Resolved: Shareholders request Illinois Tool Works, Inc. (ITW) adopt time-bound, quantitative, company-wide, science-based targets for reducing greenhouse gas (GHG) emissions, consistent with the goals of the Paris Climate Agreement, and report annually, at reasonable cost and omitting proprietary information, on its plans and progress towards achieving these targets.
Supporting Statement: The Paris Climate Agreement of 2015, agreed to by 195 countries, established a target to limit global temperature increases to 2-degrees Celsius above pre-industrial levels. To meet the 2-degree goal and mitigate the worst effects of climate change, climate scientists estimate it is necessary to reduce global emissions 55 percent by 2050 (relative to 2010 levels), entailing a US reduction target of 80 percent.
For the US to meet this, or any other reduction goal, businesses must play a part. The Task Force on Climate-related Financial Disclosures recommends that companies disclose targets and performance against targets to measure and manage climate risks.
ITW has undertaken various initiatives to reduce emissions, yet reports a 12% increase in GHG emissions per unit of revenue from 2012 to 2016. This indication of inefficiency calls into question the efficacy and ambition of the company’s initiatives. Setting GHG reduction targets would enable shareholders to better evaluate emissions performance trends and the effectiveness of ITW’s strategies.
We encourage ITW to work with the Science-Based Targets Initiative, which provides third-party verification, to set science-based goals. Over 312 global businesses currently do so. The investor group, Climate Action 100+ intends to engage the world’s largest emitters to reduce emissions consistent with the Paris Agreement – essentially setting science-based goals.
More broadly, 50% of the S&P 500 companies have set GHG emissions reduction targets. Among these companies are many of ITW’s peers, proving it is possible to reduce emissions while growing the business:
Cummins – Achieved a 36% reduction in GHG intensity from 2005 to 2015 and now commits to science-based targets.
3M – Aims to reduce GHG emissions 50% below 2002 levels by 2025 while growing the business
Johnson Controls – reduced GHG emissions intensity 41% from 2002 to 2014 and targets an additional 15% reduction by 2020
Honeywell – Set its third GHG emissions reduction goal after achieving its first two
Companies that set targets often produce benefits to their bottom-line. In 2013, Carbon Disclosure Project and World Wildlife Fund found that four out of five companies in the S&P 500 earned a higher return on investments aimed at reducing carbon emissions than other capital investments. This study also found energy efficiency improvements earned an average return on investment of 196%, with an average payback period between two and three years. Honeywell reported its investments in energy efficiency projects will save $8 million a year.