CEO’S MESSAGE OUR ESG STRATEGY DASHBOARD PEOPLE SUPPLY CHAIN ENVIRONMENT TRANSPARENCY REFERENCE TABLES Understanding Our Climate-Related Risks and Opportunities Climate risk continues to be a focus of our enterprise-wide risk identification, assessment, and management. Internal Audit facilitates an annual risk assessment and meets with management regularly to review risk monitoring activities. Risk and risk mitigation activities are reported to the Audit Committee We are committed to managing our Company quarterly and to the full Board annually. in ways that are socially responsible and Our property insurer combines climate change data and its portfolio claim environmentally sustainable. loss history with our global exposures to catastrophic events and our physical property location data to identify the regions and sites where we may be most exposed to climate hazards and risks. Once they have identified these critical locations, they analyze the hazards in depth and assess the impact. On a periodic basis, they perform physical on-site risk assessments for certain high value locations, such as distribution centers, and provide recommendations for improvements, if any, to ensure we have taken all reasonable steps to protect against possible risks. Additionally, in FY21, energy efficiency policies in China resulted in production changes across our supply chain, as our suppliers’ factories were required to shift to nighttime operations to reduce demand on local electricity grids. We use sophisticated market planning models to select physical store locations that are convenient to our target customers in each market. Distribution centers are located in areas that facilitate speedy delivery services to customers and stores. While customer proximity is the primary driver, flooding risks and other natural hazards play a role in site selection, although that could change in the future as climate risk and related modeling become more sophisticated. Further, most retail store leases have 10-year lease terms such that if climate risk substantially increases in a given area, we can mitigate the risk by locating a subsequent physical store in a less flood-prone area. Our property insurer has classified 12% of our property portfolio in the high-risk flood determination, and an additional 16% of our locations are in the medium-risk flood determination. The balance of our global property portfolio is in a low-risk flood determination area. Most of the high and medium risk locations are individual retail store locations with total insurable values less than our per location deductible. 4949