To our dear stakeholders:

I am pleased to confirm that Circular Systems reaffirms its support of the Ten Principles of the United Nations Global Compact in the areas of Human Rights, Labour, Environment and Anti-Corruption these continue to be imbedded into the fabric of our business.

In this annual Communication on Progress, we describe our actions to continually improve the integration of the Global Compact and its principles into our business strategy, culture and daily operations. We also commit to share this information with our stakeholders using our primary channels of communication as we strive to meet these goals.

Sincerely yours,

Scott Leonard
CSO

Assessment of relevance: Human Rights is a focal area for Circular Systems (also referred to as "We", "CS" or "the company"). The company is committed to working in areas that uphold the highest regard for human life. Policy: In this reporting period we drafted a Supplier Code of Conduct and internal Code of Conduct as a roadmap to assure Human Rights are protected across our company and potential abuses are prevented. Goals: Circular Systems' goal is to fully implement these Code of Conducts and certify our supply chain with regard to human rights.

Implementation: In order to implement mechanisms that allow CS to assure highest standards for human rights, we will:
- continue to assess our contract manufacturing agreements with the utmost scrutiny
- Formalize Supplier Code of Conduct and internal Code of Conduct as company policy and start to submit for (non-binding) signature to our manufacturers
- continue to build out the CSR department. In the reporting period the company has already assigned one management role in the CSR department reporting to the Chief Sustainability Officer
- continue to be involved in industry-wide consortiums to establish more inter-collaboratory means to achieve these goals and to shed light on the grievances occurring across the company.

Measurement: Performance in the field of human rights will be measured through:
- establishing a periodic review by our senior management to examine any incidents of Code of Conduct violations. During the last reporting period CS unfortunately hasn't had the resources and capacity yet to establish this.
- developing an annual Sustainability Report formalizing our sustainability strategy During the last reporting period CS unfortunately hasn't had the resources and capacity yet to create this report.

Assessment of relevance: Circular Systems sees labour rights as a key factor in our Sustainability Strategy and is committed to partnering with contract manufacturers and supply chain partners to uphold the highest standards. Policy: In the reporting period we drafted a Supplier Code of Conduct and internal Code of Conduct that defines that our partners will be asked to pledge to adhere to the Global Compact Labour Principles and the ILO Core Conventions. Goals: Circular Systems' goal is to formalize and fully implement these Code of Conducts and certify our supply chain with regard to labour rights.

Implementation: In order to implement mechamisms that allow CS to assure highest standards for labour rights externally and within the company, we will:
- continue to assess our contract manufacturing agreements with the utmost scrutiny
- Formalize Supplier Code of Conduct and internal Code of Conduct as company policy and start to submit for (non-binding) signature to our manufacturers
- certify our supply chain. As examples: In the reporting period, CS became part of the Yarn Ethically and Sustainabily Sourced initiative (YESS). YESS is designed to drive forced labor out of cotton production by building capacity and managing a credible due diligence assessment of yarn spinners and textile mills. CS is one of the pilot partners in the development process of the standard. Moreover, CS utilizes the Global Organic Textile Standard (GOTS) whose social criteria are based on the key norms of e.g. the International Labour Organisation (ILO) and United Nations Guiding Principles on Business and Human Rights (UNGPs) etc. In addition, the company started to participate in the Facility and Social Labour Module (FSLM) by the Sustainable Apparel Coalition. Herewith supply chain partners are obliged to report on social labour conditions and undergo on sight verification audits.
- conduct internal assessments for CS' employees

Measurement: Performance in the field of labour rights is measured through:
- supply chain certification and auditing of supply chain partners
- developing an annual Sustainability Report formalizing our sustainability strategy
CS internal performance in the field of labour rights is measured through:
- establishing a periodic review by our senior management to examine any incidents of Code of Conduct violations. For instance during each hiring period, internal assessments are conducted on employee diversity. Due to the fact that CS operates across several jurisdictions and continents, the employee base is relatively diverse - especially across nationalities and age groups. Moreover, management is aware that it can improve the number of women in high-level management and is actively looking for ways to address this matter.
- encouraging employees to voice concerns and informing them about their routes for legal repercussions.

Assessment of relevance: Circular Systems was founded with Sustainability as its core value. With our waste-to-fiber platforms the company focuses on environmental protection, regeneration and circularity. CS is a signatory to several reporting committments on climate change and social and environmental production. As a part of these reporting obligations, CS conducts comprehensive risk and opportunity assessments to respond proactively.
Policy: Circular Systems has a company policy which requires that all suppliers give access to production data for reporting, certification and impact assessment purposes. Moreover, the development of our technology is assessed according to environmental best practices.
Goals: With the committment to the United Nations Fashion Charter (FICCA) CS has the goal to develop a climate transition plan until beginning 2023 that aligns with the global 1.5°C goal.

Implementation: In order to implement emission reduction initiatives and work towards the 1.5°C goal, we will:
- continue to conduct detailed life cycle assessment (LCA) on own production processes. In the reporting period CS has conducted a second Life Cycle Assessment on our European and Chinese Agraloop Production. This assessment feeds into our overarching Sustainability strategy supported by external LCA experts.
- develop a responsible sourcing system for crop residues, called Crop Residue Standard (CRS). The standard supports the mitigation of unintended risks to the environment and human health when utilizing agricultural residues for textile fibre production.
- conduct comprehensive Scope 1,2,3 Greenhouse gas emissions assessment across company operations in the framework of the CDP Reporting process
- conduct annual risks and opportunities assessment of climate-related impacts such as soil health, changing precipitation patterns or extreme wheather events on company business.

Measurement: CS environmental performance and climate reduction targets are measured and documented through:
- GHG reporting according to GHG Protocol standard through the Climate Change module of the CDP framework
- reporting through the Sustainable Apparel Coalition (SAC) facility modules: Facility environmental module (FEM) and Facility and Social Labour Module (FSLM)
- establishing a periodic review by our senior management to examine environmental commitments and progress towards climate transition goals
- developing an annual Sustainability Report formalizing our sustainability strategy

Assessment of relevance: CS has zero-tolerance for corruption and takes this matter incredibly seriously. The company diligently assesses risks in countries and areas in which we operate. Policy: In the reporting period we drafted a Supplier Code of Conduct and internal Code of Conduct to ensure that staff are aware of how to respond and act if ever confronted with extortion or bribery. Goals: Circular Systems' goal is to formalize and fully implement these Code of Conducts and certify our supply chain with regard to labour rights.

Implementation: In order to prioritize these matters and establish a public protocol, we will:
- continue to assess our contract manufacturing agreements with the utmost scrutiny
- continue to operate and conduct business with partners with a high degree of transparency
- Formalize Supplier Code of Conduct and internal Code of Conduct as company policy and start to submit for (non-binding) signature to our manufacturers
- make a concerted effort to further inform ourself on the topic.

Measurement: Performance in the matter of Anti-corruption will be measured against CS company policy through:
- internal and external audits of supply chain partners
- CS' participation in diverse reporting schemes which include social requirements
- establishing a periodic review by our senior management to examine any incidents of Code of Conduct violations
- developing an annual Sustainability Report formalizing our sustainability strategy