Foreword (continued) 2. Progress relies on us all counting carbon consistently. There a re several external factors or bugs in the world’s net zero carbon program that if addressed will help us all make greater progress toward our net zero goals. The world lacks a common meaning of the term net zero and a common unit of measurement for assessing the climate impact of various net zero approaches, and we must all focus on maturing the markets needed to achieve a net zero carbon economy by 2050. We explored these topics in greater detail through t he lens of our work on carbon removal. W e will continue to inn ovate and invest to meet our ambitious commitments and we’ll do so in a principled way. We will also continue to be transparent about our progress, our challenges, and our learnings to help others on their journey. As we look to the future we are committed to: • Counting everything, including challenging Scope 3 emissions. We are putt ing programs in place to help lower them, from working with our sup pliers to help them decarbonize to continuing to innovate with our company-wide internal carbon tax to incentivize emissions reduction and continuing to invest in carbon removal. • Only investing in carbon removal offsets instead of traditional avoid ed emissions offsets because removal is an underdeveloped and critical tool to solve the world’s climate challenge. You can only get to net zero when you’ve reduced all that you can and your remaining carbon emissions are completely balanced by long-term carbon removal. Last year, we made the world’s largest purchase of carbon r emoval at 1.4 million metric tons and in this fiscal year we are on track to top that by procuring 1.5 million metric tons. From pledges to progress While 2021 presented us with some new learnings, we’ve also made some great progress that we share in more detail in this report. A few examples that illuminate the diversity of our work include the following. • Four datacenters are Zero Waste certified, with new certifications for the San Antonio, Texas and Quincy, Washington datacenters and renewed certifications for our Boydton, Virginia and Dublin, Ireland locations. • We announced the Microsoft Cloud for Sustainability to provide comprehensive, integrated, and automated sustainability management for organizations at any stage of the sustainability journey. • Through an investment from our Climate Innovation Fund, we’re helping LanzaJet complete their sustainable fuels plant in Georgia—a move that will help decarbonize our datacenters as well as the airline industry. • While overall device emissions grew because of higher sales and usage, we reduced the carbon footprint for several of our products. Surface Pro 8 is one of the most energy efficient Surface Pros ever and we introduced Energy Saver, a new low-power standby mode for Xbox consoles. • We granted $100 million to Breakthrough Ene rgy Catalyst to accelerate the development of climate solutions the world needs to reach net-zero across four key areas: direct air capture, green hydrogen, long duration energy storage, and sustainable aviation fuel. We are committed to becoming a carbon negative, water positive, zero waste company by 2030. With net zero becom i ng the new normal—more than 1,500 companies with to tal net revenue of $11.4 trillion have pledged that they will become carbon neutral or net zero—the world must move from climate pledges to climate progress. As a leading technology provider of sustainable solutions, Microsoft stands ready to support our customers, partners, and the world in the move towards a net zero, environmentally sustainable future. And while the shape of what the future holds is unknown, we will continue to build the foundations needed today and do the work that needs to be done to deliver on our commitments. It’s what the world needs us all to do. Brad Smith President and Vic e Chair Dr. Lucas Joppa Chi ef Environmental Officer 5