Product Development, R&D and Innovation is the primary responsibility of the Executive Vice President and Chief Technology Officer. We have corporate research teams in the United States, China, India, Ireland and the Czech Republic. Our data science teams work to expand our digital platforms and capabilities. We collaborate with a robust ecosystem of partners that include academia, government agencies and research incubators.

Strategic approach and management of risks and opportunities

We continually take environmental concerns into account as a part of our product design process. The principle objective of Design for the Environment (DfE) is to reduce the overall impact of a product across its lifecycle: production, distribution, use and end of life.

Eaton is in the process of defining a portfolio of sustainable products in order to measure the impact of our products that help our customers meet their sustainability goals. Criteria for the sustainability portfolio include lower energy and resource consumption, less pollution, alignment with Sustainable Development Goals, and reduced environmental impact.

We measure success by several KPIs, including R&D investments and number of patents. We are in the process of developing a sustainable portfolio of products. We will measure the percentage of our revenue attributed to products that improve the quality of life and the environment.

In 2020, Eaton will create a KPI baseline and a defined portfolio of sustainable products, which will launch in 2021.

The quality of our products, services and solutions is every employee’s responsibility, as stated in our companywide quality policy. The corporate quality team provides cross-functional leadership and is led by our Quality VP, under the direction of our EVP for EBS & Sustainability, who is part of the company’s Senior Leadership Committee. Each business is supported by a Quality Leader who regularly engages with business leaders to drive Quality initiatives.

The Quality Function relies on its Quality Management System (QMS), which is designed to monitor and evaluate the sites’ QMS risk profile, which includes, but is not limited to, product safety. Based on the risk assessment results, qualitative and actionable priorities are established and deployed. Each site completes an annual self-assessment to comply with corporate QMS requirements, industry standards and regulatory requirements. Additionally, Eaton performs internal annual audits to ensure its continuous compliance to the QMS requirements. Consumer Safety & Quality Councils – a forum to manage product safety concerns, corrective actions, and best practices – are deployed at all levels of the corporation.

The Senior Leadership Committee regularly monitors and assesses the results of Quality performance, including but not limited to any product safety incidents.

Management role and board oversight

Results on material risks, including climate change issues and other environmental topics, are reported to the Board of Directors on an annual basis or more frequently depending on circumstances, and other risks are reported as scheduled. In the case of climate change, all aspects are included in the twice-yearly report-out to the Board by the EVP, EBS and Sustainability.

Functional leaders in partnership with the businesses develop risk mitigation plans that are integrated into Eaton’s strategic planning and profit planning processes.

Greenhouse gas, water, waste and energy reduction targets are established for long-term and annual targets. These environmental targets are approved by the CEO and Chairman.

Greenhouse gas emissions, water use and waste to landfill are reported quarterly to the businesses, senior leadership and the board. Eaton continually seeks to learn from and to replicate practices that increase efficiency and help incorporate renewable energy into our operations.

Through our Eaton Business System, we have procedures for continuous improvement and sharing best practices across the enterprise. We align our greenhouse gas accounting methodology with the GHG Corporate Protocol to ensure our practices are aligned with global standards.

Our businesses report on environmental performance to the CEO annually during Environmental Operations Reviews.

Led by a board-elected officer and senior vice president, the Global Ethics and Compliance team consists of experienced U.S. and international lawyers and other professionals. To ensure the highest level of visibility and independence, the Global Ethics and Compliance program is managed directly by the Governance Committee of Eaton’s Board of Directors, with the active, visible and consistent support of Eaton’s senior management.

We periodically assess our ethics and compliance programs and performance to measure our effectiveness against best practices and changing business environments.  We leverage audits, surveys, and other tools as part of our assessment processes.  Ethics and Compliance is also a component of our annual enterprise risk management (ERM) assessment process and system.  We use the collected data from our sources to continuously improve our programs, including our training and communications, controls and other program elements.

We have a goal that 100% of employees have access to the Code of Ethics in 34 different languages.

We annually measure that targeted employees affirm that they read, know and comply with the principles in Eaton’s Code of Ethics and that managers of people certify that their reports have received at least 1 hour of ethics training. We target 100% affirmation and certification.

Each year all leaders are required to provide their direct reports in-person training on the principles of our Code of Ethics and Doing Business Right.  

We implement a robust online annual training curriculum to targeted audiences addressing critical compliance subjects. Designed to provide practical guidance on how to apply our principles and policies, the curriculum features mandatory instruction on anti-corruption laws, antitrust principles, data protection, global trade management, anti-harassment, and other key legal and regulatory areas.

Care of our employees and the environment is the responsibility of all leaders. The corporate environmental, health and safety (EHS) team provides functional and thought leadership and is led by the senior vice president of EHS, who is a member of the Senior Leadership Committee. Each business is supported by EHS business leaders who regularly engage with EHS regional leaders to support site-level activity.

Each level of management—site, regional, and corporate—periodically reviews and assesses EHS incidents and trends to determine actionable priorities. Each site completes a self-assessment annually of compliance to ISO 14001 and internal Eaton standards. Eaton performs internal audits of each site every three years and is constantly looking to implement best-in-class operational standards.

In support of overall business goals, the environmental, health and safety team determines EHS goals with guidance from the CEO and approval from the Senior Leadership Committee.

The Senior Leadership Committee regularly receives the results of operational EHS performance assessments, including any severe injuries and the recordable incident rate.

The senior vice president of Environmental, Health and Safety, who is a member of both the corporate environmental, health and safety team and Eaton's Senior Leadership Committee, reports to the Board of Directors on various EHS matters monthly, quarterly and annually.

Eaton’s EVP, Supply Chain Management leads our One Eaton Supply Chain Management philosophy, which reflects our core values and our commitment to doing business right. Our expectations for suppliers serve as an extension of these principles and our shared commitment to responsible sourcing practices.

The EVP, SCM oversees the policies and procedures that govern Eaton's supplier management and sourcing practices and is further a member of Eaton’s Senior Leadership Committee.

The EVP, SCM reports periodically to the Board on critical matters related to Eaton’s supply chain management activities.

Eaton's Supply Chain Management function works with our supply base to ensure suppliers can efficiently and effectively support our businesses. SCM emphasizes four main objectives:

• Manage the acquisition of goods and services.
• Create value to our shareholders by driving effective cost management and operational efficiencies.
• Provide risk management, governance and compliance.
• Drive continuous improvement, supporting growth opportunities for both and Eaton and our suppliers.

As part of our One Eaton Supply Chain Management philosophy, Eaton’s Supply Chain Management organization undertakes rigorous annual examination processes in order to identify and mitigate a broad spectrum of supply chain risks, including critical supply and/or critical materials. Our Risk Assessment Process includes a risk scan of external sources, intelligence gathering and internal alignment of the risk landscape. We evaluate risks based on severity and probability and develop specific mitigation strategies to address these risks.

We identify risks at the issue level and apply our evaluation across the spectrum of our business activities. For each identified risk, we explain how we are currently mitigating it based on specific activities. We monitor this process quarterly to account for any changes.

Additionally, SCM has established risk identification and contingency planning guidelines. These guidelines may be used for an ongoing sourcing process or to assess the stability of an existing supplier. These guidelines:

• Provide an overview of the approaches to identify potential risks within the supply base.
• Introduce processes and templates to validate potential risks and impacts resulting from supplier failures.
• Provide a recommended checklist to initiate contingency planning and actions.

We ask suppliers to affirm our supplier code of conduct and track their status in addition to their acceptance as part of Eaton’s standard contractual terms and conditions. We also ask for adherence to all local and regional trade management regulations.

We have updated and simplified our Supplier Site Assessment (SSA) process. This process provides a deeper analysis of supplier performance and includes evaluations of supplier EHS and product stewardship practices. The SSA results are reviewed to identify any gaps which may exist in the supplier operations and a formal corrective action plan addressing the identified gaps, if any, is required prior to conducting business.