03 Risk management Risk factors specific to Michelin, description and related management systems sensitive to the chronic effects of climate change, such as drought and changes in growing conditions. For more information, see section 4.2 of the Sustainability Statement, in this Universal Registration Document. Governance and risk management response An Environmental Governance body has been set up to provide assurance that environmental risks are understood, tracked and addressed by appropriate action plans. The body is co-chaired by the Executive Vice President, Manufacturing and the Executive Vice President, Research and Development, who are both members of the Group Executive Committee. An internal audit of the risk in 2021 resulted in the deployment in 2022 of a multi-year action plan addressing the main management levers, which is expected to improve coverage of the major risks by the end of 2025. Its main deliverables in 2024 were: n an analysis of 721 Group facilities and 227 facilities operated by key raw material suppliers to determine their exposure to physical climate risks in 2030 and 2050; n a quantitative assessment of the climate change vulnerability of six Group facilities, with the goal of defining a standard vulnerability assessment methodology for deployment across the Group; n a preliminary study to prepare for the definition and financial sizing of the Group’s climate adaptation plan. Risks concerning natural rubber supplies are covered by a resilience plan, whose main levers continued to be implemented in 2024. Further progress will be driven in the years ahead with initiatives to diversify supply sources and varietal selection and improvement programs, encourage highly resilient agricultural practices, monitor changes in climate and public health conditions in production areas, and use the most efficient materials in our products and services and reduce the carbon footprint of our operations relating to natural rubber production. More generally, risks arising from the physical impacts of climate change are managed with the support of: n a Business Continuity Plan that effectively addresses all the short-term risks of business interruption and supply chain disruption, whether climate-related or not; n a robust, regularly stress-tested crisis management process; n the identification of 36 ecosystems (suppliers, production plants, logistics facilities) within a 100 km radius that are particularly critical to the Group’s business; n a roadmap to define the necessary adaptation plans. In 2025, for example, exposure to the physical risks of climate change will continue to be assessed across the value chain and software will be developed to support the measurement of the climate change vulnerability of Group plants. Risk 2 – Supply chain Risk factors Every year, Michelin purchases some €15 billion worth of goods and services from around 50,000 different suppliers. These purchases may be broken down into three families: n raw materials; n production inputs; n business services. The Group is exposed to a certain number of supply chainrelated risk factors: n geopolitical tensions; n environment-related and other disruptions to raw materials and energy supply chains; n imbalances between supply and demand; n environment-related and other shortages of certain components; n certain regulatory requirements; n supplier failure or closure. Specific nature of the risk A tire is made from around 200 different products and components, a number of which are highly specific. This means that their availability is business-critical. The risk of supplies being interrupted is particularly acute for Michelin, whose products are highly technical and whose customers expect them to perform to consistently high standards throughout their useful lives. This is why Group procedures ban any substitute supplies unless the impact on finished product performance has been tested. Governance and risk management response The governance body tasked with managing supply chain risk is the Materials Steering Committee, which is co-chaired by the Executive Vice President, Manufacturing and the Executive Vice President, Research & Development, who are both members of the Group Executive Committee. Its meetings are also attended by representatives of the Purchasing Department. To more effectively anticipate and prevent supply continuity risks, procedures and measures have been introduced to manage purchasing across the Group at the most pertinent level, i.e., local, regional or global. These include raising employees' awareness of supply continuity risks, conducting audits of critical suppliers' business continuity plans, signing multi-year contracts with the main suppliers, looking for new suppliers, maintaining strategic buffer inventory for critical products and seeking substitute products when certain commodities become scarce. 161 2024 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN
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