|TCFD Recommendation||Whirlpool Corporation Disclosures|
Whirlpool Corporation Disclosures
Oversight for ESG
Our Board of Directors is committed to overseeing the integration of ESG principles throughout Whirlpool Corporation, as reflected in our Corporate Governance Guidelines, which provides for Board oversight of our ESG strategy and initiatives, including those related to climate risks and opportunities. In line with the guidelines, the Board reviews and receives updates on our sustainability strategy and key long-term ESG initiatives every year. The Board oversees the integration of ESG principles throughout the company to drive long-term value.
At the management level, our ESG efforts are led by our Executive Committee and guided by our ESG Councils—one covering Environmental Sustainability, one covering Social and Governance topics. Our ESG Councils are composed of regional business leaders and senior leaders from our key operational and corporate functions. The ESG Councils evaluate our strategic priorities on relevant ESG issues based on results of our ESG Materiality Assessment and input from our ESG Task Force, a cross-functional team that embeds individuals and leaders from all core functions of the business. To further strengthen our ESG governance structure and integration into our business, we established a new Senior Director of Sustainability that reports directly to our Senior Vice President, Corporate Relations and Sustainability, an Executive Committee member. Whirlpool provides monetary incentives to our CEO and Executive Committee members for the management of climate-related issues. In addition to other strategic priorities, the CEO’s and Executive Committee members’ individual performance objectives include sustaining progress in our ESG program and sustained progress towards net zero emissions by 2030 (Scopes 1 & 2). Whirlpool Corporation’s Corporate Controller is accountable for reporting to the EC and the Board of Directors on ESG matters, including climate change-related issues and financial impacts.
Managing Climate Risks
The ESG Councils are supported by the ESG Task Force, a cross-functional team that embeds individuals and leaders from all areas of the business. The Task Force is responsible for planning, communication, education, prioritization and reporting around all ESG matters.
Specific to climate change, we have set a net zero target on Scopes 1 & 2 and a target on Scope 3 products in use below 2°C. The ESG Councils continue to monitor emerging risks and opportunities related to emissions, renewable energy, recycling, new regulatory actions, materials, end of life, and the connected grid infrastructure. Emerging topics such as carbon taxes, biodiversity, water, closed loops and supply chain resiliency, net-zero homes, and environmental design, including life cycle assessments, are all areas that are continually monitored by our dedicated sustainability team.
The role of assessing risks and opportunities resides with the Enterprise Risk Management and Sustainability functions. Our Sustainability team works with internal stakeholders from multiple functions to monitor environmental metrics and promote accountability on an ongoing basis for achieving our science-based emissions reduction goals and mitigating risks.
Whirlpool Corporation Disclosures
The TCFD highlights two primary types of climate risks: physical and transition. Physical risks may include extreme weather events, such as drought or flooding, and the longer-term impact of increasing average global mean temperatures. Transition risks, on the other hand, may include the global transition to a low-carbon economy, new regulations, and innovations in energy efficiency.
We have identified several climate-related risks and opportunities with potential impact to our business as described below:
Risk type: Acute and chronic physical
We leveraged the expertise of Trucost ESG Analytics to assess impacts to our facilities. Trucost analyzed the potential physical risks that may impact Whirlpool’s operations, considering different scenarios of global warming by 2050, as described below:
Whirlpool’s physical risk levels are broadly consistent across all scenarios. The company faces moderate risk with greatest exposure to water stress as the most significant risk driver. The exposure to other physical risks such as flood, hurricane and sea level rise are low across most sites.
Adaptation plans and mitigation measures at sites with higher risk exposure are coordinated by an EHS and Sustainability group that prioritize actions to address risks and opportunities related to our assets and infrastructure. In 2022, we worked to develop a global Water Management Procedure which is part of our “We Care” EHS Policy and Standards Manual. The procedure is aligned with our climate change physical risk scenario analysis for the development of long-term plans for water consumption minimization in sites located in water stressed, high-risk areas.
Supply Chain Disruption
Risk type: Acute physical
We use a wide range of materials and components in the global production of our products, which come from numerous suppliers around the world. Because not all of our business arrangements provide for guaranteed supply, and our suppliers also are subject to the economic, social and political conditions in the countries in which they operate and, moreover, some key parts may be available only from single-source unaffiliated third-party suppliers or a limited group of suppliers, we are subject to supply chain risk. In addition, certain proprietary component parts used in some of our products are provided by single-source unaffiliated third-party suppliers. We would be unable to obtain these proprietary components for an indeterminate period of time if these single-source suppliers were to cease or interrupt production or otherwise fail to supply these components to us as agreed, which could adversely affect our product sales and operating results. Our operations and those of our suppliers are subject to disruption for a variety of unexpected reasons, including, but not limited to, COVID-19-related disruptions, sudden changes in business conditions, supplier plant shutdowns or slowdowns, transportation delays due to port delays or any disruption on the supply chain, hazards such as fire, earthquakes, flooding, or other natural disasters, including due to climate change. Insurance for certain disruptions may not be available, affordable or adequate. The effects of climate change, including extreme weather events, long-term changes in temperature levels and water availability may exacerbate these risks. Such disruption has in the past and could in the future interrupt our ability to manufacture certain products. Any significant supply chain disruption for the reasons stated above or otherwise could have a material adverse impact on our financial statements.
Regulatory Compliance and External Commitments
Risk type: Emerging regulation
The effects of climate change, whether involving physical risks or transition risks, could have an impact on our business and have in the past and could in the future cause us to incur capital and other expenditures to comply with various laws and regulations, especially relating to the protection of the environment, human health and safety, and water and energy efficiency, and may also exacerbate other risks discussed elsewhere in Item 1A. Risk Factors in our Annual Report on Form 10-K, which could have an adverse effect on our business. Climate change regulations at the federal, state or local level, or in international jurisdictions, or customer or consumer preferences or expectations, could require us to limit emissions, change our manufacturing processes or product offerings, or undertake other costly activities. For example, various municipal, state, and federal regulators have discussed, proposed, or enacted new regulations or bans on appliances that utilize natural gas citing climate change and other regulatory concerns, which would impose transition costs and impact our product mix and product offerings, among other impacts. We recognize that making changes to our supply chain, manufacturing processes and product offerings can and does introduce transition risks. Among these are the risk that our more efficient product offerings are not competitive in terms of price or consumer perception; the risk that our upstream suppliers are unable to deliver lower emissions sources of supply that are cost and quality-competitive; the risk that we fail to continually innovate to develop products and manufacturing processes with a lower carbon footprint; and, specific to our recycled plastics initiative (a pledge in our EMEA region to use an average 18% recycled plastic content by 2025), the risk that we fail to develop solutions to incorporate reformulated plastics materials that meet our rigorous quality and safety standards.
We are also subject to global regulations related to chemical substances and materials in our products (such as the U.S. Toxic Substances Control Act), which may require us to modify the materials used in our products or undertake activities which may have a cost impact. There is also increased focus by governmental and non-governmental entities on sustainability matters. In addition, a number of governmental bodies have finalized, proposed or are contemplating additional legislative and regulatory changes in response to the potential effects of climate change. In particular, cleanup obligations that might arise at any of our manufacturing sites or the imposition of more stringent environmental laws in the future could adversely affect our business.
We have set rigorous science-based targets for greenhouse gas reductions and related sustainability goals, including a net zero emissions target in our plants and operations that was announced in 2021. Any failure to achieve our sustainability goals or reduce our impact on the environment, any changes in the scientific or governmental metrics utilized to objectively measure success, or the perception that we have failed to act responsibly regarding climate change could result in negative publicity and adversely affect our reputation as well as our relationships with customers, investors and other stakeholders, which could in turn adversely affect our business operations, reputation, including a reduction in customer and consumer sentiment and negatively impact our financial condition, including our access to capital and cost of debt. In addition, not all of our competitors may seek to establish climate or other ESG targets and goals, or at a comparable level to ours, which could result in our competitors achieving competitive advantages through lower supply chain or operating costs, which could adversely affect our business, results of operations, financial condition and prospects. Additionally, any failure in our procedures to monitor climate related regulatory and policy changes in the jurisdictions in which we operate or in our processes and tools to track our greenhouse gas emissions and assess both operational and financial impacts of climate-related regulations, and any failure to comply with any such regulations and policies, could subject us to additional costs and penalties and harm to our reputation. Violations of environmental, health and safety laws are subject to civil, and, in some cases, criminal sanctions. As a result of these various uncertainties, we may incur unexpected interruptions to operations, fines, penalties or other reductions in income which could adversely affect our business, financial condition and results of operations, and harm our reputation.
Risk type: Emerging regulation
The TCFD identifies increased pricing of GHG emissions and increased operating costs as examples of climate-related transition policy risks. Carbon prices associated with emissions trading schemes, carbon taxes, fuel taxes and other policies are expected to rise in the future as governments take action to reduce GHG emissions consistent with the Paris Agreement. The speed and level to which carbon prices rise is uncertain and likely to vary across countries and regions. We leveraged the expertise of Trucost ESG Analytics to assess impact. We utilized Trucost’s Corporate Carbon Pricing Tool to quantify the risk and understand potential future financial impact against a high, medium and low carbon price scenario, from present to 2050. Trucost analyzed the impacts of carbon-related policies up until 2050 under a high, medium and low carbon price scenario. The analysis identified that, in a 2°C scenario, the carbon pricing risk associated with Scope 3 upstream emissions is the largest contributor to Whirlpool’s overall carbon pricing risk. Unmitigated risk under a high carbon price scenario could increase operating expenditures and lower the company’s operating profit margin. In 2022, we began using shadow carbon pricing to lower Scope 1 emissions via direct investments in retrofits and accelerated our investment in onsite and offsite renewable energy in every region. While we believe that Whirlpool may face increased compliance costs related to new taxes, we are confident that by encouraging low-carbon behavior and the innovation of cleaner options within our supply chain and products, we can mitigate these impacts.
Market and Technology Shifts
Risk type: Market
Future financial and social consequences of climate change may affect the demand for the products and services that Whirlpool offers. Supply chains and markets may evolve under future climate change scenarios, with increased consumer demand for more energy-efficient, water-efficient and/or lower-carbon products and the possibility of new technologies that may impact market behavior. Additionally, a number of economic factors, including the impact of the COVID-19 pandemic and consumer sentiment, generally affect demand for our products in the U.S. and other countries which we operate. We expect in the long-term to see changes in demand for fossil fuel-based products such as gas cooking and drying appliances. This would cause a shift to our broad range of consumer products that utilize electrification technologies such as induction and heat pumps.
Innovative and Efficient Products for Our Consumers
Opportunity type: Products and services
As a global leader and technology driver in the home appliances industry, we are continually improving product efficiency on a voluntary basis. This creates opportunities in sales and creates value for utilities, developers, builders, and consumers. We continue to make investments in both the efficiency and innovation of our products to improve lives at home. In 2022, we continued to invest in manufacturing efficiency, product leadership, technology and innovation, including $525 million in capital expenditures and we are completing our previously announced investments of over $70M to significantly reduce high global warming refrigerants and blowing agents in the next three years. In 2022, we were over 97% hydrofluorocarbon (HFC) free in our products and operations. In addition to driving individual product efficiency, we are developing innovations that drive resource efficiency through more dynamic interactions with the grid through connected appliances and smart homes. These innovations and engagement with our consumers have the ability to drive significant gains in the emissions of our products in use to exceed our 2030 goals, while providing savings on consumer utility bills and a more resilient grid more capable of renewable energy generation. Additionally, we believe they will open new consumer loyalty and services growth opportunities. With decarbonization and with our extensive electric product portfolio in numerous consumer segments and markets, we will be able to potentially capitalize on the shift to new technologies such as induction cooking and heat pump dryers. Growth in demand for appliances may also be impacted by more extreme weather events that disrupt homes and by additional migration.
Zero Impact Operations
Opportunity type: Resource efficiency
Through our industry-leading brand portfolio and robust product innovation pipeline, we are able to leverage both our global scale and innovative manufacturing processes to drive best-in-class energy performance across all regions. The WCM (World Class Manufacturing) system that we adopted at all of our production sites includes an Environmental pillar that addresses the identification and assessment of environmental aspects and impacts, including understanding energy losses and implementing projects to reduce emissions, energy consumption and waste. We know that managing the use of natural resources in the manufacturing process is the right thing to do as part of our efforts to reduce our environmental footprint. We invest in driving continuous improvement in emissions and energy efficiency by developing and utilizing local renewable energy generation or procurement and dedicated capital for deep energy retrofits, while investing in on and off-site renewable energy options. In 2022, we reached commercial operation of a second Virtual Power Purchase Agreement (VPPA) that we expect to cover 100% of our Scope 2 electricity emissions from U.S. plants when combined with our other VPPA and renewable investments and help reduce our overall global carbon footprint in operations by nearly 30%. Additionally, we added onsite renewable energy in India and contracted renewable energy from our utilities in Mexico and Brazil. While the majority of our GHG emissions footprint results from our products in use, the energy efficiency of our plants also represents an important opportunity for our risk management strategy. We intend to complete other off-site and on-site opportunities in the next several years.
|TCFD RecommendationRisk Management||
Whirlpool Corporation Disclosures
Our overall risk management strategy and risk oversight is disclosed in our Proxy Statement and risk factors are described in the 10-K. We evaluate risks several ways from an enterprise perspective. To conduct a climate risk and opportunity assessment in line with the recommendations of the TCFD, our environmental sustainability team worked with S&P Global’s Trucost to identify and assess transition and physical risks, taking into consideration different climate-related scenarios and associated time horizons for the short-, medium- and long-term. The analysis included three different scenarios: a 2°C scenario (RCP 2.6), a moderate mitigation scenario (RCP 4.5) and a business as usual scenario (RCP 8.5). The results of these analyses were summarized by time horizon, magnitude and likelihood to help inform the risk management process.
Whirlpool’s Enterprise Risk Management (ERM) function has the responsibility to evaluate risks and risk mitigation actions, aligned with our long-range strategic planning. We regularly assess the risks and opportunities of emerging issues and have formally integrated ESG topics into our Enterprise Risk Assessment survey. As we navigate the rapidly evolving and complex space of ESG frameworks, standards and guidelines, we continue ongoing dialogue and engagement with our stakeholders to understand and address impacts, risks and opportunities as it relates to material ESG issues. We understand that climate change poses considerable risk globally and Climate Risk is included as one of the categories in our annual risk survey. Our ESG Task Force is responsible for ensuring that ESG, including climate-related issues, is effectively integrated into regional and functional strategies and the group is composed of individuals representing a functional cross section, including ERM. Additionally, to improve organizational resilience to physical risks, a cross-regional EHSS group has been established and is prioritizing actions to address risks and opportunities related to our assets and infrastructure. Further details about our efforts to reduce climate change impact are discussed in our 2022 Sustainability Report.
Additionally, water risk assessments are conducted regionally and with use of the WRI’s Aqueduct tool to look at current and future water risks. These water risks take into account climate impacts and future scenarios.
|TCFD RecommendationMetrics & Targets||
Whirlpool Corporation Disclosures
In 2021, Whirlpool Corporation announced a global commitment to reach a net zero emissions target in our plants and operations by 2030. We also continue to progress towards our SBTi approved target of 20% reduction in emissions resulting from the use of our products (Scope 3, Category 11) by 2030, compared to 2016 levels. Additionally, we set targets on energy intensity, water intensity and zero waste to landfill to manage costs, and impacts related to climate and water. Historical performance trends against these targets and additional details on our climate transition plans can be found in our 2022 Sustainability Report.
In addition to emissions reduction metrics, we also monitor regulatory compliance, stakeholder engagement and reputation metrics impacted by climate-related risks. Furthermore, all of our Named Executive Officers have ESG priorities included as part of their individual performance objectives.