Dear 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 2022, we renew our commitment to the Ten Principles and further accelerate our efforts to bring the energy transition closer.
In this second communication on our progress, we invite you to join us on our sustainability journey and support us as we take our responsibility towards a zero-carbon future. We commit to sharing this journey with you.

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

June 2022

Principle 1
Description of BDR Thermea Group and 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.
At BDR Thermea Group we are shocked by the invasion of Ukraine and strongly condemn this aggression. To help the Ukrainian people and show our solidarity and concern, BDR Thermea is donating €500,000 to the Ukraine appeal of the Dutch emergency fundraising organisation, Giro555.
BDR Thermea colleagues in various countries have launched initiatives to support refugees and provide help. In France, for example, colleagues are collecting goods such as clothing and medicines, and have driven them in trucks to the Polish-Ukrainian border. We thank everybody for their support and initiatives.
We are horrified by this war and stand in solidarity with its victims: people suffering inside Ukraine, people who have fled the country, and friends and family all over the world. By donating to Giro555, we want to play a part in helping those affected by this humanitarian tragedy.
’One team’ is a core value of BDR Thermea and that has never been as true, relevant or urgent as it is now. We have employees from diverse origins, including from Ukraine and Russia, and are proud of everything we have achieved with all of them.
These are difficult times, and we will stick together as a community to build a sustainable future as one team.
We are continuously striving 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 demonstrations that are helping to pave the way for the large-scale application of hydrogen.
Within our Policy Framework, we have policies on, ‘Code of Conduct’, ‘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 its website.

Principle 2
Policies and 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 - this ambition is in evaluation right now.

Our supplier excellence manual describes the way we want to work together with suppliers. This is one of the most important tools we use to improve our performance. It refers to 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 (due date April 2013);
- We monitor the supply chain via Ecovadis, assessing the Corporate Social Responsibility performance of our suppliers.
- Privacy Notice;
- Group Fair Competition Policy.

Actions for 2022 for human rights in general
• In spring 2021 we launched our sustainability function as part of the Quality team. The team is still in development, but has started implementing the Ten Principles throughout our business, as part of our overarching sustainability agenda.
• We had to postpone the development of a Human Rights Policy, but implemented the Ten Principles in our BDR Thermea Group Code of Conduct as a first important step.
• Ensuring the health and safety of our people and the people in our value chain is one of our main priorities.

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 have participated in the UNGC Target Gender Equality programme, and are working to align our diversity, equity and inclusion plan with the UNGC’s focus areas.
We employ many nationalities and stimulate collaboration across the Group, sharing different perspectives and expecting openness and integrity from everyone.
Gender equality is a challenge in our traditionally men-dominated industry, but we are committed to gradually narrowing the gender gap at BDR Thermea.

Actions for 2022:
• Develop and implement a Diversity, Equity & Inclusion Policy
• Set up a Global Diversity & Inclusion Community
• Further develop our Recruitment Policy

Principle 2:
We have initiated a pulse survey to closely monitor employee wellbeing and engagement, and virtualised most of our recruitment and onboarding processes. We have implemented a flex-working policy, enabling our people to work remotely. We have also ensured our people have access to mental health professionals where needed.

In 2021, 50% of our Management Board and nearly 30% of our Group leadership team are women.
We have joined the UNGC programme on Gender Equality Target.

Health & Safety of our people:
Working safe and healthy is high on our agenda. As a global company, we have a responsibility to make sure that everyone gets home safely after a workday: every day again. As an organization, we encourage collective and individual responsibility to help each other achieve this goal. Creating an open culture where making mistakes is allowed and learning from them are important principles to us.
We have a group Health & Safety policy that is reviewed at least every three years. The Health & Safety policy can be seen as a collective framework on how we will act in our organization in such a way the health, safety & wellbeing with regard to our employees, temporary employees, subcontractors, visitors and any other third parties is guaranteed. We have the responsibility to not expose them to unacceptable risks and must do the best in our abilities to prevent all harm. The local organization have a policy present that translates the principles into the local organization.

In 2020, we started to review all our corporate policies. We have built a framework for this, enabling us to describe the required policies. Regular audits and updates of the policies themselves form part of this framework. The related principles will be part of this framework.
We have a Sustainable procurement Policy, including Human rights.
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 collection and improvement activities, building international networks to learn from one and other. Together as one team, the experts from all countries developed together a Health & Safety strategy. Even though we are sometimes miles apart in distance, the principles are the same for everyone. We want to improve training and education, prevent and learn from accidents, talk openly about health and safety, continue to comply with legislation & prevent occupational diseases. Concrete examples that have been launched for this purpose are the accountability of managing directors, launching knowledge platforms centered around risks, safety habits program in the UK (2022) & reporting tool in the FR & BNL (which will be rolled out global next year).

• We have implemented a safety dashboard, monthly presented in our Management Board.
• Safety is linked to the existing communication structures at strategic, tactical and operational level resulting in monthly updates on all levels in the organization regarding status & improvement plans.
• Knowledge platforms centered around risks grow in size. More and more stakeholders are joining, share learnings with each other and therefore harm is prevented by taking action on time.
• Resources in the form of people and financial is no longer an issue. Health and Safety improvements are taken even if this was not included in the budget. This is seen as paradigm change in where prevention is more important than to cure afterwards.
• Safety habits program will be rolled out in the UK 2022. The goal of the habits program is to embed 7 safety habits in everyone’s DNA. When the habits program is a success, scale up will be the next step.
• Reporting tool rolled out in France & Benelux around reporting any potential hazard which can bring harm to people. The reporting tool has already led to 4 times more reports on dangerous situations. To recognize, communicate and take prevention actions, regular meetings are organized to embed reporting in our way of working. When the reporting tool is a success, scale up will be the next step.

Diversity & inclusion.
- We have set up a Global Diversity & Inclusion Community;
- We have further developed a Diversity & Inclusion Policy and a Recruitment Policy;
- In 2021 we joined the UN GC programme on Gender Equality Target.
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A. Climate change & our environmental footprint:
With buildings and homes 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 company goals for our ecological footprint at our facilities in our main 8 operating countries.

A.1. Climate change:
Ambition for direct (Scope 1) and Indirect (Scope 2) emissions from our operation: 
Reduce absolute emissions (kgCO2e) by 5% annually  as from 2019 towards 2030, in line with Fit for 55 (to achieve 55% carbon emission reduction by 2030).
Achieve carbon neutrality by offsetting our emissions from operations as of 2021.

A.2. We have set a carbon reduction ambition for our scope 3 emissions:

Reduce supply chain (upstream) emissions (kgCO2e) by 30%) in 2030 with baseline 2019)
Reduce user phase (downstream) emissions (kgCO2e) by 30%) in 2030 with baseline 2019)

B. Environmental impact:

Our aim is to reduce, reuse and recycle as much as possible in order to contribute to a circular economy. At local level, our current policies are being reviewed and implemented in the local waste plans.

BDR Thermea Group aims to avoid and reduce operational waste in our manufacturing activities.
- Our ambition is to reduce the waste in operations with 50%, compared to 2019, by
- aim to reduce materials where possible and recycle 50% of our waste
- development of BDR Thermea Group global recyclable and returnable packaging concept
- development of a packaging policy
- reduce water wastage in testing process

C. Active Supply chain management for the environment:
The supplier excellence manual describes the way we want to work together with suppliers. This is one of the most important tools we use to improve our performance. It refers to 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 (due date April 2013);
- We monitor the supply chain via Ecovadis, assessing the CSR performance of our suppliers.
- Privacy Notice;
- Group Fair Competition Policy.

We currently have 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.

A. Climate Change & Energy actions:

A.1. Reduce our direct emissions & carbon neutral operations.

At our Bassano del Grappa site in Italy, the green hydrogen used in the lab and testing facility has, since 2019, been made using green electricity generated 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 Platinum LEED-certification 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.

A.2. Our indirect carbon emissions (scope 3)
In 2021 until now:
- We performed life-cycle assessments for our new and old products;
- Collaborate with gas grid providers, government & suppliers in piloting hydrogen solutions
- We engaged and involved customers in our hydrogen projects
- Implement sustainability in our New Product Development process. For every new development we ask ourselves how this contributes to our sustainability strategy.

Our portfolio includes high-efficiency boilers and heat pumps. Heat pumps play a key role in the decarbonisation of the built environment: by harnessing air and groundwater to generate sustainable heating, they enable buildings to be heated without emitting CO2. Heat pumps are especially suited to new-builds. For existing buildings, hybrid solutions are a growing segment in which we play an active role in many countries. All our residential boilers have the highest efficiency ratings and can be used in hybrid configurations to cut emissions even further.
We are making ground-breaking developments in hydrogen boilers, fuel cells and combined heat and power (CHP). We collaborate with a range of stakeholders, including utilities and grid providers, on several pilots and trials involving hydrogen, the emission-free fuel of the future. We also collaborate on financial schemes geared at encouraging more consumers towards hybrid systems, while giving them peace of mind over service and maintenance. We are also investing in our BDR Thermea digital platform so our products can be connected into the smart grid in the future.
Last year, we introduced 24 new heat pump solutions. To enhance the adoption of this carbon-free solutions, which usually take more time to commission than gas boilers, it is vital that installers can efficiently install and commission them. We therefore develop smart connected apps and give installers training and support to make installation and commissioning easier. In France, we signed an agreement with modular homebuilder Booa to supply plug-and-play heat pumps that do not require a specialized plumber to install and configure.
We launched our Commissioning Wizard App to make it simpler and faster for installers to configure heat pumps. This Bluetooth-powered app guides installers quickly through the commissioning process, reducing two hours of work to 30 minutes. The app also cuts paperwork by generating an automated commissioning report, allowing installers to focus on their core tasks.
Our Remeha business joined forces with Dutch scale-up econic to enable customers to rent our Elga Ace hybrid heating system in the Netherlands. Reducing financial barriers to making homes more sustainable is the aim of econic, which invests in energy systems and then rents them out via a subscription service. As part of its Remeha partnership, econic aims to make 40,000 homes more sustainable in the next few years – in part due to our Elga Ace.
We began participating in the UK Hydrogen Home project. These demonstration houses are open to the public for the next three years, so people can see how 100% hydrogen can fuel their homes in the future. In France, we helped the historic commune of Châteauneuf-sur-Loire take a leap into the future with the installation of our 100% hydrogen boiler – the first of its kind in France.

B. Environment:

B.1. Management systems in place.
All our operating sites have passed the surveillance or renewal audits for both their environmental management system (ISO 14001). In 2025, we aim to have an active environmental management system in place and an energy management system (ISO 50001 certification) for all our factories.

B.2. Waste reduction
BDR Thermea has an impact on waste throughout our value chain: from the production process to packaging. We are working on multiple projects to reduce our waste, such as returnable packaging for spare parts, together with suppliers. We are also reviewing our use of materials in various ongoing R&D projects.
On the waste topic we started a deepdive on data of all operating companies to develop new KPI's.

We will recalibrate our overarching sustainability strategy in 2022 and:
• Continue to work on our environmental strategy as an integrated part of our overarching sustainability strategy; assess and align with local environmental action plans;
• Implement a Group Environmental Policy (as part of ISO 14001, including ISO 50001, Waste Management, and other topics), today all our sites have their own environmental policies, so we will implement the principles for the whole Group;
• Raise awareness internally of environmental issues and the energy transition;
• Organize knowledge sessions and provide specific training for all our employees;
• Conduct deep dives to understand our environmental footprint and consolidate Group figures for monitoring & reporting.  

C. 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 encouraging them to improve year on year.
We recognise and support all relevant national and international environmental legislation and we have drafted a sustainability programme for our upstream supply chain, targeting a close cooperation with our preferred (key) suppliers to reduce our environmental footprint and enhance social impact and good governance in the upstream value chain. The programme will have a phased roll-out to suppliers during 2022 and 2023. In it, we ask our direct suppliers to achieve a 30% carbon reduction in 2030 and 50% waste reduction by 2025. We also ask them 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.
Furthermore we include sustainability in our vendor rating process to monitor our suppliers’ sustainability performance and give them regular feedback on their performance as part of our supplier management process. Since 2012, we have actively managed sustainability in our supply chain via our Ecovadis system, which we use to assess the sustainability maturity of our key suppliers. Every year, we increase the minimum required supplier rating, thereby requiring continuous improvement of our suppliers’ sustainability. If a supplier does not achieve the minimum required Ecovadis score for the respective calendar year could mean they are not eligible for new business.

Actions in 2022
• 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.

A. Results on Climate change:
In 2021, we reduced our carbon footprint by 22% compared to 2019. This reduction was in part due to a further shift to green electricity and overall energy efficiency measures. It was also helped by a reduction in fuel consumption, due to a transition to more electric vehicle fleet (in the UK). The ISO50001 certification of some of our sites (GER, TUR, CHI) also helped in this reduction.
We are also working to increase renewable energy generation at our manufacturing sites. In 2021, BDR Thermea generated 2,271,539 kWh of renewable electricity with solar panels – an increase of 30.7% compared to 2020 (1,736,776 kWh).

- In 2021 and the first months of 2022 we worked with the Climate Neutral Group on developing our baseline for our total portfolio to enabling the tracking of our performance on scope 3.

B. Results on waste:
- In 2021 we reduced our total waste by 885 metric tonnes, 8% compared to our base year 2019. In 2022 we started collecting data on all waste flows at Group level so we can start measuring and monitoring our performance and develop a company-wide strategy. The top three waste streams for the Group were paper and cardboard, metal, and wood.

C. Results on sustainable supply chain management
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 approval process, and need to be supported by a credible improvement plan.
We currently have 192 suppliers on Ecovadis with 162 in Europe and Central Asia, 25 in east Asia and Pacific and 5 in North America. Some 123 BDR Thermea suppliers have received 874 improvement requests through the Ecovadis system. Of these, 509 are complete and 195 are in progress.

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

As first line of defence, 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 defence and reports directly to the Management Board. The compliance progress is reported annually to the Supervisory Board via the Audit Committee.
We have updated our Code of Conduct to explain what we expect from our employees as regards 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. The update offers context about why we have a Code of Conduct and an ethical decision-making model.
We have an Anti-Corruption & Bribery Policy and a Whistleblower policy.
The Whistleblower process has been revised and is more robust, offering employees the ability to report confidentially or anonymously any breaches of our Code of Conduct. There is an internal committee of inquiry that investigates the reports and advises on them to the Management Board and the Supervisory Board through the Audit Committee.

BDR Thermea Group recognises the need to educate employees on ethics and integrity. An interactive workshop session, including topics such as anti-bribery, fair competition and ethical dilemmas has been developed. This compulsory workshop is being deployed to over 1000 management, commercial, procurement and finance employees across our international footprint in Q2-Q3, 2022.

• Our Group Risk & Compliance department performs an annual Policy Compliance Review; departments are monitored based on the results of their self-assessment;
• In 2021, we did not identify any cases of bribery and discovered one case of corruption. This case was diligently investigated and corrective actions were taken.
• We received three whistleblower alerts, one of which was the above-mentioned case of corruption. None of the reported cases pertained to senior management. These cases were all diligently investigated and where necessary, corrective actions were taken.