TCFD

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.

In 2020, for example, the Board approved our entry into a VPPA that we believe will lower our carbon footprint and help Whirlpool Corporation meet our ambitious GHG emissions reduction goals.

Management

At the management level, our ESG efforts are guided by our two ESG Councils - one covering Environmental Sustainability, one covering Social and Governance topics. The ESG Councils are composed of regional and senior leaders from our key operational areas and Executive Committee Sponsors that meet on a quarterly basis. The ESG Councils evaluate our strategic priorities on relevant ESG issues based on the results of our Materiality Assessment and input from our ESG Task Force. They work with the Corporate Controller and Chief Legal Officer to communicate with the Executive Committee and Board of Directors. The Councils approve ESG goals and track progress on our journey to carbon neutrality, material alternatives and phaseouts, product take-back, community impact, gender and racial equality, and circular economy matters.

Managing climate risks

The ESG Task Force is composed of individuals representing a functional cross section, including Sustainability, Legal, Investor Relations, Risk Management and other relevant functions. The ESG Task Force is responsible for monitoring emerging ESG trends and overseeing progress against the strategic priority framework established by our ESG Councils.

Specific to climate change, we have set targets on Scopes 1 & 2 and Scope 3 products in use below 2°C, with our operations target set well below 2°C. The ESG Councils continue to monitor emerging risks and opportunities related to renewable energy, recycling, new regulatory actions, and the connected grid infrastructure. Climate risks due to extreme weather events and rising sea levels and its impact on our value chain was a specific focus to address in 2020 and 2021. Emerging topics such as carbon taxes, biodiversity, 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.

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:

PHYSICAL RISKS

Operations Continuity
Risk Type: Acute and chronic physical
Time horizon: Short-term
Likelihood: More likely than not
Magnitude of impact: Medium

Description:

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, especially for certain of our facilities in Italy, U.S., Mexico, Argentina and Poland. In contrast, 42 facilities are located in low water stress areas, primarily in Russia, U.K., U.S., Poland and China. Whirlpool’s exposure to wildfire at the company level is modest with scores categorized as lower risk across all scenarios, but there are a number of outlier sites in the U.S. and Mexico that are exposed to moderate-high risk. The exposure to other physical risks such as flood, hurricane and sea level rise are low across most sites, with a few outliers in some countries.

Adaptation plans and mitigation measures at sites with high risk exposure are coordinated by an EHSS group that has been established and is prioritizing actions to address risks and opportunities related to our assets and infrastructure.

Supply Chain Disruption
Risk Type: Acute physical
Time horizon: Short-term
Likelihood: More likely than not
Magnitude of impact: Medium

Description:

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 some key parts may be available only from a single supplier or a limited group of suppliers, we are subject to supply and pricing 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, 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 reasons, including hazards such as fire, earthquakes, flooding, or other natural disasters. 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 disruption could negatively impact our financial statements.

TRANSITION RISKS

Regulatory Compliance and External Commitments
Risk Type: Emerging regulation
Time horizon: Medium-term
Likelihood: Likely
Magnitude of impact: Medium-high

Description:

Climate change regulations at the federal, state or local level or in international jurisdictions could require us to limit emissions, change our manufacturing processes or product offerings, or undertake other costly activities. We have set rigorous science-based targets for greenhouse gas reductions and related sustainability goals, and 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 business and reputation. Additionally, we could be subjected to future liabilities, fines or penalties or the suspension of product production for failing to comply, or being alleged as failing to comply, with various laws and regulations, including environmental regulations. We expect that our resiliency and focus on our commitment to keeping global warming below the 2°C as set by the Paris Agreement will mitigate the impacts of future carbon prices and regulations, as well as the potential negative publicity for companies that fail to comply.

Carbon Pricing
Risk Type: Emerging regulation
Time horizon: Medium-term
Likelihood: Likely
Magnitude of impact: Medium-high

Description:

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. While we know 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 will mitigate these impacts.

Market and Technology Shifts
Risk Type: Market
Time horizon: Medium-term
Likelihood: Likely
Magnitude of impact: Medium-high

Description:

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 energy-efficient, 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 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.

CLIMATE-RELATED OPPORTUNITIES

Innovative and Efficient Products for Our Consumers
Opportunity Type: Products and services
Time horizon: Short-term
Likelihood: Likely
Magnitude of impact: Medium

Description:

As global leaders and technology drivers in the home appliances industry, we are continually improving product efficiency on a voluntary basis. This continuous improvement 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 and in our communities. Over the last several years, we have invested over $300M in products with increased energy and/or water efficiency and have planned investments of over $70M to significantly reduce high global warming refrigerants and blowing agents in the next three years. In addition to driving individual product efficiency, we will begin to drive efficiencies through more dynamic interactions with the grid through connected appliances. 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. Additionally, they will open new consumer loyalty and services growth opportunities. With decarbonization, 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.

Zero Impact Operations
Opportunity Type: Resource Efficiency
Time horizon: Short-term
Likelihood: Virtually certain
Magnitude of impact: Medium-low

Description:

As the world’s leading kitchen and laundry appliance company¹, we’re able to leverage both our global scale and innovative manufacturing processes to drive best-in-class energy performance across all regions. The WCM 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 energy consumption. 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 energy efficiency by developing and utilizing local renewable energy generation or procurement, while investing in off-site renewable energy options. In 2020, we entered into a VPPA that is expected to cover 15% of our global Scope 2 emissions through investments in wind energy in the U.S. 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.

1 World’s leading kitchen and laundry appliance company claim is based on most recently available publicly reported annual product sales, parts, and support revenues.

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 function has the responsibility to evaluate risks and risk mitigation actions, aligned with our long-range strategic planning. We conduct an annual risk survey with global leadership to evaluate risk within the organization, providing insight on current and emerging risks. We understand that climate change poses considerable risk globally. 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 Enterprise Risk Management (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 2020 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.

Whirlpool set targets approved by the Science-Based Targets initiative (SBTi) for our emissions in both our plants and our products in use: 20% for products in use (Scope 3 category 11) and 50% for plants by 2030 from a 2016 baseline, with higher internal targets. Additionally, we set targets on energy intensity, water intensity and zero waste to manage costs, and impacts related to climate and water. Historical performance trends against these targets and additional details can be found in our 2020 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.