest room for improvement. chain, “from the farm to the table”. Fighting food waste Responsible marketing practices in the food sector and optimizing logistics chains also makes it possible to are consistent and in line with best practices, but reduce costs while improving the company's reputation. we recommend that they be extended to a broader Managing food waste is an increasingly central theme, public. Concerning the fight against waste, the retail which companies handle unevenly. sector, although it still has a fair amount of room for improvement, is more advanced than the food sector and takes a more structured view of this issue. Actions MAIN RECOMMENDATIONS MADE IN 2013 AND on food waste would deserve to be more formalised, 2015 AND THEIR LEVEL OF MATURITY but our exchanges with companies indicate interesting Generally speaking, issues related to malnutrition, prospects in this respect. undernutrition and improving the nutritional quality of products seem to be well factored by companies, although some players are lagging slightly. Implementation of adequate policies and strategies is becoming widespread.

Issue Maturity Main areas of progress Malnutrition, undernutrition and improvement in products' nutritional quality Policies and Strategies  Continue reformulating own-label products Quality and Nutrition  Define reduction targets (salt, sugar, fat)  Report systematically on scientific control of health claims Access to food  Develop targeted initiatives in terms of appropriate pricing  Accelerate development of alternative distribution networks Marketing  Extend specific policies aimed at a broader public (children over 12)

Reduce food waste Policies and Strategies  Implement a formalised policy Value chain: Analyses and Actions  Identify areas of waste in the value chain implemented  Create specific reporting associated with detailed objectives  Set targets and associated monitoring indicators

A three-tier assessment: , and ( representing the best practices) Engagement Report 2017 53

REMINDER OF GOOD PRACTICES IDENTIFIED

Key themes Best practices

Malnutrition, undernutrition and improvement in products' nutritional quality Policies & Strategies  Precise policy, including qualitative (e.g. targeted populations) and quantitative objectives (e.g. proportion of portfolio reformulated).  Coherence with standards defined by national and international health authorities.  Procedure for monitoring implementation of corporate policy.  Monitoring and performance measurement indicators.  Communication on results, objectives, areas for improvement, etc. Quality and nutrition  Reformulation and optimisation strategy.  Specific R&D dedicated to improving products' nutritional quality.  Transparency about the proportion in the portfolio of products with optimal nutrition quality.  Clinical studies and scientific validation.  Consumer impact measurement.  Nutritional labelling.  Product responsibility.  Nutritional claims controlled and validated scientifically. Access to food  Objectives and policy in terms of affordable products.  Responsible pricing structure.  Development of initiatives (products adapted to specific local characteristics, implementation of alternative distribution methods, etc.).  Mapping of specific products, monitoring and reporting on actions undertaken.  Launch of fortified products compensating recurring deficiencies. Marketing  Responsible marketing, notably for products intended for children (at the very least, compliance with EU Pledge* and IFBA*).  Extend criteria of EU Pledge and IFBA* to children over 12, secondary schools and all media. Reduce food waste Policies & Strategies  Clear and precise anti-waste policy with detailed objectives and areas for improvement.  Monitoring procedure supported by qualitative and quantitative indicators.  Impact on variable remuneration. Value chain: Analyses and Actions  Studies intended to improve and optimise supply chain. implemented  Draft mapping of waste.  Identify hotspots in the value chain.  Cooperate with all stakeholders (government bodies, producers, suppliers, consumers, etc.).  Implement targeted action plans.  Responsible packaging adapted to real needs.  Definition and roll-out of a management process for unsold goods.  Structuring of food donations.

SUMMARY TABLE OF 2015 RATINGS

Value chain: Policies & Strategies Analyses and Actions implemented Reduce food waste Ahold Delhaize Carrefour Casino Metro Tesco Danone Mondelez Nestlé Unilever

* See Appendix 1 54 Engagement Report 2017

Engagement for influence Access to food and fight against food waste in the food and food retail sectors

DEVELOPMENTS IN CORPORATE PRACTICES & In mid-2015, the CGF (Consumer Goods Forum) had CLOSING OF THE THEME already approved an objective to halve food waste by The 2016 report ended our work on nutrition and access 2025, i.e. five years ahead of Goal 12.3 of the United to food, initiated in 2013. Given companies’ maturity Nations Millennium Development Goals. on the subject, the action plans implemented and the The CGF and Champions 12.3 appealed to retailers progress made, which has been observed thanks to a and food producers to simplify and standardise, on good level of transparency on the subject, we feel it is a global level, the use-by dates on labels by 2020, now more relevant to focus our engagement on the notably by proposing a choice between an expiry date theme of fighting food waste, where there is more room for perishable items (e.g. “use by”) and a food quality for further progress. indicator for non-perishable items (for example: “Best if This 2017 report in turn concludes our work on food used before”). waste for the same reasons of companies’ maturity on In June 2016, the first global standard measuring the subject. Companies have clearly understood the food loss and waste, the Food Loss and Waste (FLW) value of proper waste management in managing their standard, was introduced. This standard was developed costs. They have also engaged in sector initiatives to in partnership with the Consumer Goods Forum better structure their approach. (CGF), the Food and Agriculture Organization of the In the 2016 engagement report, we had already United Nations (FAO), the United Nations Environment concluded that significant progress had been made Programme (UNEP), the World Business Council for in reducing food waste. Policies are generally well Sustainable Development (WBCSD) and the World established now and action plans are better structured. Resources Institute (WRI). The implementation phase is under way. The retail Finally, respondents highlighted the importance to them and food sectors have introduced clear strategies of the financial materiality of the fight against food waste. to reduce food waste through more precise action In 2017, a report commissioned by Champions plans. The retail sector has also formed partnerships 12.3 showed that a company that invests one dollar to collect food donations with charities dedicated to in reducing food loss and waste saves 14 dollars in fighting food waste. The trend for food companies operating costs - tangible evidence of the return on is also positive with commitments to reduce waste, investment stemming from good management of food more particularly food waste. Both sectors still have loss and waste reduction. room for improvement, however, notably in terms of communicating results and providing performance measurement indicators. 2017 gave concrete expression to this positive development, including in the food sector, where performances lagged those of the mass retail sector. Engagement Report 2017 55

Engagement for influence

Exclusions

Engagement plays a major role in Amundi’s The seriousness of controversy is determined by exclusion policy. We believe exclusion must analysing: remain an exception and that engagement, as ƒƒThe gravity of human or environmental damage. part of a continuous improvement approach, ƒƒThe repetitive nature of the controversy. should be preferred. Specific heed is paid to analysing the credibility of As a reminder, exclusions concern: information sources. ƒƒCompanies that violate one or several principles Dialogue is therefore aimed at putting an end to the of the Global Compact repeatedly, without most controversial corporate practices. implementing suitable corrective measures. Dialogue is considered as productive if: ƒƒCompanies involved in the production or sale of ƒƒThe company proves its determination to make a antipersonnel mines and cluster bombs (exclusions commitment. resulting from France's ratification of the Ottawa and Oslo treaties) as well as chemical, biological and ƒƒIt implements corrective measures. depleted uranium weapons. ƒƒIt sets up adequate means to obtain lasting results. ƒƒCompanies generating more than 30% of their ƒƒIt has its approach certified by an independent third revenue from coal extraction or whose annual coal party. production is 100Mt or more. Dialogue is considered as unproductive if: Issuers are identified through a monitoring system that ƒƒThe company makes no response. gives analysts access to targeted media sources on ƒƒThe company carries on the controversial activity. specific extra-financial subjects. ƒƒAmundi concludes it has no influence on the company. In this case, the engagement policy can result in an exclusion of the stocks (normative exclusion policy). 56 Engagement Report 2017

Engagement for influence Exclusions

The tables below provide details on the exclusions made by Amundi:

Countries Companies systematically Companies that violating one or violating one or generate more several of the several of the than 30% of Controversial global compact global compact their sales from weapons principles principles coal extraction Total Number of cases identified 98 15 4 54 171 Number of issuers concerned 100 49 4 103 256

Detail of companies excluded for having violated one or several principles of the Global Compact:

Cases identified Number of companies excluded Sector Global Compact Principles* involved

Case 1 4 Real Estate 1, 2 Case 2 1 Energy 7, 8, 9 Case 3 2 Energy 1, 7, 10 Case 4 3 Automobiles & Components 1 Case 5 2 Capital Goods 1, 2 Case 6 8 Technology Hardware & Equipment 4 Case 7 1 Materials 1, 7 Case 8 12 Materials 1, 2, 7, 8, 9, 10 Case 9 7 Materials 1, 7, 8, 9 Case 10 4 Technology Hardware & Equipment 1, 2 Case 11 1 Utilities 7, 8 Case 12 1 Capital Goods 1, 2, 5, 7, 8 Case 13 1 Materials 1, 2, 7 Case 14 1 Capital Goods 1, 2 Case 15 1 Media 1, 2

* See Appendix 1 Engagement Report 2017 57

Engagement for influence

Collective initiatives

Amundi supports several collective initiatives:

Initiatives Themes Supported by Amundi since: Institutional Investors Group on Climate Change Climate change 2003 (IIGCC) Carbon Disclosure Project (CDP) CO2 Emissions– Transparency of ESG data 2004 Extractive Industries Transparency Initiative (EITI) Responsible management of natural resources 2006 UN Global Compact Engagement on Leaders ESG Reporting 2008 & Laggards Forest Footprint Disclosure Project (FFD) Deforestation 2009 Water Disclosure Project Use of water resources 2010 Access to Medecine index Access to Medicine 2010 Access to Nutrition index Access to food 2013 Clinical Trials Transparency Clinical trials 2014 Human Rights Reporting and Assurance Human rights 2014 Frameworks Initiative (RAFI) Portfolio Decarbonization Coalition (PDC) Climate change 2014 (co-fondateur) Asia Corporate Governance Association (ACGA) Governance 2014 UNPRI Letter Calling Stock Exchanges to put in ESG Reporting 2015 place voluntary guidance for issuers on reporting ESG information by the end of 2016 IGCC Letter to 77 EU companies on their positions Climate change 2015 and lobbying activities on EU Climate and Energy Policy Human rights PRI Engagement Human rights – ESG Reporting 2015 Paris Green Bonds Statement de la Climate Bonds Climate change 2015 Initiative Montreal Carbon Pledge Climate change 2015 Green Bonds Principles Climate change 2015 Climate Bonds Initiative Climate change 2016 Swiss Sustainable Finance Association Sustainable Finance 2016 Lettre des UN PRI adressée aux membres Climate change 2017 du G7 et du G20 Finance for tomorrow Sustainable Finance 2017 Workforce Disclosure Initiative Letter Employment practices – ESG Reporting 2017 Climate Action 100+ Climate change 2017 58 Engagement Report 2017

Engagement for influence Collective initiatives

As a responsible investor, with growing influence on the this year, aims to improve the transparency and quality consideration given to ESG criteria, Amundi takes part of social data provided by the companies. Finally, in in and is a signatory of many ESG initiatives, notably 2017, Amundi was one of the founding members of the the Principles for Responsible Investment (PRI), which French initiative for sustainable finance,Finance for celebrated their 11th anniversary in 2017. From its very Tomorrow. Launched by Europlace in June 2017, this inception, Amundi was convinced of the relevance of this initiative aims to promote sustainable finance and to initiative and became one of the first signatories of the “speed up the influence of the Paris Stock Exchange in PRI. In 2017, Amundi was rated A+ for the third year in a France and internationally and redirect financial flows row. Amundi is also a founding member of the Portfolio to a low carbon, inclusive economy, consistent with the Decarbonization Coalition jointly with the Finance Paris Agreement7 and the United Nations Sustainable Initiative of the United Nations Environment Programme Development Goals (SDGs)”. (UNEP FI), the fourth national pension fund of Sweden In keeping with this positive momentum, Amundi (AP4), and the Carbon Disclosure Project (CDP). continued developing several financial innovations in These international initiatives bring together the area of climate change, such as the Low Carbon institutional investors and professional asset managers. Indices created in partnership with MSCI and the Their objective is to encourage companies to improve decarbonisation of Smart Beta portfolios. Amundi also their practices and transparency in the fight against strengthened its expertise in Green Bonds and currently climate change and deforestation, the protection of offers a range of investment vehicles tailored to the water resources as well as healthcare and nutrition in specific features of these bonds, ideally suited to its developing countries. They also aim at encouraging the clients’ expectations. oil and mining industries to adopt greater transparency In parallel, Amundi continued its support to academic in their relations with the countries in which they have research: operations. The human rights aspect is also included in ƒƒAmundi is one of the founding members of the the initiatives selected. Sustainable Finance and Responsible Investment In 2017, Amundi reiterated its support to several chair sponsored by the French Asset Management collective initiatives relating to climate change issues, Association (AFG) and steered jointly by the Toulouse to the need to standardise ESG reporting, or specific Institut d'Economie Industrielle (IDEI) and the to the extractive and pharmaceutical industries. This economics department of Ecole Polytechnique; approach buttresses the actions we have taken over ƒƒAmundi also supports the Climate Economy chair, a the past years with companies in these sectors. Amundi joint initiative of CDC Climat and the Paris-Dauphine has also continued its commitment to other initiatives University, as a partner of the research unit on Carbon it has joined in recent years, such as the Montreal Prices and Market; Carbon Pledge, the Green Bond Principles, the Paris ƒƒAmundi is also a member of the Steering Committee Green Bonds Statement of the Climate Bonds Initiative, and funds the FIR/PRI European award for Finance the Climate Initiative, the Swiss Sustainable Finance and Sustainable Development, which rewards the Association, among others. best European academic works in this field. This year also gave Amundi the opportunity to lend its support to new market initiatives. For example, Amundi signed the letter sent by the UN-PRI to the members of the G7 and G20, urging them to pursue the commitments made at the Paris Agreement. In the same spirit, the Group became a signatory of the Global Investor Statement on Climate Change of NGO Climate 7. The Paris Climate Agreement concluded on 12 December 2015 Action 100+, which targets the companies that emit at the outcome of the 21st Conference of Parties (COP21), within the highest levels of greenhouse gas. The Workforce the United Nations Framework Convention on Climate Change (UNFCCC). This agreement entered into force on 4 November 2016, Disclosure Initiative Letter, which Amundi also joined less than one year after its adoption. ONGOING ENGAGEMENT

61 Ongoing engagement 63 Thematic studies conducted in 2017 67 ESG development in Japan

Engagement Report 2017 61

Ongoing engagement

PHILOSOPHY In order to assign a score to all the companies in expertise on sectoral issues and refine companies’ its universe (more than 5,000 issuers), amundi has ESG rating. in each sector, the companies selected for developed a proprietary rating methodology combining this exercise represent the highest exposures in our a quantitative approach with a qualitative analysis. portfolios. They also form a diverse group representing The qualitative approach notably includes ongoing our investment universe: large and small companies, engagement with companies in order to deepen our from both developed and emerging economies.

RESULTS Statistics

For 2017

Number of interviews 193 ESG 170 Green Bonds 23 Number of topics covered 777 Average Number of themes addressed by company 4

Subjects addressed by criterion

ENVIRONMENT 33% 13% Energy consumption & Greenhouse gas emissions 12% Environmental strategy 5% Biodiversity, pollution & waste 3% Water

SOCIAL 40% 13% Customer-supplier relationship 10% Labour relations & Human resources 10% Product responsability 7% Local communities

GOVERNANCE 27% 10% ESG strategy 7% Ethics 5% Board structure & control 3% Remuneration 2% Shareholders right

Further details in appendices : Breakdown of meetings with companies addressed by sector and by region (Appendix 2), Companies met in 2017 in chronological order (Appendix 3) A Engagement Report 2017 63

Thematic studies conducted in 2017

be transferred to zones with tax advantages, for example Aggressive tax by creating companies that hold patents or brands or optimisation: what is by using asymmetry between local legislation to benefit from double non-taxation. the best ESG approach? Although these practices are usually legal, the size of the amounts in question makes them increasingly unacceptable in a context of austerity. For governments as much as people. Aggressive tax optimisation practices therefore represent a risk for investors if international tax regulation changes. Moreover, this is exactly what is Between 100 and 240 billion euros per year. happening at the European level with, for example, the This is what aggressive tax planning costs implementation of a package of measures designed to governments in lost revenue1. strengthen fiscal transparency, such as the Common Consolidated Corporate Tax Base (CCCTB) or the fight against abusive tax rulings whereby companies manage, on an exceptional basis, to be subject to a particularly accommodating tax regime. Similarly, implementation of the conclusions of the OECD working group on base erosion and profit shifting (BEPS) should soon affect companies that use aggressive tax optimisation. Asset management companies should factor this risk into their investment decisions, as a fiduciary responsibility. But taking these practices into account also raises moral questions. As a responsible management company, we Read our publication: “Aggressive tax optimisation: should be interested in practices that mean companies what is the best ESG approach?” on the Research Center amundi.com benefit from a country's riches without paying their fair share, circumvent legal requirements to contribute to government budgets and thereby question the role of public bodies in setting taxation levels. It is worth noting Such practices, designed to enable companies to avoid here that the governments most affected by these tax by using and abusing the legislation in place, have practices are emerging countries as they cannot turn to flourished in recent years. They have been supported income tax of physical persons to rebalance their income. by globalisation of communications and the growing dematerialisation of the economy. These practices have We therefore wanted to put in place a specific analysis also become more complex and industrialised, with the criterion for this question. As with other criteria used help of tax advisory companies that are increasingly to measure companies' Environmental, Social and professionalised. Companies today are therefore Governance (ESG) performance, we used our data encouraged to create financial flows that enable profits to suppliers' ratings to create a consensus on aggressive

1. Policy brief "Taxing Multinational Enterprises BASE EROSION AND PROFIT SHIFTING (BEPS)", OECD, October 2015, https://www.oecd. org/ctp/policy-brief-beps-2015.pdf 64 Engagement Report 2017

Thematic studies conducted in 2017

tax optimisation. This criterion covers more than 2,000 We felt it would be useful to address these issues at stocks in our reference universe. If this criterion meets a a time when we see three important trends emerging best-in-class policy, like all ESG criteria used by Amundi, in the market: a best-in-universe calculation shows that the software 1. The gradual implementation of stringent regulations, and pharmaceutical industry sectors have the least such as the EU’s INCO (Information to Consumers) good practices. regulation: The regulation introduces mandatory Finally, to put this criterion into perspective, we have nutrition declarations applying from 13 December 2016, developed an internal model to measure tax risk in the form of a table placed on product packages and exposure, based on companies' presence in risky specifying the energy value and the quantities of fat, countries. We have also analysed statistically the media saturated fatty acids, carbohydrates, sugar, protein and controversy on this subject. Although such approaches salt. Another example is the new “Nutrition Facts” label are limited by the quality of information available, they made mandatory in the United States from 2018. In both have enabled us to put in place a list of stocks that seem cases, the logic is the same: to inform consumers and risky at first glance, to which we could then apply more enable them to compare products; detailed qualitative analysis. 2. A change in consumer behaviour: Consumers have become more demanding in terms of quality and transparency, as evidenced notably by the multiplication The food challenge: of labels offering a more restrictive framework than the regulatory framework on the use of additives, how can one achieve pesticides, or GMOs; greater transparency? 3. Warnings from scientists and NGOs about the hazardous nature of some products or practices: For example, studies showing a link between some sweeteners and hyperactivity in children, which led to a warning being put on labels in Europe but not in the United States. Conversely, other studies, notably those on aspartame, did not lead to any restrictions by the What do we really eat? What information do health authorities, whether in Europe or the United labels give us? Do they tell us everything? Are States. companies really being transparent? How do companies integrate these changes? Are these risks and/or opportunities? This study aims to address these questions by: ƒƒdeciphering the information on the packaging, ƒƒproviding a preliminary clarification on the regulatory context and health risks. For this purpose, we contacted 17 companies in five countries and five sectors – including three subsectors Read our publication: "The food challenge: how can one achieve greater transparency?” of the agri-food industry, mass retail and catering – in on the Research Center amundi.com order to get a comprehensive picture from field to fork. We interviewed them on six issues: nutrition, responsible Engagement Report 2017 65

marketing, additives, contaminants (pesticide residues, drug residues, pollutants and residues of materials in Opportunities of contact with food), nanoparticles and GMOs. deep-sea mining and Our first conclusion concerns the maturity of companies by sector. ESG risks Companies in the retail sector obtain the best results. Some retailers integrate the precautionary principle, when others are too often content with complying with local regulations. This peculiarity is explained by the fact that the retail sector is the one most sensitive to the reputational risk. In recent decades, interest in deep-sea mining Our second conclusion concerns the degree to which has been growing, focusing mainly on three companies handle each of the six issues addressed. types of deposits: polymetallic nodules, polymetallic sulphides and cobalt-rich crusts. Nutrition is by far the criterion best managed by companies. They generally have a policy on the use of sugar, fat and salt, with quantified or at least qualitative objectives. The second criterion for which the most information is available is responsible marketing, especially since claims are highly regulated. On the subject of pesticides, nanoparticles, antibiotics and GMOs, companies usually merely comply with local regulations, with no proactivity or global policy. Nanoparticles are the most taboo subject. Read our publication: Our recommendations therefore relate to the "Opportunities of deep-sea mining and ESG risks” implementation of a transparency and precautionary on the Research Center amundi.com policy that goes beyond local regulations.

These deposits could contain large amounts of minerals, making them an interesting option to meet growing global demand. Several countries and the European Union have expressed a keen interest in these activities, seeing them as an opportunity to secure their supply of mineral resources and their independence (90% of the metals used in Europe are imported). France has defined a national strategy to support the sector’s activities, and the European Union supports several exploration campaigns conducted by European consortiums. Some companies have also positioned themselves in the sector, although no mining activity has started to date. 66 Engagement Report 2017

Thematic studies conducted in 2017

Deep-sea mining faces several types of hurdles, however. revenue and avoid the so-called “resource curse”3. The From a regulatory standpoint, obtaining permits comparison of the impacts of land and deep-sea mining for exploration and especially for mining is far from is also a subject of debate. simple. Mining in international waters, regulated by the In order to better understand these issues and establish a International Seabed Authority (ISA), is in fact currently situational analysis of current activities, we contacted the impossible as the regulations for these activities are main players involved in deep-sea mining, both French 1 incomplete. In Exclusive Economic Zones (EEZ) , and international. In addition to the obstacles cited above, the rules and requirements set by each country must it appears that the development of these activities has be complied with. slowed due to low mineral prices, which already makes Extracting ores at depths of up to 5,000 metres also existing above- and underground mining operations represents a major technological challenge, notably in difficult economically speaking and limits the opening of terms of dealing with pressure and low temperatures. new mines. An upturn in mineral prices, however, could Apart from an elaborate system to extract polymetallic quickly lead to renewed interest in deep-sea mining, sulphides, there is as yet no operational mining which could offer several advantages compared to technology. terrestrial mining (higher metal content, possibility of Deep-sea mining would especially have significant moving and re-using mining equipment, etc.). environmental impacts, as has been demonstrated Deep water biodiversity is unique and fragile, and the by many scientific reports2. Given the broad lack of impacts of mining are largely unknown, but potentially knowledge of these environments’ ecosystems, it is serious. The ESG rating methodology that we propose for difficult to estimate the extent of these impacts and the companies involved in these activities is therefore based potential resilience of species following the disturbance on a precautionary approach. caused by mining. According to Yves Fouquet, a geologist at Ifremer, “we have a better knowledge of the 1. EEZ: the zone extending beyond territorial sea and adjacent to it, over which the coastal State has special rights regarding the exploration and Moon than of the depths of our oceans, which make up use of marine resources, including energy production from water and wind. It extends in a radius of 200 nautical miles (370 km) from the 71% of the globe’s surface”. Social impacts (disturbance baseline (the mean low water mark, the maritime chart datum). to fishing, local customs, etc.) could also be significant, 2. One can refer notably to Professor Richard Steiner’s report on the assessment of the environmental impact of Nautilus Minerals (2009), but they remain largely unknown and unexplored. Finally, the CNRS-Ifremer collective expertise on the “Environmental impact of it is important to remain vigilant about governance deep sea mineral resources exploitation” (2014), or the reports of the Deep Sea Mining Campaign. issues. Deep-sea mining will generate additional revenue 3. Resource curse: the resource curse, also known as the paradox for a number of countries, which will require strong of plenty, refers to the paradox that revenue generated by natural resources can have negative consequences on a country’s economy, institutional and regulatory capacities to manage this society and political stability (rise in violent conflicts, corruption, etc.).

Discussion Paper

DP-26-2017

October 2017

THE FOOD CHALLENGE: HOW CAN ONE ACHIEVE

GREATER TRANSPARENCY? Marie NAVARRE, Aurélie RENARD , Jérôme TENDEAU, ESG Analysis Read Amundi Discussion Papers Series OPPORTUNITIES OF DEEP-SEA MINING

our publication “Discussion Paper” DP-24-2017 August

Marie 2017 NAVARRE, AND ESG RISKS • Aggressive tax optimisation - Héloise LAMMENS, ESG Analysis

what is the best ESG approach ?

SRI I CROSS ASSET Investment Strategy SRI • The food challenge : Discussion Paper Finalised at 31 August 2017 RESEARCH Finalised at 9 June 2017 STRATEGY how can one achieve greater transparency? & ANALYSIS DP-31-2018 For professional investors only Aggressive tax optimisation: what is the best ESG approach? • Opportunities of deep-sea mining SRI

and ESG risks Document for the exclusive attention of professional clients, investment services providers and any other professional of the financial industry

For professional investors only Engagement Report 2017 67

ESG development in Japan

specified, and the guidelines for Principle 3 stated that risk and return opportunities in the businesses of investee companies should be comprehended, including those related to ESG factors. In response, we strengthened Amundi Japan's stewardship framework, set up the Responsible Investment Advisory Committee, which comprises external members, and bolstered the management of conflicts of interest in stewardship activities such as proxy voting. Moreover, to bring us into line with Amundi, we started disclosing our voting decisions on Debate regarding stewardship and responsible individual agenda items. We will also investment evolved further in Japan. implement self-evaluation of stewardship activities from the end of this fiscal year, and we intend to describe As three years had passed since the Japanese version them in our stewardship activity report and publish them of the Stewardship Code had been formulated in on the corporate website. February 2014, the Financial Services Agency and the The implementation of ESG investment has also Tokyo Stock Exchange held follow-up meetings on the accelerated. In July, the GPIF selected a total of three Stewardship Code and the Corporate Governance Code ESG indices. These comprise two broad indices and prepared a written opinion concerning the state targeting Japanese companies and an ESG index that of effective stewardship activities aimed at enhancing supports companies that empower women, which is the effectiveness of corporate governance reform. an urgent issue for Japan, as it faces a decline in the As a result, the Japanese version of the Stewardship working-age population due to the ageing society and Code was revised in May 2017. The revised version declining birth rate. The GPIF has allocated 1 trillion made changes to the guidelines that constitute each yen to ESG investment linked to these indices and has principle while maintaining the seven principles. Above specified its intention to continue to expand ESG assets all, it recommends effective monitoring of stewardship under management. At present, the GPIF is calling for activities at asset managers by asset owners, applications for a global environmental equity index strengthening of governance and conflict of interest and has revealed a policy of supporting companies that management at investment institutions, implementation actively contribute to the realization of a low-carbon of engagement and dialogue for passive investment, society. Meanwhile, responsible investment in Japan has improvement of the transparency of the results of the expanded rapidly, and according to statistics produced exercise of voting rights, and self-evaluation of the by JSIF, the balance of sustainable investment in Japan stewardship activities of asset managers. ESG was also has increased to 136 trillion yen. 68 Engagement Report 2017

ESG development in Japan

In February 2017, Amundi Japan launched the Quality We have continued to exchange opinions with the Reinforcement Fund, which integrates ESG as part policy side on various occasions. In particular, we of engagement aimed at enhancing corporate value, held an opinion exchange meeting with the Ministry and fund managers and ESG analysts work together of Health, Labour and Welfare regarding "working in carrying it out. This includes engagement with style reform", which has come increasingly under the management beyond dialogue regarding financial and spotlight since the death from overwork incident at business strategies to increase capital efficiency. In Dentsu Inc. in 2016. In addition, we exchanged opinions addition, it includes engagement for influence with Nidec regarding ESG information disclosure at a joint study and Ryohin Keikaku that we are carrying out globally group formed by the Ministry of Environment and regarding the theme of a living wage. Besides these Financial Services Agency. We are also continuing to initiatives, owing to the rapid increase in interest in ESG, participate as a member in the Environmental Reporting requests from companies to engage in dialogue with us Platform Development Pilot Project conducted by the regarding integrated reports and integrated strategies as Ministry of Environment, and thereby endeavoring well as the materiality of ESG and information disclosure to create a common platform for the disclosure of have increased, and fund managers and our ESG environmental information by Japanese companies team are cooperating in responding to such requests. and realize a platform for dialogue with companies and To implement dialogue, we are also using Guidance investors concerning environmental issues. We expect for Integrated Corporate Disclosure and Company- that the development of this platform for dialogue will Investor Dialogues for Collaborative Value Creation facilitate discussions between global investors and – For encouraging ESG integration and non-financial Japanese companies regarding their ESG initiatives. information disclosure and investment in intangibles (Guidance for Collaborative Value Creation), which was announced by METI in May 2017. There has been progress in academic cooperation as well. In June 2016, Amundi Japan entered into a joint research agreement concerning ESG investment with the Tokyo University of Science and started research activities. In December 2017, we held a symposium by inviting asset owners, corporations and academic researchers and announced the results of joint research. Furthermore, to promote ESG investment and develop more advanced investment chains, we invited speakers and held panels to broadly discuss what kind of roles asset owners, asset managers and companies should play. In 2018 as well, we intend to continue joint research regarding ESG with the Tokyo University of Science. Engagement Report 2017 69

2017 figures:

ESG Dialogue Shareholder dialogue AEON MALL CO., LTD. ADVANTEST CORPORATION

ASAHI GLASS CO., LTD. CAPCOM CO., LTD.

ASTELLAS PHARMA INC. THE DAIICH-LIFE INSURANCE COPMANY, LIMITED

CALBEE, INC. DAIKIN INDUSTRIES, LTD.

DAIKIN INDUSTRIES, LTD. DAIWA SECURITIES GROUP INC.

DAIWA HOUSE INDUSTRY CO., LTD. DMG MORI CO., LTD.

DYDO GROUP HOLDINGS, INC. FUJIMI INCORPORATED

FUJITSU LIMITED FUTABA ELECTRIC CO., LTD.

HITACHI HIGHTECH HODOGAYA CHEMICAL CO., LTD.

INPEX CORPORATION JVC KENWOOD CORPORATION

KAO CORPORATION KAWASAKI KISEN KAISHA, LTD

KONOIKE TRANSPORT CO., LTD. KENEDIX, INC.

MARUI GROPU CO., LTD. MITSUBISHI CORPORATION

MURATA MANUFACTURING CO., LTD. MORINAGA MILK INDUSTRY CO., LTD.

NABTESCO CORPORATION NEC NETWORKS & SYSTEM INTEGRATION CORPORATION

NIDEC CORPORATION NIHON KOHDEN CORPORATION

NIPPON TELEGRAPH AND TELEPHONE CORPORATION NIPPON PAPER INDUSTRIES CO., LTD.

OMRON CORPORATION NOMURA REAL ESTATE HOLDINGS, INC.

ORIX CORPORATION NIPPON TELEGRAPH AND TELEPHONE CORPORATION

PALTAC CORPORATION ROHM CO., LTD.

RYOHIN KEIKAKU CO., LTD. SHIKOKU ELECTRIC POWER CO., INC.

SATO HOLDINGS CORPORATION SHINKO ELECTRIC INDUSTRIES CO., LTD.

SHIONOGI STANLEY ELECTRIC CO., LTD.

SIIX CORP. SUMITOMO RUBBER INDUSTRIES, LTD.

SONY CORPORATION SUZUKEN CO., LTD.

SUBARU CORPORATION TAIYO YUDEN CO., LTD.

SUMITOMO RIKO COMPANY LIMITED TASAKI & CO., LTD.

SUZUKEN CO., LTD. TEIJIN LIMITED

TOKYO ELECTRIC POWER COMPANY HOLDINGS, INC. TOHOKU ELECTRIC POWER CO., INC.

TORAY INDUSTRIES, INC TOKYO ELECTRIC POWER COPMANY HOLDINGS, INC.

TRANSCOSMOS INC. TRANSCOSMOS INC.

WACOAL HOLDINGS CORP.

RECRUIT HOLDINGS CO., LTD.

MITSUI & CO., LTD

*Questionnaires from Paris for which Tokyo played an intermediary role A

aa ENGAGEMENT THROUGH VOTING

73 Voting at general shareholders' meetings and pre-meeting dialogue

Engagement Report 2017 73

Voting at general shareholders' meetings and pre-meeting dialogue

PHILOSOPHY Amundi focuses primarily on the financial performance Chairman of the Board in shareholder dialogue in the of the companies in which it invests. This performance German Code in February 2017, then of that of directors can only be sustainable as part of a long-term vision, in dialogue by the High Committee of Corporate combined with exemplary corporate governance Governance in October, and lastly the report of the and strong societal and environmental responsibility. “Shareholder-Director Dialogue” Commission of French Amundi comes fully into its own as a shareholder within independent think-tank Le Club des Juristes (which this scope of analysis, notably by exercising its voting Amundi attended). rights and through shareholder dialogue. This shareholder dialogue also makes it possible to A special report on the exercise of voting rights and extend the scope of engagement to other issues. Thus, shareholder dialogue is available here: 2016 had been marked by the rejection of resolutions http://about.amundi.com/Navigation/A-committed- requesting more information on the climate risk player/Developingresponsible-finance management strategy in the United States, and in particular at Exxon, where a resolution to that effect had been overruled by very few votes. Continuing its 2017 VOTING SEASON public support for these resolutions, in 2017, Amundi In early 2017, Amundi decided not to make any major decided to table a similar resolution at Exxon jointly with changes to its voting policy, but rather to reinforce an international investor coalition. This time, despite existing principles, expressing the wish for a more another negative recommendation from the company, direct dialogue with Boards of Directors through a the resolution was approved with a majority of more representative of their choice. than 60%. In late December, the company announced it This trend, developed in many European countries, has would comply with investors’ wishes. experienced a significant surge in France: about one While environmental and societal issues are increasingly third of the dialogues conducted by Amundi with CAC integrated in the dialogue Amundi nurtures with 40 companies have been with a director. In the light of companies, much remains to be done. Amundi was a this positive trend, Amundi is convinced of the interest member of the jury of the first “Integrated Thinking of this dialogue, which allows the Group to complement Awards” to promote and reward best practices in the quantitative approach of its voting policy for many integrated dialogue. criteria (independence, diversity, list of skills, etc.). Of course, no General Meetings season would be With this approach, Amundi expresses its will to complete without widely-publicised opposition to better grasp governance issues by fully understanding executive compensation. In 2017, Amundi supported a the role of the Board in the context of a lasting, “shareholder spring” in Germany, with clear rejections of trusting relationship. The relevance of this approach compensation policies at two large companies, Munich was confirmed by the recognition of the role of the Re and Merck. 74 Engagement Report 2017

Voting at general shareholders' meetings and pre-meeting dialogue

SAP is a striking example. Despite 45% opposition to its of votes against, showing both their commitment to a compensation policy in 2016, the company ignored this more transparent compensation policy and their wish for warning from shareholders and did not change its policy the Supervisory Board to be more receptive to messages for 2017. Investors punished this lack of responsiveness from a substantial part of the shareholders. by voting against the discharge of the Board, with 49.5%

RESULTS In 2017 Amundi participated in more than 2,500 annual general meetings worldwide and engaged with 233 issuers, resulting in substantial improvements (warranting a change in our voting intentions) in corporate practices in almost fifty cases.

2017 2016

Voting statistics

General meetings at which we voted 2,540 2,623 of which in France 240 249 of which International 2,300 2,374 General meetings at which we voted against at least one resolution 71% 76% of which in France 78% 79% of which International 70% 75% Resolutions voted 32,443 32,771 Votes against resolutions 15% 17%

Thematic breakdown of votes against resolutions

Structure of the Board 38% 38% Remuneration 27% 29% Capital transaction 19% 18% Shareholder resolutions 6% 6% Other 10% 9%

Statistics on shareholder dialogue

Pre-GM alerts 85 120 Issuer initiatives 148 120 Number of alerts + issuer initiatives 233 240 of which in France 99 98 of which International 134 142 Dialogue rate 79% 72% of which in France 81% 77% of which International 78% 69% Engagement Report 2017 75

EXAMPLES OF VOTES 2017

Company Country Resolutions Vote Context

Softbank Japan Independence We dialogued with the Chairman on many sensitive Auditors’ compensation then governance issues, notably their independence criteria for Directors and external auditors, but also the requirements of their compensation policy. The company’s willingness to move towards meeting our main voting policy criteria led us to vote for all of the resolutions. Crédit Suisse Switzerland Binding approval of After having dialogued with the company on our questions compensation elements in terms of transparency and standards for fixed and Compensation policy then variable remuneration, a public statement by the Chairman (advisory) responding in part to our wishes led us to vote for the “binding” resolutions. On the other hand, we maintained our opposition to the resolution (merely advisory) on the overall compensation policy. Continental AG Germany Compensation policy After having accepted the compensation policy in 2014 following dialogue with the company, an amendment in 2017 increased the remuneration potential without any explanation, notwithstanding our previous comments. Despite further dialogue, we finally rejected this change, along with around 20% of the shareholders who spoke at the General Meeting. Mitsubishi Heavy Japan Independence Our dialogue addressed an improvement in the Board’s Industries Group Directors’ attendance rate then rate of independence, but also greater transparency in terms of director attendance and variable compensation Remuneration report components. After sharing our views, we approved all the proposals tabled at the General Meeting.

For Abstention Against A

aa APPENDICES

Engagement Report 2017 79

Appendix 1 Glossary

 AB Sustain: A specialist in data relating to the  Codex : the Codex Alimentarius Commission, agriculture logistics chain, AB Sustain works with established by the FAO and WHO in 1963, develops distributors, processors and brands (abagri.com). harmonised international food standards, guidelines and codes of practice to protect the health of  ARISE : The Achieving Reduction of Child Labour in consumers and ensure fair practices in the food trade. Support of Education (ARISE) programme was initiated The Commission also promotes coordination of all in 2012 with the support of the ILO and American NGO food standards work undertaken by international Winrock International. ARISE is dedicated primarily to governmental and non-governmental organisations. removing the underlying causes of child labour through education and improving living standards.  Core Coalition: “CORE is a leading UK civil society coalition on corporate accountability. Core brings  Business Learning Program (BLP) by SHIFT : together expertise on international development, the “Through our Business Learning program, we work environment and human rights from NGOs, academics, with a select number of companies that we believe are trade unions and the legal profession. Core works with serious about implementing the Guiding Principles. partners to advance the protection of human rights and Participants come from different industries and different the environment with regard to the global operations regions of the world and face very different human of UK companies, by promoting a stronger regulatory rights challenges. They typically work with us over two framework, higher standards of conduct, compliance to three years. The purpose of this program is to foster with the law, and improved access to remedy for those leading practice by companies and to gain insight, both harmed by the activities of UK companies.” for ourselves, for participants and for the wider business (http://corporate-responsibility.org/about-core/). and human rights community, about how to implement the Guiding Principles. Insights gained through  ECLT: “Eliminating Child Labour in Tobacco Growing is this program also inform all of our other activities a non-profit organisation whose goal is the elimination with governments, civil society and international of the worst forms of child labour and forced labour organizations – our direct work with companies helps in the cultivation and production of tobacco. The us know where we can push for better practices more ECLT Foundation is a multi-stakeholder partnership widely.” composed of unions, tobacco growers as well as (www.shiftproject.org/what-we-do/business-learning). multinationals of the tobacco industry. The Foundation also relies on the International Labour Office, the  CLMRS: Child Labour Monitoring and Remediation permanent secretariat of the International Labour Systems. Organization. We are working with a unique and integrated approach to address the problem of child labour.” (http://www.eclt.org). 80 Engagement Report 2017

Appendix 1 Glossary

 Electronic Industry Citizenship Coalition (EICC)  Fair Labor Association (FLA): As part of FLA, brands is now the Responsible Business Alliance (RBA): have committed to ensuring fair labor practices and The RBA was founded in 2004 by a small group of safe and humane working conditions throughout their electronics companies seeking to create an industry- supply chains. Companies that have committed to FLA's wide standard on social, environmental and ethical Code of Conduct and established systems to identify issues in the electronics industry supply chain. The and remedy ethical violations are making significant founding members of the RBA – originally founded strides towards that goal. These companies are working under the name “Electronics Industry Code of with FLA to develop and improve social compliance Conduct” – saw an opportunity to drive positive change systems that flag issues and lead to sustainable and increase efficiency across the industry by creating solutions when workers are at risk. Companies join the a unified approach and ensuring that suppliers were FLA on a voluntary basis, but they must meet strict held to a common standard. Unique amongst industry labor standards for as long as they are affiliated. groups, the original founders of the EICC included (www.fairlabor.org). major electronics brands as well as large Tier 1 suppliers. (www.responsiblebusiness.org).  Fair Wear Foundation : Fair Wear Foundation works with brands, factories, trade unions, NGOs  Enough Project: Project stemming from the Center and sometimes governments to verify and improve for American Progress aimed at ending genocide and workplace conditions in 11 production countries in crimes against humanity. Founded in 2007, Enough Asia, Europe and Africa. FWF keeps track of the focuses on crises in Sudan, southern Sudan and Congo. improvements made by the companies it works with. Enough conducts intensive field studies and has And through sharing expertise, social dialogue and developed several tools to provide citizens and working strengthening industrial relations, FWF increases the groups with practical methods to cope with these effectiveness of the efforts made by companies. crises. (enoughproject.org). (www.fairwear.org).

 Ethical Trading Initiative (ETI): The Ethical Trading  Grievance mechanisms: “A grievance mechanism Initiative (ETI) is an alliance of companies, trade unions is a process consisting in receiving, investigating and and NGOs that promotes respect for workers' rights responding to the concerns and complaints formulated around the globe. Their vision is a world where all by the stakeholders concerned, in a timely and workers are free from exploitation and discrimination, systematic manner.” (IPIECA). and enjoy conditions of freedom, security and equity. The company members include supermarkets, fashion  ICI: Created in 2002, the International Cocoa retailers, department stores and stone sourcing Initiative (ICI) is the leading organisation promoting companies, as well as major suppliers to retailers of child protection in cocoa-growing communities. food and drink, flowers, clothing, shoes, homewear, ICI works with the cocoa industry, civil society and promotional and other products. national governments in cocoa-producing countries (www.ethicaltrade.org/). to ensure a better future for children and contribute to the elimination of child labour. Operating in Côte d’Ivoire and Ghana since 2007, ICI has worked in more than 890 cocoa-growing communities, where it has supported more than 3,000 community development actions to benefit more than one million people, more than half of whom are children. As a result of ICI’s assistance, more than 50,000 of these children now have improved access to quality education. (http://www.cocoainitiative.org/). Engagement Report 2017 81

 ILO Better Work programme: Better Work  Indice HIGG: The Sustainable Apparel Coalition (SAC) – a collaboration between the United Nation’s develops the Higg Index, a set of standardized supply International Labour Organization (ILO) and the chain measurement tools for all industry participants. International Finance Corporation (IFC), a member of The Higg Index includes facility, brand, and product the World Bank Group – is a comprehensive programme tools that measure environmental and social labor bringing together all levels of the garment industry to impacts across the supply chain. improve working conditions and respect of labour rights (https://apparelcoalition.org/). for workers, and boost the competitiveness of apparel businesses. Currently, the programme is active in  Industrial Emissions Directive (IED): EU directive 1,450 factories employing more than 1.9 million workers aiming to achieve a high level of environmental in seven countries. As well as advising factories, Better protection through the prevention and reduction of Work collaborates with governments to improve labour pollution from a wide range of industrial and agricultural laws, and with brands to ensure progress is sustained. activities. The directive provides that the best available They also advise unions on how to give workers a techniques (BAT) form the basis for the definition of greater say in their lives, and work with donors to help emission limit values (ELV) and for other conditions achieve their broader development goals. for the operations authorisation of the activities (betterwork.org/about-us/the-programme). concerned. The conditions for authorisation must be reviewed periodically. The directive also provides for the  ILO Conventions no. 138 and 182: “Conventions no. reclamation of the site in a state at least equivalent to 138 and 182 are fundamental conventions. Under the that described in a “basic report” describing the state of ILO Declaration, even if a Member State has not ratified the soil and groundwater before the commissioning of these conventions, it is bound to respect, promote and the operation. (ied.ineris.fr/directive_ied). realise the principles enacted by this statement.  IndustriALL (ACT): ACT is a foundation jointly ƒƒILO Convention No. 138 on the minimum age for created by global brands and retailers in the garment admission to employment and work. and textile sector and IndustriALL, the global trade One of the most effective methods to ensure union federation representing garment and textile that children do not start working too young is to workers. Brands, retailers and IndustriALL realised that determine the age at which they are likely to be purchasing practices facilitating the payment of living employed or permitted to work. wages, through the establishment of industry wide ƒƒILO Convention no. 182 on the worst forms of child collective bargaining requires collaboration among labour, 1999. brands and between companies and trade unions. Child labour, as the statistics clearly show, is a global (actonlivingwages.com). problem. Following comprehensive research on  Institutional Investors Group on Climate Change this issue, the ILO concluded that it was necessary (IIGCC): “is a network of 120 members, composed of to strengthen existing conventions on child labour. some of the largest pension funds and asset managers Convention no. 182 helped focus international attention in Europe, which account for nearly €13 trillion in assets on the urgency of actions to be undertaken, which and adopt a proactive approach to the management of address in priority the worst forms of child labour, the risks and opportunities related to climate change.” without losing sight of the long-term goal for the (www.iigcc.org). effective elimination of child labour.”(http://ilo.org/) . 82 Engagement Report 2017

Appendix 1 Glossary

 Interbrand (Classement Interbrand): With a network  National Pollutant Inventory (NPI): Australia’s of 21 offices in 17 countries, Interbrand is a global brand National Pollutant Inventory (NPI) provides the consultancy, and publisher of the highly influential community, industry and government with free annual Best Global Brands and Breakthrough Brands information on substance emissions in the air, ground reports, and Webby Award-winning brandchannel. and water in Australia. It contains estimates of emissions Interbrand is part of the Omnicom Group Inc. of 93 toxic substances as well as the source and location (NYSE:OMC) network of agencies. of these emissions. (npi.gov.au). (http://interbrand.com/about/).  OECD Guidelines: The OECD Guidelines for  International Trade Union Confederation (ITUC): Multinational Enterprises are recommendations to “is the global voice of the world’s working people. The help these companies conduct their activities in a ITUC’s primary mission is the promotion and defence responsible manner. 44 Governments have adhered to of workers’ rights and interests, through international the guidelines (representing all regions of the world and cooperation between trade unions, global campaigning 85% of foreign direct investment and encourage their and advocacy within the major global institutions. Its companies to observe them, regardless of where they main areas of activity include the following: trade union operate. (oecd.org). and human rights; economy, society and the workplace; equality and non-discrimination; and international  PRI Clearinghouse: “is a unique global platform for solidarity. […]The ITUC has close relations with the collaborative engagement initiatives. It provides PRI Global Union Federations and the Trade Union Advisory signatories with a private forum to pool resources, Committee to the OECD (TUAC). It works closely with share information, enhance influence and engage with the International Labour Organisation and with several companies, stakeholders, policymakers and other other UN Specialised Agencies.” (www.ituc-csi.org). actors in the investment value chain on environmental, social and corporate governance issues across different  Joint Audit Co-operation (JAC): JAC is an association sectors and regions. The vision of the Clearinghouse is of telecom operators aiming to verify, assess and to foster sustainable long-term value creation through develop the Corporate Social Responsibility (CSR) collaboration, benefiting the environment and society implementation across the manufacturing centres of as a whole.” (www.unpri.org). important multinational suppliers of the Information Communication Technology (ICT) industry. JAC  RAFI (Reporting and Assurance Frameworks members share resources and best practices to Initiative): “RAFI is an international advisory project develop long term Corporate Social Responsibility to develop frameworks of reference for reporting and implementation in the different layers or tiers of the ICT its reliability, based on the UN guiding principles. This Supply Chain globally. (www. jac-initiative.com). project was initiated by Shift (an independent non- profit organisation for the respect of human rights in  National Association of Manufacturers: Association business) and Mazars (international audit, accounting of US industrial companies aiming to improve the and advisory firm) in cooperation with the resource competitiveness of American manufacturers by center for human rights of ASEAN (the Association of encouraging the creation of a legislative and regulatory South-East Asian nations).” environment favorable to its members. (nam.org). (http://shiftproject.org/project/humanrights-reporting- and-assuranceframeworksinitiative-rafi). Engagement Report 2017 83

 Resolve: NGO founded in 1977 to address  SRTP: The Social Responsibility in Tobacco Production environmental, social and health challenges. This programme, or SRTP, defines minimum result objectives organisation provides lasting solutions to identified for suppliers of tobacco leaves and also includes problems and develops collaborative approaches and guidelines for measures to be taken to prevent child dedicated programmes. (resolv.org). labour. The goal is to understand the reasoning that lies at the origin of child labour, improve access to  RJC – The Responsible Jewellery Council: “is a education and solve vulnerability issues through an not-for-profit, standards setting and certification effort monitoring system. organization. It has more than 1000 member companies that span the jewellery supply chain from mine to retail.”  STP: The Sustainable Tobacco Programme (STP) (www.responsiblejewellery.com/). replaced the SRTP in 2016. This sector initiative, launched in 2015, presents the best sector practices  RSPO (Roundtable on Sustainable Palm Oil): RSPO complying with external standards. is a not-for-profit that unites stakeholders from the 7 sectors of the palm oil industry: oil palm producers,  Sustainable Apparel Coalition (SAC): Manufacturers, processors or traders, consumer goods manufacturers, brands, and retailers are joining together to identify and retailers, banks/investors, and environmental and social measure their sustainability impacts on an industrial non-governmental organisations (NGOs), to develop scale like never before. The Coalition develops the Higg and implement global standards for sustainable palm Index, a set of standardized supply chain measurement oil. The RSPO has developed a set of environmental and tools for all industry participants. The Higg Index social criteria which companies must comply with in includes facility, brand, and product tools that measure order to produce Certified Sustainable Palm Oil (CSPO). environmental and social labor impacts across the When they are properly applied, these criteria can help supply chain. (https://apparelcoalition.org/). to minimize the negative impact of palm oil cultivation on the environment and communities in palm oil-  TFT (The Forest Trust): “The Forest Trust, or TFT producing regions. The RSPO has more than 3,000 (formerly Tropical Forest Trust) is an organisation members worldwide who represent all links along the created in the United Kingdom whose purpose is to palm oil supply chain. They have committed to produce, support businesses and communities in marketing source and/or use sustainable palm oil certified by the responsible products. TFT works in the field, in forests, RSPO. (www.rspo.org). farms and factories, to help create products that respect the environment and improve the lives of local  SEC (Securities & Exchange Commission): US federal populations. TFT helps companies transform their raw agency for the regulation and control of financial material supply chains and thus curb deforestation. It markets. (sec.gov). notably ensures that businesses obtain tropical timber not originating from the plunder of rain forests. TFT is  SHIFT: “Shift is a US-registered 501(c)3 non-profit a non-profit organisation based in 14 countries with its organization. We are funded primarily by governments, headquarters in Crassier, Switzerland. It is headed by a both for advisory work with individual government Board of Directors composed of representatives of its departments under our Government Engagement members as well as independent experts.” program as well as bigger projects under our (http://www.tft-earth.org/). International Partnerships program, like our cross- cutting reporting program and for our Education and Outreach program.” (www.shiftproject.org). 84 Engagement Report 2017

Appendix 1 Glossary

The Universal Declaration of Human Rights : “The corporate sector. The Act, which came into force on Universal Declaration of Human Rights (UDHR) is a 29th October 2015, requires many businesses to disclose milestone document in the history of human rights. a 'slavery and human trafficking statement'.” Drafted by representatives with different legal and (https://www.pwc.co.uk/services/sustainability-climate- cultural backgrounds from all regions of the world, change/supply-chain/the-modern-slavery-act.html). the Declaration was proclaimed by the United Nations General Assembly in Paris on 10 December 1948  United Nations Global Compact (UN Global (General Assembly resolution 217 A) as a common Compact): “The Global Compact asks companies to standard of achievements for all peoples and all nations. embrace, support and enact, within their sphere of It sets out, for the first time, fundamental human rights influence, a set of core values in the areas of human to be universally protected and it has been translated rights, labour and environmental standards, and the into over 500 languages.” (http://www. un.org/fr/ fight against corruption.”(unglobalcompact.org) . universal-declaration-human-rights/)  US Chamber of commerce: Non-profit business  UK Modern Slavery Act : “The Modern Slavery Act federation representing about three million businesses is a globally leading piece of legislation. It sets out a in the country, 2,000 local and State chambers, and range of measures on how modern slavery and human 830 business associations, aiming to promote human trafficking should be dealt with in the UK. Whilst not progress through an economic, political and social all of the Act is directly relevant for business, section system based on individual freedom, incentive, initiative, 54 entitled 'Transparency in supply chains' impacts the opportunity and responsibility. (uschamber.com).

GLOBAL COMPACT - The ten principles

Principle 1 Principle 6 Businesses should support and respect the The elimination of discrimination in respect of protection of internationally proclaimed human employment and occupation. rights. Principle 7 Principle 2 Businesses should support a precautionary Make sure that they are not complicit in human approach to environmental challenges. rights abuses. Principle 8 (www.pactemondial.org)Principle 3 Undertake initiatives to promote greater Businesses should uphold the freedom of environmental responsibility. association and the effective recognition of Principle 9 the right to collective bargaining. Encourage the development and diffusion of Principle 4 environmentally friendly technologies. The elimination of all forms of forced and Principle 10 compulsory labour. Businesses should work against corruption in all its Principle 5 forms, including extortion and bribery. The effective abolition of child labour. (www.pactemondial.org) Engagement Report 2017 85

Appendix 2

BREAKDOWN OF TOPICS ADDRESSED BY SECTOR

26.6% Industrials 22.9% Financials 11.5% Materials 10.4% Consumer Discretionary 8.3% Consumer Staples 5.7% Utilities 5.0% Real Estate 4.2% Energy 2.6% Information Technology 2.1% Health Care 1.0% Telecommunication Services

BREAKDOWN OF TOPICS ADDRESSED BY REGION

36% France 28% Euro 13% Europe ex euro 11% Others 8% NA 4% Japan 86 Engagement Report 2017

Appendix 3 Companies met in 2017

ESG ANALYSIS TEAM

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Adidas AG DE000A1EWWW0 DEU 2017/12/20 • Nordea Bank AB SE0000427361 SWE 2017/12/19 • • • • Ryanair Holdings PLC IE00BYTBXV33 IRL 2017/11/28 • • • • • • • Siemens AG DE0007236101 DEU 2017/12/18 • • • • • Peugeot SA FR0000121501 FRA 2017/12/11 • • • • • • • Veolia Environnement FR0000124141 FRA 2017/12/07 • • • • • • Électricité de France-EDF SA FR0013217064 FRA 2017/12/07 • • • • • Engie FR0010208488 FRA 2017/12/07 • • • • • Industria De Diseno Textil SA ES0148396007 ESP 2017/12/05 Seb SA FR0000121709 FRA 2017/12/05 • • • • • Repsol SA ES0173516115 ESP 2017/11/14 • • • • • • • • • Landwirtsch.rentenbk 2017/10/25 • • • • • • BPCE SA XX0002866395 FRA 2017/09/28 • • • • • Societe Generale FR0000130809 FRA 2017/11/07 • • • • • • • • • • Royal Bk Scotl Group PLC GB00B7T77214 GBR 2017/11/07 • • • • • • • • • • Hsbc Holdings PLC GB0005405286 GBR 2017/10/26 • • • • • Ing Groep Nv NL0011821202 NLD 2017/11/28 • • • • • • Banco Bilbao Vizcaya Argentari ES0113211835 ESP 2017/12/01 • • • • • • • • Asahi Glass Co Ltd JP3112000009 JPN 2017/11/30 • • • Aeon Mall Co Ltd JP3131430005 JPN 2017/11/30 • • • Daikin Industries Ltd JP3481800005 JPN 2017/11/30 • • • Airbus SE NL0000235190 FRA 2017/11/29 • Unibail-Rodamco SE FR0000124711 FRA 2017/11/15 • • • Rwe AG DE0007037129 DEU 2017/11/21

Dong Energy A/S DK0060094928 DNK 2017/11/21

Luxottica Group Spa IT0001479374 ITA 2017/11/21

Arcelormittal LU1598757687 LUX 2017/11/21 Vestas Wind Systems A/S DK0010268606 DNK 2017/11/15 • • • • • Engagement Report 2017 87

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Adidas AG DE000A1EWWW0 DEU 2017/12/20 • Nordea Bank AB SE0000427361 SWE 2017/12/19 • • • • Ryanair Holdings PLC IE00BYTBXV33 IRL 2017/11/28 • • • • • • • Siemens AG DE0007236101 DEU 2017/12/18 • • • • • Peugeot SA FR0000121501 FRA 2017/12/11 • • • • • • • Veolia Environnement FR0000124141 FRA 2017/12/07 • • • • • • Électricité de France-EDF SA FR0013217064 FRA 2017/12/07 • • • • • Engie FR0010208488 FRA 2017/12/07 • • • • • Industria De Diseno Textil SA ES0148396007 ESP 2017/12/05 Seb SA FR0000121709 FRA 2017/12/05 • • • • • Repsol SA ES0173516115 ESP 2017/11/14 • • • • • • • • • Landwirtsch.rentenbk 2017/10/25 • • • • • • BPCE SA XX0002866395 FRA 2017/09/28 • • • • • Societe Generale FR0000130809 FRA 2017/11/07 • • • • • • • • • • Royal Bk Scotl Group PLC GB00B7T77214 GBR 2017/11/07 • • • • • • • • • • Hsbc Holdings PLC GB0005405286 GBR 2017/10/26 • • • • • Ing Groep Nv NL0011821202 NLD 2017/11/28 • • • • • • Banco Bilbao Vizcaya Argentari ES0113211835 ESP 2017/12/01 • • • • • • • • Asahi Glass Co Ltd JP3112000009 JPN 2017/11/30 • • • Aeon Mall Co Ltd JP3131430005 JPN 2017/11/30 • • • Daikin Industries Ltd JP3481800005 JPN 2017/11/30 • • • Airbus SE NL0000235190 FRA 2017/11/29 • Unibail-Rodamco SE FR0000124711 FRA 2017/11/15 • • • Rwe AG DE0007037129 DEU 2017/11/21

Dong Energy A/S DK0060094928 DNK 2017/11/21

Luxottica Group Spa IT0001479374 ITA 2017/11/21

Arcelormittal LU1598757687 LUX 2017/11/21 Vestas Wind Systems A/S DK0010268606 DNK 2017/11/15 • • • • • 88 Engagement Report 2017

Appendix 3 Companies met in 2017

ESG ANALYSIS TEAM

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Gecina SA FR0010040865 FRA 2017/11/08 • • • • Ferrovial SA ES0118900010 ESP 2017/11/08 • • • • • Tarkett SA FR0004188670 FRA 2017/11/08 • • • • Eiffage SA FR0000130452 FRA 2017/11/07 • • • Leonardo SPA IT0003856405 ITA 2017/11/07 • Hochtief AG DE0006070006 DEU 2017/11/07 • • Icade FR0000035081 FRA 2017/11/02 • • • • Compagnie de Saint-Gobain FR0000125007 FRA 2017/10/30 • • • • Danone (Ex Groupe Danone) FR0000120644 FRA 2017/09/27 • Indus & Comial Bank China-Icbc CNE000001P37 CHN 2017/09/27 • Sumitomo Mitsui Financial Grou JP3890350006 JPN 2017/09/29 • Golden Agri-Resources Ltd MU0117U00026 SGP 2017/10/30 • • • • • Sime Darby Bhd MYL4197OO009 MYS 2017/10/30 • • • • • Puma SE DE0006969603 DEU 2017/10/27 • • • • Delta Air Lines Inc US2473617023 USA 2017/10/24 • • • • • • • Kuehne + Nagel International A CH0025238863 CHE 2017/10/25 • • • • • • • Klepierre FR0000121964 FRA 2017/10/18 • • • Leg Immobilien AG DE000LEG1110 DEU 2017/10/17 • • • British Land Co PLC GB0001367019 GBR 2017/10/16 • • • Industria De Diseno Textil SA ES0148396007 ESP 2017/10/10 • Bunge Ltd BMG169621056 USA 2017/10/11 • Bouygues SA FR0000120503 FRA 2017/10/11 • • • • Bhp Billiton PLC GB0000566504 AUS 2017/10/03 • • • • Deutsche Wohnen AG #N/A DEU 2017/10/10 • • • • Fonciere Des Regions FR0000064578 FRA 2017/10/09 • • • Nokia Oyj FI0009000681 FIN 2017/10/06 • • • Csx Corp US1264081035 USA 2017/10/03 • • • • • • • Mitsubishi Heavy Industries Lt JP3900000005 JPN 2017/10/02 • • • • • • Engagement Report 2017 89

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Gecina SA FR0010040865 FRA 2017/11/08 • • • • Ferrovial SA ES0118900010 ESP 2017/11/08 • • • • • Tarkett SA FR0004188670 FRA 2017/11/08 • • • • Eiffage SA FR0000130452 FRA 2017/11/07 • • • Leonardo SPA IT0003856405 ITA 2017/11/07 • Hochtief AG DE0006070006 DEU 2017/11/07 • • Icade FR0000035081 FRA 2017/11/02 • • • • Compagnie de Saint-Gobain FR0000125007 FRA 2017/10/30 • • • • Danone (Ex Groupe Danone) FR0000120644 FRA 2017/09/27 • Indus & Comial Bank China-Icbc CNE000001P37 CHN 2017/09/27 • Sumitomo Mitsui Financial Grou JP3890350006 JPN 2017/09/29 • Golden Agri-Resources Ltd MU0117U00026 SGP 2017/10/30 • • • • • Sime Darby Bhd MYL4197OO009 MYS 2017/10/30 • • • • • Puma SE DE0006969603 DEU 2017/10/27 • • • • Delta Air Lines Inc US2473617023 USA 2017/10/24 • • • • • • • Kuehne + Nagel International A CH0025238863 CHE 2017/10/25 • • • • • • • Klepierre FR0000121964 FRA 2017/10/18 • • • Leg Immobilien AG DE000LEG1110 DEU 2017/10/17 • • • British Land Co PLC GB0001367019 GBR 2017/10/16 • • • Industria De Diseno Textil SA ES0148396007 ESP 2017/10/10 • Bunge Ltd BMG169621056 USA 2017/10/11 • Bouygues SA FR0000120503 FRA 2017/10/11 • • • • Bhp Billiton PLC GB0000566504 AUS 2017/10/03 • • • • Deutsche Wohnen AG #N/A DEU 2017/10/10 • • • • Fonciere Des Regions FR0000064578 FRA 2017/10/09 • • • Nokia Oyj FI0009000681 FIN 2017/10/06 • • • Csx Corp US1264081035 USA 2017/10/03 • • • • • • • Mitsubishi Heavy Industries Lt JP3900000005 JPN 2017/10/02 • • • • • • 90 Engagement Report 2017

Appendix 3 Companies met in 2017

ESG ANALYSIS TEAM

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Samsung Electronics Co Ltd KR7005930003 KOR 2017/09/28 • • • • Siemens Gamesa Renew Energy ES0143416115 ESP 2017/09/29 • • • Burberry Group PLC GB0031743007 GBR 2017/09/27 • • • Asml Holding Nv NL0010273215 NLD 2017/09/26 • • • • Adidas Ag DE000A1EWWW0 DEU 2017/09/26 • • • • Air France-Klm FR0000031122 FRA 2017/09/28 • • • • Kering FR0000121485 FRA 2017/09/21 • • • • Next Plc GB0032089863 GBR 2017/09/21 • • • • Hennes & Mauritz Ab SE0000106270 SWE 2017/09/18 • • • • Koninklijke Ahold Delhaize Nv NL0011794037 NLD 2017/09/14 • Nat Australia Bk Ltd AU000000NAB4 AUS 2017/09/04 • Development Bank of Japan XX0002711299 JPN 2017/09/06 • Imerys SA FR0000120859 FRA 2017/09/12 • Lafargeholcim Ltd CH0012214059 CHE 2017/09/12 • Pandora A/S DK0060252690 DNK 2017/09/12 • • • • Vinci SA FR0000125486 FRA 2017/09/04 • • Commonwealth Bk Aust AU000000CBA7 AUS 2017/09/05 • Volvo Ab SE0000115446 SWE 2017/09/25 • • • Vinci SA FR0000125486 FRA 2017/09/04 • • Alstom SA FR0010220475 FRA 2017/09/29 Groupe Eurotunnel SA FR0010533075 FRA 2017/09/27 • • • • Easyjet Plc GB00B7KR2P84 GBR 2017/09/15 • • • • Vallourec SA FR0000120354 FRA 2017/09/13 • • • • • Worldline SA FR0011981968 FRA 2017/03/21 • • • • Dassault Systemes SA FR0000130650 FRA 2017/03/22 • • • • Dgf - FRA 2017/07/13 • • • • • • • • Luneau - FRA 2017/07/25 • • • • • • • • Indicia - FRA 2017/07/28 • • • • • • • • Engagement Report 2017 91

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Samsung Electronics Co Ltd KR7005930003 KOR 2017/09/28 • • • • Siemens Gamesa Renew Energy ES0143416115 ESP 2017/09/29 • • • Burberry Group PLC GB0031743007 GBR 2017/09/27 • • • Asml Holding Nv NL0010273215 NLD 2017/09/26 • • • • Adidas Ag DE000A1EWWW0 DEU 2017/09/26 • • • • Air France-Klm FR0000031122 FRA 2017/09/28 • • • • Kering FR0000121485 FRA 2017/09/21 • • • • Next Plc GB0032089863 GBR 2017/09/21 • • • • Hennes & Mauritz Ab SE0000106270 SWE 2017/09/18 • • • • Koninklijke Ahold Delhaize Nv NL0011794037 NLD 2017/09/14 • Nat Australia Bk Ltd AU000000NAB4 AUS 2017/09/04 • Development Bank of Japan XX0002711299 JPN 2017/09/06 • Imerys SA FR0000120859 FRA 2017/09/12 • Lafargeholcim Ltd CH0012214059 CHE 2017/09/12 • Pandora A/S DK0060252690 DNK 2017/09/12 • • • • Vinci SA FR0000125486 FRA 2017/09/04 • • Commonwealth Bk Aust AU000000CBA7 AUS 2017/09/05 • Volvo Ab SE0000115446 SWE 2017/09/25 • • • Vinci SA FR0000125486 FRA 2017/09/04 • • Alstom SA FR0010220475 FRA 2017/09/29 Groupe Eurotunnel SA FR0010533075 FRA 2017/09/27 • • • • Easyjet Plc GB00B7KR2P84 GBR 2017/09/15 • • • • Vallourec SA FR0000120354 FRA 2017/09/13 • • • • • Worldline SA FR0011981968 FRA 2017/03/21 • • • • Dassault Systemes SA FR0000130650 FRA 2017/03/22 • • • • Dgf - FRA 2017/07/13 • • • • • • • • Luneau - FRA 2017/07/25 • • • • • • • • Indicia - FRA 2017/07/28 • • • • • • • • 92 Engagement Report 2017

Appendix 3 Companies met in 2017

ESG ANALYSIS TEAM

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Marcel & Fils - FRA 2017/03/22 • • • • • • • • Didactic - FRA 2017/07/25 • • • • • • • • Briconord - FRA 2017/03/30 • • • • • • • • Mcdonalds Corp US5801351017 USA 2017/07/31 • • • Airbus SE NL0000235190 FRA 2017/07/26 • • Dbs Group Holdings Ltd SG1L01001701 SGP 2017/07/17 • Berlin Hyp Ag DE0008029000 DEU 2017/06/28 • • Électricité de France-EDF SA FR0010242511 FRA 2017/06/22 • • • • Fm Logistics FRA 2017/07/12 • • • • • • Vedanta Ltd INE205A01025 IND 2017/07/21 • • • • • • Arcelormittal LU1598757687 LUX 2017/07/06 • • • Abn Amro Bank Nv XX0003324388 NLD 2017/07/06 • • • • • • • Coca Cola Co/The US1912161007 USA 2017/06/27 • • • • • Norsk Hydro Asa NO0005052605 NOR 2017/06/27 • • • Steel Dynamics Inc US8581191009 USA 2017/06/23 • • • Siemens Gamesa Renew Energy ES0143416115 ESP 2017/06/19 • • • • • • • • • • Bnp Paribas FR0000131104 FRA 2017/06/16 • • • • • • • • Hsbc Holdings Plc GB0005405286 GBR 2017/06/14 • • • • • • • • • Eurazeo FR0000121121 FRA 2017/06/09 • • • • • Heineken Nv NL0000009165 NLD 2017/06/08 • • • • • Carrefour SA FR0000120172 FRA 2017/06/08 • • • • Outokumpu Oyj FI0009002422 FIN 2017/06/08 • • • • Glencore Plc JE00B4T3BW64 CHE 2017/06/07 • • • • • Schneider Electric Se FR0000121972 FRA 2017/06/12 • • • • • • • • • • Danone (Ex Groupe Danone) FR0000120644 FRA 2017/06/06 • • Serge Ferrari FRA 2017/01/11 • • • Verescense FRA 2017/03/07 • • Babiloo FRA 2017/02/08 • Engagement Report 2017 93

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Marcel & Fils - FRA 2017/03/22 • • • • • • • • Didactic - FRA 2017/07/25 • • • • • • • • Briconord - FRA 2017/03/30 • • • • • • • • Mcdonalds Corp US5801351017 USA 2017/07/31 • • • Airbus SE NL0000235190 FRA 2017/07/26 • • Dbs Group Holdings Ltd SG1L01001701 SGP 2017/07/17 • Berlin Hyp Ag DE0008029000 DEU 2017/06/28 • • Électricité de France-EDF SA FR0010242511 FRA 2017/06/22 • • • • Fm Logistics FRA 2017/07/12 • • • • • • Vedanta Ltd INE205A01025 IND 2017/07/21 • • • • • • Arcelormittal LU1598757687 LUX 2017/07/06 • • • Abn Amro Bank Nv XX0003324388 NLD 2017/07/06 • • • • • • • Coca Cola Co/The US1912161007 USA 2017/06/27 • • • • • Norsk Hydro Asa NO0005052605 NOR 2017/06/27 • • • Steel Dynamics Inc US8581191009 USA 2017/06/23 • • • Siemens Gamesa Renew Energy ES0143416115 ESP 2017/06/19 • • • • • • • • • • Bnp Paribas FR0000131104 FRA 2017/06/16 • • • • • • • • Hsbc Holdings Plc GB0005405286 GBR 2017/06/14 • • • • • • • • • Eurazeo FR0000121121 FRA 2017/06/09 • • • • • Heineken Nv NL0000009165 NLD 2017/06/08 • • • • • Carrefour SA FR0000120172 FRA 2017/06/08 • • • • Outokumpu Oyj FI0009002422 FIN 2017/06/08 • • • • Glencore Plc JE00B4T3BW64 CHE 2017/06/07 • • • • • Schneider Electric Se FR0000121972 FRA 2017/06/12 • • • • • • • • • • Danone (Ex Groupe Danone) FR0000120644 FRA 2017/06/06 • • Serge Ferrari FRA 2017/01/11 • • • Verescense FRA 2017/03/07 • • Babiloo FRA 2017/02/08 • 94 Engagement Report 2017

Appendix 3 Companies met in 2017

ESG ANALYSIS TEAM

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Starbucks Corp US8552441094 USA 2017/05/19 • • Kommunekredit XX0008023770 DNK 2017/05/16 • Ontario (Province Of) XS0424787926 CAN 2017/05/11 • Norddeutsche Ldbk Girozent.ag XX0008022860 DEU 2017/05/03 • Bndes-Bco Nac Desvol Eco Soc USP14486AA54 BRA 2017/04/25 • Bk Nederlandse Gemeenten Nv XX0008022600 NLD 2017/04/05 • Comunidad De Madrid ES0000101297 ESP 2017/03/30 • Deutsche Hypothekenbank Ag DE000DHY4614 DEU 2017/03/14 • Berlin Hyp Ag DE0008029000 DEU 2017/03/14 • Nederlandse Fin Matschappij On XS0993154748 NLD 2017/03/07 • Nat Australia Bk Ltd AU000000NAB4 AUS 2017/02/23 • Nordrhein Westfalen (Land) DE000NRW0EQ4 DEU 2017/02/22 • Caisse Des Depots & Consignati FR0010725549 ITA 2017/02/20 • Klepierre FR0000121964 FRA 2017/01/10 • Credit Foncier De France FR0010469122 FRA 2017/01/10 • Sncf Mobilites Epic XX0008022540 FRA 2017/01/10 • Bmw-Bayerische Motor Werke Ag DE0005190037 DEU 2017/06/01 • • • • Thales SA FR0000121329 FRA 2017/04/26 Lafargeholcim Ltd CH0012214059 CHE 2017/03/16 • Compass Group Plc GB00BLNN3L44 GBR 2018/05/18 • • Nexans SA FR0000044448 FRA 2017/06/20 • • • • • • • • • • Abb Ltd (Asea Brown Boveri) CH0012221716 CHE 2017/06/14 • • • • • • • • • • Ratp XX0002711220 FRA 2017/06/06 • • • • • • • • • • Pne Wind Ag DE000A0JBPG2 DEU 2017/06/01 • • • • • • • • • • Philips Lighting Nv NL0011821392 NLD 2017/06/01 • • • • • • • • • • Vestas Wind Systems A/S DK0010268606 DNK 2017/06/01 • • • • • • • • • • Nidec Corp JP3734800000 JPN 2017/06/01 • • • • • • • • • • Eaton Corp Plc IE00B8KQN827 USA 2017/06/01 • • • • • • • • • • Engagement Report 2017 95

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Starbucks Corp US8552441094 USA 2017/05/19 • • Kommunekredit XX0008023770 DNK 2017/05/16 • Ontario (Province Of) XS0424787926 CAN 2017/05/11 • Norddeutsche Ldbk Girozent.ag XX0008022860 DEU 2017/05/03 • Bndes-Bco Nac Desvol Eco Soc USP14486AA54 BRA 2017/04/25 • Bk Nederlandse Gemeenten Nv XX0008022600 NLD 2017/04/05 • Comunidad De Madrid ES0000101297 ESP 2017/03/30 • Deutsche Hypothekenbank Ag DE000DHY4614 DEU 2017/03/14 • Berlin Hyp Ag DE0008029000 DEU 2017/03/14 • Nederlandse Fin Matschappij On XS0993154748 NLD 2017/03/07 • Nat Australia Bk Ltd AU000000NAB4 AUS 2017/02/23 • Nordrhein Westfalen (Land) DE000NRW0EQ4 DEU 2017/02/22 • Caisse Des Depots & Consignati FR0010725549 ITA 2017/02/20 • Klepierre FR0000121964 FRA 2017/01/10 • Credit Foncier De France FR0010469122 FRA 2017/01/10 • Sncf Mobilites Epic XX0008022540 FRA 2017/01/10 • Bmw-Bayerische Motor Werke Ag DE0005190037 DEU 2017/06/01 • • • • Thales SA FR0000121329 FRA 2017/04/26 Lafargeholcim Ltd CH0012214059 CHE 2017/03/16 • Compass Group Plc GB00BLNN3L44 GBR 2018/05/18 • • Nexans SA FR0000044448 FRA 2017/06/20 • • • • • • • • • • Abb Ltd (Asea Brown Boveri) CH0012221716 CHE 2017/06/14 • • • • • • • • • • Ratp XX0002711220 FRA 2017/06/06 • • • • • • • • • • Pne Wind Ag DE000A0JBPG2 DEU 2017/06/01 • • • • • • • • • • Philips Lighting Nv NL0011821392 NLD 2017/06/01 • • • • • • • • • • Vestas Wind Systems A/S DK0010268606 DNK 2017/06/01 • • • • • • • • • • Nidec Corp JP3734800000 JPN 2017/06/01 • • • • • • • • • • Eaton Corp Plc IE00B8KQN827 USA 2017/06/01 • • • • • • • • • • 96 Engagement Report 2017

Appendix 3 Companies met in 2017

ESG ANALYSIS TEAM

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Emerson Electric Co US2910111044 USA 2017/06/01 • • • • • • • • • • Osram Licht Ag DE000LED4000 DEU 2017/05/31 • • • • • • • • • • Allianz Se DE0008404005 DEU 2017/05/29 • • • Kellogg Co US4878361082 USA 2017/05/19 • • Aegon Nv NL0000303709 NLD 2017/05/18 • • • Pepsico Inc/Nc US7134481081 USA 2017/05/15 • • • Sodexo FR0011532431 FRA 2017/05/15 • • • Axa SA FR0000120628 FRA 2017/05/15 • • • Casino Guichard Perrachon SA FR0000125585 FRA 2017/05/11 • • • • Vinci SA FR0000125486 FRA 2017/05/10 • • Nestle SA CH0038863350 CHE 2017/05/04 • • Bp Plc GB0007980591 GBR 2017/05/03 • • • • • • • • • Assicurazioni Generali Spa IT0000062072 ITA 2017/05/03 • • • Vedanta Ltd INE205A01025 IND 2017/04/29 • • • • • • Carrefour SA FR0000120172 FRA 2017/04/28 • • • • Metlife Inc US59156R1086 USA 2017/04/24 • • • American Intl Group Inc. US0268747849 USA 2017/04/24 • • • Legal & General Group Plc GB0005603997 GBR 2017/04/24 • • • Caisse Ntle Prevoyance-Cnp Ass FR0000120222 FRA 2017/04/24 • • • Blue Solutions SA FR0011592104 FRA 2017/04/20 • • • • • • • • • • Bollore FR0000039299 FRA 2017/04/20 • • • • • • • • • • Zurich Finance Plc (Uk) 2017/04/14 • • • Bonduelle SA FR0000063935 FRA 2017/04/01 • • • • Bhp Billiton Plc GB0000566504 AUS 2017/03/30 • • • Kerry Group Plc IE0004906560 IRL 2017/03/30 • • • Royal Dutch Shell Plc GB00B03MLX29 NLD 2017/03/30 • • • • • • • • Newmont Mining Corp US6516391066 USA 2017/03/24 • • • • Deutsche Bank Ag DE0005140008 DEU 2017/03/23 • • • • • • Engagement Report 2017 97

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Emerson Electric Co US2910111044 USA 2017/06/01 • • • • • • • • • • Osram Licht Ag DE000LED4000 DEU 2017/05/31 • • • • • • • • • • Allianz Se DE0008404005 DEU 2017/05/29 • • • Kellogg Co US4878361082 USA 2017/05/19 • • Aegon Nv NL0000303709 NLD 2017/05/18 • • • Pepsico Inc/Nc US7134481081 USA 2017/05/15 • • • Sodexo FR0011532431 FRA 2017/05/15 • • • Axa SA FR0000120628 FRA 2017/05/15 • • • Casino Guichard Perrachon SA FR0000125585 FRA 2017/05/11 • • • • Vinci SA FR0000125486 FRA 2017/05/10 • • Nestle SA CH0038863350 CHE 2017/05/04 • • Bp Plc GB0007980591 GBR 2017/05/03 • • • • • • • • • Assicurazioni Generali Spa IT0000062072 ITA 2017/05/03 • • • Vedanta Ltd INE205A01025 IND 2017/04/29 • • • • • • Carrefour SA FR0000120172 FRA 2017/04/28 • • • • Metlife Inc US59156R1086 USA 2017/04/24 • • • American Intl Group Inc. US0268747849 USA 2017/04/24 • • • Legal & General Group Plc GB0005603997 GBR 2017/04/24 • • • Caisse Ntle Prevoyance-Cnp Ass FR0000120222 FRA 2017/04/24 • • • Blue Solutions SA FR0011592104 FRA 2017/04/20 • • • • • • • • • • Bollore FR0000039299 FRA 2017/04/20 • • • • • • • • • • Zurich Finance Plc (Uk) 2017/04/14 • • • Bonduelle SA FR0000063935 FRA 2017/04/01 • • • • Bhp Billiton Plc GB0000566504 AUS 2017/03/30 • • • Kerry Group Plc IE0004906560 IRL 2017/03/30 • • • Royal Dutch Shell Plc GB00B03MLX29 NLD 2017/03/30 • • • • • • • • Newmont Mining Corp US6516391066 USA 2017/03/24 • • • • Deutsche Bank Ag DE0005140008 DEU 2017/03/23 • • • • • • 98 Engagement Report 2017

Appendix 3 Companies met in 2017

ESG ANALYSIS TEAM

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Technip SA #N/A FRA 2017/03/23 • Nautilus Minerals AUS 2017/06/02 • Eramet FR0000131757 FRA 2017/03/21 • Scor Se FR0010411983 FRA 2017/03/17 • • • • • Anglo American Plc GB00B1XZS820 GBR 2017/03/16 • • • • • • Legrand SA FR0010307819 FRA 2017/03/16 • • • • • • Abertis Infraestructuras SA ES0111845014 ESP 2017/03/15 • • • • • • • Orange SA FR0000133308 FRA 2017/03/15 • • • • • Telenor Asa NO0010063308 NOR 2017/03/15 • • • • Eni Spa IT0003132476 ITA 2017/02/27 • • • Vinci SA FR0000125486 FRA 2017/02/21 • Imerys SA FR0000120859 FRA 2017/02/14 • Edp Renovaveis SA ES0127797019 ESP 2017/02/07 • • Edp-Energias De Portugal SA PTEDP0AM0009 PRT 2017/02/06 • • E.on Se DE000ENAG999 DEU 2017/02/06 • • Iberdrola SA ES0144580Y14 ESP 2017/02/06 • • • Enel Spa IT0003128367 ITA 2017/02/06 • • • Leclanche CH0110303119 CH 2017/02/06 • • Eni Spa IT0003132476 ITA 2017/01/31 • • • • • • • Anglo American Plc GB00B1XZS820 GBR 2017/01/23 • Bhp Billiton Plc GB0000566504 AUS 2017/01/23 • • • Arcelormittal LU1598757687 LUX 2017/01/16 • Total SA FR0000120271 FRA 2017/01/12 • • • Pierre Houe FRA 2016/10/12 • • • • • • • • Eurazeo FR0000121121 FRA • • • • • • • • • • Thales SA FR0000121329 FRA 2017/02/20 • Engagement Report 2017 99

Company ISIN Area Geographic Date Strategy Environmental use energy and Emissions Water biodiversity recycling, Waste, & pollution Employment & relations Labour practices customers & Chain Supply responsibility Product involvement Community rights Human & control & Independence Remuneration rights Shareholders' Ethics Strategy ESG Technip SA #N/A FRA 2017/03/23 • Nautilus Minerals AUS 2017/06/02 • Eramet FR0000131757 FRA 2017/03/21 • Scor Se FR0010411983 FRA 2017/03/17 • • • • • Anglo American Plc GB00B1XZS820 GBR 2017/03/16 • • • • • • Legrand SA FR0010307819 FRA 2017/03/16 • • • • • • Abertis Infraestructuras SA ES0111845014 ESP 2017/03/15 • • • • • • • Orange SA FR0000133308 FRA 2017/03/15 • • • • • Telenor Asa NO0010063308 NOR 2017/03/15 • • • • Eni Spa IT0003132476 ITA 2017/02/27 • • • Vinci SA FR0000125486 FRA 2017/02/21 • Imerys SA FR0000120859 FRA 2017/02/14 • Edp Renovaveis SA ES0127797019 ESP 2017/02/07 • • Edp-Energias De Portugal SA PTEDP0AM0009 PRT 2017/02/06 • • E.on Se DE000ENAG999 DEU 2017/02/06 • • Iberdrola SA ES0144580Y14 ESP 2017/02/06 • • • Enel Spa IT0003128367 ITA 2017/02/06 • • • Leclanche CH0110303119 CH 2017/02/06 • • Eni Spa IT0003132476 ITA 2017/01/31 • • • • • • • Anglo American Plc GB00B1XZS820 GBR 2017/01/23 • Bhp Billiton Plc GB0000566504 AUS 2017/01/23 • • • Arcelormittal LU1598757687 LUX 2017/01/16 • Total SA FR0000120271 FRA 2017/01/12 • • • Pierre Houe FRA 2016/10/12 • • • • • • • • Eurazeo FR0000121121 FRA • • • • • • • • • • Thales SA FR0000121329 FRA 2017/02/20 • 100 Engagement Report 2017

Appendix 3 Companies met in 2017

CORPORATE GOVERNANCE TEAM: LIST OF COMMITMENTS MADE IN 2017 (ALERTS AND INITIATIVE OF ISSUERS)

Company Country

ABB LIMITED Switzerland ABERTIS INFRAESTRUCTURAS Spain ACCIONA Spain ACCOR France ACS, ACTIVIDADES Spain ACTELION LIMITED Switzerland ADIDAS AG Germany AEGON NV The Netherlands AHOLD DELHAIZE The Netherlands AIR FRANCE France AIR LIQUIDE France AIRBUS SE The Netherlands AKER BP ASA Norway ALLIANZ Germany ALSTOM France ALTEN France ALTRAN France AMADEUS IT Spain AMUNDI France ANDRITZ Austria AP MOLLER MAERSK A/S Denmark APERAM Luxembourg APOLLO HOSPITALS ENTERPRISE LIMITED India ARCELOR MITTAL Luxembourg ARCONIC USA ARKEMA France ASML The Netherlands ATOS France AXA France AXIS BANK LIMITED India BANCO POPULAR Spain BANKIA Spain BANKINTER Spain BARRY CAILLEBAUT Switzerland BAYER Germany BBVA Spain Engagement Report 2017 101

Company Country

BEIRSDORF Germany BIC France BMW Germany BNP France BONE THERAPEUTICS Belgium BOUYGUES France CAIXA BANK Spain CAP GEMINI France CARLSBERG A/S Denmark CASINO France CASTELLUM AB Suède CHINA LIFE Chine CLARIANT Switzerland CNP France COFINIMMO Belgium COMMERZBANK Germany CONTINENTAL Germany CREDIT AGRICOLE France CREDIT SWITZERLAND Switzerland DAIMLER Germany DANONE France DASSAULT AVIATION France DBV France DEUTSCHE EUROSHOP Germany DEUTSCHE POST Germany DEUTSCHE WOHNEN Germany DEUTSCHEBANK Germany E.ON Germany EDENRED France EDP ENERGIAS Portugal Portugal EDP RENOVAIS Spain EFG HERMES HOLDING SAE Egypte EIFFAGE France ELIOR France ENAGAS Spain ENEL CHILE Chili 102 Engagement Report 2017

Appendix 3 Companies met in 2017

CORPORATE GOVERNANCE TEAM: LIST OF COMMITMENTS MADE IN 2017 (ALERTS AND INITIATIVE OF ISSUERS)

Company Country

ENGIE France ERSTE GROUP Austria ESSILOR France EURAZEO France EUROFINS SCIENTIFIC SE Luxembourg EUROPCAR France EUROTUNNEL France EUTELSAT France FAURECIA France FERROVIAL Spain FIAT CHRYSLER AUTOMOBILES NV The Netherlands FIRST GULF BANK Emirats Arabes Unis FNAC France FONCIERE DES REGIONS France FRESENIUS Germany FRESENIUS MEDICAL CARE Germany GALP ENERGIA Spain GAS NATURAL SDG Spain GAZPROM Russia GBL Belgium GECINA France GEMALTO The Netherlands GRIFFOLS Spain GURIT HOLDING Switzerland HEINEKEN NV The Netherlands HERO MOTOCORP LIMITED India HUFVUDSTADEN AB Sweden IBERDROLA Spain ILIAD France INBEV Belgium INDITEX Spain ING GROEP The Netherlands INGENICO France INNATE PHARMA France INNOGY SE Germany IOCHPE MAXION Brazil Engagement Report 2017 103

Company Country

JERONIMO MARTENS Spain KBC GROEP NV Belgium KEPCO PLANT SERVICE & ENGINEERING COMPANY korea KERING France KERRY GROUP Ireland KESKO OYJ Finland KLEPIERRE France KONE Finland KONINKLIJKE BAM GROEP NV The Netherlands KPN The Netherlands LAFARGE HOLCIM Switzerland LAGARDERE France LEGRAND France LINDT Switzerland LONZA GROUP Switzerland L'OREAL France M6 France MANDO CORPORATION Korea MAPFRE Spain MCKESSON USA MERCIALYS France MERCK GROUP Spain MERLIN PROPERTIES Spain METRO Germany MICHELIN France MITSUBISHI HEAVY INDUSTRIES LIMITED Japan MODERN TIMES GROUP MTG AB Sweden MUNICH RE Switzerland NATIXIS France NEOPOST France NESTLE Switzerland NEXANS France NEXITY France NOKIA Finlande NORDEA BANK LIMITED Sweden NOVARTIS Switzerland 104 Engagement Report 2017

Appendix 3 Companies met in 2017

CORPORATE GOVERNANCE TEAM: LIST OF COMMITMENTS MADE IN 2017 (ALERTS AND INITIATIVE OF ISSUERS)

Company Country

NOVO NORDISK Denmark NOVOZYMES A/S Denmark NTT JAPON Japan OMV AG Austria ORANGE France ORANGE BE Belgium ORION Finland ORKLA ASA Norway OSRAM Germany PERNOD RICARD France PETROBRAS Brazil PEUGEOT France PHILIPS NV The Netherlands PROSIEBEN Germany PROXIMUS Belgium PSP SWISS PROPERTY AG Switzerland PUBLICIS France PUMA Germany QIAGEN NV The Netherlands RAFFEISENBANK Austria RED ELECTRICA Spain RENAULT France REPSOL Spain REXEL France RTL GROUP Luxembourg RUBIS France RWE Germany BANCO DE SABADELL Spain SAF HOLLAND SA Luxembourg SAFRAN France SAINT GOBAIN France SAMSUNG ELECTRONICS Korea SANOFI France SANTANDER BANK Spain SAP Germany SARTORIUS AG Germany Engagement Report 2017 105

Company Country

SCHNEIDER France SCOR France SES SA Luxembourg SIEMENS Germany SIKA AG Switzerland SOCIETE GENERALE France SODEXO France SOITEC France SOLVAY SA Belgium SONAE GPS Portugal SOPRA STERIA France STEINHOFF South Africa STMICROELECTRONICS NV The Netherlands STRAUMANN HOLDING AG Switzerland STROERR Germany SUEZ France SWATCH GROUP Switzerland SWISS LIFE Switzerland TABREED NATIONAL CENTRAL COOLING PJSC United Arab Emirates TAISHIN FINANCIAL Taïwan TARKETT France TECHNICOLOR France TECHTRONICS INDUSTRIES COMPANY LIMITED Hong Kong TECNICAS REUNIDAS Spain TELEFONICA Spain TELENOR ASA Norway TELEPERFORMANCE France TF1 France TGS NOPEC GEOPHYSICAL COMPANY Norway THALES France THYSSEN KRUPP Germany TOTAL France TUI AG Germany UBISOFT France UBS GROUP Switzerland UMICORE Belgium 106 Engagement Report 2017

Appendix 3 Companies met in 2017

CORPORATE GOVERNANCE TEAM: LIST OF COMMITMENTS MADE IN 2017 (ALERTS AND INITIATIVE OF ISSUERS)

Company Country

UNIBAIL France UNILEVER The Netherlands VALEO France VALLOUREC France VALMET Finland VEOLIA France VINCI France VIVENDI France VOLKSWAGEN Germany VOLVO AB Sweden WENDEL France WERELDHAVE NV The Netherlands WOLTERS KLUWER The Netherlands WORLDLINE France ZEALAND PHARMA A/S Denmark ZODIAC France ZURICH INSURANCE GROUP Switzerland A This document has not been reviewed by any authority, it is communicated solely for information purposes and neither constitutes an offer to buy, an investment advice nor a solicitation to sell a product. This material is neither a contract nor a commitment of any sort. The information contained in this material is intended for general circulation, without taking into account the specific investment objectives, financial situation or particular need of any particular investor. Any projections, valuations and statistical analyses provided herein are provided to assist the recipient in the evaluation of the matters described herein. Such projections, valuations and analyses may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results; accordingly such projections, valuations and statistical analyses should not be viewed as facts and should not be relied upon as an accurate prediction of future events. There is no guarantee that any targeted performance will be achieved. The provided information is not guaranteed to be accurate, exhaustive or relevant: although it has been prepared based on sources that Amundi AM considers to be reliable it may be changed without notice. Information remains inevitably incomplete, based on data established at a specific time and may change. This material may contain materials from third parties which are supplied by companies (“Third Party”) that are not affiliated with any Amundi AM entity (“Third Party Content”). Amundi AM has not been involved in the preparation, adoption or editing of such Third Party Content and does not whether explicitly or implicitly endorse or approve such content. Any opinions or recommendations expressed from Third Party are solely those from the independent third parties, and not from Amundi AM. Third Party Content is provided for informational purposes only, and Amundi AM shall not be liable for any loss or damage arising from your reliance upon such information. Amundi AM accepts no liability whatsoever, whether direct or indirect, that may arise from the use of information contained on this page. Amundi AM can in no way be held responsible for any decision or investment made on the basis of this information. The information contained in this material shall not be copied, reproduced, modified, translated or distributed without the prior written approval of Amundi AM, to any third person or entity in any country or jurisdiction which would subject Amundi AM or any of its products, to any registration requirements within these jurisdictions or where it might be considered as unlawful. The information contained in this document may be regarded as the provision of a general investment advice, it is hereby reminded that this document has not been drafted in compliance with the regulatory requirements aiming at promoting the independence of financial analysis, Amundi AM is therefore not bound by the prohibition to conclude transactions of the financial instruments mentioned in this document. Amundi Asset Management, French “société par actions simplifiée”- SAS with a registered capital of € 1 086 262 605 and regulated by the French Securities Regulator (Autorité des Marchés Financiers-AMF) under number GP 04000036 as a portfolio management company. 90 boulevard Pasteur -75015 Paris- France - 437 574 452 RCS Paris. amundi.com.

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