Commitment to sustainability as a core value extends to our suppliers

In addition to prioritizing sustainability within our company, we also work to ensure our suppliers around the world are equally committed to sustainability as a core value.

In 2021, we spent over $10 billion with more than 30,000 suppliers globally for raw materials, indirect products and services, and the transport of goods. We expect these suppliers and their subcontractors to fully comply with all applicable laws and to adhere to internationally recognized environmental, social and governance standards. Our Global Code of Ethics, Supplier Sustainability Policy and Global Supplier Code of Conduct clearly state our expectations for every supplier.

Throughout the year we continued to pursue initiatives to assess risk among our suppliers. This includes the expansion of our use of EcoVadis, a third-party ratings organization that assesses responsible practices of more than 60,000 companies worldwide. We also continued to monitor the performance of our suppliers using a variety of tools, including more than 130 on-site or remote audits. Finally, we found new ways to engage with suppliers to investigate and work together to provide more environmentally conscious products, recycle packaging used to ship materials to our facilities and offer more fuel-efficient transportation services.

Details on some of our efforts throughout 2021 to improve the sustainability of our supply base follow.

Increasing Visibility Across Our Supply Base

With the phased launch of our global eProcurement (ePro) platform, our suppliers will use this supplier portal to do business with PPG. This includes completing an electronic acknowledgment of our Global Supplier Code of Conduct and Sustainability Policy. Suppliers also must indicate compliance with data privacy laws as they pertain to any relationship with PPG.

Since the platform went live in the United States and Canada, and in our Europe, Middle East and Africa (EMEA) regions, more than 10,000 suppliers have acknowledged these policies. We intend to extend ePro into the remaining Latin America and Asia Pacific regions.

In 2021, challenges from the ongoing COVID-19 pandemic, weather-related disruptions and supply challenges led us to increase evaluation of our suppliers on ethical and regulatory performance in addition to financial solvency, business stability and operational capability. Our global spend visibility database, first introduced in 2020, has continued to increase transparency across our supply chain, enhancing our capabilities to identify and manage potential at-risk suppliers.

Our approach to assessing the sustainability of our supply base improved significantly over the past three years. Historically, we assessed the top 100 suppliers globally that represented approximately 25% of our annual procurement spend. We continue to target our top spend raw material suppliers, and more recently, we shifted our focus to evaluating and monitoring 1,000 high-risk suppliers based on geographic position, participation in the mining industry, and other category factors to better gauge current or potential risk with existing suppliers.

Through our supplier assessment in partnership with EcoVadis, we can evaluate four key segments of sustainability across our supply base:

• Environment: Energy consumption, product use, customer health and safety, and biodiversity;
• Labor and human rights: Employee health and safety, working conditions, child labor, forced labor, human trafficking, diversity, discrimination and harassment;
• Ethics: Corruption and anticompetitive practices; and
• Sustainable procurement: Supplier environmental and social practices.

The EcoVadis scorecard allows assessed companies to benchmark against industry peers, and it provides an overall corporate social responsibility (CSR) performance rating on a scale from increasing risk to best in class. The average score of the PPG suppliers who have had their labor and human rights programs rated by EcoVadis through December 31, 2021 was above EcoVadis' market average score.

We have continued to roll out the EcoVadis assessments in waves. In 2021, we included approximately 200 suppliers each quarter. At the end of 2021, 816 suppliers had been contacted. More than 67% have already responded and have been rated as of March 2022.

We are pleased that our suppliers who responded and have received ratings tend to perform above the EcoVadis average across all four segments.

Our plan is to achieve a year-over-year increase in both response rate and average rating, then use that information to improve practices within the supply base.

Procurement plays a fundamental role in our commitment to sustainability, and it is critical to drive those responsibilities into our global supply base as an extension of our values and expectations of the way we do business. To evaluate our own maturity and understand how we can improve upon our success, PPG also carried out an assessment with EcoVadis at the end of 2021. It showed that PPG’s strengths include:

• Strong leadership;
• Advanced policies;
• Established procedures and processes; and
• Articulated sustainable procurement vision and goals.

In 2021, PPG earned a Gold rating from EcoVadis. Only 6% of evaluated companies met the qualifications for this rating.

We also participate in the Responsible Mica Initiative (RMI) and have taken a number of steps to assure the responsible sourcing of Indian mica. For example, RMI has taken action to ensure that our major mica pigment suppliers are active members of RMI. Currently, 99.4% of our spend volume in this category is covered by suppliers that are RMI members, which is more than an entire percentage point improvement from the 2019 report. We continue to align spend with trusted sources and/or onboard suppliers to RMI in order to close the gap to 100%.

RMI is working collaboratively with various stakeholders including several government agencies, civil society organizations, local mica businesses and sector experts. Some of our customers are now represented in RMI, demonstrating that this is a growing and critical sustainability program throughout the supply chain.

Monitoring Supplier Performance

Asia-Pacific

In Asia Pacific, we conducted onsite audits with eight raw material suppliers – seven new and one existing – during 2021. We select existing suppliers for onsite audits based on an established schedule or when a new product will be produced in a supplier facility. New suppliers are selected for onsite visits based on their impact on our business, formulations or supply chain.

Evaluation criteria for both groups of suppliers include:

• Product review;
• Production process: Incoming raw materials, quality control, packaging and shipping;
• Quality system: Key controls, inspection/testing, abnormality reporting, continuous improvement and training;
• Environment, health and safety performance; and
• Corporate social responsibility: Human rights and regulatory performance.

For the onsite audits, we will stop business or development with suppliers that achieve a score of less than 50 on a 100-point scale. A score between 50 to 64 results in suspension until the supplier meets our requirements by implementing corrective action plans that we closely monitor. A final evaluation of 65 or higher enables the supplier to be moved to or remain in the approved supplier pool. The approved suppliers are subject to ongoing audits to ensure their performance level is sustained or improved.

EMEA

In the Europe, Middle East and Africa (EMEA) region, we conducted 28 on-site audits and three remote audits in 2021 for suppliers identified as critical, based on an assessment that considers product category, quality risk and supply risk. This activity spanned both new and existing suppliers that represented 17 raw material vendors, six packaging suppliers and eight service providers. The number of assessments continues to be scaled back from previous years due to impacts from the pandemic.

The evaluation criteria included quality systems, product and process review and contamination prevention. It also included a questionnaire requesting supplier certifications, sustainability processes and contingency plans. Five of the suppliers had minor non-conformities related to quality and delivery requirements that will require corrective actions for improvement.

In the event suppliers have major non-conformities, we put them under surveillance status until the corrective action is closed. If corrective actions are not implemented, we may elect to end our relationship with those suppliers.

U.S. and Canada (Aerospace)

Our Aerospace business in the United States and Canada (USCA) maintains a similar approach for supplier development and quality as the EMEA region to ensure alignment with the AS9100D aerospace standard. The standard provides guidelines for implementing a quality management system for both PPG and suppliers operating in the aerospace industry.

We evaluate suppliers to our Aerospace business based on their ability to meet technical requirements, financial stability, quality management systems and sustainability practices utilizing audit/risk assessment worksheets. In 2021, over 100 qualified suppliers underwent either an on-site assessment or a remote/ desktop audit to ensure standards were met. If the standards are not met, we do not do business with that supplier.

Aerospace supplier risk assessments are based on complexity and the level of impact on product performance. Suppliers are classified and we regularly monitor the number and frequency of approved suppliers via on-site or remote audits, process control oversight and report and system evaluations to ensure policy and program compliance.

We work closely with these suppliers to improve key performance indicators, drive continuous improvement initiatives and establish opportunities for supplier development. Supplier on-time delivery and defects are monitored on a monthly basis.

Latin America

In Latin America, we conducted 63 audits in 2021 to comply with ISO9001, Minimum Automotive Quality Management System (MAQMSR), International Automotive Task Force (IATF) and Verband der Automobilindustrie (VDA) standard requirements, primarily on raw materials suppliers. Selection criteria were based on previous performance, follow-up on previous audit results and a continuous need to develop new suppliers.

The regional team worked on standardizing all metrics and criteria used to evaluate suppliers, and to ensure proper alignment and consistency when assessing performance. This new process creates a more standardized evaluation – especially for suppliers with a regional or global scope. The evaluation criteria include four major focus areas:

• Quality, which ensures raw material adherence to PPG specs;
• Service and Delivery, which assess suppliers' commitment on lead times, and timely and active responses to nonconformities when applicable;
• On-time in-full (OTIF) metrics; and
• Supplier initiatives, which promote innovation and continuous process improvement.

Engaging With Our Suppliers

Globally, we work to comply with evolving regulations that impact the sustainability of our operations, and we expect the same from our suppliers. These regulations include the Modern Slavery Act of 2015; General Data Protection Regulation (GDPR); Registration, Evaluation, and Restriction of Chemicals (REACH); and other third-party due-diligence screenings for compliance purposes.

In addition to helping suppliers evaluate and improve their sustainability performance, we seek their help in improving our own. Examples include asking suppliers to provide more environmentally friendly products, recycling packaging used to ship materials to our facilities and offering more fuel-efficient transportation services.

Earlier in 2022, PPG's Procurement team launched an internal Sustainability Tracker to capture all sustainability actions and initiatives taken by the organization. The benefits of this include increased awareness of efforts for others to leverage similar ideas for their categories or globalize the benefit, and further demonstrate our commitment to this increasing focus area. Procurement sustainability actions will be shared during quarterly town hall meetings delivered by our Chief Procurement Officer.

Below are a few examples of sustainability actions and initiatives:

• PPG is working with Constellation to purchase renewable energy from the 200 MW Big Star Solar Project currently under development in Bastrop County, TX. In addition, we’re generating on-site electricity with natural gas at our Caivano, Italy, facility, which will equate to an annual reduction of approximately 1,100 metric tons of CO2. Learn more about these projects in the Energy section.
• Last year, we teamed up with Chemours in order to improve our process used to determine the sustainable benefits of PPG products. Helping to fast track our journey, Chemours shared best practices from their sustainable offerings assessment methodology, Evolve 2030. Key learnings from this partnership set the groundwork for our new sustainable product assessment process, outlined in the Product Stewardship section.
• Within our e-catalogs, suppliers can flag products as green, recycled, Energy Star and safer choice products. These include environmentally conscious products that are widely recognized as having lower environmental impacts than comparable items. Safer choice items advance the mission of the U.S. Environmental Protection Agency (EPA) to protect human health and the environment by helping users choose the safest functional ingredients possible. During the fourth quarter of 2021, we contacted suppliers based in USCA with e-catalogs, requesting that they review and appropriately flag their sustainable items. Such designations will give us increased visibility into a product’s impact and help employees make more sustainable decisions. The same effort will be initiated for the EMEA region during the first half of 2022.

We strive to continuously improve our supplier sustainability programs. Actions include benchmarking, expanding program parameters, improving our reporting and program visibility, providing organizational training and creating a longterm plan on joint sustainable initiatives with thirdparty organizations.

For more details about our supplier sustainability initiatives and policies, visit our Supplier Sustainability section.

Supplier Diversity

We believe that our company and communities benefit when we provide equal opportunities for diverse suppliers to compete for our business. By including qualified diverse suppliers in our purchasing process for products and services that meet our requirements, we will strengthen our business position and that of our suppliers and customers.

We actively seek suppliers that are recognized by certifying entities and government agencies. These suppliers include small businesses and businesses that are owned by veterans, minorities, members of the lesbian, gay, bisexual, transgender and queer (LGBTQ+) community, people with disabilities and women.

Our Supplier Diversity Program is aligned with our One PPG philosophy and built on four focus areas:

• Data and technology;
• Operational program;
• Resources to drive results; and
• Effective outreach.

Used in conjunction with our global spend visibility database, ePro, we will be able to identify new diverse suppliers, maintain accurate records and use that information for enhanced reporting.

Examples include:

• Potential suppliers can self-register for business opportunities with PPG;
• Existing suppliers can self-identify as diverse suppliers by including certification evidence;
• Tier 1 program reporting is improved for internal and external purposes; and
• Generating e-catalogs of diverse suppliers to increase visibility.

During 2022, we will be partnering with a third party to promote program growth. Two of the main benefits are:

• Data enrichment services of our supply base to detect unflagged diverse suppliers and further refine their classification; and
• Utilization of their search engine to identify potential new sources by category, industry or geography.

Operationally, we continually look to embed qualified diverse suppliers into our sourcing strategies and projects and channel more spend volume to existing and new suppliers using market information, references, tools and other reports to expand the program.

Program success hinges on leadership support and cross-functional and business awareness, collaboration and execution. Our procurement team is strengthening its internal relationships through alignment on requirements, target achievement and value-add impact. In 2022, we will be conducting program training to improve awareness and goals for both our existing functions and businesses, but also our recent acquisitions.

Effective outreach encompasses myriad ways in which we can expand the Supplier Diversity Program's footprint. Within our business and corporate functions, select employees maintain memberships and associations with key diverse supplier organizations, participate in matchmaker events and perform benchmarking activities. We are beginning to leverage our DE&I organization, including the Employee Resource Networks, to help identify potential suppliers or perform benchmarking activities. Learn more in our Diversity, Equity and Inclusion report.

We recognize outstanding performance from our suppliers through the PPG Excellent Supplier Award for the category of Supplier Diversity. Last year, we presented the award to a meeting and event planning company that helped PPG save and avoid costs due to cancellation and postponement penalties as a result of the pandemic. The organization was highly innovative and responsive in communication between the venues and PPG stakeholders.

Overall, we look to play a part in the business growth and success of diverse suppliers, drive economic and social benefits with targeted businesses and local communities, and enhance community relations. We recognize the strategic value of supplier diversity initiatives and strive to have a sustainable program.