CEO statement: To our all stakeholders

I am pleased to confirm that BDR Thermea Group is reaffirming its commitment to the Ten Principles of the United Nations Global Compact in the areas of Human Rights, Labour, Environment and Anti-Corruption.
In this annual Communication on Progress, we describe our actions to continually improve the integration of the Global Compact and its principles into our business strategy, culture and daily operations.
In 2021, we renew our commitment to the Ten Principles and further accelerate our efforts to bring the energy transition closer.
In this first communication on our progress, we invite you to join us on our sustainability journey towards a zero-carbon future. We commit to sharing this journey with you

Yours sincerely,
Bertrand Schmitt
Chief Executive Officer, BDR Thermea Group

Principle 1.
Description of BDR Thermea Group & human rights in general:

We’re a global company with market-leading brands. We serve customers in more than 100 countries worldwide.
We have a strong presence in Europe, hold top market positions in the US, Turkey and Russia, and are seeing strong growth in China.
We are helping to bring the zero-carbon future closer, reducing carbon emissions by developing smart thermal comfort solutions that can operate on low-carbon fuels such as electricity and hydrogen. We participate in ground-breaking demonstration that are helping to pave the way for the large-scale application of hydrogen.
Within our Policy Framework, we have policies on ‘respect for international human rights’, ‘anti-corruption’ and ‘bribery’. As required by the UK’s Modern Slavery Act,

Baxi UK, as part of the BDR Thermea Group, published a statement on their website.

Principle 2.

Policies & Goals available on one of the human rights: Women & gender equality
Equality and an inclusive culture are key to our continuous improvement and innovation towards a zero-carbon future.
We have set an ambition for 2025: 30% women in (senior) management positions.

Actions for 2021 for human rights in general
• In spring 2021 we started the sustainability function as part of the Quality team. This team will start implementing the Ten Principles throughout of our business, as part of our overarching Sustainability agenda.
• We will develop a Human Rights Policy and make it available on our internal and external website

Implementation of Principle 2.

We focus on diversity in our recruitment and internal promotion processes. We believe that increased diversity of gender, cultures, nationalities, views and more will benefit the quality of our decision-making and business operations. An inclusive approach also ensures we can attract and retain the most talented people in society, and so perform better as a company. We will participate in the UNGC Target Gender Equality program.
We employ many nationalities and stimulate collaboration across the Group, sharing different perspectives and expecting openness and integrity from everyone.
Gender equality is without a doubt a challenge in our male-dominated industry, but we are committed to gradually narrowing the gender gap at BDR Thermea.

We will measure the outcomes via our plan-do-check-act cycle via the existing management systems.

In 2020, one-third of our Management Board was female and 23% of our employees were women.

Actions for 2021:
• Develop a Diversity & Inclusion Policy
• Set up a Global Diversity & Inclusion Community
• Further develop our Recruitment Policy
• Join UN GC program on Gender Equality Target

In 2020, we started to review all our corporate policies. We have built a framework for this, allowing to describe the needed policies. Regular audits and updates of the policies themselves form part of this framework. The related principles will be part of this framework.
Through Ecovadis, our system to measure and improve our suppliers, we pay special attention to criteria such as Labour and Human Rights, which are part of the assessment process.

To safeguard our employees, we have increased our Health and Safety activities. We have stepped up our data collecting and improvement activities, building international networks to learn from one and other. One example for this is the Zero Harm program in the UK.
The health, safety and wellbeing of our employees is vital for us, even more so due to COVID-19. We reacted quickly to take relevant actions such as modifying travel regulations, restricting attendance/ organization of large events, and increasing smart-working for all locations. To support our employees in these unprecedented times and to enable remote working, we also introduced various digital content and online learning materials.

We regularly conduct reviews to ensure working conditions in our operations meet all our standards. Site visits are conducted where management is invited to communicate how the Group’s common policies and guidelines are implemented in the business and how they work in these areas.

Operating companies are monitoring and evaluating performance on labour conditions. We will implement a HR dashboard for the Group in 2021.

– Environment in general
With buildings and homes from consumers responsible for 40% of energy consumption in the EU and around 30% globally, climate change and the energy transition are key topics for us and our industry.
We are committed to complying with the climate goals of the Paris Agreement and the European Green Deal. Our added value is in the core of our business – throughout the value chain. We provide smart thermal comfort solutions with near-zero carbon footprint for building owners and users. At the same time, we are very much aware that there is a strong need for everyone to have access to energy. So, there is a huge challenge for us to develop more environmentally friendly technologies. In 2020, we set our first goals for our ecological footprint at our facilities in our main operating countries.

For BDR Thermea Group the CO2 & Waste KPIs were one of the first priorities.

Our ambition is to reduce the environmental footprint. Therefore we start to set goals on the most important topics first, and promote greater environmental responsibility in the supply chain.

These are our goals regarding Climate Change & Energy for 2025:

1. Carbon-neutral operations in all our facilities (scope 1 & 2), by:

- Absolute reduction of our CO2 footprint at all our facilities,
- Offsetting the emissions of our facilities that cannot be reduced (yet) – via our Gold Standard Uganda project
- Implement a sustainable mobility plan for our company vehicle fleet and staff travelling

2. We increase our share of smart CO2 efficient solutions (scope 3), by:

- Performing life-cycle assessments for all our new and old products
- Perform pilots with hydrogen solutions
- Collaborate with gas grid providers, government & suppliers
- Engage and involve customers
- Implement sustainability in our New Product Development process

3. For Waste we set the following ambition for 2025:
Waste reduction of 50%, with reference to 2019
- Waste separation at all our OpCos & HQ
- Reduce waste by recycling 50% of our waste
- Development of BDR Thermea Group global recyclable & returnable packaging concept
- Less spill of water in testing process

Policy & Action on waste reduction:

Our policy is to reduce, reuse and recycle as much as possible – in order to contribute to a circular economy. At local level, these policies are available and implemented in the local waste plans.
BDR Thermea has impact on waste throughout the value chain: from the production process to packaging. We are working on multiple projects such as returnable packaging for spare parts, together with suppliers, in order to reduce waste. We are also reviewing our use of materials in various ongoing R&D projects.

4. Promoting a greater environmental responsibility in our supply chain

Our approach to our work with our suppliers is laid out in our Supplier Excellence Manual. This includes working with suppliers to identify their level of sustainability, using the Ecovadis sustainability audit tool, and encourage them to improve year on year.
We recognise and support all relevant national and international environmental legislation and we believe we have a duty to pursue sustainable development in all we do.
We ask our suppliers to comply with the Ten Principles via a Sustainability Policy that is part of the supplier excellence manual. This manual is available on our website.
We include sustainability in our vendor rating process to monitor our suppliers’ sustainability performance and give them feedback on their performance regularly. Sustainability performance is part of our supplier management process and requires all major suppliers to achieve a minimum performance. Since 2012, we have actively managed sustainability in our supply chain via our Ecovadis system.

Policies in place:
The supplier excellence manual is one of the most important tools we use to improve our performance. It contains a:
- Sustainable Procurement Policy. See text in the review policy 2021. This policy was set for review in 2020, but due to COVID-19 will be updated in 2021;
- Ethical Sourcing Code (dd April 2013);
- We monitor the supply chain via Ecovadis , assessing the CSR performance of our suppliers.
- Privacy Notice;
- Group Fair Competition Policy.

Our implementation in general:
We are recalibrating our overarching Sustainability strategy and:
• Continue to work on our environmental strategy as an integrated part of our overarching sustainability strategy, roadmaps and assess and align the local environmental action plans;
• Implement a Group Environmental Policy (as part of ISO 14001, including Waste and other topics);
• Raise awareness internally of environmental issues and the energy transition;
• Organize knowledge sessions and provide specific training for all our employees;
• Have deep dives to understand our environmental footprint much better and consolidate Group figures for monitoring & reporting.

Each operation company is managing it's own environmental processes, risk and responds to environmental incidents.  
All our operating sites have passed the surveillance or renewal audits for both their quality management systems certifications (ISO 9001) and their environmental management system (ISO 14001). In 2025, we aim to have an active environmental management system in place for all our factories.

2. "We increase our share of smart CO2 efficient solutions (scope 3) - how did we implement this goal?

The energy transition is a complex global challenge, so we invest in, develop and offer customers a wide variety of options. Our portfolio includes high-efficiency boilers and heat pumps, and we are also making ground-breaking developments in hydrogen boilers, fuel cells and combined heat and power (CHP). Connectivity allows the full integration of our appliances into the building ecosystem, which helps users to optimise their energy usage and reduce their carbon emissions.
All our residential boilers have the highest efficiency ratings and can be used in hybrid configurations to cut emissions even further. Heat pumps, which harness air and groundwater to generate sustainable heating, enable buildings to be heated without emitting CO2. To accelerate the energy transition, we again increased investments in our heat pump business unit last year.
After piloting a pioneering experiment featuring a high-efficiency pure hydrogen boiler in 2019, we significantly expanded our hydrogen initiatives in 2020. We participated in the European Clean Hydrogen Alliance launched last year, and are working with utility companies, gas grid providers, building owners and governments in many countries to make this 100% clean technology available throughout the full supply chain all over Europe.
A pilot project went live in Uithoorn, the Netherlands, with an existing natural gas network adapted to carry hydrogen via our BDR Thermea Hydrogen Boiler – the first 100% hydrogen boiler in the world. We are also helping homeowners take steps towards cleaner heating with a new breed of ‘hydrogen-ready’ boilers. These boilers can work on natural gas, but can also be converted to hydrogen relatively easily in the future. In the UK, Baxi Heating is participating in the government’s
Hy4Heat programme, exploring how to replace natural gas with hydrogen in residential and commercial buildings and gas appliances. Our Baxi Heating business in the UK and Ireland pledged to phase out carbon-intensive heating, by ensuring every product it makes from 2025 is compatible with low-carbon energy.

Measurement of outcomes on Climate change & energy Goals 1 & 2:
In 2020, we reduced our carbon footprint by 16% compared to 2019. This reduction was in part due to our shift to green electricity in Germany (1,702 tons) and reduced activities due to COVID-19 measures.
We are also working to increase renewable energy generation at our manufacturing sites. In 2020, BDR Thermea generated 1,736,776 kWh of renewable electricity with solar panels.
At our Bassano del Grappa site in Italy, the green hydrogen for the lab and testing facility has since 2018 been generating electricity coming from solar panels installed on the roof of the factory.
In China, the world’s largest boiler market, we have built a near-zero carbon factory, which started operating in June 2020. These new facilities have achieved LEED-certified platinum for the main office building, and gold for the production site and warehouse. Local government in China is using our factory to attract other long-term investors to stimulate sustainability.

BDR Thermea Group aims to avoid and reduce operational waste in our manufacturing activities. In 2020, we reduced our waste by 49% as we stopped our foundry activity in UK and reduced waste in the remaining activity by 7%. If waste reduction is not feasible, we recycle as much as possible.

Outcomes on environmental performance & supplier management:
We set a target for all preferred suppliers to achieve a minimum score of 55 in the Ecovadis system by 2025. In addition, we have mandatory annual targets in place to ensure this objective is achieved.
If a supplier does not achieve this annual target, they are no longer eligible for consideration as a preferred supplier to BDR Thermea. Any exceptions to this requirement are managed by a senior management approvals process, and need to be supported by a credible improvement plan.

We currently have 192 suppliers on Ecovadis with 162 being in Europe and Central Asia, 25 in east Asia and Pacific and 5 in North America; 123 of BDR Thermea suppliers have received 874 Improvement requests through the Ecovadis system 509 are complete and 195 are in progress.

Actions in 2021
• We will review our current sustainable procurement policies;
• Assessment of 200 suppliers including 126 preferred suppliers (via Ecovadis);
• Corrective action plans in place with all Preferred Suppliers to ensure that BDR Thermea continuously improves its supplier base sustainability performance.

Compliance at BDR Thermea focuses on promoting and maintaining compliance with (inter)national regulations, standards, and internal rules, including the Code of Conduct. The purpose of compliance is to safeguard the integrity of the organization, protect the Management Board and employees, and avoid legal and regulatory penalties, material financial loss and reputational damage to the organization.

We have a Code of Conduct that sets out what we expect from our employees in the field of integrity. This includes regulations on respectful dealings with colleagues, side work, accepting gifts, using alcohol and drugs, dealing with commercially sensitive information, and using social media.
We have an Anti-Corruption & Bribery Policy and a Whistleblower policy.

As first line of defense, the line managers are responsible for compliance in their local market or department.
The Group Risk and Compliance Department has an independent role as a second line of defense and reports directly to the Management Board. The compliance progress is reported annually to the Supervisory Board via the Audit Committee.

The ‘Whistleblower’ process ensures that employees can confidentially report unwanted manners or integrity issues. There is an internal committee of inquiry that investigates the reports and advises on them to the Management Board.

Our Group compliance officer performs an annual Policy Compliance Review; departments are monitored based on the results of their self-assessment.
In 2020, we have not identified any cases of bribery or corruption and there were no whistleblower alerts received.