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Doing business right

 

* The foundation of our commitment to being a responsible global citizen is to operate efficiently and sustainably, while producing products and services that allow our customers

to do the same. We care about "doing business right" — and how we get our results is just as important as the results themselves.

 
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More of what matters:
proactive management
is the foundation of our
sustainability program

We embody our principle of doing business right by focusing on the sustainability impacts in our business. We resolved to do more of what matters by prioritizing the sustainability priorities most important to our stakeholders and us. We analyzed our most important sustainability priorities, which are now integrated into our sustainability and reporting strategies and serve as our compass for mapping future performance.

 
 
Our analysis consisted of the following steps:
 
  • 1

    Collected input from a diverse group of internal and external stakeholders. After analysis of internal and external research, we compiled a master list of potential issues to consider for additional review.

  • 2

    Leveraged our understanding of the GRI framework to narrow the master list of priorities to those most important to stakeholders and aligned them with GRI G4 reporting standards. (The Global Reporting Initiative is a non-profit organization that offers the world's most widely used sustainability reporting frameworks for performance on human rights, labor, environment, anti-corruption and corporate citizenship.)

  • 3

    Conducted additional internal interviews to prioritize the topics with substantive impact.

  • 4

    Presented the findings to our leadership team, who provided feedback that was incorporated to a final list of sustainability priorities.

  • 5

    Reviewed existing data and interviewed functional leaders to gain a greater understanding of our current state, assessing our strategy, goals, metrics, performance and reporting on each issue.

 
 

Our sustainable priorities



 
 
 
Throughout our process, we implemented the GRI "Principles for Defining Report Content":
 
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Materiality:
 

We evaluated potential issues based on the significant economic, environmental and social impact using stakeholder input.

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Stakeholder inclusiveness:
 

We collected input from both internal and external stakeholders and validated our results with internal leaders.

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Sustainability context:
 

In identifying potential material issues, we consulted sources both within and outside our industry. We present our sustainability performance so that stakeholders may easily compare us with other organizations.

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Completeness:
 

For each of our prioritized material issues, we provide stakeholders with our management approach and performance.

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Balance:
 

We consider both our successes and our challenges associated with managing each of our material issues.

 
 
Mapping the boundaries of our sustainability priorities along our value chain.
 
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To understand the boundary for each of our sustainability priorities, we mapped the impacts along our value chain. Through this exercise, we divided our impacts into three groups:

 
  • Upstream
  • Internal
  • Downstream

In the table on the right, we have captured our priorities and their associated boundaries.

Material issue Boundary
Community involvement Internal, Downstream
Disclosure Internal
Economic value Upstream, Internal, Downstream
Ethics and compliance Upstream, Internal
GHG and emissions reduction Internal, Downstream
Health and safety Internal
Inclusion and diversity Internal
Operational excellence Internal
Products Internal, Downstream
R&D and innovation Internal, Downstream
Risk management Internal
Spills and releases Internal, Downstream
Talent management Internal
Waste reduction Internal
Water usage Internal
 
 
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Stakeholder engagement: essential to our continued business success

 

Our business operations affect many groups and organizations across the globe. In turn, these stakeholders have a fundamental impact on Eaton's sustainability performance. We identify these groups based on each group's impacts and influence associated with our business practices. Our key stakeholders are:

  • Customers
  • Employees
  • Investors/shareholders
  • Suppliers
  • Local communities
  • Governments

Our processes for engaging with stakeholder groups and identifying and responding to their concerns vary. One way we identify and summarize stakeholder concerns is through the materiality assessment. The outcome of this assessment helps us define our strategy, goals, metrics and reporting on the most important issues to Eaton and our stakeholders.

 
 
Customer engagement: to understand market needs and drive business value
 

Our customers help us understand and explore innovation opportunities. Through our direct and frequent engagement, we develop and launch products that solve our customers' critical power management challenges.

We engage with our customers through two innovative methods: our Customer Advisory Board and our Customer Relationship Reviews.

Through our Customer Advisory Board, we solicit unfiltered feedback about how we can continuously improve our performance. Customer feedback through this channel helps us identify our successes and areas of opportunity. We incorporate this feedback directly into our action plans and reporting efforts.

The Customer Relationship Reviews (CRR) is a face-to-face interview process conducted with decision-makers and influencers from key strategic customers. We conduct more than 1,000 CRR interviews each year. We often interview more than one contact at each account to gain a well-rounded view of the customer's perceptions of our company.

The Customer Relationship Reviews (CRR) is a face-to-face interview process conducted with decision-makers and influencers from key strategic customers. We conduct more than 1,000 CRR interviews each year. We often interview more than one contact at each account to gain a well-rounded view of the customer's perceptions of our company.

Results are delivered to key leaders within each business and follow-up action plans are developed and monitored.

Learn more about the value we deliver to our customers.

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Employee engagement: to foster a collaborative atmosphere of sustainability and excellence at every level of our operations
 

Our primary method for measuring employee engagement is our biennial employee survey. The survey provides a structured way to evaluate employee engagement and to solicit ideas for how we can keep improving our workplaces. We have held what is considered a favorable employee engagement score, according to external normative data, since 2008. A common Eaton-wide action planning and follow-up process is utilized to produce direct and measurable improvements. This process extends all the way to the direct reports of the CEO, who each provide a summary of their action plans after the survey.

In addition to the survey, it is common for managers to conduct informal meetings with employees on an intermittent basis. While managers regularly meet with their direct reports, they also conduct skip-level meetings with the employees who report to their direct reports, which is a common practice for informal feedback.

Roundtable meetings occur when a plant manager or other executive calls a meeting with a small number of employees during site visits. During these meetings, employees can ask questions and provide feedback. This practice commonly occurs when an executive travels to visit a site.

All employees receive information through our internal intranet system called JOE (named after our founder, Joseph Oriel Eaton). Employees without computer access can access JOE at kiosks at their specific job site.

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Investor and shareholder engagement: to identify and address potential risks to our long-term financial viability
 

Eaton pursues ongoing engagement with our shareholders through:

  • Annual shareholders meetings
  • Annual reporting mailed to shareholders and available on our website
  • Analyst conferences and reports
  • Investor Relations page on Eaton.com where shareholders can submit questions or retrieve financial information from Eaton archives
  • Meetings between investors, senior leadership and investor relations

 

Our Investor Relations team hosts our quarterly earnings call and communicates with our investors. Through these communications, we describe our financial position and the value of our company to current and potential shareholders.

Almost a decade ago, Eaton was among those to pioneer the integration of our financial and sustainability reporting. In 2016, we transitioned to providing most of this information digitally.

Since 2006, we have reported our GHG emissions to CDP, an international nonprofit environmental reporting organization. The annual CDP Climate Change survey provides critical information to our investor and potential investor audience. Learn more about our CDP survey responses.

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Supplier engagement: to proactively manage our sustainability performance throughout the value chain
 

Our supply chain activities are an important element of our sustainability performance. We work actively with our suppliers to ensure they are meeting Eaton's expectations to operate responsibly. We further engage directly with suppliers on select focus areas such as:

  • Financial stability and operational efficiency
  • Environmental responsibility including greenhouse gas emissions management via CDP
  • Social responsibility, such as conflict minerals
  • Supply chain meetings

Our managers and buyers supplement these strategic approaches with direct, daily interactions.

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Financial stability and risk management:

Through our Supply Chain Continuity Program (SCCP), we aim to develop a predictive supply chain. We work directly with suppliers to develop guidelines, processes, tools and technology to support supplier continuity planning. This planning aligns with the financial, operational, environmental and safety requirements of our suppliers. Our Supplier Excellence Manual includes our risk management and continuity guidelines.

We engage extensively with our top 100 suppliers, by spend, to assess risks. We categorize risks and enhance our mutual understanding of the types of risks affecting each relationship. After identifying potential risks, we discuss mitigation strategies to prevent failures and recovery strategies to address failures.

Additionally, we deploy our structured supply chain continuity and risk management guidelines. We apply these guidelines to a variety of situations. We also implement tools to monitor suppliers for financial risk, evaluate potential events and conduct assessments. During site visits with all suppliers, our business continuity team members discuss risks and back-up plans with our suppliers.

Learn more about our supply chain guidelines

 
 
 
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CDP Supply Chain program:

Through the CDP Supply Chain Program, we seek to better understand and improve our environmental footprint and those of our suppliers. Our participation emphasizes to our suppliers the importance of tracking and reducing emissions, energy use and identification of associated risks and opportunities.

In 2016, we asked approximately 150 strategic suppliers to join us in our sustainability commitment by completing the CDP Supplier Questionnaire. We prioritize and select suppliers based on a variety of risk-based criteria. These criteria include top spend and carbon emissions intensity of supplied products or operations, among others.

We provide support assistance including training and one-on-one consultation to suppliers completing the questionnaire.

We leverage climate change data reported by our suppliers to enhance our understanding of our footprint. We also use this qualitative and quantitative data to monitor climate change-related risks and opportunities within our supply chain and utilize relevant supplier-reported emissions data in calculating our publicly reported Scope 3 emissions.

 
 
 
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Conflict minerals:

Eaton is committed to ensuring our products do not incorporate conflict minerals, which are minerals smelted into tin, tantalum, tungsten and gold sourced from entities that directly or indirectly finance conflict in the Democratic

Republic of Congo or adjoining countries. Eaton's dedicated management team with senior executive oversight works to directly engage our supply chain on responsible sourcing practices.

Learn more about our policy on conflict minerals.

 
 
 
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Supply Chain Management meetings:

Our Supply Chain Management meetings are an important method for engaging with our strategic suppliers. These suppliers represent those with whom we hope to grow our business and expand our relationship in the future.

We aim to conduct these meetings annually. In the past, we have hosted more than 250 strategic suppliers and 500 attendees. In 2016, we hosted a combined in-person and virtual global supplier meeting event, which was both highly successful for participation and enables our more remote suppliers to participate more easily at lower cost

and even avoid greenhouse gas emissions and other travel-related impacts. During these events, we typically bestow our highest award for supplier excellence and other recognitions for outstanding performance to our highest performing suppliers.

Additionally, we emphasize the important role of suppliers in helping achieve our sustainability goals and as critical partners in Doing Business Right.

Learn more about our supply chain practices.

 
 
Community engagement: to enhance the quality of life for our employees and those impacted by our operations
 

We care deeply about the communities in which we live and work. We invest our time and money in programs making a difference in the lives of others. Robust, healthy communities are a vital component of global sustainability.

To deliver value on a local level, we identify the specific needs of individual communities. In each of our facilities around the world, local managers and employees work together to determine the programs their facility will support, through philanthropy or volunteerism. This allows our efforts to have the most impact, as programs are selected by members of the community.

Supporting local communities is ingrained in our history. Our founder, Joseph O. Eaton, partnered with other community leaders to establish the entity that

eventually became the United Way. Through our various community contributions, we exemplify deep, personal commitments to the communities where we live and work. Joseph's legacy lives on through our work and our enhanced communities around the world.

Learn more about our local community involvement.

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Government engagement: to develop and support products, programs and policies that benefit our global society
 

Governments represent three different relationships for our company. Governments represent our customers, our partners in enhancing global sustainability, and our regulators. We value and respect our relationships with all government bodies.

Governments represent an important customer segment for our company. We implement environmentally beneficial power management projects for local and national governments worldwide.

These projects include, among others:

  • Hybrid powertrains that boost fuel economy and reduce emissions in commercial and government vehicles
  • Electrical power control systems for the efficient use of power in office buildings
  • Hydraulic aircraft systems that reduce weight and save fuel
  • Automotive superchargers for enhanced fuel economy
  • Electrical and hydraulic products for solar power and wind turbine systems

Throughout our work, we respect the role of governments as our regulators. We have extensive policies to ensure compliance with the special laws, rules and regulations related to government contracts. The policies extend to our relationships with government personnel. We do not make contributions on behalf of our company to political candidates or parties, even where lawful.

Learn more about our commitment to ethics and compliance.

Learn more about our Ethics Guide and associated policies.

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Eaton demonstrates accountability
for sustainability practices and
performance at the highest levels of
governance

The success of our sustainability practices is reflective of the accountability we instill throughout our organization. We have strong internal processes and controls for managing our sustainability performance. Explore our interactive governance map and learn more about who at Eaton has the primary responsibility for various sustainability practices, how we monitor those practices, and how we evaluate our practices and goals.

 
 

Eaton's governance map – an interactive journey of our sustainable performance management

 
 
 

Our corporate governance policies establish a common set of expectations and governance practices that guide our senior management and board of directors.

Learn more about our corporate governance policies and charters.

Integrating sustainability performance with financial performance and providing monetary incentives for meeting goals

We communicate our EHS performance in conjunction with our annual financial reporting to stakeholders. We evaluate our performance against the goals developed annually by our Senior Leadership Council. Once established, we communicate our goals across our business units. We ensure this communication reaches down through our organization to our manufacturing service and other operations within the company.

We assess progress to goals through our APEX program. APEX enables us to evaluate each employee against established goals and conformance to company values. We leverage these APEX performance evaluations to make compensation and other financial incentive decisions for all employees and executive leaders.

Meeting and exceeding our sustainability goals is essential to our overall business success. To encourage progress across our business, we provide incentives for achieving high performance. Our corporate executive team receives a monetary reward when we achieve our annual emissions reduction targets set by our CEO. Additionally, all employees have the opportunity to receive awards celebrating excellence in the workplace. We design the awards process to engage the entire workforce in our progress. We also aim to increase the development and transfer of best practices through these awards.

Our awards recognize practices enhancing our energy efficiency and sustainability progress. Awards highlighting sustainability achievement include our Continuous Improvement Award, Engineer of the Year and Eaton Business Excellence, among others.