Sustainability at the heart of WEG's activities

I. Integrating sustainability into business strategy

The industry is recognizing the importance of sustainability in its business strategies. This involves incorporating sustainable practices at all product life cycle stages, from design and manufacturing to delivery and after-sales service.

II. Energy efficiency and emissions reduction

One of the main ways companies contribute to sustainability is by improving energy efficiency with products that reduce energy consumption and greenhouse gas emissions. In WEG's case, this is achieved through enhancing the performance and efficiency of products and solutions that are part of the production process of industries and their energy sources. Substations, battery storage systems, solar energy and wind turbines, generators, and reliable automation hardware or motors, among others, are playing a pivotal role in this situation.

For instance, in all rotatory equipment installed in all kinds of industries, WEG supports high-efficiency electric motors that consume less energy and generate less heat, and variable speed drives that allow the speed of the motors to be adjusted as required, saving energy in applications requiring variable rates or adopting automatic regulation processes when optimizing production. In both of these products, the improvement in efficiency and performance of auxiliary systems, lowering heat losses, is a must for reducing emissions.

III. Compliance with regulations and standards:

Companies that manufacture electrical and electronic equipment must comply with several regulations and standards related to energy efficiency and sustainability. But not only that; regulations and standards push the state of the art and technologies to go beyond the actual values to standardize more efficient components. Market leaders go even further, and their products perform better than regulations require.

IV. Research and development:

Innovation is critical to advancing sustainability in the industry. Companies invest in research and development to create more advanced and efficient technologies. This includes exploring new renewable energy solutions and improving manufacturing processes.

V. Education and awareness-raising:

Companies are also playing an important role in sustainability education and awareness raising. They provide information on how their products can help companies reduce their carbon footprint and offer training on the efficient use of products and services.

In the water sector, this concerns how the public and critical stakeholders view rational water use, worries about leakage, water quality and pollution, as well as policies dealing with water demands, water tariffs, the proper use of water, and how meagre the cost of the water is compared with other raw materials. Furthermore, we have to continue to lower energy consumption in all scenarios, as water and energy are linked environmental concerns.

Sustainability at WEG

Since the early 1960s, WEG has created an organizational culture aligned with governance practices and social and environmental responsibilities, which are pervasive in its policies and processes. As sustainability has evolved over the last decade, we have sought to understand better how WEG can contribute, whether by reducing the impact of our operations, in our relationship with our stakeholders, or by developing solutions aligned with the low carbon economy and minimal environmental impact. To this end, WEG created an ESG governance structure:

• Board of Directors and General Management: provides strategic guidelines and approves ESG-related investments and actions.
• Sustainability Council: promotes and mandates strategic ESG issues.
• Sustainability Committee: discusses, requests, and approves ESG actions and investments. The committee comprises a multidisciplinary team, including representatives from the five business units, external representatives, and representatives from the company's strategic areas.

From this structure, sustainability programmes have been implemented in various aspects such as environmental, social and governance:

Environmental actions

In the context of GHG emissions and climate change, in 2022, WEG took an essential step by creating the WEG Carbon Neutral Programme. The programme aims to mobilize efforts to achieve the GHG emissions targets for the entire WEG group. The medium and long-term goals are to reduce 52% of its operational emissions by 2030 and reach the Net Zero goal by 2050, with 2021 as the base year. In addition, the programme structures guidelines, actions, and responsibilities, formalizing its commitment to its stakeholders in the face of the challenges of combating global warming and climate change. In the programme's first year, WEG achieved a 15% reduction in operations emissions.

Sustainable products and solutions: WEG manufactures products aligned with a low-carbon, low-impact economy, with solutions that support our customers in their decarbonization efforts and energy transition. We also work around circular design, extending the recyclability, dematerialization, and durability of materials, products, and packaging.

Even before receiving the final product, the customer contributes to reducing emissions, as production consumes fewer natural resources

This is the case of the WEG W51 HD range of motors recently launched on the market, which can deliver more power using less raw material and resources, offering a better weight/power ratio and improved efficiency levels. This has been obtained through the thermal improvement of the assembly, as they are manufactured with more compact and robust casings, thus generating more productivity and occupying less physical space.

These achievements are not consequences but project requirements reinforcing the WEG Group's commitment to sustainability. In this way, even before receiving the final product, the customer contributes to reducing CO₂ emission rates, as it consumes fewer natural resources and auxiliary materials for its production.

Sustainable packaging and biodiversity preservation: more than 12,000 hectares of green areas, of which 50% are reforestation areas for packaging production, 23% are natural forests, 20% are nature reserves, and 7% are permanent preservation areas.

Regarding relations with local communities, 271 projects were supported in 2022, with education being the area with the highest number of projects and investments. Finally, corporate policies and guidelines are implemented in the social area, and the WEG Leadership Academy provides training with diversity modules.

Governance actions

WEG has established good corporate governance practices, being a member of the Novo Mercado (B3) and creating a solid corporate risk management system. WEG also maintains the WEG ethics channel, managed by an independent and impartial company, where reports related to violations of WEG's policies and code of ethics can be made anonymously 24 hours a day. Anti-corruption policies, practices, and training are also in place.

The innovation rate is 50.7%, focusing on electric mobility, renewable energies, digital solutions, technological materials, energy, and industrial efficiency. WEG already has 109 research/testing laboratories worldwide and 450 international patents (pending and granted). In 2022, USD 132 million, 59.4% of turnover, was from products launched in the last five years.

As a reaffirmation of its commitment to Sustainable Development, WEG is a signatory to the United Nations Global Compact and works continuously to align its strategy and operations with the ten universal principles of human rights, labour, environment, and anti-corruption. This commitment also reaffirms WEG's alignment with the SDGs.

WEG, water and sustainability

WEG's water business line must catch up with all these sustainability policies. We have increased energy efficiency in the water treatment plants where WEG has supplied motors through IE3 and IE4 motors and up to IE5. However, it is worth noting that the R&D department has already developed engines with efficiency levels equivalent to IE8 and even IE9. The more efficient they are, the lower the consumption and, consequently, the more GHG emissions reduction.

There is a significant increase in energy efficiency in large plants such as desalination plants in the Middle East or large pumping systems, where the equipment is getting bigger and bigger. WEG's high-voltage motors achieve the highest efficiency standards on the market, and the frequency inverters improve their internal cooling designs to lower the thermal load of the electrical rooms. In this way, we help, among other parameters, desalination plants to reduce electricity consumption to below 3 kWh/m³. For example, in a 600 MLD desalination plant, by improving the efficiency of high voltage motors by 0.5%, we save around 4 GW/year, representing more than one thousand tonnes of CO₂ equivalent. In other big desalination SWRO plants, just by optimizing the variable frequency drives' efficiency, clients can save 8 GW/year. These examples represent the impact of GHG savings that the design and higher efficiencies have in the sustainability report.

With WEG's high-efficiency solutions, we can achieve up to 70% energy savings, reducing water consumption and plant downtime costs by adding a better flow control system. At WEG, we are very proud to be able to contribute to our customers' energy savings and clean energy with increasingly efficient and sustainable products.