Leroy Merlin España

The company's administrative, management, and supervisory bodies are the Board of Directors, the Audit Committee, and the Executive Leader Team. The Compliance Department and the Iberian Audit Department (both part of ADEO Holding Iberia, SA, the parent company of LEROY MERLIN Spain), as well as the Internal Control and Human Resources Departments, the Ethics Committee, and the Internal Control Body, are responsible for monitoring impacts on their areas of responsibility and for detecting and assessing the company's risks.

The Audit Committee is composed, as of December 31, 2024, of Pablo Óscar Adán Castro, Olivier Debeunne and Yann Jöel Christian Dubourthoumieu, the latter acting as its Chairman, for the statutory term of four years ending on December 31, 2027. Juan Maggio and Paula Ordoñez act as Secretary and Deputy Secretary, respectively, of this body.

There is no direct employee representation within the Board of Directors or the Audit Committee. The Executive Leader Team is made up of the leaders of each area (executive directors), who thus represent the employees in their respective areas.

The Ethics Committee, managed by the Compliance Department, oversees business conduct. The Director of Ethics and Compliance chairs the Committee. A compliance function report, issued by the Ethics Committee, is shared annually with the Board of Directors, summarizing all actions related to the company's compliance programs.

Composition and Diversity

Diversity

Diversity

In line with their track records, the members of the Board of Directors and Executive Leader Team have experience in business conduct issues, as well as extensive experience in the retail sector. The assessment of the knowledge or suitability of the Commission members' profiles is carried out within the Board. Their professional positions imply that they have knowledge of auditing and sustainability.

Throughout 2024, two specific sustainability training sessions were held for the Executive Leader Team: a specific in-person module on sustainability in the Power Leader Lap program and Climate Mural, in-person training focused on climate change and its effects.

The results of the materiality assessment and risk analysis are communicated and validated annually with the Positive Impact Executive Leader. The Positive Impact Executive Leader then communicates the publication of the sustainability information to the Executive Leader Team. Finally, the Board of Directors also approves the information included in the report annually.

In 2024, while topics related to impacts, risks, and opportunities have been addressed in the oversight of the company's strategy and decision-making, they have not been explicitly addressed as part of the dual materiality process. This is because this is the first time this methodology has been applied.

Material impacts, risks and opportunities addressed by governing bodies:

Board of Directors and/or Audit Committee:

• Impacts: Contribution to the protection of working conditions and human rights in the value chain through audits and internal control; Protection of sustainability and ethical principles in the value chain through audits and internal control
• Risks: Inadequate management of ethical alerts or complaints
• Opportunities: A culture of ethical and responsible conduct in the company that strengthens its reputation among stakeholders

Steering Committee:

• Addressed extensive list of material impacts, risks and opportunities across ESG topics including working conditions, customer experience, climate change, cybersecurity, and business conduct

At LEROY MERLIN Spain, the position of director is unpaid, so the members of the governing body (Board of Directors) do not have an incentive system.

The members of the executive leadership team do have an incentive system consisting of:

Progress bonuses (quarterly variable)

Applies to all LEROY MERLIN Spain employees. Rewards progress in Gross Merchandise Value and results of each store, region, and headquarters. Includes achievement of two qualitative objectives related to sustainability:

• Customer satisfaction (NPS objective)
• Employee safety (frequency rate objective)

Awarded four times a year with maximum quarterly and annual limit of 25%.

Profit-sharing rate (annual variable)

Applies to all employees, rewarded for company performance. Rate percentage applied to gross annual salary, capped at 15%.

Share Revaluation (VALADEO)

All employees become shareholders in ADEO Group. Share price appreciation influenced by results achieved in the ADEO Positive Index, which measures company performance through ten key indicators including:

• Occupational accident frequency rate
• Workplace accident severity index
• Percentage of employees trained in Code of Ethics
• Percentage of female directors and managers
• Training hours per employee
• Employee satisfaction index (eNPS)
• Percentage of suppliers signing Code of Conduct
• Sales share of products with Home Index rating A, B or C
• Direct carbon emissions (scopes 1 and 2)
• Product lifecycle carbon emissions (Scope 3)
• Sale of products that allow customers to avoid emissions
• Percentage of renewable energy consumption
• Percentage of waste recovered

Long-term incentive for management team

Senior management has long-term incentives with environmental or social indicators depending on their mission, primarily related to health and safety, carbon footprint, and customer satisfaction.

It is not possible to provide a consolidated percentage of executive compensation that depends on sustainability-related goals, since each profile may have different indicators.

Below are the main stages of due diligence and their coverage in LEROY MERLIN Spain's sustainability statement:

Essential Elements of Due Diligence:

Integrating due diligence into governance, strategy, and business model:

• ESRS 2 GOV-2: Information provided to administrative, management and supervisory bodies
• ESRS 2 GOV-3: Integrating Sustainability-Related Performance into Incentive Systems
• ESRS 2 SBM-3: Material impacts, risks and opportunities and their interaction with strategy and business model
• ESRS S1-1: Policies related to own personnel
• ESRS S2-1: Policies related to workers in the value chain
• ESRS G1-1: Corporate Culture and Business Conduct Policies

Collaboration with affected stakeholders at all key stages:

• ESRS 2 GOV-2, SBM-2: Stakeholder Interests and Opinions
• ESRS 2 IRO-1: Description of processes for determining and assessing material impacts, risks and opportunities

Identification and assessment of adverse impacts:

• ESRS 2 IRO-1 and SBM-3

Adoption of measures to address adverse impacts:

• ESRS E1-1: Climate Change Mitigation Transition Plan
• ESRS E5-2: Actions and resources related to use of resources and circular economy
• ESRS S1-4, S2-4, S3-4: Actions taken regarding material impacts on respective stakeholders

Monitoring effectiveness and communication:

• Reported specifically in different thematic ESRS across all material topics

The sustainability reporting information request process consists of six stages:

1. Materiality analysis (every two years): third quarter of current year
2. Launch of process and collection of qualitative information: third quarter of current year
3. Collection of quantitative information: fourth quarter of current year and first quarter of following year
4. Drafting of Sustainability Report document: first and second quarter of following year
5. Validation of information by areas and Executive Committee: first and second quarter of following year
6. Publication of Sustainability Report: second quarter of following year

The ESG Reporting team, within the Positive Impact area, coordinates and monitors the entire sustainability reporting process, applying various forms of validation and control:

• During information collection phase, data reporters must validate information with their direct supervisor
• ESG Reporting team thoroughly reviews all data and requests clarification when necessary
• Document is periodically reviewed by the team with several final rereads
• Final document is shared with Executive Leader Team for knowledge, review, and validation

Main risks identified:

• Points of error or failure in data processes, from origin to consolidation and reporting
• Failure to comply with established deadlines for collecting information and evidence
• Lack of understanding by those responsible for reporting about required data or evidence
• Inconsistencies in information traceability due to use of different digital platforms or formats

To mitigate these risks, validation and control processes include review and approval processes, verifications, and controls carried out by both the organization and an independent third party.

In 2024, no periodic notifications have been made to the administrative, management and supervisory bodies related to risk management and internal controls for sustainability information disclosure.

We are a company dedicated to home improvement and renovation, part of ADEO, a group focused on home improvement, DIY, construction, and renovation projects. LEROY MERLIN aims to be a relevant company in Spain, contributing positively to employees, customers, suppliers, and society. Our business model is based on values, placing people at the center of our decisions.

Value Chain

Previous stages: Activities related to manufacturing, extraction, storage, and transportation of products. Main agents are strategic suppliers responsible for extracting raw materials and finished products.

Company position: Key position focused on selling products and providing services to consumers through:

• Products: Wide range segmented into Project, Rehabilitation, Garden, Technical and Decorative categories
• Services: Installation services, tool rental, B2B solutions, Hogami Platform
• Sales channels: 130 stores, e-commerce website, mobile app, marketplace, telephone sales
• After-sales service: Customer service, complaint management, Club Leroy Merlin loyalty program

Later stage: Responsible end-of-life management promoting circular economy practices through repair, rental and sale of products with minor cosmetic damage.

Products and Services

Products: Furniture, bathrooms, garden, lighting, decoration, wood, kitchens, doors/windows/stairs, flooring, heating/air conditioning, tools, paint, construction materials, electricity/home automation, ceramics, hardware/security, plumbing, renewable energies

Services: Hogami installation service, project service, telephone sales, tool rental

Markets and Customer Groups

• Final consumer/resident: entire Spanish market
• Corporate clients: managed by Major Accounts Department
• PRO Clients: professional clients in renovation and construction sector

Financial Results

Strategy Objectives 2024

Battle 1: Platform business model - 5-star omnichannel experience, improving customer experience, reducing friction

Battle 2: Improving value proposition - Competitive portfolio coverage, strengthening omnichannel brand proposition

Battle 3: Sustainability of business model - Improving net margins, supply chain efficiency, quality stock management

Battle 4: Leaders of positive future - Diverse and inclusive workforce, employee safety, sustainable living through Home Index, circular consumption, social action commitment

LEROY MERLIN Spain is integrating sustainability into its business model through the Home Index project (measuring environmental and social impact of products), energy efficiency market focus, and circular economy services (rentals, repairs). The Circlewood project promotes wood recycling and transformation into new products.

The purpose of stakeholder engagement is to foster communication and dialogue with key groups affected by our decisions and actions. Stakeholder engagement allows us to align interests, identify and manage potential impacts, and ensure decisions reflect the needs and expectations of those involved.

Stakeholder Engagement Process

During 2023, to determine material issues impact on stakeholders:

• Surveys and direct interviews with suppliers, customers, and unions
• In-depth interview with CEO of LEROY MERLIN Spain
• Session with internal working group of key company areas

Key Stakeholders and Communication Channels

In 2024, the administrative, management, and oversight bodies were not informed about stakeholder opinions regarding sustainability-related impacts, as this was the first dual materiality study using this methodology. The company's strategy considers ongoing stakeholder interests and opinions, particularly customer and employee satisfaction results.

Material impacts, risks and opportunities have been identified through the dual materiality assessment across the value chain and their interaction with strategy and business model:

Environmental (E1 - Climate Change)

Opportunities:

• New business opportunities associated with just transition
• New business opportunities associated with eco-design and product innovation
• New business opportunities associated with lifestyle changes and responsible consumption trends
• Recognition as company committed to responsible consumption and sustainable living habits

Impacts:

• Contribution to energy renovation and sustainability in homes through products and services (Positive, Current)
• Contribution to responsible consumption and sustainable living habits through Home Index and communication initiatives (Positive, Potential)
• Multiple negative potential impacts from failure to reduce carbon footprint across logistics, product manufacturing, transport, use and end-of-life

Risks:

• Company exposure to physical and transition risks from climate change
• Increased financial resource allocation for carbon footprint costs
• Failure to meet sustainability goals due to inability to reduce carbon footprint

Social - Own Workforce (S1)

Opportunities:

• Positive and collaborative work environment improving satisfaction and performance
• Increased ability to attract and retain talent through good employer perception
• Increased productivity through employee engagement policies

Impacts:

• Improving job satisfaction through positive collaborative environment (Positive, Current)
• Improved working conditions through professional growth opportunities (Positive, Potential)
• Improved working conditions contributing to financial security (Positive, Current)
• Various negative impacts related to work-life balance, workload, discrimination

Risks:

• Difficulty attracting and retaining necessary talent
• Loss of employee satisfaction due to various factors (workload, work-life balance, discrimination, harassment)
• Legal proceedings from accidents/occupational diseases

Social - Value Chain Workers (S2)

Impacts:

• Contribution to protection of working conditions and human rights through audits (Positive, Current)
• Accidents/illnesses in suppliers from work for company (Negative, Current)

Risks:

• Legal proceedings from harassment cases by subcontractors/suppliers

Social - Communities (S3)

Not extensively detailed in the provided section, but referenced in stakeholder engagement.

Social - Customers (S4)

Impacts:

• Improved customer experience through clear environmental/social product information via Home Index (Positive, Potential)
• Improved satisfaction through product affordability commitment (Positive, Potential)
• Improved satisfaction through authentic experience and excellent service (Positive, Potential)
• Improved experience through digital innovation and new business solutions (Positive, Potential)

Risks:

• Legal proceedings from product quality/safety issues
• Legal proceedings from store accidents affecting customers
• Loss of customer satisfaction from inability to offer products improving housing conditions

Governance (G1)

Opportunities:

• Culture of ethical and responsible conduct strengthening reputation
• Positioning in sustainability increasing reputation and recognition
• Participation in sustainability alliances fostering collaboration

Impacts:

• Protection of sustainability and ethical principles in value chain through audits (Positive, Current)
• Loss of information/personal data due to cybersecurity breaches (Negative, Potential)

Risks:

• Inadequate management of ethical alerts or complaints
• Exposure to security breaches or information leaks
• Loss of customer confidence due to phishing attacks

These impacts, risks and opportunities are integrated into the company's four strategic 'battles' and inform the development of policies, actions, and targets across all ESG areas.

The company's risk management process and various existing risk matrices have been a fundamental basis for identifying impacts, risks, and opportunities in the dual materiality process.

The process has changed compared to last year because, this time, the assessment was conducted in accordance with the new requirements of the Corporate Sustainability Reporting Directive. The latest modification was to align with these requirements, allowing better reflection of both current risks and opportunities. A further review will be conducted in 2025 to adapt to potential regulatory changes and continue improving impact management throughout the entire value chain.

Dual Materiality Assessment Process

The dual materiality study was conducted in 2024 using the new ESRS methodology. During 2023, to determine the impact of material issues on stakeholders:

• Surveys and direct interviews with broad range of groups including suppliers, customers, and unions for the first time
• In-depth interview with CEO to incorporate management's vision on key sustainability issues
• Internal working group session with key company areas to review and validate material topics

In 2024, the dual materiality study was updated through identification and assessment of impacts, risks, and opportunities across the entire value chain.

Time Horizons

• Short-term: one fiscal year
• Medium-term: from end of short-term reference period to five years later
• Long-term: more than five years

Stakeholder Engagement in Assessment

Stakeholders consulted included customers and consumers, collaborators, suppliers, institutions and business community, with identification of key sustainability topics as priorities for each group.

The results of the materiality assessment and risk analysis are communicated and validated annually with the Positive Impact Executive Leader, then communicated to the Executive Leader Team, and finally approved by the Board of Directors.

This is the first year implementing this dual materiality methodology, representing a significant enhancement to the company's approach to sustainability impact, risk and opportunity identification and management.

See Annex 3 for the complete disclosure requirements covered by the Sustainability Statement of LEROY MERLIN Spain. The company has determined its material topics through the dual materiality assessment and is reporting on the following ESRS:

• ESRS 2 - General Disclosures (all companies must report)
• E1 - Climate Change (material)
• E5 - Resource Use and Circular Economy (material)
• S1 - Own Workforce (material)
• S2 - Workers in the Value Chain (material)
• S3 - Affected Communities (material)
• S4 - Consumers and End-Users (material)
• G1 - Business Conduct (material)

Other ESRS topics (E2 Pollution, E3 Water and Marine Resources, E4 Biodiversity and Ecosystems) were assessed but determined to be not material for the company based on the dual materiality assessment.

This is the first year of ESRS reporting for LEROY MERLIN Spain, representing alignment with the Corporate Sustainability Reporting Directive requirements.

Resource outflows

Expected durability of products

Leroy Merlin Spain uses the Home Index tool to assess the environmental and social impact of products throughout their life cycle. One of the pillars analyzed is "useful life and repairability," which includes five criteria:

• Spare parts availability
• Repairability potential
• Failure rate or return rate
• Availability of documentation
• Manufacturer's warranty (commercial)

The average score for this pillar, for applicable products, as of end-2024 is 71.7 out of 100.

Based on the "manufacturer's (commercial) warranty" criterion, the minimum expected durability for a selection of best-selling products is:

Note: The data provided comes from warranty years for each product group. Therefore, the years reported represent minimum expected durability, not actual durability. It cannot be compared with industry average, as this information is not available at the local or European level.

Repairability of products

The Home Index applies repairability criteria to potentially repairable products in accordance with French legislation. Three criteria are considered: availability of documentation, availability of spare parts, and repairability potential.

As of end-2024, among products with Home Index ratings:

Recycled and recyclable material

The "Raw Materials" pillar of the Home Index includes criteria related to the recyclability of the product's main material and packaging, as well as recycled content within the product. However, as of end-2024, it was not possible to extract reliable quantitative information from these criteria. The company works daily with suppliers to promote continuous improvement and hopes to provide this information in the next report.

Circular economy services

Second Life / Almost Perfect / Refurbished:

Note: Value of Managed Products refers to total value of products dispatched for recovery within the project. Value of recovered products refers to purchase price value of checkouts generated by sale of NEARLY PERFECT and REFURBISHED products.

Home Index performance

Target 2024: 55% of sales come from products with an A, B or C rating on the Home Index
Achievement 2024: 56.9% of sales come from products with an A, B or C rating on the Home Index

More than 140,000 products are now rated with Home Index, with over 700 trained suppliers. Fifty percent of sales come from products with A, B, or C ratings.

Waste

Waste management approach

LEROY MERLIN Spain follows a Zero Waste approach, recovering waste within the company's reach. The company promotes source segregation and identifies all waste streams to reduce the amount sent to landfills and ensures documentary control for traceability.

Key initiatives include:

• Recycling and waste recovery through authorized managers or collective systems of extended producer responsibility (SCRAP, such as Ecoembes)
• Application and fertilization based on ecomodulation of SCRAP
• Increased waste collection points in collaboration with SCRAP (multi-container waste in 100% of stores)
• Contract requirements for waste managers to prioritize recovery treatment over disposal
• Training in waste management for employees
• Reverse logistics pallet recovery project to increase reuse and reduce wood waste
• Increased control over information and waste traceability

Target 2024: 85% waste recovery rate in stores and warehouses
Achievement 2024: 80.7% waste recovery rate

Total waste from own operations (tonnes)

Recycling/Recovery rates

Waste composition

Among waste generated by LEROY MERLIN Spain, the most notable categories are:

• Waste from wood processing and panel and furniture production
• Paper and cardboard packaging
• Plastic packaging
• Wood and metal packaging
• Construction waste
• Composite textile waste
• Electrical and electronic equipment waste
• Batteries and accumulators
• Other waste with hazardous components

Main materials identified: wood, paper pulp, plastic, metal, glass, and construction materials such as ceramics.

The most significant waste stream is waste derived from wood processing and panel and furniture production, which, including wooden packaging such as pallets, has accounted for around half of the waste managed in the last two fiscal years. Waste wood is separated in stores and managed by authorized waste processors. Pallets are managed using the reverse logistics model.

Data methodology

Waste data is calculated through direct weight measurements during collection and waste treatment at recycling plants, using weighing tickets and treatment categories from waste manager plants. Estimates are primarily made for December 2024 for all types of waste, based on historical waste generated by stores in previous months.

Circular economy projects

The company collaborates with suppliers to reuse certain waste, transforming it into new products:

• Circlewood Project with FINSA: transforms wood waste from Galicia centers into new products like chipboard, decorative panels, kitchen furniture, and shoe racks
• KETER Project (pilot 2024): plastic waste from two Zaragoza stores converted into dog kennel floors