Sustainability
Communication
on Progress

2017

This is Embraco’s Communication
on Progress in the process of
implementing the United Nations
Global Compact principles, supporting
broader UN goals.

Embraco’s Profile

Sustainability

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Engaged People

PRESIDENT STATEMENT
The world we’re going to leave
for future generations depends on
decisions taken today. Based on that,
the United Nations (UN) launcheda global agenda for sustainable
development towards 2030, with aset of global goals that governments
are expected to adopt and that
require partnerships with private
sector, civil society and citizens.
At Embraco, we see these goals
as opportunities to solve global
challenges through innovation,
investment and collaboration.
We work to be at the forefront on
our mission to develop innovative
solutions for a better quality of life,
by meeting our customers’ demands
and differentiating ourselves throughhigh performance, energy efficiency
and reduced usage of natural
resources in over 80 countries that
Embraco has commercial presence.

This combination of technology drivers andsustainable development has been part of our DNA
and has brought new opportunities to innovate.
We’re not only improving the overall refrigerator’soperations through energy consumption savingsand superior food preservation, but also offering
services to expand our portfolio related to reverse
logistics and Internet of Things.
In our plants, we have advanced with theimplementation of WCM - World Class
Manufacturing, a methodology that helps us
to improve productivity, energy and water
consumption, while minimizing possible negative
impacts of operations.
In the next pages, you can check out, in detail, theoutcomes and achievements reached during 2017by our talented and engaged team. Also, in thisCommunication on Progress (COP) we share ouractions and initiatives to continually support anduphold the ten UN Global Compact Principles.
Have a good reading.

LUIS FELIPE DAU
President of Embraco

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EMBRACO’S PROFILE
Promote quality of life through innovative
solutions for refrigeration: this is themission of Embraco, one of the largest
global cooling specialists.

11

business units

1,700

patents granted

Today, we’re present in over 80 countries showcasing
technologies that advance high performance andenergy efficiency. We provide cooling solutions forhousehold, commercial - such as medical applications,food retail and services - distribution and aftermarket
segments. Through partnerships with startups anddigital services, we also deliver value and intelligenceto customers.

Innovation is in our DNA and it happens basedon our MISSION and VALUES:

To provide
innovative
solutions for abetter qualityof life.

Respect
Integrity
Diversity with Inclusion
Teamwork
Spirit of Winning

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A TEAM OF TALENTS
Our employees are an essential pillar to our business. Present in different continents, with multiple
nationalities and cultures, we have a talented team divided as follows:

EMPLOYEE PROFILE

In total, Embraco has 10,698 employees.
Numbers collected on December 31, 2017.

Distribution of employees by gender

Distribution of employees by country
0.42% 0.08%
21.46%

29%

45.80%
12.59%

71%

5.04%
14.60%

Male employees

Female employees

SUSTAINABILITY - COMMUNICATION ON PROGRESS 2017

Brazil

China

Italy

MexicoSlovakia

USA

Russia4

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Embraco’s corporate governanceCompliance

At Embraco, there is a “staff” composed of the President, five Vice-presidents andtwo Directors. This group is responsible for defining and monitoring the execution of
the company’s strategy; analyzing the organization and the executives’ performance;and creating long-term and directional goals aligned to our mission.

Embraco’s reputation is a direct reflection of its daily performance.
To ensure that business and people are aligned to our values, we havean Ethics Committee, composed of representatives from Compliance,
Audit, Corporate Security and Labor Relations areas. This committee is
responsible for reviewing our policies, accounting records and internal
controls and also to guarantee that international requirements arebeing followed, such as Sarbanes-Oxley (SOX), a US law created toreduce the risk of financial fraud.

The staff also evaluates key decisions in the economic, environmental and social
aspects that influence our company’s results, and is responsible for the risk
management of the organization.

ANTI-CORRUPTION
Aligned with the United Nations
Global Compact Principles,
Embraco works against corruption
in all its forms, including extortionand bribery.

President

Vice-presidents

Directors

All those involved in this structure are responsible for the creation of goals
fully aligned with the organization’s mission and long-term objectives.

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OUR VALUES AND PRINCIPLES
To maintain an environment where open andhonest communications are the expectation,
not the exception, ethics principles should
guide not only employees’ conduct, but also
other stakeholders’.
All publics can be aware of the expectedbehavior and practices through these
Embraco’s official documents:
Principles and Organizational
Values Letter;
Code of Ethics;
Global Compliance
Policies (GCP)

Engaged People

ETHICS
Beyond these official documents, we count on a Compliance team,that makes sure that it permeates all our company and is responsible
for some specific actions, such as:

1,400
employees

Periodic assessment of documents and internal proceduresfor continuous improvement.

Creation and implementation of specific procedures related
to global compliance policies in our units, like donationand freedom of association.

Complaint channels management: All publics can raisea concern anonymously, where local law permits, using ourconfidential Ethics Hotline, available by phone or online.
Check here for more information about each country.

47

sessions75%

of leaderspresence

ADMINISTRATIVEEMPLOYEES’TRAINING
2017

COMPLIANCE E-LEARNINGS

3
We have 15 GCPs to further explainsome topics, as Antitrust Competition
Laws, Diversity, Equal Opportunity
and Respect in the Workplace andEnvironmental, Health& Safety.

sessions

Employees’ training and communication about
Ethics matters.

SUSTAINABILITY - COMMUNICATION ON PROGRESS 2017100%of administrative
employees

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SUSTAINABILITY
For us, at Embraco, Sustainability goes beyond
developing innovative solutions and ensuring
efficient operations, it’s part of this company’s
beliefs. Through our committed team, we’re able toshare value with partners, customers, suppliers andsociety while sustaining our business growth andmission of delivering a better quality of life.”

URSULA ANGELI
Vice-president of Sustainability,
Human Resources and Communication

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SUSTAINABILITY
We develop sustainability through three workstreams:

SUSTAINABLE SOLUTIONS
We’re committed to provide high energy-efficient solutions, and this is strategic for the
research and development area, as well as reduce the environmental impact through theentire life cycle.

SUSTAINABLE VALUE CHAIN
Our vision of sustainability extends throughout our value chain, from the purchase of raw
material to our own operations.

ENGAGED PEOPLE
We develop and engage employees in our culture of diversity to promote their safety andprofessional growth, and contribute to the communities in which we are located throughsocial programs and volunteer work.

EXAME SUSTAINABILITY GUIDEIn 2017, we participated for the 8th time in the ranking of Brazil’s most sustainable companies, according to the
Exame Sustainability Guide. We were recognized in the Electronics category for the Nat.Genius case – a program
originally created to recycle compressors that is now considered an international reference in circular economy(read more on page 12).

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SUSTAINABILITY& SDG INDEX

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EMBRACO´S PROFILEA TEAM OF TALENTSCOMPLIANCE

Our commitment tosustainability is also
reinforced by our support
to the Sustainable
Development Goals (SDG),
and for the fact thatwe’ve been signatories of
the Global Compact since2004 – both initiatives
proposed by the United
Nations (UN).
Check out how each topic
is aligned with the SDGs:

OUR VALUES AND PRINCIPLES

4

5

8

9

10 16

13

9

RELATIONSHIP WITH
CUSTOMERS7INNOVATIVEPORTFOLIO

8NEW BUSINESSSUSTAINABLE SOLUTIONSProvide high energy-efficient solutions and reduce
environmental impact through the entire life cycle.

11 Nat.Genius
12 diili
88

9

SUPPLIERSENVIRONMENTAL

12 EFFICIENCY
7

EnergySUSTAINABLE VALUE CHAIN
Improve productivity and reduce impacts fromraw material to our own operations.

11 Waste

ENGAGEDPEOPLE

4

PEOPLE EXCELLENCE

6

Promote employee
safety and professional
growth, contribute to
the communities.

8

HEALTH & SAFETY

4

TRANSFORMINGCOMMUNITIES

Water

Click on each SDG to know more.

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Sustainable solutions
Innovation is at the center of our strategy andencompasses not only the development of our
products, but also new business models, digital
services and processes.
Our goal is to help customers and stakeholders
succeed, evaluating new opportunities forpartnerships in household, commercial - such as
medical applications, food retail and services distribution and aftermarket segments.

RELATIONSHIP WITH CUSTOMERS
Characterized by long-term partnership;
Co-development actions generating
business opportunities;
Assessment of the level ofcustomer satisfaction.

RELATIONSHIP WITHREFRIGERATION MARKET
From the beginning of our
trajectory we have built a
relationship of trust with theprofessionals of the segment,
through educational and technicalcontents. One of the channels
with the greatest interaction withthe public is the Refrigeration
Club, that was created as a print
magazine 34 years ago.
For the past five years, theRefrigeration Club has also a
website available in more than
five languages, creating aninteractive forum to exchange
experiences. In the last two
years,the website received more

TOOLBOX APPLICATIONWe also provide digital services through Embraco ToolBox (available for download
at App Store and Play Store). It assists the professionals on day to day tasks,
offering a set of virtual tools in the same place, such as:
Nearest distributor search tool

Refrigerant Slider

Embraco’s product catalog

Exclusive training andlecture schedule

Cross-reference product guide

800,000 visitsthanand consolidated itself as areference in refrigeration industry
news and practices .
In 2017,226 customers from56 countries answered the survey.
Our highest score was in productperformance, with good ratings in
product quality, quality assistance,
supplier responsiveness andtechnical support.

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INNOVATIVE PORTFOLIOVESF FOR HOUSEHOLD
To improve energy efficiency, fight climatechange and deliver value for the business, wedevelop innovative and sustainable solutions
considering the entire life cycle.
Embraco’s pioneering research has led to thedevelopment of new technologies and solutions,such as variable speed and products that use
natural refrigerants.

This Fullmotion solution with highperformance is capable of reducing
energy consumption by up to 45%.

SOME
EXAMPLES:FMFT FOR LIGHT COMMERCIAL
With variable speed, it reduces up
to 30% when compared to the mostconventional compressors.

For more than 20 years, Embraco
has used natural refrigerants as analternative to reduce the negative
impacts on the ozone layer,
greenhouse effects and to improvethe equipments’ efficiency index.

SUSTAINABILITY - COMMUNICATION ON PROGRESS 2017

PLUG N´ COOL FOR
SUPERMARKETS
A complete solution with highenergy efficiency that uses naturalrefrigerant (R290).

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NEW BUSINESS
Besides our current business, we seek opportunities
to expand our portfolio with our New Businesses
area, through partnerships and digital services that
anticipate market trends and help solve customers’
or end-users’ challenges.
In 2014, we took inspirationfrom nature to create
Nat.Genius, a reverse
logistic operation thatgenerates positive impacts
for the environment
through recycling, reuse andremanufacturing of several
electronic products at theend of their useful life.
Developed based on the Internet of Things(IoT), diili understands the operation ofcommercial freezers and refrigerators,
indicates the equipment’s location andalerts about lack of stock, faults or theneed for preventive maintenance.
The intelligence generated enables
brands to better understand its consumer
while supporting processes that can
result in sales increase. It also reduces
maintenance costs and has the potential
to decrease the refrigerator’s energy
consumption by

15%.

Since 2016, Nat.Genius has
also been using its know-how
to offer waste management
consultancy services for
its customers around theglobe. There were projects
developed in Europe, Mexico,
China and USA.

SOME RESULTS
In the last 3
years, Nat.Genius
recycled more than

20 thousand

tons of materials:

SUSTAINABILITY - COMMUNICATION ON PROGRESS 2017

13.4k
tons of steel

4.8k

tons of iron

1k

tons of copper

1.6k

tons of plastic

The representative
impact of thisbusiness wasrecognized by the
Ellen MacArthur
Foundation, which
considers it as aworld reference.

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Sustainable Value Chain
To continually increase efficiency
and reduce direct and indirect
impacts, we work with theentire value chain looking foropportunities.

SUPPLIERS
More than having a qualified
supplier base, it is essential toensure legal compliance andencourage sustainability bestpractices. That’s why our suppliersalso have to be aware and alignedwith our Code of Conduct, which
focuses on matters like: anticorruption, discrimination, nontolerance of slave and childlabor, deforestation or otherenvironmental infractions, andnon-compliance with labor laws
in the country.

There are several aspects (Quality, Logistics, Cost andSustainability) considered in sourcing, development
and supply base management. By following thoserequirements, in 2017, we worked withdirectmaterial suppliers fromdifferent continents.

STRATEGIC MANAGEMENT OF DIRECT MATERIAL SUPPLIERS

443

3

1.
Assessment

Supplier Geographical Distribuition

38.2%

2.
Audit andcompliance

25.4%

1

local
workshop1

globalworkshopsupplier
26 potential
assessments

76 audits

New and existing
suppliers

35

new
supplier andcomponents
developed

4.
Monitor anddevelopment

3.
Certification

973

certificationsof supplier andmaterials

36.4%
In 2017 we performed this workshop in China, with participation of representatives
from Brazil, Mexico, Slovakia. We also performed one local workshop in Europe.

America

Asia

EuropeCODE OF CONDUCT82%

In 2017, we had
supplier adherence to ourcode of conduct.

In the Procurement department, we combine thebenefit of having suppliers with the ability todeliver their material globally with those that act
more local, supplying for just one plant.

SUSTAINABILITY - COMMUNICATION ON PROGRESS 2017

SUPPLIER’S DAY
Once a year, we gather partners from our supply chain and hold the Supplier Day event torecognize and engage with this strategic audience. In 2017,suppliers took part inevents held in Brazil and China (both Beijing and Qingdao plants).

250

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ENERGYIn 2017, we consumed 1,449,926,397 MJ of energy.

OUR OPERATIONS
Since 2013, we’ve adopted WorldClass Manufacturing (WCM), a
structured, rigorous and integrated
methodology to enhance ouroperational performance.
By the end of 2016, all of our plants
had implemented it, resulting
in continuous improvement andsimplification, while leveraging
people’s capabilities to eliminate
losses and wastes.

ENERGY CONSUMPTION IN 2017

Engaged People

When we look at the relative global number, we cansee that the ratio of MJ per compressor produced,
considering total energy consumption, was 46.29 in2016 and 44.11 in 2017, which means that we used
4.69% less energy per unit produced.
More than that, considering just electricity, thereduction was up to 7.28%. Mainly due to adoptionof several energy efficiency initiatives in our plants
resulting from implementation of WCM.

37.90%
ENERGY CONSUMPTION RATE (MJ/COMPRESSOR)

46.29

62.10%-4.69%-7.28%

29.54

ENVIRONMENTAL EFFICIENCYWith WCM we continuously seek to havea lean manufacturing and improve ourenvironmental performance, eliminating
risks related to environmental
legislation and maximizing
opportunities and best practices.

INDIRECTENERGY

Electricity

2016
DIRECT
ENERGYSUSTAINABILITY - COMMUNICATION ON PROGRESS 201716.74

Natural Gas
DieselGasoline

Liquefied
PetroleumGas (LPG)

Direct energy

44.11
27.39

-0.13%
16.72
2017
Indirect energy

14Embraco’s Profile

WASTE

Sustainability

DESTINATION OF HAZARDOUS/ NON-HAZARDOUS
WASTE IN 2017

Considering ourglobal operations,in 2017, we
generated 124,442
tons of waste. Of
this total, 87%
were recycled,
co-processed orincinerated and
13% were sent tolandfill.

13%

Recycle

-17%
34

2016

28

Sustainable Value Chain

WATER

Landfill

Considering just ourcompressors plants, to eachproduced compressor, we’ve
sent only 28g of waste
to landfill and we have a
global target to zero out
this number.

2017

We also use WCM 5Rs approach to help us achieve Zero: we first think about
how to REFUSE and REDUCE waste generation, then look for the correct way to
REUSE, RECYCLE and RECOVER.

In 2017, we reduced by 7.34%
the consumption of potablewater globally. For each produced
compressor, 18 liters were used,
two less than in 2016, which means
more efficiency in the process.

SUSTAINABILITY - COMMUNICATION ON PROGRESS 2017*considering the UN average that110 liters per day are enough forbasics needs.

Last year, we consumed 606,647m³ of incoming water.

29%

71%

Water supply networks

428,446
178,201

Water supply networks

Wells

WASTEWATER TREATMENT
AND WATER REUSETOTAL WATER CONSUMPTION (m³)

Wells

Engaged People

INCOMING WATER CONSUMPTIONIn practice, the company avoided
consuming 48 million liters ofwater in the production processduring 2017, enough for the annual
consumption of 1,200 people*.

87%

WASTE SENT TO LANDFILLS RATE
(g/COMPRESSOR)

Sustainable Solutions

221,815

Water From Recycling

To prevent the pollution of natural
resources, all of our plants haveinternal wastewater treatment.
Beyond that, compressor plants
in Brazil, China and Mexico reuse
this treated water in discharges
of toilets, cooling tower, garden
irrigation or sidewalk washing.
Considering all the water
consumed by the company,
including potable and non-potable,
was from reuse.

27%

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CERTIFICATIONS
To guarantee sustainability in all global markets, Embraco has the following external certifications:

ISO 9001OHSAS 18001

IECQ QC 080.000

ISO 14001

ISO TS 16.949

Based on quality management
principles, including astrong customer focus, themotivation and implication of
top management, the process
approach and continual
improvement.

Focused on occupational
health and safety
management, it provides aframework to identify, control
and decrease the risks at theworkplace.

Establishes procedures for
manufacturers of electricaland electronic products andcomponents to implementa management process ofhazardous substances.

Guides the implementation ofenvironmental management
systems to enhanceenvironmental performanceand fulfil complianceobligations.

In conjunction with ISO 9001,
defines quality management
system requirements for thedesign and development,
production and, when relevant,installation and service ofautomotive-related products.

Compressors
Foundry
Components & CoolingCompressors
Foundry
Components & CoolingCompressors
Foundry
Components & CoolingCompressors
Foundry
Components & CoolingFoundry

Compressors
Electronics

Compressors
Electronics

Compressors
Electronics

Compressors
Electronics

Electronics

Compressors

Compressors

Compressors

Compressors

Compressors

Compressors

Compressors

Compressors

Compressors

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Engaged People
For Embraco, people’s safety and development are part of its core strategy.

PEOPLE EXCELLENCE
Our People Excellence strategy aims to unleash individualand collective talents and inspire a winning culture.

Extraordinary
performanceGreatpeopleWe also believethat all employees
should beprotagonists of
their careers anddevelopment within
the company.

Our Leadership Model inspires everyone to live and leadthe Embraco values:

CREATE

BUILD

a compellingand inspiring
strategyand sustain
broad
followership

DRIVE
differentiatedresults

Winning
cultureENGAGEMENT
To measure the level of employee engagement, we carry out an annual survey.
In 2017, 86% of Embraco’s employees responded and our overall rate
was 76%.

In 2017, Embraco was featured for the 10th time in the Best
Companies to Work guide, published by Você S/A magazine,
which recognizes the most prominent organizations for HR
and management practices.

SUSTAINABILITY - COMMUNICATION ON PROGRESS 2017

Talent Attraction
Recruitment and selection processes are carefully done considering
our Leadership Model, Values and Strategy. The internal recruiters also
conduct end-to-end processes, taking into account specific relevant
information for each position and country, always focusing on diversityof gender and nationality.

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OUR DEVELOPMENT PROGRAMS ARE BASED ON:

PROFESSIONAL DEVELOPMENT
To boost out talents’ professional growth, we use Career
Compass, a tool that helps employees map, discuss anddocument a career journey.

The goal is toprovide options to
support employees
throughout theircareers.

W career is also a tool that supports employees to drive
their own careers, and it’s divided into three paths:
Technical: employees who work in researchand engineering functions and are involved in
product transformation processes.

Projects: employees who work on larger
projects defined in the Global Product
Leadership (GPL), with high technologicaland managerial complexity.

Administrative: employees working in theadministrative and support areas, not involvedin product transformation processes.

SUSTAINABILITY - COMMUNICATION ON PROGRESS 2017

Experience

Exposure

Educationmeans possibilities

means challengemeans discovery

RESPECT FOR LABOR
WCM’s People
Development team is a
key player to transform thecompany in a continuous
learning organizationand speed up thetransformation process.
Based on a systematic
approach, this pillar
sustains the developmentfrom the plant director tothe operator.

Present in seven countries, we‘re always focused on complying with local labor laws:
COLLECTIVE BARGAINING AGREEMENTSCountry / Plant

Percentage of
employees covered

Brazil100%

China (compressors)

100%

Italy

100%

Mexico74%

Slovakia

100%

Our
operations
in Qingdao,
United States
and Russia
don’t require
separatebargaining
agreements.

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HEALTH AND SAFETY
We have a very strong leadership commitment to ensure
safety on a daily basis. In addition to the locations’routines, where each plant holds weekly meetings to
discuss safety matters, the subject is also the first topic
discussed at the monthly Leadership Meeting, in which
the President, Vice-presidents and Directors of all units
take part.
To achieve the desired Safety Culture, we need toengage all Embraco employees, visitors, customers andcontractors. Our Global Compliance Policy covers this
topic and we have also a more detailed guideline named
Safety Golden Rules.

Also, in order to manage operational safety, we use WCM, that has a clear objective toachieve and maintain the goal of ZERO accident.
The following initiatives also add value while protecting our people:

27,045
Best Practices
Platformin which our teams
share the solutions andimprovements that areextended to other sites.

THE SAFETY
GOLDEN RULES:
Created to spread awareness of safety
behaviour and how to act in daily
situations;

Safety Kaizens

to reinforce safe behavior
among blue collars inblue collars in all shifts in
manufacturing areas.

(improvements)suggested by blue
collars.

Autonomous Safety Group: created by blue collars to takeownership and lead safety routines while practicing specificactivities as inspections, audits, checks, trainings to support
their development in the Safety learning.

Covers the main topics and risks of ourcompany;It’s standardized in all plants for our
employees, suppliers and visitors (all people
that enter a manufacturing site must beaware of it).

Daily safety dialogue

Safety Management
Audit Training (SMAT)
a tool that seeks to createa safe work environment
through the observation of
employees’ behavior.

Leadership Safety Audit: a specific SMAT whereleadership is directly responsible. In 2017, weregistered an overall of 4,980 audits.

With all these initiatives, we ensure the safety of our people and reach important advances: all sites’ Days Away cases’ rate results in2017 is 0.11, which is around 9 times better than the average.
*Reference from 2015 U.S. Bureau of Labor Statistics, considering U.S Manufacturing Industries.

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TRANSFORMING COMMUNITIES
Being a multinational company, we havedifferent opportunities to make a positive impact
around the world. In this sense, Embraco has a
global policy to guarantee alignment with thebusiness and local teams, to better understandthe different cultures and act according to theneeds of each community.

Sustainable Solutions

Sustainable Value Chain

1,800

over

2017 Embraco Social
Investment Activities

Engaged People

16,000hours ofcommunity
work

peoplebenefited

USA
Community work

SLOVAKIA

Donations

Community work

We engage employees to volunteer in activities
that bring benefits to the people living aroundthe plants and offices globally. Our activities
also contemplate social projects (as Embraco
Ecology Award), donations and technical support
to local NGO organizations that develop projects
or activities that generate positive impacts forthe society.

DonationsSocial Programs

CHINA
Community work
Social Programs

MEXICO
Community work
DonationsITALY
BRAZIL

Social Programs

Social Programs
Donations

SUSTAINABILITY - COMMUNICATION ON PROGRESS 201720

Overall coordination
Embraco - Corporate Communication and Sustainability

Writing, Translation,
Revision, Layout and Productionação integrada

Rui Barbosa Street, 1020, mailbox 91
Zip code: 89219-901
Joinville - Santa Catarina, Brazil

In case of doubts, suggestions or comments about this document,
contact us through this email: corporate.communication@embraco.com.