Assessing and monitoring suppliers risks

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1 Assessing and monitoring suppliers risks Eni adopts criteria for the qualification and selection of suppliers which assesses their ability to meet corporate standards on ethics, health, safety, environmental protection and Human Rights. Eni implements this commitment by promoting these values in its relationships with suppliers and engaging them in the risk prevention process. Indeed, Eni performs processes aimed at minimizing Human Rights risks deriving from the conduct of its counterparties and monitors compliance with these commitments over time. Should critical issues emerge, Eni requires the implementation of corrective actions. Where contractors performance in terms of respect for Human Rights falls below minimum standards, Eni limits or prevents their participation in tenders. Selection and management of suppliers Eni requires suppliers make a formal commitment to respect principles such as the protection and promotion of Human Rights, high safety standards at work, environmental protection, the fight against corruption, compliance with laws and regulations, ethical integrity and fairness in relations. Eni carries out selection and management processes aimed at: analysing the reliability of the operational and compliance levels of potential and actual suppliers; beyond assessing technical capacity, assessing also sustainability aspects and compliance with suppliers HSEQ requirements, defining appropriate action plans geared to the development and continuous improvement of suppliers' performance and aimed at remedying any shortcomings identified; monitoring the performance and integrity of suppliers and their compliance with the sustainability and social requirements for collaborating with Eni; performing a gap analysis against the main international Human Rights standards by assessing them based on the evaluation parameters inspired by the Social Accountability Standard (SA8000). This management model guarantees Eni s constant monitoring over its suppliers, up to the suspension of relationships if suppliers do not meet the minimum standards set by Eni.

2 Focus on Human Rights assessment Eni has strengthened its determination to contribute to social progress over the years, encouraging the development of its suppliers' skills relating to sustainability issues, promoting and requiring respect for the main ILO standards. In particular, the assessment activities relating to Human Rights and workers' rights include a recently implemented model to identify the most at-risk areas to focus efforts on; moreover, in order to develop in-house expertise on the subject and directly interact with suppliers on these issues, selected resources of the procurement department have participated in training initiatives, for example the SA8000 Auditor course. The application of the risk-based model makes it possible to define a yearly assessment plan for suppliers identified as "critical" on the basis of factors such as country risk and sector risk (high-risk countries in terms of violation of human rights as well as critical sectors in terms of workers' rights abuses). These assessments are especially aimed at understanding suppliers strengths and weaknesses and increasing awareness on issues regarding workers' rights, such as minimum age of workers, prohibition of forced labour, prohibition of discrimination, safety and working conditions, freedom of association and rights to collective bargaining, working hours, remuneration, etc. This is done through: actions aimed at effectively involving suppliers, on site visits, verification of social policies, procedures and applied labour contracts, random checks on sensitive documents (attendance register, payslips, accident register, etc.), individual and group interviews on a representative sample of workers, sharing of findings and definition of an action plan for addressing the identified gaps. Facts and figures on assessment and monitoring activities In 2017, Eni assessed and monitored more than 5,000 suppliers on issues having potential implications relating to respect for Human Rights (Health, Safety, Environment protection, workers rights, anti-corruption, etc.). Potential criticalities and/or possible areas of improvement were detected in 24% of these suppliers, however none were so serious as to compromise, in 95% of cases, the possibility of using these suppliers. The remaining 5% of the suppliers presented critical issues which led to a suspension of relations with Eni. More specifically, Eni carried out 16 Human Rights Assessments and 7 follow-ups in 2017, bringing the total since 2008 to 172 assessments in 14 countries of operation (China, Congo, Angola, Nigeria,

3 Pakistan, East Timor, Ecuador, Mozambique, Indonesia, Algeria, Ghana, Vietnam, Kazakhstan and Italy). Human Rights in the Supply Chain Number of suppliers subjected to assessment and monitoring of which suppliers with criticalities/areas for improvement of which suppliers with whom Eni has suspended relations (number) ,114 5,171 5, ,336 1, The KPIs refer only to the processes managed by the headquarters Procurement department which deals with all Italian, Mega-supplier and International suppliers. Engaging with peers to improve our management of Human rights risks deriving from suppliers Considering the remarkable progress which can be attained through cooperation with peers, Eni is actively participating in IPIECA s project on Human Rights in the supply chain, which is aimed at building awareness and improving industry performance relating to the rights of site-based contractors workforces.

4 CASE STUDY: HUMAN RIGHTS ASSESSMENT IN THE SUPPLY CHAIN BACKGROUND Over time Eni has boosted its commitment to encourage its suppliers to develop skills on sustainability issues and to promote the main ILO standards. A model has been implemented to identify the areas most at risk, for which contractual leverage is used, and focus its efforts. A Human Rights risk-based approach: The Human Rights assessment was carried out on an African supplier identified by taking into account: the Country risk, based on criteria focused on human rights violations the sector risk, based on workers rights risk exposure. PROCESS The assessment is carried out with the aim of understanding the supplier s strengths and weaknesses on issues of social responsibility, particularly on workers rights, and increasing awareness of these issues through: Supplier engagement; On site visit; Check of social policies, procedures, employment contracts applied; Sample checks of sensitive documents; Individual and/or group interviews on a representative group of workers; Sharing the results and definition of the action plan required in order to fill any gaps found. Both the methodology for the assessment and the areas covered were based on the SA8000 Standard. In particular, the assessment included verification of compliance to international standards on the following main issues: Child Labour; Forced Labour; Health and Safety; Freedom of Association & Right to Collective Bargaining; Discrimination; Disciplinary Practices; Working Hours; Remuneration; Management Systems. CRITICALITIES FOUND AND ACTIONS REQUIRED Thanks to the assessment, the following Human Rights abuses were identified: Lack of transparency in employment contracts with regard to remuneration conditions; Impossibility for women who fall pregnant during the trial period to take advantage of maternity leave; No clear indication of the number of annual holidays due.

5 The results of the assessment have been used to: define a monitoring plan on a group of employees to check that information on salary calculation and the related payment is traced precisely and accurately; define an improvement plan to fill the gaps found in the employment contracts applied, particularly concerning employees maternity leave and annual holidays. FOLLOW-UP A follow-up was carried out in order to make sure that the standard working agreement had been amended by: Aligning contract clauses with international standards; Improving transparency on working conditions, including remuneration. The assessors ascertained that the recommendations had been adopted and implemented by the supplier within the agreed time. LESSONS LEARNED Key elements for success: involving the parties concerned more effectively in the process, demonstrating adequate cultural sensitivity in conducting interviews with workers and presenting results as an opportunity for development and continuous improvement. Challenges: putting interviewed workers at their ease, avoiding them feeling intimidated and ensuring that there are no repercussions when delicate information is revealed, therefore ensuring that the interviews correctly reflect the actual working situation.