_224 2023 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN 4 NON-FINANCIAL STATEMENT Sustainable Development Report Change in reported Taxonomy-eligible activities, 2022‑2023(1) Sales KPI At the 2022 scope of taxonomy reporting (activities 3.6 and 8.2 contributing to climate change objectives), 53% of Michelin Group sales were Taxonomy-eligible in 2023 (53% in 2022). At the 2023 enlarged scope of eligible activities reporting (adding activity 5.1 contributing to the transition to a circular economy objective), 54% of Michelin Group sales were Taxonomy-eligible. CapEx and OpEx KPIs: At the 2022 scope of taxonomy reporting (activities 3.6 and 8.2 contributing to the climate change objectives), 58% of Michelin Group CapEx and 53% of its OpEx was Taxonomy-eligible in 2023 (64% and 53% respectively in 2022). At the 2023 enlarged scope of eligible activities reporting (adding activity 5.1 contributing to the transition to a circular economy objective), 59% of Michelin Group CapEx and 54% of its OpEx was Taxonomy-eligible. In 2023, the proportions aligned with the substantial contribution criteria stood at 16% of sales, 22% of capital expenditure and 16% of operating expenditure. Analysis of Taxonomy-non-eligible Group activities Under the current Regulation, some of the Group’s activities do not meet the eligibility screening criteria even though they have a potentially positive impact on the environment: ● Process electrification capital projects to support the Group's decarbonization plan: These projects are delivering substantial gains in energy efficiency and a smaller carbon footprint, but they are not yet recognized in the European Taxonomy. In December 2023, the Group submitted a request concerning this issue to the AMF Platform on Sustainable Finance created by the European Commission; ● Agricultural, mining, aircraft and two-wheel tires: These types of tires are not covered by a labeling regulation and therefore cannot be reported in the Taxonomy, even though they provide an array of customer benefits, including improved energy efficiency and with it, lower carbon emissions; ● Tire-as-a-service activities: The Group is developing fleet management and other services and solutions that optimize the use and management of vehicle fleets, while improving their fuel/ energy efficiency. This activity is not deemed Taxonomyeligible under activity 5.5 because it does not meet the criterion of the service provider retaining ownership of the product. The Group will continue to assess the eligibility of activities in 2024 in consultation with the Platform on Sustainable Finance and the European Commission. Michelin has not identified any activities eligible for the water, pollution prevention and control and biodiversity objectives. For the climate change adaptation objective, see above. 4.1.1.7 b) Substantial contribution screening criteria As in 2022, the Michelin Group has assessed the substantial contribution of activities 3.6 and 8.2 to the climate change mitigation objective. In accordance with the Delegated Act published in June 2023, the aligned proportion of activities 5.1 will be assessed in 2024 for disclosure in 2025. ● In the case of activity 3.6, as in 2022, the Group considers that the “substantial contribution to climate change mitigation” criterion is met by tires in the two highest populated rolling resistance classes [A and B], as defined by European tire energy efficiency labeling rules. The criterion of verification by an independent third party is met insofar as the calculation method is defined by European regulations and the testing machines are approved by the European Union (Regulation (EU) [2020/740, Annex V], which defines the concept of reference laboratory and the alignment procedure for rolling resistance measuring machines); ● In the case of activity 8.2, as in 2022, the Group has not disclosed the aligned proportion because (i) the activity is not deemed sufficiently material (less than 3% of sales); and (ii) there is a lack of data to demonstrate alignment with the criterion defined by the European Taxonomy(2). The Group plans to perform additional assessments at a future date. 4.1.1.7 c) Do no significant harm (DNSH) screening criteria In 2023, as in 2022, the Group assessed compliance with the criteria of doing no significant harm to the other five environmental objectives in connection with activity 3.6 “Manufacture of other low-carbon technologies”. Objective 1: Climate change adaptation The Taxonomy Regulation requires us to: Identify the materiality of a list of chronic and acute climate phenomena with respect to the Group’s activities: After review, retain all the relevant climate phenomena to support assessments. Select the 90 priority sites for assessment on the basis of their materiality: ● Sites with the most employees; ● Sites critical to business continuity. (1) For the principles used to calculate the sales, CapEx and OpEx KPIs, see section 4.1.1.7 e) below. (2) Communication on Commission Work Programme 2024, October 17, 2023, p. 5: “no assessment is needed from undertakings for activities that are not material to their business and where they lack evidence or data to prove compliance with the technical screening criteria of the EU Taxonomy”.
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