Oversight for ESG

Oversight of ESG is inextricably linked to the oversight of our company. Our Board of Directors operates pursuant to a set of Corporate Governance Guidelines that ensures that the Board will periodically review the company’s ESG policies, initiatives and objectives. This approach allows us to uncover new issues, address rising topics and respond to the evolving needs of our stakeholders.

Management

In addition to the Board of Directors, we have ESG oversight across our leadership, including Executive Committee (EC) members. There is additional oversight at the management and functional levels which supports the execution of key ESG initiatives. 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. The ESG Task Force oversees progress against the strategic priority framework established by our ESG Councils. Whirlpool Corporation’s Corporate Controller and Principal Accounting Officer 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

Whirlpool, with oversight from our Board of Directors, proactively manages potential risks across the organization and ensures alignment with our core values. This includes a focus on strategy and the most significant risks facing Whirlpool, including climate and water risk. The Board also receives risk management updates in connection with its general oversight and approval of significant matters. This has resulted in a strong track record of successfully managing and mitigating risk.

Our risk management, internal audit and compliance teams serve as the primary monitoring and testing functions for company-wide policies and procedures. This team is also responsible for managing the day-to-day oversight of the risk management strategy for Whirlpool Corporation, including climate risk management.

Climate change poses a risk to all businesses and communities. A changing climate and its impacts create risk throughout our operational footprint, from more frequent and severe fires, to earthquakes, floods or other natural disasters. Our Board of Directors oversees ESG strategy and initiatives, while the Risk Management and Sustainability functions assess climate risks and opportunities. Our Sustainability team collaborates across internal functions to monitor environmental metrics and track progress toward achieving our science‑based emissions‑reduction goals.

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. 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 Environment, Health and Safety and Sustainability group that prioritizes actions to address risks and opportunities related to our assets and infrastructure. In 2022, we launched a Global Water Procedure for water management in alignment with our We Care Commitment, which directs us to act sustainably and share responsibility for the care of planetary systems. In 2023, we made progress in standardizing definitions and implementing new controls, with a goal to fully implement the Global Water Procedure at all manufacturing sites by 2024. Our global operational footprint includes areas of geographical water stress, and we operate in countries with a variety of regulations around wastewater management and water conservation. By developing and deploying a global standard, we can ensure that we are maintaining our own high standards of practice which, in many locations, exceed the expected level of management.

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 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. 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, supplier plant shutdowns or slowdowns; epidemics and pandemics; 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 interrupted our ability to manufacture certain products in the past, and could do so again in the future. Any significant supply chain disruption for the reasons stated above or otherwise could have a material adverse impact on 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, 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. We have set rigorous science-based targets for GHG reductions and related sustainability goals, including a Net Zero emissions target in our plants and operations that was announced in 2021. These targets could prove more costly or difficult to achieve than we expect, and we may be unable to achieve these targets or any other sustainability goal or commitment at acceptable cost or at all. Whether as a result of cost, operational or technological limitations, or if such targets or our progress against them are not perceived to be sufficiently robust, 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.

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. Whirlpool uses a shadow carbon price with the objective to lower scope 1 emissions via direct investments in retrofits and to accelerate our investments in on‑site and off‑site renewable energy in every region. 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 and/or lower‑water‑using 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 in 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 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. In 2022, we continued to invest in manufacturing efficiency, product leadership, technology and innovation. In 2023, we had transitioned over 97% of all refrigerators to climate-friendly, low GWP refrigerants and blowing agents. 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 that is more capable of renewable energy generation. Additionally, 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
Time horizon: Short-term
Likelihood: Virtually certain
Magnitude of impact: Medium-low

Description:

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 2023, we were excited to cut the ribbon for the official opening of our Limestone Wind farm in Dawson, Texas, with 53 MW of clean energy produced from 88 turbines. Limestone represents our second VPPA site. When fully operational, the two VPPAs are expected to generate sufficient renewable energy to cover 100% of Whirlpool’s U.S. sites’ electrical consumption. This year, we also entered into agreements with One Energy to add on‑site wind and solar power in our Findlay and Clyde, Ohio, operations. When combined with existing turbines, these projects are expected to supply at least 70% of the plants’ energy needs. The solar and wind projects are expected to be online and operational by early 2025. 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.

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 they relate 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 Environmental, Health and Safety 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 2023 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.

In 2021, Whirlpool Corporation announced a global commitment to reach a Net Zero scopes 1 and 2 emissions target in our plants and operations by 2030. We also continue to progress toward our Science‑Based Targets initiative 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 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 2023 Sustainability Report Sustainability Report Data Appendix.

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.