SUSTAINABILITYREPORT2017 & 2018

SUSTAINABILITYREPORT

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2017 & 2018message fromleadershipTransformation is a pillar of our cultureand — together with innovation anda spirit of winning — is among ourcompetitive advantages

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presencesustainable
solutions

Message from Leadership
We’re a renowned global refrigeration company guided
by the purpose to promote quality of life – to ouremployees, customers, communities and partners –through innovative solutions. To sustain it in more than
80 countries where we have commercial presence,
Embraco seeks to transform itself in terms of processes, products and services, considering our people’s
development and the sustainable contribution to ourcustomers’ success as key factors.
Among the various implemented innovations, it’sworth highlighting the evolution of our market positioning: from a hermetic compressor company toa provider of integrated solutions to our customers'
systems. On the other hand, we’ve continued to focus
on quality delivery combined with reduced environmental impact. This is possible through an increasingly efficient, high-performance portfolio with state-ofthe-art technology.
Aligned with this continuous transformation concept,
in early July of 2019 an important chapter of thecompany’s history has been started: Nidec Corporation,

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102-14

the world’s leading comprehensive motor manufacturer, successfully completed Embraco’s acquisition
that was incorporated into Nidec Global Appliance
Division. Since then, I’ve been having the honor to leada knowledgeable team in which the desire to make thedifference in everyone’s quality of life is notable.
In the following pages, you will be able to check someof our business’ highlights during the last two years(2017/2018). Furthermore, this report officializes
our renewed commitment to the 10 principles of the
Global Compact and reinforces our support for the 17
Sustainable Development Goals established by theUnited Nations (UN).
Good reading!

Valter Taranzano
CEO Nidec Global Appliance Division

As a global refrigeration company,
Embraco is driven by a single
purpose: providing quality of life
through innovative solutions.

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2017 & 2018

our strategic
topicsSustainability goes beyond developing
innovative solutions and ensuring
efficient operations: it’s part of ourcompany’s beliefs

SUSTAINABILITYREPORT2017 & 2018message fromleadership

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Our strategic topics
Published every two years, our sustainability reportpresents key developments related to Embraco’s
material topics. It provides quantitative and qualitative information about our operations from January 1, 2017 to December 31, 2018, and has beendeveloped in accordance with the Global Reporting
Initiative Standards—Core option, without independent assurance. 102-48, 102-49, 102-50, 102-52, 10254, 102,56

In 2018 we published our Communication on Progress (COP) related to 2017, and in the previous year
the sustainability report for the two-year period
2015 and 2016 (GRI G4). 102-51
For strategic reasons, no financial information is disclosed and the results of operations are disclosed toshareholders only. 102-45

How we manage economic performance 103 | 201
As global main policies, we prepare internalfinancial reports in accordance with the International Standards and Policies describedin US GAAP (United States Generally Accepted Accounting Principles), and for local
official financial reports, in accordance with
the International Financial Reporting Standards (IFRS).
Targets for economic performance affectprofit-sharing results for employees. All
financial KPIs are tracked on a monthly basis
and forecasts for the current month areissued on a weekly basis.

Our results and reports are audited by global firms to ensure financial disclosures areaccurate. To assure compliance with ouroperations, we count on a five-person Internal Control team that operates full time andaudits all units.
Financial targets are developed as part ofan annual process, and our annual budget is validated both within the company
and by our controlling shareholder. Since
2017, we have used zero-based budgeting
methodology for both budget forecasting

and budget control and execution, for all
expenses within the company.
We report on our financial results in monthly meetings with the controlling shareholder’s CEO, CFO and vice president of Embraco business.
Externally, we are part of a group that islisted both in Brazil (B3) and in the US (Dow
Jones), and our audited and consolidated
financial information is included in national
disclosures and transmitted on a quarterly
basis to our controlling shareholder.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

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GLOBAL COMPACT AND
MATERIAL TOPICS
102-12 102-46 102-47 103-1

We are signatories of the Global Compact since2004 and have developed projects and initiatives
supporting specific targets within the Sustainable
Development Goals (SDGs) that are related to ourmaterial topics.
Between 2017 and 2018 we redesigned our sustainability strategy. At the diagnosis phase, we first
analyzed key information on global trends, risks andchallenges and then rated their importance within ourbusiness and operational model based on stakeholder
impact. 102-44
This process included a document review, customer
interviews as part of an annual performance assessment and satisfaction survey – with each source ofsurvey data matched to the relevant stakeholder
group. After assessing general aspects, we focused on

stakeholder perceptions reported in internal documents, and used their inputs to validate the material
topics identified in 2015 exercise. This resulted innine topics representing the economic, environmental
and social issues that are especially material to ouroperations and activities. 102-44

We develop projects and initiatives
on well-defined fronts within our
strategy, and which help to connect
the Sustainable Development Goals(SDGs) to our material topics.

Our stakeholders 102-40

Customers

Government

We identify stakeholders according to the extent levelthat our business model impacts them. 102-42

Shareholders

Employees

Outsourced
workers

Suppliers

Communities
surrounding Embraco’s
operations

Research,development andeducation institutions

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Our strategy is focused on three fronts:
Compliance and reputation [within and outside the organization]

1

STAKEHOLDER ENGAGEMENT
The materiality process included stakeholder
engagement activities such as surveys with strategic groups (sales representatives, customers andemployees), internal and external events, corporate
panels, community events, assessment processes, joint calls for projects, collective agreements
among others.
This exercise was also informed by documents
formalizing our relations and interactions with eachstakeholder group. These can include customer

surveys conducted during the reporting period on
aspects related to preferences, needs, satisfaction
and dissatisfaction. 102-43 102-44
Priority topics identified from these documents werethen used to validate the ones listed in our materiality exercise in 2015. 102-44

2
3

SUSTAINABLE SOLUTIONS
Research, development and innovation in products, services and processes.
[within and outside the organization]

SUSTAINABLE OPERATIONS
Employee training, education and development. [within the organization]
Occupational health and safety management. [within the organization]
Environmental management and efficiency (energy, water, waste and effluents).
[within the organization]

SUSTAINABLE PARTNERSHIPS
Promoting best practices in sustainability across the supply chain.
[within and outside the organization]
Quality and customer satisfaction. [within and outside the organization]
Engagement with society. [Outside the organization]

A focus on energy efficiency and climate change [within and outside the organization]

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SUSTAINABILITYREPORT2017 & 2018message fromleadership

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OUR GLOBAL PRESENCEGRI content
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DECENT WORKAND ECONOMICGROWTH

Principles and values
GovernanceCompliance08

INDUSTRY,INNOVATION &INFRASTRUCTURE

PEACE, JUSTICE& STRONG
INSTITUTIONSSUSTAINABLE SOLUTIONS
Research, development and innovation in products, services and processes

AFFORDABLE AND
CLEAN ENERGY

INDUSTRY,INNOVATION &INFRASTRUCTURE

CLIMATE ACTIONPARTNERSHIPSFOR THE GOALSHEALTH & WELL
BEING

GENDEREQUALITY

CLEAN WATER
AND SANITATIONAFFORDABLE AND
CLEAN ENERGY

INDUSTRY,INNOVATION &INFRASTRUCTURE

REDUCEDINEQUALITIESSUSTAINABLE
CITIES & COMMUNITIESRESPONSIBLE
CONSUMPTION
AND PRODUCTIONQUALITYEDUCATIONDECENT WORKAND ECONOMICGROWTH

INDUSTRY,INNOVATION &INFRASTRUCTURE

PEACE, JUSTICE& STRONG
INSTITUTIONS

Delivering energy-efficient solutions and reducing environmental impact throughout the
product life cycle is a strategic imperative for our Research & Development department(read more on page 16).

SUSTAINABLE OPERATIONSAt the workplace
We develop and engage our employees around a culture of diversity, supporting theirprofessional security and growth. Occupational safety management is top-of-mind at
Embraco, as is operational management and efficiency performance across energy,
water, waste and effluents (read more on page 24).

SUSTAINABLE PARTNERSHIPS
Collaboration and co-creation in the value chain
We invest in quality and customer satisfaction, promote best sustainability practices
in the supply chain, and support the communities where we operate through social
programs and volunteer work (read more on page 42).

DECENT WORKAND ECONOMICGROWTHSUSTAINABILITYREPORT2017 & 2018message fromleadership

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OUR APPROACH TOSUSTAINABILITY
Sustainability goes beyond developing innovative
solutions and ensuring efficient operations: it’s partof our company’s beliefs. Our team is committed togenerating positive impact and sharing value withbusiness partners, customers, suppliers and society.
That is how we sustain the growth of the businesswhile delivering results in line with our mission ofbringing people a better quality of life.

Exame Sustainability Guide
OUR SUSTAINABILITY VISION IS GLOBAL AND INTERCONNECTED
We have a global strategy for managing economic, environmental and social
aspects that is adapted by our local teams to suit the needs and context ofeach operation.
Our sustainability team helps to strengthen and enhance the positive impacts
from our efforts across the company.
For each of our material topics, a department has been assigned responsibility
for developing strategies and monitoring results.

In 2018 we were ranked by Exame
Sustainability Guide as one of Brazil’s
most sustainable companies for the
ninth consecutive time. Embraco wasrecognized in the “Electronics” category for a case study on engagement
around water management (read moreon page 40).

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SUSTAINABILITYREPORT

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2017 & 2018

our global
presence

Our operations started in Joinville (SC, Brazil) in1971 and since then have expanded 102-1

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsGlobal presence1

our global
presencesustainable
solutionssustainable
operations

a commercial presencea production capacity ofin more than 80
countries 102-6

37 million

11

OUR PRINCIPLES 102-16

compressors per year

11 business

10,000units

employees

47 researchlaboratories

annual R&D
investment of

3% to 4%MISSION

VALUES

Provide innovative
solutions for a better
quality of life.

Respect
Integrity
Diversity & inclusion
Teamwork
Spirit of winningof net revenue

Approximately 500 people
engaged in Research & Development—with 100
staff working at partner universities

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102-3 102-4 102-7

1 out of every 5 compressors worldwide carries the Embraco brandon four continents

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1. In July 2019, Embraco was acquired by Nidec Corporation, Japanese andworld’s leading comprehensive motor manufacturer. The data below, as well
as all data in this report, reflect information prior to this fact.

SUSTAINABILITYREPORTmessage fromleadership2017 & 2018

Our market presence goes back48 years to our first operation in
Joinville (SC), southern Brazil.1

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EMBRACO ITALY
Riva Presso Chieri(Piemonte, Turin)
Sales Office

EMBRACO RUSSIA
MoscowSales office

12

Reindustrializationagreement in Italy 102-4 102-7

Italy is among our strategic markets and our customers there will continue to be served by a sales office
and a well structured logistics network for productmarketing and distribution.

EMBRACO MEXICO
Monterrey (Nuevo León)
Compressor factory

1. Embraco is a private entity organized as alimited company. 102-5

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In July 2018 signed the reindustrialization agreementof our plant in Riva Presso Chieri (Turin, Italy). It cameas a result of a joint effort and continuous collaboration among employee representatives, government
authorities and local agencies that enabled all 413
plant employees to be transferred to Ventures, anIsraeli-Chinese company producing solar powered
cleaning robots and water purifiers.

EMBRACO US
Duluth (GA)
Sales office and Distribution Center

EMBRACO BRAZIL
Joinville (SC)Compressor factory –HEADQUARTERS 102-3
Foundry
Itaiópolis (SC)Component factorysustainable
partnerships

EMBRACO SLOVAKIA
Spišská Nová Ves
Compressor and coolingsystem factory
KošiceGlobal Shared Services Center

EMBRACO CHINA
Beijing
Compressor factory
QingdaoElectronics factory

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OUR GOVERNANCESTRUCTURE
Along 2017 and 2018, we counted on a solid corporate governance structure that leads our businessand strategy, driven by experience and a pioneering
spirit. Our highest governance and decision-making
body is the CEO’s staff, comprising five vice presidents(for Operations, Research & Development, Finance,
Human Resources, Communications & Sustainability,
and Sales & Marketing) and two directors. The CEO’s
staff is responsible for: 102-18
Setting our strategic direction:• Tracking the performance of the business and executives against our strategy;CEO

RISK MANAGEMENT
Our vice presidents and directors assess key decisions on economic, environmental and social aspects
affecting our results. They are also responsible formanaging risks and potential impacts related to ouractivities and operations, assessing significant aspects based on the precautionary principle. 102-11
The CEO’s staff meets on a weekly basis to discussbusiness results, legal matters, health and safety issues and relevant processes in order to mitigate risks
and identify opportunities for improvement.

• Setting targets aligned with our mission and longterm goals.

We have a solid corporate governancestructure that leads our business andstrategy, driven by experience and apioneering spirit.

VICE PRESIDENTS
CEO´s staff structure in 2018.

DIRECTORSSUSTAINABILITYREPORT2017 & 2018message fromleadership

COMPLIANCE
Our reputation directly reflects the way we do business. Embraco’s legal team is responsible for managing Compliance in matters related to ethics within our
activities. The Legal department is responsible for:• Providing training and addressing reported ethics
violations;• Periodically reviewing the organization’s internal documents and procedures for continual improvement;

our strategic
topicsour global
presencesustainable
solutionsance guidelines through Code of Ethics, our Global
Compliance Policies and Charter of Organizational
Principles and Values.
We believe organizations must be accountable in theirdealings with local and international governments. Inline with the United Nations Global Compact, it is ourview that companies have a duty to work against corruption in all its forms, including extortion and bribery.

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Ethics and reporting channels 103-2
We use an independent system to receive and manage reports on concerns. Reports received
through other channels (e.g. email, telephone or directly from employees) are entered by the Compliance team into the report management system. All reports and concerns received are reviewed
internally by designated investigators. Formal feedback is given to the parties making the reports
and action is taken where appropriate.

• Managing available reporting channels.
Our Ethics Committee is composed of representatives from Embraco’s Legal, Human Resources andAll stakeholders have access to our ethics and compli-

Corporate Security departments.
Ethics-related documents and initiatives• We communicate our principles and values to business partners through our Code of Ethics.
• We ensure compliance with the US Sarbanes-Oxley (SOX) Act to reduce the risk of financial fraud.
• We conduct periodic audits on our operations.

Anti-bribery
We have subscribed to the principles of
the United Nations Global Compact andactively work against extortion, bribery
and other forms of corruption.

• We have procedures in place to implement our global compliance policies on matters such as
donations and freedom of association.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

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ETHICS TRAINING

Reporting channels
Employees, suppliers, outsourced
workers and customers can reportviolations of Embraco’s Code of Ethics
online. Reports are handled in confidence and persons making reports
can remain anonymous, protectedagainst retaliation.

Ethics and compliance training

2017

2018

Number of employees

1,400

368

Number of sessions

47

19

Percentage of leaders

75%

100%

E-learning compliance programs

2017

2018

Number of employees

100% of administrative functions

100% of administrative functions

Number of sections

3

2

We have 17 Global Compliance Policies addressing importantmatters such as antitrust laws, diversity, equal opportunity
and respect in the workplace, environment, health and safety.

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2017 & 2018sustainable
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Energy efficiency, innovation and highperformance are the guiding principles indeveloping our product portfolio

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Sustainable solutions: innovation, energy
efficiency and high performance
As a market leader in our segment, we offer solutions and services for household, commercial (e.g. supermarket, food service and medical applications), distribution andaftermarket applications.

We develop innovative solutions that deliver better
quality of life and are responsive to global trends
such as:SUSTAINABLE SOLUTIONS:
research, development andinnovation in products, services
and processes
We are committed to delivering solutions that are highly energy efficient asa strategic imperative for our markets
and for our Research & Development
department, which works continually tofind ways to reduce environmental impact throughout the product life cycle.

Quality in food preservation;
Energy efficiency – products that are increasingly energy efficient and innovative in theuse of natural refrigerants;
Competitiveness—solutions with smaller
footprints as part of a miniaturization strategy.

We have taken an increasingly outside-in approach
to innovation.

We act as business partners to our customers, cocreating refrigeration solutions with them.

We develop market-leading product portfolios by first gaining insight into customers’ challenges and needs.

We offer a complete platform combining
high-quality, high-performance compressors, services and solutions.

Differentiation through a portfolio that delivers efficiency, reduced life-cycle
impact, superior quality and reliability.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

Fresher foods andmore energy-efficient
refrigerators
HOUSEHOLD REFRIGERATION 102-2
Hermetic compressors for domestic freezers andrefrigerators.
With a focus on consumer perspectives and customer
needs, we have worked to deliver solutions that are
increasingly silent (for improvements in comfort),
efficient (for lower electricity bills) and more effective
in food preservation.
CERTIFIED AND APPROVED FOR MARKETSWITH UNSTABLE POWER SUPPLY
Embraco FMX solution has been certified and approved by the VDE Institute with a 25-year lifetime.
In markets such as India, this solution handles widevoltage fluctuations (stabilizer free) and is designed
to work reliably and safely maintaining refrigerators
performance integrity despite energy fluctuations.
Initially developed for the household refrigeration
market, the technology has since been incorporated
into our commercial range.

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Variable speed technology:
20 years of energy-efficient innovation
According to the Brazilian Energy Research Company (EPE)
has shown that refrigerators account for 20% of total
electricity consumption in an average household. Researchfindings such as these and a global drive to reduce energy
consumption have informed the development of increasingly efficient solutions at Embraco.
Our Fullmotion Inverter solution, developed 20 years ago,
was the first variable speed technology in the refrigerationindustry. This solution allows compressor capacity to beadapted to the freezer’s or refrigerator’s heat load.
With each new generation we have delivered a 5% improvement in energy efficiency: from our first model—VEM—to
one of our most recent models—VESF—compressor efficiency has improved by a total of 32%.

In 2017, in China, we launched the FMX (Fullmotion inverter
compressor), our most compact and optimized solution.

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Full portfolio for Light
Commercial segment
COMMERCIAL REFRIGERATION102-2
Hermetic compressors, condensing units and sealed
units for commercial applications - food service, foodretail, medical and scientific applications.
Embraco’s Fullmotion Inverter variable speed solution is also ideally for supermarket and food service
applications, and is one of the most energy-efficienttechnologies available.
Our most recent product launch for this segment is
FMFT, the first dual-voltage compressor for commercial refrigeration applications and one of themost efficient solutions available in this capacity
range. Developed for food retail, medical and foodservice applications, the solution delivers energy
savings by up to 30%. As a dual voltage system,
FMFT is suited for use in different regions and in
markets with energy fluctuations.

In addition to Fullmotion technology, we also
launched a new Scroll compressor, providing a very
wide portfolio from 2 to 13 hp, and NJX, a new 2 hp
single piston compressor delivering strong reliability and low noise levels.
For the European market, we recently launched
Bioma, a condensing unit with new silent features
for food service and convenience store applications,and Sliding Units offering easy maintenance andfast installation for reduced costs of ownership atconvenience stores and supermarkets.

Plug n’ Cool solution delivers 30% energy savings for supermarket chain
In 2017 Mig Atacarejo, a Brazilian supermarket chain, replaced its legacy refrigeration
system with Embraco’s Plug n’ Cool solution—a self-contained unit designed for reachin applications.
The replacement delivered better food preservation performance in display cases and increased cooling capacity with 32% lower power consumption, while also increasing available display space by 25%.
As a plug-in system, the solution reduces installation time by 70% and is easier to service
and clean. It also operates on natural refrigerants, such as R290 (propane).

Learn more about our products:
https://products.embraco.com/products/compressors

SUSTAINABILITYREPORT2017 & 2018message fromleadership

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Digital solutions for morethan 80 countries
Toolbox: the contractor’s app
DISTRIBUTION AND AFTERMARKET 102-2
We supply spare parts to distributors, retailers, installers and contractors providing equipment servicing
on-site.
In addition to business units in seven countries, we
also have a network of local distributors and consultants that work with our sales and engineering
team providing technical support in locations suchas Australia, New Zealand, India, Japan, Indonesia
and Thailand.
These specialists actively listen to and work to address the needs of customers, specifiers (food andbeverage manufacturers) and consumers.

REFRIGERATION CLUB
Another important channel for interaction with stakeholders—and which delivers on our commitment tosharing content and knowledge—is our Refrigeration
Club, a communication channel originally launched
as a print magazine in 1984. An online version was
launched five years ago, as well as content available
on Facebook.
Global refrigeration trends, technical and educational content are available in seven different
languages.

Embraco’s Toolbox app (available fromApp Store and Google Play) provides
tools to support contractors in fieldwork. The app features:• A troubleshooting section that supports contractors in on-site equipment assessments.
• Support for sales representatives
in recommending the best-suited compressor models for eachapplication.
• Embraco’s complete product range,
cross-references to comparable
compressor models, refrigeration
store locations, a refrigerant gas
scale, and other functionality.

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New business:an innovative approachto the cold chain 102-2
We work to address market needs by developing
services that create value for our customers and ultimately improve the end-consumer experience.

THE INTERNET OF THINGS FOR PRODUCTMANAGEMENT AT THE POINT OF SALE
In 2017 we launched diili, a disruptive service platform based on a complete Internet of Things (IoT)
solution. Through this system, managing commercial
refrigerators at points-of-sale becomes more strategic by delivering intelligence in the use, maintenance,energy performance and sales effectiveness of equipment in the field.
diili presents a business model that delivers realvalue to equipment manufacturers, beverage andfood brands and retailers, translating in a practical
way the innovation concept advocated by the company's New Business area.

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Innovating for the future
We invest 3% to 4% of our annual revenue in Research & Development. Embraco has 47 laboratories
and 500 engineers dedicated to innovation, including
around 100 researchers working at leading engineering universities.

also been reduced. This has been achieved throughprocess reviews and by identifying opportunities for
improvement in efficiency, safety and quality.

As a result, 59% of our revenues were derived fromproducts launched during the past six years.
This constant drive for innovation has challenged
us to adopt an increasingly agile and simplified
approach. Our goal is to integrate internal processes with customer processes to build a seamless development workflow that delivers value toboth sides.
FASTER DELIVERY
Process improvements implemented over the last
three years have reduced product development times
from 35 to 15 months.
The time taken to deliver samples to customers aspart of the pre-implementation validation stage has

Sharing knowledge
PIONEERISM IN NATURAL REFRIGERANTS
Our product development practices are aligned withemerging regulatory requirements in Europe, which
are among the most stringent in the world on aspects
such as health, safety and quality.
We were pioneers in the use of natural refrigerants such as propane (R290) across all productsegments, and we have led the development of
products for our commercial range. We also havean extensive product range employing alternative
and transition refrigerants for customers that have
not yet migrated to hydrocarbons.

Energy efficiency and the use of natural refrigerants are among the topics
addressed in our training programsfor customers (OEMs, distributors
and retailers) and for industry professionals such as contractors. Embraco
also participates in events in which
we provide thought leadership andengage in constructive debate.

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A company of inventors: we have more than 3,000 patents
Embraco currently has 1,200 granted patents, resulting from both our own innovation efforts and collaborations with globally recognized universities. Including
expired patents, Embraco boasts a total of 3,000
patent applications to date in Europe, the US, Asia
and Brazil, placing us among the top private companies for patent applications in the US and Brazil.
In the last three years Embraco has filed approximately 200 patents. Some applications are linked
to recently launched projects, such as VESF inverter
technology (read more about our Fullmotion Inverter

solution on page 18) and FMX, which is part of our latest generation of inverter compressors for household
and commercial refrigerators. Our FMX solution involved a total of 74 patent applications filed between
2016 and 2018 to protect the intellectual property
contained in most components.
INNOVATION ECOSYSTEMS
Our culture of innovation reaches beyond our factory
walls and into universities and research institutions,which act as key partners in sharing knowledge anddeveloping solutions that are responsive to market

expectations. In Brazil, our partnership with the Federal University of Santa Catarina (UFSC) goes back37 years.
We also collaborate with startups on innovation anddeveloping solutions through joint projects, partnerships, calls for projects and events.

We have developed projects
with partners such as:• The Federal University of Santa
Catarina (Brazil)• The State University of Santa
Catarina (Brazil)• SENAI (Brazil)• The Regional University ofBlumenau (Brazil)• UNISOCIESC (Brazil)• Instituto Tecnológico y de Estudios
Superiores
de Monterrey (Mexico)• Politehnica University Timisoara(Romania)• Fraunhofer Institute (Germany)• RWTH Aachen University (Germany)• University of Illinois (US)• University of Glasgow (UK)• University of Shanghai (China)

SUSTAINABILITYREPORT2017 & 2018message fromleadership

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We contribute toimportant industry issues
We actively advocate for policies supporting thedevelopment of our industry, with a focus on issues
related to innovation, energy efficiency, professional
development and industry regulation. The organizations of which we are members include: 102-13• Heating, Air-conditioning and Refrigeration Distributors International (HARDI);• The Brazilian Electrical and Electronics Industry
Association (ABINEE);• The Russian Union of Refrigeration Industry
Enterprises;• The Brazilian Industrial Internet Association (ABII);• The China Association of Home Appliance Manufacturers (CHEAA);• The Brazilian Heating, Ventilation and Air Conditioning Association (ABRAVA);• The Brazilian Association for Research & Development at Innovative Companies (ANPEI);• The Santa Catarina State Industry Federation (FIESC);• The Slovakian Association for Human Resources
Development;• The Slovakian Association for Refrigeration and Air
Conditioning;• The American Chamber of Commerce in Slovakia;• The US Association of Home Appliance Manufacturers (AHAM);• The American Society of Heating, Refrigeratingand Air-Conditioning Engineers (ASHRAE);• Centro Studi Galileo - Italy;• The Mexican National Association of Refrigeration
Industry Manufacturers (ANFIR);• The Home Appliances Cluster of Nuevo Leon, Mexico (CLELAC);• Market accelerator for natural refrigerants(SHECCO).

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2017 & 2018sustainable
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We offer a continuous cycle of training, learningand transformation that drives continual
improvement in plant productivity and safety

SUSTAINABILITYREPORT2017 & 2018message fromleadership

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presencesustainable
solutionssustainable
operations

sustainable
partnerships

GRI content
index

25

Sustainable operations: zero accident, zero defect, zero
scrap, zero waste and zero loss

SUSTAINABLE OPERATIONS:
at the workplace
We provide training to our employees
and invest in education and development. Occupational safety management is top-of-mind at Embraco, as is
operational management and efficientperformance in energy, water, waste
and effluents.

In 2013 we adopted World-Class Manufacturing(WCM) in our operations—a rigorous, integrated
methodology designed to improve operational performance through engagement, motivation and people
development. WCM is being implemented across Embraco plants through a continuous training, learningand transformation cycle that will ensure our compressors are produced to increasingly high standardsof efficiency and by highly trained personnel.
Plants are rated on a scale of 0 to 100, with abronze level representing the first major milestone
on a journey towards the highest level of WorldClass. Currently, our Brazil (Compressors), China(Compressors), Slovakia and Mexico plants haveachieved bronze status, meaning we are progressing towards a level of excellence in our productionlines that will place us among a select group of
global, world-class manufacturers.

HOW THE METHODOLOGY WORKS
The goal of the methodology is to improve safety andproductivity through a set of definitions, principles,policies and techniques that help to identify potential
bottlenecks using the ‘zeros’ concept: zero accident,
zero defect, zero scrap, zero waste and zero loss.
The methodology comprises 12 technical pillars and
10 managerial pillars. Safety, for example, is one of
the technical pillars and entails training employees to
identify and prevent potential risks. The managerial
pillars are for purposes that include securing employee engagement at all levels of the organization, building the roadmap for WCM, allocating sufficient humanand financial resources for implementation.

Advancing toward world-classproduction: bronze WCM certificationachieved at four plants.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presencesustainable
solutionssustainable
operations

sustainable
partnerships

GRI content
index

26

Improving our processes
through simplification,
creativity and increased
effectivenessIn 1997, as part of an effort to improve operational
excellence, Embraco launched a suggestion program
called the ‘Quality Control Circle’ (QCC) in our Brazil
operations. Through this program, operators organize
themselves into groups to identify potential weaknesses
or areas for improvement inside production processes.
In addition to factory-floor improvements, the Program
encourages employees to use their creativity to findopportunities across our broader operations – fromprocurement to press tooling change-outs.
In the last 22 years, the QCC program has implemented more than 140,000 suggestions, of which
30% have been implemented in the last 2 years. The
significant increase in recent years has come as adirect result of the implementation of WCM concepts
and tools in our day-to-day operations.

Employee participation in the QCC program68%

in 201761%

in 2018

an average of

15 solutions
per participant

more than

48,000 projects

implemented in the last two years

SUSTAINABILITYREPORTmessage fromleadership2017 & 2018

our strategic
topicsour global
presencesustainable
solutions

CERTIFICATIONS

sustainable
operations

sustainable
partnerships

GRI content
index

27

Excellence in people management 103 | 401

ISO 9001
Based on quality management principles,
including a strong customer focus, the motivationand implication of top management, the process
approach and continual improvement.

Compressors
Foundry
Components

Compressors
Electronics

Compressors
Foundry
Components

Compressors
Electronics

Compressors

OHSAS 18001
This standard addresses occupational healthand safety management and provides a framework for identifying, mitigating and reducing
risks at the workplace.

Compressors

IECQ QC 080.000
This standard outlines procedures for electronics manufacturers in implementing management processes for hazardous substances.

Compressors
Foundry
Components

Compressors
Electronics

Compressors

Compressors
Foundry
Components

Compressors
Electronics

Compressors

ISO 14001
This standard addresses the implementationof environmental management systems toenhance environmental performanceand fulfil compliance obligations.
IATF 16949
Together with ISO 9001, this standard establishes
requirements for quality management systems,
from the design and development through the
production and, where applicable, the installationand servicing of automotive products.

Electronics

Compressors

We develop and engage our employees within a cultureof diversity. Our team is highly diverse in terms of employees’ nationalities, generations, experience and training.
Embraco’s approach to people management isdesigned to attract, develop and retain talents witha passion for delivering quality of life both within
and outside the workplace, and is underpinned by
the principles of respect, integrity, diversity, inclusion
and a spirit of winning. The process is led by a global
team with local support, including regular internal andexternal audits. 103 | 401
Following our people strategy, we offer an inspiringand innovative environment and seek to provide thetools necessary for our talents to have an excellent
work experience and achieve extraordinary results. We
operate on the basis of three pillars:• Extraordinary performance – A highly effective organization that consistently delivers results
above expectations;• Great people – Diverse talents prepared to be
future leaders;• Winning culture – Internally and externally recognized as a great place to work.
ATTRACTING AND RETAINING TALENT
Global talent acquisition team has a mission ofrecruiting people who are aligned with our leadershipmodel. We offer career advancement opportunities
first to our internal staff, while seeking out external
candidates on a need-only basis. 202-2
During the previous two years we intensified programs such as succession, which recognizes internal
staff performance through promotions.
In talent acquisition processes, we foster continual
communication with candidates, dealing with them ina respectful and transparent way.
Onboarding training begins during the selection
process, giving selected candidates the opportunity tolearn about our business and challenges.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presencesustainable
solutions

Proportion of senior management hired from the local community (%) 202-2
Business Unit

2016

2017

2018

Brazil (Compressors)

86

98

99

Brazil (Foundry)

-

-

-

Brazil (Components)

-

-

100

China (Compressors)

100

91

92

China (Electronics)

100

100

100

Italy

100

90

83

Mexico

100

50

56

Slovakia

100

75

75

United States

75

40

25

Russia

100

100

100

Note 1: Our strategy is implemented at the senior management level.

Embraco’s positive relations with communities are reflected in our ability to source
talents locally. Combined with the recognition of employee performance, this
scenario is also valid in leadership positions.

sustainable
operations

sustainable
partnerships

GRI content
index

28

SUSTAINABILITYREPORT2017 & 2018message fromleadership

LEADERSHIP MODEL AND PROFESSIONAL
DEVELOPMENT
Embraco’s leadership model sets out the behaviors
and attitudes expected of employees based on ourvalues. At Embraco we are all considered leaders – ofthe business, of a function, of a team or of ourselves– being expected to act as owners of our own careersand development.
We support the professional growth of our talents using Career Compass, a tool for developing,discussing and documenting career plans while
outlining the next steps and experience needed foran employee’s development.

our strategic
topicsour global
presencesustainable
solutionsleadership model as a basic guideline. To further enhance diversity throughout the business, our leaders
are assigned targets for performance, gender representation and nationality.
Engagement
Embraco periodically conducts a global survey toassess the level of engagement among salariedand hourly employees, supporting an inclusive andmotivating workplace environment. The survey isconfidential and the information is used as an input indesigning action plans for improvement. The survey
addresses the following topics:• Employee perceptions of leaders;

W Career
We develop and retain talents using the W Career
methodology, which accommodates employees’
different ambitions and skills. The model provides
three possible pathways: administrative, technicalor project leadership. Embraco gives employees
the opportunity to identify and select their preferred pathway.
Succession
Each employee’s potential for growth in either the administrative, technical or project leadership pathway
is assessed by a Succession Committee that uses the• Strengths;• Opportunities for improvement.
In 2017, 86% of Embraco employees responded
to the survey and the overall engagement rating
was 76%. Based on the inputs from the survey, anumber of initiatives were implemented throughout 2018 by both local teams and our Mindset andCulture Committee, which meets on a weekly basis
to discuss and implement initiatives that improves
employee engagement.

sustainable
operations

sustainable
partnerships

As a testament that the survey and the resulting
initiatives have been effective, for ten consecutive
years Embraco has been ranked as one of the 150
Best Companies to Work for in Brazil by Guia VocêS/A, which recognizes the top companies for humanresources and management practices.

GRI content
index

29

We believe employees should be free toshape their own careers and this is theunderlying assumption in the tools andpathways we offer for the development.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsThink Tank: employee development with purpose
and aligned with our leadership model
Our Think Tank program in Joinville (SC), run by Associação Projeto Resgate, develops innovative and transformational leaders
through a combination of theoretical training on innovation
methods (e.g. Design Thinking, Theory U and Design for Change)and hands-on experience of leading groups in developing solutions to real-world problems in communities.
Since 2017, this program has helped to enhance the development of our future leaders.

our global
presencesustainable
solutionssustainable
operations

sustainable
partnerships

GRI content
index

WORKFORCE BY AGE GROUPS (%) 102-8

EMPLOYEE PROFILES 102-8
As a company with a global presence in different
markets, employee profile varies with the economic,
cultural, labor and other regional factors surrounding
our different operations.

22

Our headcount in Italy was recently reduced after
the local plant was reindustrialized and our manufacturing operation was discontinued (read more on
page 12).

2018
13

Our headcount data is based on the number of employees working at the Company as of December 31.
The workforce figures include any employees on medical, maternity or unpaid leave, but exclude trainees,
apprentices, interns and outsourced workers.

CEO and Vice Presidents

8

12

65

26
30 TO 50

2016

Workforce by employee category
102-8

62

2017

< 30

Home Office
Our home office policy was implemented in response
to a natural market demand reflecting employees’
search for a better work-life balance. We launcheda pilot in Brazil in 2018, with approximately 50% of
eligible employees joining the program. In 2019 weplan to roll out the initiative at our business units in
Slovakia, US, Italy and Mexico.

30

> 50

2017

1

8

2018

1

6

1

Directors

22

1

23

1

23

1

Senior Managers

73

13

68

11

61

13

Leaders

150

58

308

76

282

76

Management

1,297

555

1,033

489

968

456

Operational

6,204

2,458

5,934

2,561

5,734

2,356

Other

82

44

0

0

0

0

TOTAL

7,836

3,130

7,374

3,139

7,074

2,899

SUSTAINABILITYREPORTmessage fromleadership2017 & 2018

Workforce by gender

our strategic
topics

2016
TOTAL

5,079

1,221

2018
TOTAL

Brazil (Compressors)
3,858

sustainable
operations

sustainable
solutions2017

and region 102-8

Brazil (Foundry)

our global
presence

Brazil (Components)

TOTAL

3,044

807

3,851

3,204

853

4,057

242

11

253

257

16

273

204

236

440

205

223

428

China (Compressors)

1,155

313

1,468

1,039

273

1,312

969

252

1,221

China (Electronics)

50

178

228

64

169

233

55

188

243

Italy

383

169

552

376

163

539

28

10

38

Mexico

828

435

1,263

880

668

1,548

808

541

1,349

Slovakia

1,535

791

2,326

1,492

784

2,276

1,517

793

2,310

United States

23

17

40

27

16

43

28

17

45

Russia

4

6

10

6

12

18

3

6

9

TOTAL

7,836

3,130

10,966

7,374

3,139

10,513

7,074

2,899

9,973

Note: workforce figures by business unit in Brazil were not available in 2016.

2016

Workforce by employment type 102-8

2017

2018

Type of employment
Full time

7,452

3,034

7,371

3,136

7,070

2,897

Part time

384

96

3

3

4

2

TOTAL

7,836

3,130

7,374

3,139

7,074

2,899

sustainable
partnerships

GRI content
index

31

Employees covered by collective bargaining agreements (%) 102-41

2016

2017

2018

Brazil (Compressors)

100

100

100

Brazil (Foundry)

100

100

100

Brazil (Components)

100

100

100

China (Compressors)

95

95.4

99.4

China (Electronics)

N/A

N/A

N/A

Italy

100

100

100

Mexico71

72

73

Slovakia

100

100

100

United States

N/A

N/A

N/A

Russia

N/A

N/A

N/A

Note: In China, collective bargaining agreements are non-mandatory and the figures for
the Compressors unit exclude retired employees and interns. Our China Electronics factoryuses individual rather than collective agreements. In Mexico, only operational employees
are covered by collective bargaining agreements. In the US and Russia, collective bargaining
agreements are not required by local regulations.

SUSTAINABILITYREPORTmessage fromleadership2017 & 2018

our strategic
topicsour global
presencesustainable
operations

sustainable
solutionssustainable
partnerships

2016

2017

2018

Employee turnover, by age

No.

No.

No.

group 401-1

< 30

1,063

960

1,348

30 to 50

794

808

901

> 50

32

53

53

TOTAL

1,889

1,821

2,302

TOTAL

By gender

No.

No.

No.

By gender

No.

No.

No.

Men

1,345

1,000

1,278

Men

1,248

1,446

1,855

Women

551

821

1,024

Women

805

709

1,059

TOTAL

1,889

1,821

2,302

TOTAL

2,053

2,155

2,914

23%

TOTAL RATE

19%

20%

29%

New hires by age group
401-1

TOTAL RATE

18%

17%

2016

2017

2018

No.

No.

No.

< 30

1,031

886

991

30 to 50

880

1,041

1,498

> 50

142

228

425

2,053

2,155

2,914

GRI content
index

32

Compensation 103 | 202
At Embraco we seek to reward our talents for theirefforts so they continue to deliver extraordinary
results. Our rewards and compensation policy uses
merit-based criteria to recompense performance.
Profit sharing program
Supplementing our employees’ fixed compensation,
Embraco has a profit-sharing program that encourages employees to demonstrate teamwork and a spiritof winning. In addition to overall corporate targets,each country has its local ones.

2

3

4

5

6

7

1

2

3

4

5

6

7

2016

2017

Note: The percentage figures are for both men and women.
Note 2: Employees in Russia work in administrative positions only. This explains the higher percentage compared with other countries.

8

403
247
200

204

128

129

100

137

176

193

258

246

424

202-1
BUSINESS UNITS
1. Brazil
2. China (Compressors)
3. China (Electronics)
4. Italy
5. Slovakia
6. Mexico
7. United States
8. Russia

8

120

1

114

8

100

7

108

6

120

5

112

4

105

3

110

2

590

1

111

RATIOS OF STANDARDENTRY LEVEL WAGE
COMPARED TO LOCALMINIMUM WAGE (%)

105

Note: The changes in employee hire and turnover rates from one year to another reflect the
typically higher turnover rates in Mexico and the repurposing of our plant in Italy (read more on
page 12).

2018

SUSTAINABILITYREPORT2017 & 2018message fromleadership

Our retirement and benefits plans 201-3
In Brazil, employees contribute 1% of their nominal
compensation, up to a limit of R$ 7,780.00, and canelect to contribute 5.5% of the amount by which that
limit is exceeded, with Embraco’s matched contributions amounting to 50% to 200% of employee
contributions depending on age.
In the US, retirement plan contributions begin in thethird month of employment. Employees can elect tocontribute 6% of their compensation, which is thenmatched by the Company.
In Italy, employees can voluntarily join the program
under applicable collective bargaining agreements.
Contribution percentages are 1.4% for employees and
4% for managers, and are matched by the Company.

All Embraco plants have venues forcontinuous training as part of the WCM
methodology.

our strategic
topicsour global
presencesustainable
solutionssustainable
operations

sustainable
partnerships

GRI content
index

33

How we manage training
and development 103 | 404
Our training and development strategy addresses
both general and operation-specific training needs
using the EEE (Experience, Exposure and Education)
methodology. With support from corporate and local
talent management teams, each area can independently invest in training courses and initiatives
suited to its business needs and challenges. Organizational competencies are addressed by global training
initiatives.
In 2018, we diversified our training offering by incorporating online distance learning assets with support
from internal facilitators trained to teach others the
skills they have learned. The WCM methodology’s
People Development pillar is central to providing anenvironment for continuous learning.

Frontline Leaders
Our workforce largely consists of plant operators who are managed by supervisors. Because
they play a key role in the day-to-day management of the factory floor, supervisors receive
special training to develop and enhance their technical skills and leadership competencies.
This global program is known as the Frontline Leaders

SUSTAINABILITYREPORTmessage fromleadership2017 & 2018

Average hours of training by
employee category and bygender 404-1

our strategic
topicsour global
presence

2017

2018

2016

sustainable
solutionssustainable
operations

sustainable
partnerships

GRI content
index

Our education policy extends beyond the classroom
experience. We disseminate knowledge through initiatives such as:

Executive (CEO, Vice Presidents,
Directors, Senior Managers)

21.3

19.6

8.7

14.7

6.1

19.1

Leaders

22.2

24.7

4.6

7.5

8.3

14.3

Administrative, Operational and
Other

23.3

14.3

19.0

10.7

9.6

9.8

TOTAL

23.3

14.6

18.3

10.7

9.5

10.0

Executive coaching

Type of initiative

Audience

Frontline Leaders

Leadership skills building

Supervisors

Leadership Academy

Leadership skills building

Managers, senior managers anddirectors

Compliance Training

Online courses on regulations andour code of conduct

All employees

Education Grants (Brazil)

Education grants for external
training or education programs

Operational and technical-pathway employees

Embraco Journey
We track the experience our employees
acquire with the Company through Embraco Journey: an online monitoring anddevelopment platform comprising three
annual stages:
Align and Commit
Targets are set for the year based on our
corporate strategy and priorities.

PROGRAMS FOR UPGRADING EMPLOYEE SKILLS AND TRANSITION ASSISTANCE PROGRAMS 404-2
Program

34

International secondment

Develop and Deliver
Delivery to date is assessed and reviewed
and any needed adjustments of course
are made.
Job rotation and job
shadowing

Note 1: We offer a variety of training opportunities to employees, but none are specifically focused on preparing
them for retirement.
Note 2: Administrative employees receive assistance in jobseeking where they are terminated as a result of reorganizations (including both leadership- and analyst-level employees).

Mentoring

Confirm and Reward
Delivery at year end is assessed to inform
each employee’s variable compensation.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presencesustainable
solutionssustainable
operations

sustainable
partnerships

GRI content
index

35

In the performance assessment step, we use the EP&R (Extraordinary Performance & Results) methodology toshare feedback with employees as a way of supporting their professional development.
Employees receiving
regular performance2016

reviews (%) 404-3

TOTAL

2017
TOTAL

19.78

20.06

19.86

2018
TOTAL

19.53

18.41

19.20

TOTAL
18.94

18.87

18.92

Note: We assess 100% of salaried employees (CEO, Vice Presidents, Directors, Senior Managers, Leaders and Administrative Employees).

Health and safety103 | 403
Our employees’ health and safety is a priority. In
addition to local weekly alignment meetings attended
by managers and employees at each plant, Occupational Health & Safety is also addressed in monthly,
global leadership meetings attended by the CEO,vice presidents, directors and senior managers at all
business units.

A continual improvement process is in place as partof our operations management, and we also address
health and safety by applying WCM principles and international certification standards. Using appropriate
methodology, we assess conditions at each workstation and work with employees to develop action plans
to eliminate or mitigate potential risks.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presencesustainable
solutionssustainable
operations

sustainable
partnerships

GRI content
index

36

ZERO ACCIDENT OR OCCUPATIONAL ILLNESSES
Embraco organizes regular engagement initiatives as part of safety culture, which include:

Sharing Best Practices
through a co-creation network and collective intelligence in processes

Daily safety discussions
a safety culture that enables space for daily discussion on the subject;

Safety Kaizens
new ideas and suggestions from employees to improve
operational practices and processes. Between 2017 and 2018
we received approximately 50,000 suggestions;
Safety Management Audit Training (SMAT)
a tool for creating a safe workplace by observing employee
behavior;

Autonomous Safety Group
we bring together influential employees to lead the processes that are part of oursafety routine, specific activities (inspections and audits), and support the building of
the safety learning culture in our operations.

Our employees are taught the Safety Golden Rules, which:• Help to foster safe behavior and provide specific pointers related toroutine activities;• Emphasize the primary aspects and risks related to our business modeland operations;• Stress the importance of disseminating safety guidelines and recommendations to employees, suppliers and visitors at all plants.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presencesustainable
solutions

Employee health is also among our priorities and isaddressed by programs covering both occupational
health and healthcare.

ment programs including periodic health checkups,
workplace exercise activities and programs to encourage fitness exercise.

Our primary objective is to provide employees withthe care they need to perform their activities andprovide a healthier workplace environment. Embraco
has programs in place covering ergonomics, healthynutrition, hearing and respiratory protection, as wellas blood pressure and occupational health manage-

Our management process is under constant improvement. The table below shows recent trends in key
performance indicators.

Health & Safety Rates 403-2

2016

2017

2018

Injury Rate

2.57

2.28

2.32

Occupational Disease Rate

0.11

0.04

0.09

Days Lost Rate

7.19

3.71

6.12

Absenteeism rate by business
unit 403-2

2016

2017

2018

Brazil (Compressors)

2.60

2.79

2.83

Brazil (Foundry)

3.14

2.94

3.18

Brazil (Components)

2.04

1.76

1.61

China (Compressors)

0.70

1.62

1.57

China (Electronics)

0.73

0.50

0.71

Italy

2.67

-

-

Mexico

2.23

2.69

2.40

Slovakia

2.67

3.01

3.30

United States

0

0

0

Russia---Note: Reason for calculating absenteeism on a local basis: Currently absenteeism data is tracked, calculated and managed separately for each plant, as health and safety definitions vary depending on local legislation and culture.

sustainable
operations

sustainable
partnerships

GRI content
index

37

Health and safety topics covered in formal
agreements with trade unions 403-4
Activities at all plants are conducted in compliancewith applicable regulations, contractual requirements
and others under labor agreements, not only regulations related to health and safety. Regulatory developments are monitored continuously and systematically with support from specialist firms. As part ofour efforts to protect employee health and safety, we
continually stress the importance of wearing appropriate personal protective equipment while providing
appropriate training on prevention and joining local
meetings with trade unions.

Safety Committees 403-1
Each Embraco plant has its own formal health and safety committee. Globally, 252 employees are members of it representing 100% of our manufacturing teams.
Considering Embraco's total number of employees, 99.5% of the workforce is represented
by the safety committees. Because these committees are not mandatory for administrative
offices, our teams in Italy and Russia (where we have offices only) are not covered.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presencesustainable
solutionssustainable
operations

Environmental efficiency

Energy103 | 302 103 | 303 103 |305 103 |306

103 | 302

Operational management, natural resource efficiency
and minimizing waste and effluents are integral to
our commitment to continually reducing the environmental impact from our products and processes,
preventing pollution and protecting the environment.
This commitment is further reflected in our Global
Policy, Environment and Energy Golden Rules, ISO
14001 certification and our adoption of WCM methodology, by which we aim to achieve global excellencein operations through continual process improvement
and simplification.
Process audits
Initiatives such as training, identification of process
improvement opportunities and targeted audits are
implemented as a way to increase employee engage-

ment and ownership of our environmental and energy
performance. Leaders are engaged in weekly audits
to measure the results of these initiatives. We also
perform internal and external audits to ISO 14001,
and provide Environmental Management Audit
Training (EMAT) to employees at different levels toequip them to address behavioral and environmental
aspects and assist in implementing measures within
the day-to-day operations to mitigate adverse environmental impacts.
The findings from these audits are reviewed bycross-disciplinary teams who then develop actionplans to address identified gaps.

sustainable
partnerships

Our entire approach to energy management iscentered around the WCM methodology. Based on
the level of consumption for different sources, weprioritize consumers and implement pilot projects tofirst gain a detailed understanding of consumption
dynamics and potential efficiencies. The data collected from these pilots informs solutions and strategies
for maximizing energy efficiencies in our processes.
Other energy management methods used in our
global operations include online consumption
monitoring, losses evaluation and targeted audits toensure resources are being utilized effectively.

GRI content
index

38

Our energy management
practices include:• Selecting energy models (basedon energy consumption vectors);• Online measurement;• Energy losses evaluation andenergy efficiency projects.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

Embraco's energy management projects generated
electric energy savings of 13% from 2016 to 2018, equivalent to one month’s supply for a city with a population of
approximately 300,000. Initiatives in the period included:•

Automation retrofits (HVAC, cooling towers, etc.);•

Replacing equipment with more efficient models(pressure, compressed air, consumption, etc.);

our strategic
topicsour global
presencesustainable
solutionssustainable
operations

sustainable
partnerships

GRI content
index

39

ENERGY CONSUMPTION WITHIN THE ORGANIZATION 302-1•

Solar pilot project;•

LED lighting retrofits and sensor installation.

Energy consumption (gigajoules) was reduced by
10.5% from 2017 to 2018, and by 4.5% from 2016 to2017. Embraco’s Energy Intensity Rate (GJ per compressor produced) fell by 5.5% from 2017 to 2018
and by 7.4% from 2016 to 2017. 302-4

Fuel combustion (GJ)

2016

2017

2018

Electric Power941,442

900,353

814,490

Natural Gas

543,781512,685456,710

Liquefied Petroleum Gas (LPG)

8,400

12,9705,690

Diesel

2,412

2,329

2,219

Gasoline (petrol)

904

1,071

761

1,496,940

1,429,406

1,279,872

TOTAL

ENERGY INTENSITY 302-3

Emissions 305-1 305-2 305-3

2016

2017

0.041

Projects
implemented from2016 to 2018
generated electricenergy savings of
13%.

0.043

0.047

(GJ per compressor produced)

2018

Our primary strategy for reducing greenhouse gas(GHG) emissions is reducing electricity consumption.
In 2018 we successfully reduced our emissions percompressor produced by 10% across our global operations, compared to a 2017 baseline. This was partly
driven by a reduction in: electricity consumption, theemission factor for power generation in Brazil, andthe emissions reduction as a result of our operations
in Italy being discontinued.
We use the Brazilian GHG Protocol platform for standardization purposes, and adjust the power generation emission factors for each country accordingly.

Direct and indirect greenhousegas emissions – (t CO2eq)

Scope 1

Scope 2

Total

Index
(kg CO2eq/
Compressor)

2016

38,79957,141

95,9402.92

201738,84956,406

95,2552.90

2018

31,08749,31480,401

2.58

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presencesustainable
operations

sustainable
solutionssustainable
partnerships

GRI content
index

40

Water 103 | 303
WATER CONSUMPTION (M³) 303-1 | 303-3

These programs and our water management strategy generated savings of 17% from 2016 to 2018,or the equivalent of 110 million liters (one month’swater supply for a city with a population of approximately 35,000).

Water withdrawal by source (m³)
303-1 | 303-3

2016

2017

2018

Groundwater

220,647

178,201

155,139

Municipal or utility water

434,022428,446

387,867

TOTAL

654,669

606,647

543,006

Percentage and total volume
of water recycled and reused

2016

2017

2018

Water recycled (m³)

243,958

221,815

191,831

Percent reused (%)

27

27

26

CONSUMPTION RATE

2016

2017

17.44

(Liters per compressor produced)

18.45

Efficient water consumption is regularly addressed at
all levels of the organization, and we have programsin place to monitor consumption per building ona daily basis. Another program covering operators
monitors the timing of operation of critical machineryand equipment. This allows operators to identify andquickly respond to any overconsumption.

From detailed data it has been possible to adopt
measures and projects of maximum efficiency inconsumption, such as: reuse of rainwater, reuse ofwater in processes or for sanitary purposes, replacement for more efficient equipment among others.

20.55

Water management at Embraco is also based on
WCM methodology, in which critical processes are prioritized and assessed to gain a detailed understanding of the factors involved in consumption.

2018

SUSTAINABILITYREPORT2017 & 2018message fromleadership

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presencesustainable
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sustainable
solutionssustainable
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GRI content
index

41

Effluents and waste103 | 306
WASTE BY TYPE AND DISPOSAL METHOD (metric tons) 306-2
Type ofwaste

Nonhazardous waste

Hazardous waste

Method ofdisposal

Landfilling

Recycling

Incineration
or recovery

Landfilling

Recycling

Incineration
or recovery

Total

2016

15,330.59

97,350.81

575.95297.532,937.47

186.02

116,678.37

2017

15,888.34

103,211.00

729.10183.202,371.57

1,012.99

123,395.73

2018

11,955.81

89,458.77

861.20228.092,086.12864.07

105,454.07

3.39
0.391

0.490

3.75

(RATES PER COMPRESSOR PRODUCED)

3.66

In addition to the controls, programs and projects
in place in our operations, all third-party waste
management companies undergo a stringent certification process in which they are screened against
legal, documentation and licensing requirements.
We also conduct desktop and on-site audits thatmust be approved prior to these companies
initiating their activities.

Effluent management follows strict processes that
ensure disposal in accordance with local legislation,with daily and monthly monitoring for quality control.
If any variables exceed established limits, an action
plan is developed immediately to correct the problem.
Whenever necessary, monitoring reports are submitted to the appropriate environmental authorities.

0.490

Waste management at Embraco is based on WCM
methodology, with a focus on the 5 Rs approach (Refuse, Reduce, Reuse, Recycle and Recover).

Total waste rate (kg/compressor)
Total landfill rate (kg/compressor)

2016

2017

2018

SUSTAINABILITYREPORT42

2017 & 2018sustainable
partnerships

Co-creation is among the approaches we
use to deliver positive impact throughout
the value chain

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presencesustainable
solutionssustainable
partnerships

sustainable
operations

GRI content
index

43

Sustainable partnerships
Our customers
The innovative solutions are designed to deliver value
and positive impact for our customers and to provide
a better service experience. (read more about our
products and services on page 20).

SUSTAINABLE PARTNERSHIPS:
Collaboration and co-creationin the value chain
Our operations and approach to doing
business are designed to generate
positive impact on the communities
where we operate and on different
stakeholders. As part of this, weinvest in quality and customer
satisfaction by promoting bestsustainability practices in the supply
chain, supporting the communities
where we operate through social
programs and volunteer work.

We want to be recognized as preferred partner ofour customers. To achieve this, we work closely withthem to understand their challenges and needs tothen support on the development of strategies andprocesses that deliver improvements in quality, competitiveness and efficiency.

Quality endorsement
Throughout more than five decades of operation, we
have built a strong brand that is recognized as a market
leader for efficiency, quality and innovation. We also dosome partnerships in co-branding, endorsing brands andproducts of customers who use our compressors, attesting the quality of their attributes to end consumers.

Customer Complaint Management System
We implemented a new global system for addressing
customer complaints at all manufacturing plants.
Complaints can now be submitted either by the quality team or directly by customers.

Customer satisfaction
Listening to customers is essential in ensuring we are increasingly responsive to their needs. Embraco has carriedout customer satisfaction surveys since 2012 to measure
the level of customer satisfaction with our brand and theprimary factors driving their purchasing decisions.

Perceived quality
Embraco uses Quality Ratings toclosely monitor customer perceptions
on quality. Compared with a target of
90% for 2017 and 2018, we achieveda Quality Rating of respectively
91% and 94%.

Survey results 2017

226

customers

56

countries

Best-rated
dimension:
product
performance

Good ratings on quality,
servicing, supplier
responsiveness andtechnical support

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presencesustainable
solutionssustainable
operations

sustainable
partnerships

GRI content
index

44

We inspire our suppliers to enhance the positive impact from their operations 103 | 414
Embraco engages the supply chain in implementing
practices that help them generate positive impacts—social, environmental and economic—and effectively
manage and mitigate risks.
Each year we mark Supplier Day with a global eventthat brings together our key suppliers and business
partners. In the previous two years, 405 suppliers
attended events in Brazil and China to celebrate
our achievements and renew their commitment todoing business and managing operations in accordance with Embraco’s principles and values.

SUPPLIER SOCIAL AND ENVIRONMENTALASSESSMENTS 103 | 308
The Embraco Code of Conduct guides the relationand management of suppliers. The guidelines andprinciples contained in it address applicable regulations and standards on social responsibility, environment and compliance.

In 2018, as in the previous two years, we identified
no suppliers causing significant adverse impacts on
the environment. 308-2

Hazardous Substance Assessment
A self declaration in which suppliers declare whether
they use hazardous substances classified into fourgroups, as follows:

No suppliers were identified as being at significant risk
for incidents of child, forced or compulsory labor.

•

RoHS substances;•

Substances of very high concern (SVHC-REACH);•

Forbidden hazardous substances;

To ensure respect for human dignity in all activities,
help to prevent and combat child, slave and forcedlabor, these issues are addressed in our General
Terms and Conditions, which suppliers are required
to formally accept as part of the onboarding process.

Supplier management and relations are the responsibility of our Procurement department, which uses
different methods depending on product quality,
logistics requirements, type of relationship and supply
risks. The assessment process also screens suppliers
against environmental aspects, and includes the procedures described below.

•

Hazardous substances treated as exceptions.

103 | 408 103 | 409

408-1 409-1

POTENTIAL SUPPLIER ASSESSMENT 2018
102-9
New suppliers

Suppliers withpotential assessments

Brazil85China (Compressors)00China (Electronics)

7

7

Mexico52Slovakia

3

3

TOTAL

23

17

Operation

100% of suppliers onboarded in 2018,2017 and 2016 were screened against
the social and environmental criteria
detailed in our Code of Conduct.
308-1 414-1 414-2

SUSTAINABILITYREPORT2017 & 2018message fromleadership

Potential supplier assessments 408-1 409-1
Our suppliers perform a self assessment known
internally as a Potential Supplier Assessment. In thisprocess, suppliers are required to confirm whether theymeet Embraco’s requirements on quality, competitiveness, reliability, sustainability and organizational
practices. The assessment results in a score, and where
suppliers fail to meet the minimum threshold, an improvement action plan can be implemented.

our strategic
topicsour global
presencesustainable
solutions

Supplier Audit Process
103-408 | 103-409

Supplier audits are conducted to verify the accuracy of information contained in Potential Supplier
Assessments. Every year we audit those with quality issues during the previous year plus some of themost strategic ones. 308-1 102-9

sustainable
partnerships

sustainable
operations

Developing a diversified supplier base
Our global presence and operations require us todevelop a highly diversified supplier base. Our Procurement team has developed a portfolio combining local suppliers and suppliers with global delivery
capabilities.

including electrical materials, metals, polymers, andother materials. 102-9

GLOBAL DISTRIBUTION OF SUPPLIERS BY
TYPE, LOCAL OR GLOBAL 102-9

Geographic distribution by continent

Monitoring the metal supply chain 408-1 409-1

1. The blacklist is prepared by a non-government organization and is available at:
http://www.responsiblemineralsinitiative.org/

45

In 2018 our supplier base included 481 suppliers ofmaterials used in the production of compressor parts,

SUPPLIER LOCATION 102-9

Our suppliers are assessed on whether they use conflict minerals or minerals minedin countries where revenues from its sale are used to finance illegal activities, violence or human rights violations. We have access to a blacklist of suppliers1 selling
conflict minerals; Embraco suppliers are forbidden from sourcing products from any
blacklisted suppliers.

GRI content
index

16.2%

0.2%
83.8%

30.9%
32.6%

36.3%
EUROPEAMERICASASIA

OCEANIALOCALGLOBAL* Local: delivers to asingle Embraco plant.
* Global: delivers to
two or more Embraco
plants.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presencesustainable
solutionssustainable
operations

sustainable
partnerships

GRI content
index

46

Supporting development is important for Embraco
We believe our business model, brand and operations are platforms from which we can generate
impact and create positive value for the communities where we operate. We engage and encourage
our employees to participate in volunteer work within surrounding communities.

US
Community work
Donations

MEXICO
Community work
Donations

BRAZIL
Social programs
Donations

SLOVAKIA
Community work
DonationsSocial programs

CHINA
Community work
Social programs

Volunteer work at a women’s
shelter
Volunteer work in support of a shelter
for victims of domestic violence.

“Adopt a child” campaign
An event in which employees dovolunteer work and donate gifts forchildren in needy communities.

Plogging
Voluntary cleanup activities that engage
participants in exercise while raisingawareness about proper waste disposal.

iNOVEum
Lectures, courses and workshops forsecondary education students to help themtransform ideas into viable businesses.

Education for migrant children
Volunteers communicate with students
through monthly letters and six-monthly
in-person meetings.

Donations to families in crisis situations
Collective cleanup hikes that help to raiseawareness about the importance of volunteer
work and environmental preservation.

Environmental protection
Collective cleanup hikes that help to raiseawareness about the importance of volunteer
work and environmental preservation.

SUSTAINABILITYREPORT2017 & 2018message fromleadership

our strategic
topicsour global
presence

We support environmental education through the Embraco Ecology Awardsustainable
solutionssustainable
operations

sustainable
partnerships

GRI content
index

47

The Embraco Ecology Award has been recognized
as a good practice by the Global Compact:

This Program places environmental education at the center of discussions both within andoutside the classroom, encouraging and recognizing social and environmental practices atpublic schools in Joinville.
The award helps to expand the depth and breadth of knowledge about methods of implementing sustainable policy in public schools. It equips students to act as stewards and transformation agents at their schools, in their families, neighborhood and cities.

25
editions
to date800+
projects
enteredSupporting sports and recreation
Embraco offer residents in Joinville (SC), our employees and their dependents a large facility for sports
and recreation. The Embraco Sports Association (ADE)features an athletics track, park, restaurant and pavilions for events, as well as services such as a fitness
center and gymnastics, volleyball, soccer, basketball,yoga and dance lessons.

100+
selected andimplemented

100,000+
peoplebenefited

SUSTAINABILITYREPORTmessage fromleadership2017 & 2018

our strategic
topicsGRI Content Index
GRI Standard

Disclosure

Page/URL

our global
presencesustainable
solutionssustainable
operations

Omission

Sustainable
Development
Goals

GRI Standard

STRATEGY

ORGANIZATIONAL PROFILEGRI 102:
Generaldisclosures
2016

GRI 102:
Generaldisclosures
2016

10

102-2 Activities, brands, products, andservices18, 19102-3 Location of headquarters

11, 12102-4 Location of operations

11, 12102-5 Ownership and legal form

12102-6 Markets served

11102-7 Scale of the organization

11, 12102-8 Information on employees andother workers

30, 31102-9 Supply chain

44, 45102-10 Significant changes to theorganization and its supply chainNone

102-11 Precautionary principle or approach

13102-12 External initiatives

6102-13 Membership of associations

23

GRI content
index

48

102-55

GENERAL DISCLOSURES

102-1 Name of the organization

sustainable
partnerships

Disclosure

Page/URL

102-14 Statement from senior decisionmaker3

Omission

Sustainable
Development
Goals

ETHICS AND INTEGRITY
GRI 102:
Generaldisclosures2016

102-16 Values, principles, standards, andnorms of behavior

11102-18 Governance structure

13

16

GOVERNANCE8

GRI 102:
Generaldisclosures
2016

STAKEHOLDER ENGAGEMENTGRI 102:
Generaldisclosures2016

102-40 List of stakeholder groups

6102-41 Collective bargaining agreements

31

102-42 Identifying and selecting stakeholders

6102-43 Approach to stakeholder engagement43102-44 Key topics and concerns raised

6, 7

8

SUSTAINABILITYREPORTmessage fromleadership2017 & 2018

GRI Standard

Disclosure

our strategic
topicsPage/URL

Omissionsustainable
solutionsSustainable
Development
Goals

sustainable
operations

GRI Standard

sustainable
partnerships

GRI content
index

Disclosure

Page/URL

49

Omission

Sustainable
Development
Goals

MATERIAL TOPICSREPORTING PRACTICESGRI 102:
Generaldisclosures
2016

our global
presence

102-45 Entities included in the consolidated
financial statements

5102-46 Defining report content and topic
Boundaries

6102-47 List of material topics

6

102-48 Restatements of information

5

102-49 Changes in reporting5

102-50 Reporting period

50

ECONOMIC PERFORMANCEGRI 103:
Management
approach2016

GRI 201:
Economic
performance
2016

103-1 Explanation of the material topic
and its Boundary6

103-2 The management approach andits components

14103-3 Evaluation of the management
approach

5201-3 Defined benefit plan obligations andother retirement plans33

1, 5, 8, 16

MARKET PRESENCE
102-51 Date of most recent report102-52 Reporting cycle
102-53 Contact point for questions
regarding the report102-54 Claims of reporting in accordancewith the GRI Standards

51
5

53

GRI 103:
Management
approach20165102-55 GRI content index

48102-56 External assurance

5

GRI 202:
MarketPresence
2016

103-1 Explanation of the material topic andits Boundary6

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach32

202-1 Ratio of standard entry level wage
compared to local minimum wage32

1, 5, 8202-2 Proportion of senior management
hired from the local community

27, 288

SUSTAINABILITYREPORTmessage fromleadership2017 & 2018

GRI Standard

Disclosure

our strategic
topicsPage/URL

our global
presence

Omissionsustainable
solutionsSustainable
Development
Goals

ENERGYGRI Standard

sustainable
partnerships

GRI content
index

50

Omission

Sustainable
Development
Goals

Disclosure

Page/URL

103-1 Explanation of the material topic andits Boundary6

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach

38, 40303-1 Water withdrawal by source

40

6, 7

303-3 Percentage and total volume of water
recycled and reused

40

6, 8, 12103-1 Explanation of the material topic andits Boundary6

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach38

305-1 Direct (Scope 1) GHG emissions

39

3, 12, 13, 14,15305-2 Indirect (Scope 2) GHG emissions

39

3, 12, 13, 14,15

305-5 Reduction of GHG emissions

39

13, 14, 15

WATER
103-1 Explanation of the material topic andits Boundary

GRI 103:
Management
approach2016

sustainable
operations

6

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach38

302-1 Energy consumption within theorganization

39

302-4 Reduction of energy consumption

39

302-5 Reductions in energy requirements ofproducts and services

7, 8, 12, 13

39302-3 Energy intensity

GRI 302:
Energy2016

GRI 103:
Management
approach2016

GRI 303:
Water
2016

7, 8, 12, 13
EMISSIONS
7, 8, 12, 13
Our products
and solutions aredesigned to provide enhancedenergy efficiency(see the chapter
on sustainable
solutions). This
indicator is being
assessed internally and will bereported for thefollowing reporting period.

GRI 103:
Management
approach2016

7, 8, 12, 13
GRI 305:
Emissions2016

SUSTAINABILITYREPORTmessage fromleadership2017 & 2018

GRI Standard

Disclosure

our strategic
topicsPage/URL

our global
presence

Omissionsustainable
solutionsSustainable
Development
Goals

EFFLUENTS AND WASTE
103-1 Explanation of the material topic andits Boundary
GRI 103:
Management
approach2016

GRI 306:
Effluents
and waste2016

sustainable
operations

GRI Standard

GRI 308:
Supplier

6
GRI 103:
Management
approach2016

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach

39, 41306-2 Waste by type and disposal method

41

3, 6, 12306-3 Significant spills

None

3, 6, 12, 14, 15

103-1 Explanation of the material topic andits Boundary6

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach44308-1 New suppliers that were screenedusing environmental criteria

All newly onboarded suppliers in 2017and 2018 werescreened against
environmental
criteria

308-2 Negative environmental impacts in the
supply chain and actions taken

GRI content
index

Disclosure

Page/URL

103-1 Explanation of the material topic andits Boundary6

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach27

401-1 New employee hires and employee
turnover32

51

Omission

Sustainable
Development
Goals

EMPLOYMENTGRI 401:
Employment
2016

44

5, 8

OCCUPATIONAL HEALTH AND SAFETY

SUPPLIER ENVIRONMENTAL ASSESSMENTGRI 103:
Management
approach2016

sustainable
partnerships

GRI 103:
Management
approach2016

GRI 403:
Occupational
health andsafety2016103-1 Explanation of the material topic andits Boundary6

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach35403-1 Workers representation in formal
joint management–worker health and safetycommittees

378403-2 Types of injury and rates of injury,
occupational diseases, lost days, andabsenteeism, and number of work-related
fatalities

37

3, 8

403-4 Health and safety topics covered informal agreements with trade unions

37

8

SUSTAINABILITYREPORTmessage fromleadership2017 & 2018

GRI Standard

Disclosure

our strategic
topicsPage/URL

our global
presence

Omissionsustainable
solutionsSustainable
Development
Goals

TRAINING AND EDUCATIONGRI 103:
Management
approach2016

GRI 404:
Training andeducation
2016

sustainable
operations

GRI Standard

GRI 408:
Child labor
2016

GRI content
index

Disclosure

Page/URL

52

Omission

Sustainable
Development
Goals

FORCED OR COMPULSORY LABOR

103-1 Explanation of the material topic andits Boundary6

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach33

GRI 103:
Management
approach2016

103-1 Explanation of the material topic andits Boundary6

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach44409-1 Operations and suppliers at significant
risk for incidents of forced or compulsory labor44, 45404-1 Average hours of training per year per
employee34404-2 Programs for upgrading employee
skills and transition assistance programs

34

8404-3 Percentage of employees receiving
regular performance and career development
reviews

GRI 409:
Forced orcompulsory
labor
2016

35

5, 8

SUPPLIER SOCIAL ASSESSMENT

4, 5, 8CHILD LABORGRI 103:
Management
approach2016

sustainable
partnerships

103-1 Explanation of the material topic andits Boundary6

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach44408-1 Operations and suppliers at significant
risk for incidents of child labor44, 45

GRI 103:
Management
approach
2016

8, 16

GRI 414:
Suppliersocialassessment
2016

103-1 Explanation of the material topic andits Boundary6

103-2 The management approach and its
components

14103-3 Evaluation of the management
approach

44414-1 New suppliers that were screenedusing social criteria

44414-2 Negative social impacts in the supply
chain and actions taken

44

8

5, 8, 16

General coordination
Embraco—Corporate Communications & Sustainability
Reporting, editing, graphic design, project management and GRI
consulting
rpt.sustentabilidade
Photographs
Embraco Archives
Embraco Corporate Human Resources, Communication andSustainability
Rua Rui Barbosa, 1.020, caixa postal 91
CEP: 89219-901
Joinville—Santa Catarina, Brazil.
Contact information
For any questions or requests for information about our Sustainability
Report 2017 & 2018, please write to corporate.communication@embraco.com. 102-53