ALSTOM SUSTAINABLE SOURCING PROGRAM

Alstoms sustainable sourcing program was initiated in 2007 and effectively deployed since 2009. Within 3 years, Alstom has joined the leading companies in terms of responsible sourcing.

The origin of the program

With 11 billion spent to some 40,000 suppliers, sourcing represents around 60% of the groups turnover. Additionally to economic weight, heavy industry and international dimension also bring their share of risks to the sourcing function, and even more so since the group works with suppliers of all different sizes located in countries with different legislations. It should be noted that a proportion of Alstoms purchases take place locally in the emerging countries in which the group operates, especially the BRICS (Brazil, Russia, India, China, and South Africa) where international conventions are not always respected. Therefore many issues come into play and we should pay special attention to the social, environmental and ethical risks. With the OECD redefinition of companies sphere of influence, our responsibility and reputation can be engaged in the event of irresponsible conduct by any of the players in our supply chain. Managing risk appears to us as a priority. That is why we decided, as a first step, to focus our sustainable sourcing program on limiting them, which also depends on encouraging our suppliers to progress.

The approach followed

The Alstom Groups sustainable sourcing policy has been deployed in three major stages: establishment of standards, creation of tools to measure performance, and support to suppliers. 1. Establishment and deployment of a charter for sustainable development All our sustainable sourcing standards are described in the Sustainable Development Charter between Alstom and its Suppliers and Sub-contractors which is based on the principles of the Global Compact, the Universal Declaration of Human Rights and the Fundamentals Conventions of the International Labour Organization. The principles set out in the charter mainly concern respect for Human Rights, for international labour conventions, for the environment and for correct health and safety conditions. It also contains elements referring to Alstoms Code of Ethics, to avoid having several charters. We should emphasise here that Alstoms Code of Ethics includes a chapter specifically dedicated to sourcing and that it is made available to all member of our staff. Finally, in view of Alstoms sector of activity, the charter is completed by other criteria essential for the Group (such as the absolute ban on use of asbestos).

ALSTOM SUSTAINABLE SOURCING 3 avenue Andr Malraux - 92309 Levallois Perret Cedex

The charter is mandatory for all Alstoms suppliers who must undertake to respect its principles, constantly strive to improve their conduct and accept all assessments on sustainable development criteria initiated by Alstom. This is a full part of contracts between Alstom and its suppliers. It is now included in almost all the General Purchasing Terms and Conditions of Alstoms orders. 2. Set up of an evaluation system In order to understand the risks linked to our supply chain, we considered it necessary to evaluate our suppliers. Different evaluation methods exist, such as documentary assessments via questionnaires, and on-site audits. Alstom has decided to outsource its suppliers documentary assessment to an external company, EcoVadis, which offers the suppliers a poolable solution through a collaborative platform. We decided to begin by assessing our main and strategic suppliers and then the ones representing potential risks. For that, we mapped out the risks for around 6,500 suppliers, representing 80% of Alstoms spend. This risk mapping takes two types of risks into account: the sourcing risk (direct supplier, specific item, etc.) and the risk in terms of sustainable development (environmental, social, ethical and those 3 applied to their own supply chain). This step allowed us to prioritize the suppliers to be assessed and to identify the commodities on which we have to focus in priority. We based the on-site audits on the supplier quality management process, which is a fundamental element of the sourcing approach in our industry. This allows us to take advantage of the expertise of the Alstom quality teams by asking them to conduct sustainable development audits, while respecting the usual qualification procedures. To help our quality teams to carry out these on-site audits, we have developed a sustainable development audit handbook listing the elements to analyse for each question.

3. Support our supplier in their improvement action plans Supplier assessment is a tool, not an end in itself. The results allow us to see whether or not the supplier complies with Alstoms Sustainable Sourcing policy . Once this point has been established, we request suppliers who have not obtained a certain score to implement improvement action plans to ultimately reach the necessary degree of compliance. We help non-compliant suppliers to define their action plans by giving them information about their sustainable development performance, examples of good practices, and arguments to convince their own management to bring about the change. Once all the corrective actions have

ALSTOM SUSTAINABLE SOURCING 3 avenue Andr Malraux - 92309 Levallois Perret Cedex

been implemented, we reassess these suppliers to measure their progress which, in the majority of cases, allows them to meet our requirements. In the event that a non-compliant supplier refuses to initiate an improvement plan, we will consider the possibility of bringing our business relationship with this supplier to an end. We have stopped working with many non-compliant suppliers, although sustainable development is not the only reason for the decision not to renew the contract. This decision is the responsibility of the buyer in charge of the relationship with the supplier concerned. We focus our action on non-compliant suppliers, but we also encourage suppliers that have obtained a satisfactory score, which could nonetheless be improved, to initiate progress plans.

Leading the change

Given that the approach is relatively new and demands some changes in sourcing/ supplier quality practices, a change management process needs to be put in place. By change we mean incremental, not radical change. We want everyone to understand and accept the project, for it to last in the long-term and for finals responsible (e.g. buyers, supplier quality team) to create new reflexes. 1. Training the key players To manage the program deployment, the first step was to train the sourcing community. We have thus developed different training programs over the years. The first step was to raise staff awareness on sustainable development issue so that they would share a common vision. To ensure that everyone would be pulling in the same direction, we created a general training course explaining Alstoms vision for sustainable development and responsible sourcing. It is an e-learning course, available in 7 languages so that as many staff as possible have access to the information in their mother tongue. This first training offer was essential but not sufficient to ensure that the sourcing community be able to implement it. That is why we have designed a second training course. In partnership with EcoVadis, we have developed a 3-hour training session in English, conducted virtually, which allow everyone to follow it and intervene from their own office. This training program clarifies the policy, its processes, and actions to be led and explains the tools provided to achieve them. That is why it is very well perceived by the staff and constitutes an excellent means of communicating about the entire approach.

ALSTOM SUSTAINABLE SOURCING 3 avenue Andr Malraux - 92309 Levallois Perret Cedex

2. Communication To ensure that the approach is effective and that it is fully adopted by all, we have also focused on communication. Concerning internal communication, there are various pages specifically dedicated to sustainable sourcing on the Alstom Intranet so that everyone in the sourcing community can easily find the information and tools that they need. These pages, and all the data found on them, are very regularly updated. We conduct monthly monitoring of the number of times that these pages are viewed and the rise in the number of visitors is a proof effective change. We also send out a concise sustainable sourcing newsletter to keep people informed of the latest sustainable sourcing news, but also to remind them of the importance of the project. Concerning external communication, information about responsible purchasing is available in the registration document, in the activity and sustainable development report and on the Group website. The primary target audience of our web pages is our suppliers because we want them to have direct access to Alstoms Sustainable Sourcing strategy . They can find there all the information about our approach, our charter, and also the first two parts of our e-learning course, as well as presentations to convince them to participate with us to build a more responsible value chain. 3. Steering tools Steering the project according to a continuous improvement approach depends on setting Group-wide objectives, creating tools, receiving alerts to develop action plans and improve the tools. All this is achieved through means indicators and results indicators which allow us to precisely monitor the deployment of the policy. Annual objectives are set during sustainable sourcing committee meetings, and are then validated by the sourcing board. Three main objectives have been defined: the number of charters signed, the number of suppliers assessed and the number of suppliers who have improved their performances. Once again, to encourage staff to adhere to the project, these indicators should be adopted by the Groups different entities so that each can follow its own progress and set its own objectives. Other indicators are taken into account to monitor the project and whistle the possible alerts. For example, the number of non-compliant suppliers including those who have refused assessments, the number of suppliers assessed per country, the number of people trained, the frequentation rates of the EcoVadis platform and the intranet pages, etc.

ALSTOM SUSTAINABLE SOURCING 3 avenue Andr Malraux - 92309 Levallois Perret Cedex

Maturity and perspectives

The sustainable sourcing program has already reached a certain maturity. Indeed, the initiative is increasingly recognized outside of the company. For example, within 3 years our score in SAM (Sustainable Asset Management) assessments has almost doubled and we are now up amongst the best in our category in terms of responsible sourcing. Furthermore, Alstom is invited to talk at various conferences throughout Europe, and at Grandes Ecoles, and our peers regularly come to us to establish their benchmark. Finally, through the integration of sustainable development criteria in the processes of attributing new contracts, some of our clients recognise the progress that we are making, which is a further source of motivation. On the other hand, will consider the initiative as a success when sustainable sourcing exceeds the level of its committee and when the sourcing departments adopt its principles in their day-to-day conduct. This is already the case in certain entities which have integrated the policy and set objectives for their teams. The sustainable sourcing program should continue to develop and take on new dimensions. In 2009, Alstom set itself 3-year targets and all of them have been met. It is thus necessary to reinforce the program and to make the most of the experience built up. Therefore, we are going to continue to constantly improve our process and tools and extend our fields of action. We also have to integrate our clients and suppliers more in the approach. Therefore, we need to be more attentive to the sustainable development needs of our clients in order to achieve a completely responsible supply chain. Furthermore, we will continue to support our suppliers in their improvement, but will also work more upstream on products, innovation and integration of sustainable development in our purchasing conduct.

In a short space of time we have managed to set up a policy and deploy it effectively and that is a first success in itself. We should continue this change management so that sustainable development becomes the responsibility of each and every one of supply chain players. That is why we place the sustainable sourcing program within a continuous improvement approach which includes the willingness to also learn from our client and suppliers.

TOGETHER WE SHAPE THE FUTURE

ALSTOM SUSTAINABLE SOURCING 3 avenue Andr Malraux - 92309 Levallois Perret Cedex