2016 Modern Slavery Statement

Introduction

Nest Labs, Inc. and Nest Labs (Europe) Ltd. (collectively “Nest”) strives to ensure that working conditions in our operations and supply chains are safe, that all workers are treated with respect and dignity, and that our business operations are conducted ethically.

We are issuing this statement pursuant to the UK Modern Slavery Act and California Transparency in Supply Chains Act to disclose Nest’s efforts to combat modern slavery in its supply chains and business operations. Throughout this statement we reference “modern slavery,” which includes slavery, servitude, forced or compulsory labor, and human trafficking.

Nest’s structure, business, supply chain

Nest is a wholly owned subsidiary of Google LLC. (“Google”), which is, in turn, a wholly owned subsidiary of Alphabet Inc. (“Alphabet”). Nest generates revenue primarily through the sale of its core products, which include the Nest Learning Thermostat, Nest Protect, Nest Cam Indoor, and Nest Cam Outdoor. Nest also generates revenue from selling services to end-user customers and enterprise customers. These services include Nest Aware, Rush Hour Rewards, Seasonal Savings, and Safety Rewards.

Nest does not have manufacturing facilities. Because of this, our anti-modern slavery efforts require strong collaboration and engagement with suppliers that manufacture products on our behalf.

Internal management, accountability, and programs

Nest participates in Google’s Anti-Modern Slavery and Responsible Supply Chain programs and, as such, is subject to the policies and procedures associated with those programs. Google's Chief Ethics and Compliance Officer oversees a team focused on combating modern slavery in the company’s supply chains and business operations, including Nest’s. The Chief Ethics and Compliance Officer provides quarterly updates on the status of the company’s Anti-Modern Slavery program to a Compliance Steering Committee, composed of senior executives from different areas within Google's business. In addition, the Chief Ethics and Compliance Officer provides regular updates on the anti-modern slavery efforts to Alphabet’s Audit Committee. Regular updates on the status of the Responsible Supply Chain Program—which includes addressing modern slavery risk—are provided to a Steering Committee composed of Google’s Chief Ethics and Compliance Officer and leaders from Google’s and Nest’s hardware product areas. Finally, while day-to-day compliance program management is operated by Google, Nest-specific supply chain sustainability or modern slavery compliance concerns are addressed in collaboration with Nest, including Nest’s legal team.

Policies addressing ethical conduct and prevention of modern slavery

Nest is subject to Google's Code of Conduct (the “Code”), which sets forth expectations regarding compliance with anti-modern slavery legislation such as the UK Modern Slavery Act and the California Transparency in Supply Chains Act. The Code encourages Nest employees to use an anonymous helpline to raise questions or concerns about the Code and to report suspected violations. Employees failing to follow the Code can be subject to disciplinary action, including termination of employment. Failure of a Nest contractor, consultant or other covered service provider to follow the Code can result in termination of their relationship with Nest.

Nest is also subject to Google’s Human Trafficking and Child Labor Practices Policy, which prohibits Nest employees from knowingly engaging in or supporting human trafficking and child labor practices in our business operations. A Nest employee, contractor, service provider, supplier, or vendor who knowingly engages in or otherwise takes action to support human trafficking or child labor practices will be disciplined up to and including termination of employment or business relationship.

Nest also adheres to Google's Supplier Code of Conduct (the “Supplier Code”) for our product and research and development suppliers (collectively, “hardware suppliers”). The Supplier Code is based on the Electronic Industry Citizenship Coalition Code of Conduct; international standards, such as the United Nations Guiding Principles on Business and Human Rights and the Universal Declaration of Human Rights; and our own values. Nest seeks to have all of its direct hardware suppliers certify compliance with the Supplier Code either through direct signature of the Supplier Code or the inclusion of a certification clause in an executed contract. The Supplier Code sets standards designed to protect the health, safety, and treatment of workers, including the prohibition of any form of forced, bonded (including debt bondage), or indentured labor; involuntary prison labor; sex trafficking; and slavery or trafficking of people.

Risk assessment

Nest’s business operations and supply chains are regularly assessed for risk associated with modern slavery. The factors considered in these assessments are based on international standards described by the Universal Declaration of Human Rights and the International Labour Organization as well as industry standards. Nest works with Google's Responsible Supply Chain team to evaluate and address modern slavery risks, among other risks, presented by our hardware suppliers.

Recently, Google conducted a Supplier Risk Assessment of Google suppliers, including Nest suppliers, to identify additional modern slavery risks that may exist beyond our hardware suppliers. This assessment involved a review to identify higher-risk areas of Google’s and Nest’s businesses based on external reports and standards, country and sector risk profiles, and input from experts in this area. The assessment included interviews of employees who hire suppliers in these higher-risk areas. The risk assessment identified higher risk areas of focus, which include call centers, construction, janitorial services, food services, and other manual labor–related jobs.

The plan is to expand these risk assessment efforts to better understand modern slavery risks associated with the numerous layers of our different supply chains, including more detailed mapping and assessment of sector and geographic risks.

Due diligence and contracting

Nest’s contracting practices are managed within Nest by Nest’s legal team, in alignment with the policies and processes developed by Google regarding supplier conduct. Due diligence is conducted on Nest’s direct hardware suppliers and on suppliers or vendors identified as having higher risk (collectively, the “higher-risk suppliers”).

As part of the due diligence process, higher-risk suppliers complete a self-assessment questionnaire about their working conditions and management systems. The due diligence process also includes comprehensive background checks, examination of labor-related red flags that appear in publicly available databases and media sources, and review of higher-risk suppliers’ names against human trafficking watch lists.

If red flags are discovered, extensive and documented follow-up is conducted to remediate those issues. In certain cases, Nest may decide to no longer pursue a relationship or to terminate the current relationship with a supplier.

Additionally, we are in the process of reviewing our template contracts with the goal of adding language that requires suppliers to:

• comply with human trafficking, forced labor, and modern slavery laws;
• implement anti-modern slavery due diligence processes for their own suppliers and business partners;
• extend similar anti-modern slavery language to their suppliers and business partners;
• allow audits for instances of modern slavery; and
• allow us to terminate our agreements with them for any violation of our obligations related to modern slavery eradication.

Training

Nest personnel involved with Nest’s supply chain and product procurement are bound by and trained on the policies and procedures to manage modern slavery risk at Nest. This training reinforces the expectation that all Nest employees, temporary workers, and contractors (collectively, “workers”) follow applicable laws and report concerns of illegal or unethical activity. Nest workers who manage relationships with higher-risk suppliers receive supplemental in-person training. In addition, in 2016, a new online training course that includes anti-modern slavery education was provided to Nest workers in roles related to hardware supplier management. This training helps our workers identify modern slavery red flags, shares anti-modern slavery best practices, and instructs our workers to report modern slavery concerns.

Assessing and reporting on effectiveness

Periodic independent third-party audits are performed at higher-risk Nest hardware and non-hardware suppliers’ facilities. The audits include in-depth factory tours, meetings with management, on-site worker interviews, document reviews, and assessments of related areas, such as dormitories, cafeterias, wastewater treatment facilities, and warehouses. The audit protocol is designed to assess suppliers’ performance in the areas covered by the Supplier Code, including modern slavery risk. Any issues identified during the audit are investigated to determine root causes and develop corrective action plans. While our audits are not unannounced, our supplier managers are trained to report any concerns they might observe on an ongoing basis.

In addition to audits, risk is assessed at Nest suppliers via direct engagement with workers through individual and group interviews, as well as tablet-based worker surveys.

Reporting concerns or raising issues related to modern slavery

Multiple options for reporting issues related to modern slavery are available to Nest workers, including a helpline that gives callers an option to report concerns anonymously, which is promoted through internal policies, communications, and trainings. In addition, we strictly prohibit retaliation for raising concerns.

If a modern slavery concern is raised through the helpline or other reporting channels, Google's Ethics and Compliance team coordinates with appropriate stakeholders at Nest and at Google to investigate and address the issue. If a reported concern is substantiated, the corrective response may involve working with the supplier to ensure that the issue is addressed or, if that is not possible, terminating the supplier.

Moving forward

Modern slavery is a complex challenge that cannot be solved overnight. Therefore, our efforts to combat these practices are ongoing, evolving, and continually improving. We intend to increase our efforts to ensure that modern slavery is not taking place in our supply chains and business operations.

This statement was approved by Nest Labs, Inc.’s and Nest Labs (Europe) Ltd.’s Board of Directors.

Ken Yi
Board Member, Nest Labs, Inc.
August 2017

Elizabeth Cunningham
Board Member, Nest Labs (Europe) Ltd.
August 2017