2017 Modern Slavery Statement

Introduction

Nest Labs, Inc. and Nest Labs (Europe) Ltd. (collectively “Nest”) are committed to treating all workers with respect and dignity, ensuring safe working conditions, and conducting environmentally responsible, ethical operations.

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 ensure that modern slavery is not taking place in our supply chains and business operations. This is our second statement, covering our 2017 financial year (January - December 2017).

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 Labs, Inc. is a wholly owned subsidiary of Google LLC, which is, in turn, a wholly owned subsidiary of Alphabet Inc. (“Alphabet”). Nest Labs (Europe) Limited’s ultimate parent undertaking is also Alphabet, and its immediate parent undertaking is Google Ireland Holdings Unlimited Company. Google LLC and Google Ireland Holdings Unlimited Company are collectively referred to in this statement as “Google”. Nest generates revenue primarily through the sale of its core products, which include the Nest Learning Thermostat, Nest Thermostat E, Nest Protect, Nest Cam Indoor, Nest Cam Indoor IQ, Nest Cam Outdoor, Nest Cam Outdoor IQ, Nest Hello, and Nest Secure. Nest also generates revenue from selling services to end-user customers and enterprise customers. These services include Nest Aware, Rush Hour Rewards, Time of Savings, 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 our global 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 continues to oversee 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 the Audit Committee of Alphabet’s Board of Directors. Regular updates on the status of the Responsible Supply Chain Program—which includes addressing modern slavery risk—are provided to a Responsible Supply Chain Steering Team, 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

As reported in our last statement, Nest is subject to Google's Code of Conduct (the “Code”) and 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 sets standards designed to protect the health, safety, and treatment of workers, including the prohibition of any form of modern slavery, including forced, bonded (including debt bondage), or indentured labor; involuntary prison labor; sex trafficking; and slavery or trafficking of people. We hold our employees and suppliers to high standards. Any violation of our standards by a Nest employee can result in disciplinary action, including termination of employment. Any violation by a supplier can result in contract termination.

In 2017, we continued our efforts to ensure we include modern slavery-specific language in our contracts, requiring 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 their contractual obligations related to modern slavery eradication.

Additionally in 2017, we received approval from Google’s Compliance Steering Committee to expand the types of suppliers required to comply with our Supplier Code of Conduct. We began this effort in Q4 2017 and will continue expanding supplier engagement and education on our Supplier Code of Conduct throughout 2018.

Risk assessment

As subsidiaries of Google, Nest’s business operations and supply chains are increasingly aligning with Google’s, and, as such, continue to be regularly assessed for risk associated with modern slavery by Google’s Responsible Supply Chain team. 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 continues to work with Google's Responsible Supply Chain team to evaluate and address modern slavery risks, among other risks, presented by our hardware suppliers. For more information on Google’s efforts to assess these risks (which assessment includes Nest’s business operations and supply chains), please see the Google 2017 Modern Slavery Statement and Google’s Responsible Supply Chain report, Creating a Responsible Supply Chain.

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 vendors that are identified as having higher risk through the assessments described in the preceding section (collectively, the “higher-risk suppliers”).

In 2017, we worked to update and improve our questionnaire assessing the labor risks of our suppliers, which incorporates questions from The Slavery & Trafficking Risk Template (developed by the Social Responsibility Alliance), and the US Department of State’s Responsible Sourcing Tool. 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 supplier 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.

Training

Training on the Code of reinforces the expectation that employees, temporary workers, and contractors (collectively, “workers”) follow applicable laws and report concerns of illegal or unethical activity. Nest workers involved with Nest’s supply chain and product procurement are trained to conduct due diligence to identify and avoid working with third parties that engage in modern slavery or other illegal practices. Nest workers who manage relationships with higher-risk suppliers identified in the Google risk assessment receive supplemental in-person training. In addition, in late 2016, an online training course was launched that includes anti-modern slavery education for Nest workers in roles related to hardware supplier management. This training helps workers identify modern slavery red flags, shares anti-modern slavery best practices, and instructs 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 2017, Google published its first Responsible Supply Chain report, titled Creating a Responsible Supply Chain, which report includes Nest’s business operations and supply chains within its scope. This report provides more detailed information about the above-mentioned audit and supplier engagement efforts.

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. Our efforts to combat these practices are ongoing, evolving, and continually improving. We made progress in 2017 and intend to continue our momentum in 2018.

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 2018

Fionnuala Meehan
Board Member, Nest Labs (Europe) Ltd.
August 2018