CHANEL’S CLIMATE STRATEGY 3 BUILDING A MORE INCLUSIVE COMPENSATING FOR ENERGY TRANSITION SUPPLY-CHAIN EMISSIONS Extreme climate events will disproportionately We currently estimate our Scope 3 emissions affect the most socially and economically to be approximately 1.72 million tCO e per vulnerable communities. Often, it is these 2 same communities that are excluded from year, with the majority being generated in the economic benefits of the transition to our supply base from the steps associated renewable energy. Just as we look outside our with the sourcing and transformation of immediate operations in building resilience and the raw materials used in our products, and investing in our approach to sourcing, we also the upstream impacts associated with the aim to include communities in how we envision production of sales and promotional materials. a resilient renewable-energy market. For the Work is underway to better understand our new energy system and economy to be truly full Scope 3 emissions in order for us to be sustainable, it must include and benefit all able to set ambitious targets for reducing communities. Based on this vision, we will these emissions over a reasonable time frame. look for renewable-energy investments that In parallel, we are committing to offset at least 1.5 million tCO e per year to compensate for meet at least one of the following principles: 2 our overall emissions, while also continuing COMMUNITY to invest in various insetting projects in our Rather than contribute to financing a large- supply base. scale wind or solar farm, we will aim to invest primarily in community-level projects. Not only is this type of investment closer to our actual INSETTING energy use and spending, but it also resonates Insetting refers to what an organization does within with our brand value of empowering people. its own value chain to balance out its negative impacts INCLUSIVENESS on climate. For CHANEL, insetting is a key component of our strategy to compensate for our Scope 3 carbon In each market we sign a deal, we will look emissions. It translates into projects within our supply to ensure our investment benefits communities base, including agroforestry projects, which are that have historically experienced economic designed to sequester as much carbon as possible. or social exclusion. Our priority will be to work We are a founding member of the International with community businesses and organizations Platform for Insetting (IPI), a multi-stakeholder group to provide training and professional opportunities that facilitates collaboration on insetting projects and in energy infrastructure for local residents, and promotes best practices. ensure equal access to these opportunities. RESILIENCE As extreme weather becomes more common, empowering people will also mean building their capacity for resilience. Providing economic opportunity through training and job creation is one way we can contribute to this. Where relevant, we may also look to invest in physical grid resilience through microgrid and storage capacity.