2013 Annual Report

SUPPLIER ASSESSMENT ANTI-CORRUPTION Indicators Consolidation The rate of new suppliers hired based on environmental criteria, labor laws, human rights and impacts on society G4-EN32 G4-LA14 G4-HR10 G4-S09 At Santander Brazil, 100% of suppliers are selected based on social/environmental criteria (including issues such as labor laws, human rights, and impacts on society), to the extent that throughout the approval process, any bidders in bidding where this item is applicable must be compliant with the RFQ, with these requirements being included as a clause in the supply agreement. Actual and potential material impacts in the supplier chain and action taken about it G4-EN33 G4-LA15 G4-HR11 G4-SO10 High-impact suppliers go through the same process as described above (the Control and Assessment Mechanisms). In 2013, from the 1.515 active suppliers, 293 underwent impact assessments, i.e., approximately 20%. In case of a new high-impact supplier, a compliance visit is scheduled by specialists, based on the Self-Assessment questionnaire filled out by the supplier and submitted at the beginning of the assessment process. The questionnaire (IQF) generates a rating (varying between 1 and 4); in case the rating is below 2, the firm is considered unfit to be hired and its records are blocked. However, if the manager in the area in charge of the contract is interested in hiring the supplier, he/she will seek authorization so that the approval process proceeds. In addition, the area should take on the commitment to request an action plan for improvements from the supplier. The approval process is updated on a regular basis; in the case of business critical suppliers, the update is done on an annual basis. The benchmarks used in the process to identify adequate suppliers are the Global Compact and the ISE. Beginning in 2014, any suppliers deemed as with a high social/environmental impact will be included in the approval process that requires the application of the IQF. No contracts were suspended in 2013. Operations and suppliers identified as having significant risk for incidents of forced, child or bonded labor and actions taken G4-HR5 G4-HR6 High-impact suppliers are subjected to compliance inspection visits. These visits, performed by specialists, reveal whether or not the supplier has in place adequate labor practices. In 2013 the visits did not detect any evidence of irregularities in connection with forced, child or bonded labor. In order to contribute with the eradication of child labor, the Bank requires that the hiring of suppliers deemed as high-impact includes documents that deal with the topic such as clauses in services and supply agreements. For other agreements, we use a simplified clause that deals with social/environmental items. This clause was updated in 2013. In addition, it encourages suppliers to embrace the Global Compact principles. New suppliers also sign a declaration to the effect that they do not use child labor and bonded labor. Considering the above mechanisms, no cases of bonded or forced labor were detected during the year. Materiality The Anti-Corruption item, in charge of the Compliance Office, is material to the Bank because it is associated with the compliance with both laws and the Organization's ethical principles; it also represents both a reputational and a financial risk. At Santander we believe that transparent bank practices strengthen the relationship with our investors and clients; it helps identify and manage any potential conflicts of interest, while ensuring that any investments made by the bank are not treated as bribery. Impacts A strong governance that prevents the involvement of the Bank in corruption cases contributes to the Bank's image as an honorable company, recognized by both the market and the society at large. The opposite would lead to loss of trust among stakeholders while increasing the risk of reputational damage and financial loss via fines and sanctions. In order to minimize negative impacts while highlighting positive impacts Santander has in place special policies that are communicated to employees, including training sessions on the action against corruption. In addition, It has a Compliance team that is dedicated to areas with a relationship with the sector; the Service Channel in Compliance to guide employees with information and clarification; a Reporting Channel for inadequate behavior, corruption and bribery, to name a few. The Bank has also a process to verify any participation of the Bank's Board members in requests for sponsoring, in order to identify any potential conflicts of interest. We are also committed to ensuring the applicability of Anticorruption Act 12.846/13 in cases of corruption by the Executive Committee or Compliance. In terms of the governmental sector, the Bank acts via specific areas to service the sector in order to ensure good practices to promote integrity in the deals. 142 Annual Report 2013 143

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