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Governance

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

Strong systems and processes

We recognise that we need strong governance systems and processes to ensure that we deliver on our vision and on our financial and aspirational goals. 

Sustainability Governance

Eaton is proud to have strong internal processes and controls for managing our sustainability performance. Many of these controls connect individuals and teams across our company and include management at each level of the organisation. We invite you to expand each section of the governance table below, which features our governance and management approach for material topics and who at Eaton is responsible for them.

Integrating sustainability performance with financial performance and incentives

We communicate our ESG 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 organisation to our manufacturing, service and other operations within the company.

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. 

 

Board of Directors

Our Board is composed primarily of independent directors, except for our Chairman and Vice Chairman. The audit, compensation and organisation, finance and governance committees are chaired by independent directors. The governance committee's oversight includes significant public policy issues with respect to our relationships with shareholders, employees, customers, competitors, suppliers and the communities in which we operate, including such areas as ethics, compliance, environmental (including climate change), health and safety, and public and community affairs issues.

Senior Leadership

Under the direct supervision of the Board of Directors, strategic, financial, operational, legal and compliance risks and opportunities are continually assessed at the company level by Eaton’s Senior Leadership Committee (SLC), the most senior management committee within the corporation. 

Sustainability Governance Council

The SGC is comprised of 35 representatives from across the global enterprise. The group meets regularly to advance our strategy, discuss our response to emerging issues and ensure that we have a unified position on environmental, social and governance (ESG) issues. The SGC includes functional leaders who report to members of Eaton’s Senior Leadership Council.

Inclusion and diversity

Management role and board oversight

Inclusion and diversity are primarily the responsibility of our Global Inclusion Council, made up of the Senior Leadership Committee members, leading our efforts by working with our four Regional Inclusion Councils. Regional Inclusion Councils are comprised of business leaders from each region that tailor their efforts to the region in which they work. 

Regional Inclusion Councils engage with and support the work of our Inclusion Eaton Resource Groups.

Our Vice President of Global Inclusion and Diversity, who reports to the Chief Human Resources Officer, leads a team that provides, direction, expertise and coordination for all of our inclusion and diversity efforts. This team engages with the Global Inclusion Council on a quarterly basis and the Board of Directors on an annual basis.

All leaders are responsible for ensuring their functions and organisations are inclusive and diverse and every employee is responsible for creating an inclusive environment.

Strategic approach and management of risks and opportunities

Both the Global Inclusion Council, made up of the Senior Leadership Committee members, and the Regional Inclusion Councils approve and support global inclusion and diversity priorities annually. Regional Inclusion Councils determine priorities in their respective regions.

All leaders use global and regional inclusion and diversity tools to ensure their functions and organisations are inclusive and diverse.

Inclusion ERGs provide enterprise-wide and site-level support to attract, retain and develop talent in support of business goals. All Global Inclusion Council members are executive sponsors for an iERG.

Use of metrics or targets to assess and manage topic-related risks and opportunities

Eaton's Global Inclusion Council, made up of the Senior Leadership Committee members, develops goals for inclusion and diversity.

Regional Inclusion Councils are responsible for executing on global goals and setting regional goals for measuring progress on regional priorities.

All leaders determine specific goals and targets for their function or organisation, based on high-level priorities determined by the Senior Leadership Committee and Regional Inclusion Councils. These include action-based inclusion goals, which are part of the performance goals for leaders.

How we assess and monitor progress

To continuously improve our programme, Regional Inclusion Councils and all leaders gather feedback on opportunities for improvement in creating a more inclusive culture.

Successful initiatives developed by the ERGs or Regional Inclusion Councils may be escalated to the corporate-level Global Inclusion Council for consideration as a best practice to pilot in other areas or enterprise-wide.

The Global Inclusion Council, made up of the Senior Leadership Committee members, meets quarterly, and reviews the annual progress update from the Global Inclusion & Diversity team, which includes representation metrics, iERG metrics and other measures of progress, such as employee and exit surveys.

Every quarter one of each of the four Regional Inclusion Councils presents its accomplishments and progress to the Global Inclusion Council.

Annually, the Vice President of Inclusion and Diversity, who heads the global inclusion and diversity team and reports to a member of the Senior Leadership Committee, reports progress to the Board of Directors, including diversity representation, iERG participation and projects, and progress on I&D initiatives and programmes.  

Talent management

Management role and board oversight

Talent development is the responsibility of Managers of People, with the strategy being the primary responsibility of the Executive Vice President/Chief Human Resources Officer (CHRO).

Our Global Talent & Learning Centre of Excellence (COE) advises leaders on the attraction, engagement and development of employees.

Our Global Total Rewards COE develops compensation and benefit programmes that are integral to the attraction, engagement and retention of employees.

The CHRO and COE leads regularly engage with the Compensation & Organisation Committee of the Board on talent and total rewards and with the Board of Directors annually on the development of talent for succession planning.

Strategic approach and management of risks and opportunities

The Global Talent & Learning and Total Rewards COEs set the approach for executing our strategy to attract, engage, develop and retain talent in a growth culture in an integrated talent model.

The Global Talent & Learning COE and the Total Rewards COE work in partnership to execute integrated services and processes designed to create a positive and growth-oriented experience for our employees’ entire life-cycle. This enhances our competitive ability to engage employees in building their careers at Eaton.

Use of metrics or targets to assess and manage topic-related risks and opportunities

To be competitive in the marketplace, we focus on attraction, engagement, development and retention targets.

Success is measured through key performance metrics focused on the outcomes mentioned above.

The team takes feedback seriously, using it to continuously improve the function by acting on information gathered from surveys of our candidates, new hires and hiring teams.

How we assess and monitor progress

Employee-listening surveys and formal talent reviews are among the processes we use to assess progress.

Employee-listening surveys help us monitor the employee experience (from onboarding through exit) and how it influences our success.

Leadership in partnership with the Global Talent & Learning COE monitors the results and uses it to inform our future approach. 

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Positive-impact products | R&D and innovation

Management role and board oversight

Product development, R&D and innovation is the primary responsibility of the Executive Vice President and Chief Technology Officer. We have corporate research teams in the United States, China, India, Ireland and the Czech Republic. Our data science teams work to expand our digital platforms and capabilities. We collaborate with a robust ecosystem of partners that include academia, government agencies and research incubators.

 

Strategic approach and management of risks and opportunities

 

PROLaunch – a set of integrated processes designed to guide our programme and project management processes, including product development from concept through production launch. These products include Eaton's wide variety of innovative products and solutions that improve energy efficiency and reduce greenhouse gas emissions.
 
Use of metrics or targets to assess and manage topic-related risks and opportunities

We continually take environmental concerns into account as a part of our product design process. The principle objective of Design for the Environment (DfE) is to reduce the overall impact of a product across its life-cycle: production, distribution, use and end of life.

Eaton is in the process of defining a portfolio of sustainable products in order to measure the impact of our products that help our customers meet their sustainability goals. Criteria for the sustainability portfolio include lower energy and resource consumption, less pollution, alignment with the Sustainable Development Goals, and reduced environmental impact.

How we assess and monitor progress

We measure success by several KPIs, including R&D investments and number of patents. We are in the process of developing a sustainable portfolio of products. We will measure the percentage of our revenue attributed to products that improve the quality of life and the environment.

In 2020, Eaton will create a KPI baseline and a defined portfolio of sustainable products, which will launch in 2021.

Product quality and safety

Management role and board oversight

 

The quality of our products, services and solutions is every employee’s responsibility, as stated in our company-wide quality policy. The corporate quality team provides cross-functional leadership and is led by our Quality VP, under the direction of our EVP for EBS & Sustainability, who is part of the company’s Senior Leadership Committee. Each business is supported by a quality leader who regularly engages with business leaders to drive quality initiatives.

 
Strategic approach and management of risks and opportunities

The quality function relies on its quality management system (QMS), which is designed to monitor and evaluate the sites’ QMS risk profile, which includes, but is not limited to, product safety. Based on the risk assessment results, qualitative and actionable priorities are established and deployed. Each site completes an annual self-assessment to comply with corporate QMS requirements, industry standards and regulatory requirements. Additionally, Eaton performs internal annual audits to ensure its continuous compliance to the QMS requirements. Consumer Safety & Quality Councils – a forum to manage product safety concerns, corrective actions, and best practices – are deployed at all levels of the corporation.

Use of metrics or targets to assess and manage topic-related risks and opportunities In support of overall business goals, the quality function establishes quality goals with guidance from the Senior Leadership Committee and final approval from the CEO.
How we assess and monitor progress

The Senior Leadership Committee regularly monitors and assesses the results of quality performance, including but not limited to any product safety incidents.

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Climate action | Waste and hazardous materials management | Water usage | Energy

 

Management role and board oversight

 

The Executive Vice President, Eaton Business System (EBS) and Sustainability, is a member of Eaton's Senior Leadership Committee (SLC), and reports on climate-related and environmental issues including waste reduction, hazardous materials management, water usage and energy, on a quarterly basis. The SLC is the highest-level non-board committee, and its members report directly to the Board of Directors on major corporate and business issues.   
Strategic approach and management of risks and opportunities

Results on material risks, including climate change issues and other environmental topics, are reported to the Board of Directors on an annual basis or more frequently, depending on the circumstances, while other risks are reported as scheduled. In the case of climate change, all aspects are included in the twice-yearly report-out to the Board by the EVP, EBS and Sustainability.

Use of metrics or targets to assess and manage topic-related risks and opportunities

Functional leaders in partnership with the businesses develop risk mitigation plans that are integrated into Eaton’s strategic planning and profit planning processes.

Greenhouse gas, water, waste and energy reduction targets are established on a long-term and annual basis. These environmental targets are approved by the CEO and Chairman.

How we assess and monitor progress

Greenhouse gas emissions, water use and waste to landfill are reported quarterly to the businesses, senior leadership and the Board. Eaton continually seeks to learn from and to replicate practices that increase efficiency and help incorporate renewable energy into our operations.

Through our Eaton Business System, we have procedures for continuous improvement and sharing best practices across the enterprise. We align our greenhouse gas accounting methodology with the GHG Corporate Protocol to ensure our practices are aligned with global standards.

Our businesses report on environmental performance to the CEO annually during Environmental Operations Reviews.

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Ethics and compliance

Management role and board oversight

Led by a Board-elected officer and senior vice president, the Global Ethics and Compliance team consists of experienced US and international lawyers and other professionals. To ensure the highest levels of visibility and independence, the Global Ethics and Compliance programme is managed directly by the Governance Committee of Eaton’s Board of Directors, with the active, visible and consistent support of Eaton’s senior management.

Strategic approach and management of risks and opportunities

We periodically assess our ethics and compliance programmes and performance to measure our effectiveness against best practices and changing business environments.  We leverage audits, surveys and other tools as part of our assessment processes.  Ethics and compliance is also a component of our annual enterprise risk management (ERM) assessment process and system.  We use the collected data from our sources to continuously improve our programmes, including our training and communications, controls and other programme elements.

We have a goal that 100 % of employees have access to the Code of Ethics in 34 different languages.

We annually measure that targeted employees affirm that they have read, know and comply with the principles in Eaton’s Code of Ethics and that managers of people certify that their reports have received at least one hour of ethics training. We target 100 % affirmation and certification.

Use of metrics or targets to assess and manage topic-related risks and opportunities We monitor the effectiveness of our ethics and compliance programme, including our communications and training elements, by leveraging existing audits, surveys and other tools to assess execution, learning and application. Our Internal Audit teams routinely include ethics and compliance matters within the scope of their audits. And we monitor the rapidly evolving regulatory landscape, ensuring that our leaders and employees stay informed and up to speed on matters of importance. 
How we assess and monitor progress

Each year all leaders are required to provide their direct reports about in-person training on the principles of our Code of Ethics and Doing Business Right.  

We implement a robust online annual training curriculum to targeted audiences addressing critical compliance subjects. Designed to provide practical guidance on how to apply our principles and policies, the curriculum features mandatory instruction on anti-corruption laws, antitrust principles, data protection, global trade management, anti-harassment, and other key legal and regulatory areas.

Employee health and safety

Management role and board oversight

Care of our employees and the environment is the responsibility of all leaders. The corporate environmental, health and safety (EHS) team provides functional and thought leadership and is led by the Senior Vice President of EHS, who is a member of the Senior Leadership Committee. Each business is supported by EHS business leaders who regularly engage with EHS regional leaders to support site-level activity.

Strategic approach and management of risks and opportunities

Each level of management – site, regional, and corporate – periodically reviews and assesses EHS incidents and trends to determine actionable priorities. Each site completes an annual self-assessment of compliance to ISO 14001 and the internal Eaton standards. Eaton performs internal audits of each site every three years and is constantly looking to implement best-in-class operational standards.

Use of metrics or targets to assess and manage topic-related risks and opportunities

In support of overall business goals, the environmental, health and safety team determines EHS goals with guidance from the CEO and approval from the Senior Leadership Committee.

How we assess and monitor progress

The Senior Leadership Committee regularly receives the results of operational EHS performance assessments, including any severe injuries and the recordable incident rate.

The Senior Vice President of Environmental, Health and Safety, who is a member of both the corporate environmental, health and safety team and Eaton's Senior Leadership Committee, reports to the Board of Directors on various EHS matters monthly, quarterly and annually.

Sustainable supply chain

Management role and board oversight

Eaton’s EVP, Supply Chain Management leads our One Eaton Supply Chain Management philosophy, which reflects our core values and our commitment to doing business right. Our expectations for suppliers serve as an extension of these principles and our shared commitment to responsible sourcing practices.

The EVP, SCM oversees the policies and procedures that govern Eaton's supplier management and sourcing practices and is also a member of Eaton’s Senior Leadership Committee.

The EVP, SCM reports periodically to the Board on critical matters related to Eaton’s supply chain management activities.

Strategic approach and management of risks and opportunities

Eaton's supply chain management function works with our supply base to ensure suppliers can efficiently and effectively support our businesses. SCM emphasises four main objectives:

  • To manage the acquisition of goods and services.
  • To create value for our shareholders by driving effective cost management and operational efficiencies.
  • To provide risk management, governance and compliance.
  • Drive continuous improvement, supporting growth opportunities for both and Eaton and our suppliers.

 

As part of our One Eaton Supply Chain Management philosophy, Eaton’s supply chain management organisation undertakes rigorous annual examination processes in order to identify and mitigate a broad spectrum of supply chain risks, including critical supply and/or critical materials. Our risk assessment process includes a risk scan of external sources, intelligence gathering and internal alignment of the risk landscape. We evaluate risks based on severity and probability and develop specific mitigation strategies to address these risks.

Use of metrics or targets to assess and manage topic-related risks and opportunities

We identify risks at the issue level and apply our evaluation across the spectrum of our business activities. For each identified risk, we explain how we are currently mitigating it based on specific activities. We monitor this process quarterly to account for any changes.

Additionally, SCM has established risk identification and contingency planning guidelines. These guidelines may be used for an ongoing sourcing process or to assess the stability of an existing supplier. These guidelines:

  • Provide an overview of the approaches to identify potential risks within the supply base.
  • Introduce processes and templates to validate potential risks and impacts resulting from supplier failures.
  • Provide a recommended checklist to initiate contingency planning and actions.
How we assess and monitor progress

We ask suppliers to affirm our supplier code of conduct and track their status in addition to their acceptance as part of Eaton’s standard contractual terms and conditions. We also ask for adherence to all local and regional trade management regulations.

We have updated and simplified our Supplier Site Assessment (SSA) process. This process provides a deeper analysis of supplier performance and includes evaluations of supplier EHS and product stewardship practices. The SSA results are reviewed to identify any gaps which may exist in the supplier operations and a formal corrective action plan addressing the identified gaps, if any, is required prior to conducting business.

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