Climate Transition Plan and GHG Reduction Goals

Resolution Text

WHEREAS: To limit global warming to 1.5 degrees Celsius, the Intergovernmental Panel on Climate Change has advised that greenhouse gas emissions must be halved by 2030 and reach net zero by 2050. Every incremental increase in temperature above 1.5 degrees will increase physical, transition, and systemic risks for companies and investors alike. Up to 10 percent of global economic value could be lost by 2050.1

Illinois Tool Works (ITW) acknowledges that climate change creates operational and financial risks for the Company.2 The Company states “climate change is highly complex and not linear, with many uncertainties, and there is no assurance that our operations will not be impacted substantively by climate change-related risks in the future.”3 Yet, ITW lacks long-term targets in line with 1.5 degree Celsius science-based-target methodologies and fails to comprehensively inventory and set scope 3 emission-reduction targets.

To date, the Company neglects Scope 3 emissions, targeting only Scope 1 and 2 greenhouse gas emissions reductions of 50 percent by 2030. ITW also lacks a climate transition plan.

Peers including Cummins, Deere, and Stanley Black and Decker have set ambitious and transparent science-based targets, with Scope 1, 2, and 3 SBTi-approved targets that are 1.5 degrees Celsius aligned for 2030.

As a large supplier, ITW must also consider its clients’ emission-reduction targets. Recognizing this pressure, ITW states that is “partnering with customers in innovating solutions that address their needs for environmentally responsible products.”4 Yet, the Company lacks the targets and transparency necessary to reassure clients of its climate commitments.

There is also increasing regulation around Scope 3 disclosures. California recently released legislation requiring companies to disclose Scope 3 emissions by 2027, as these emissions often represent the majority of companies’ total emissions profiles and provide important transparency into climate risks.5

Investors believe additional action will position ITW to comprehensively address climate risk, including adopting 1.5-degrees- Celsius-aligned science-based targets for its full carbon footprint and developing a climate-transition plan that details near-term quantitative actions to achieve medium- and long-term goals.

RESOLVED: Shareholders request that Illinois Tool Works issue near- and long-term science-based-greenhouse-gas-reduction targets aligned with the Paris Agreement’s ambition of limiting global temperature rise to 1.5 degrees Celsius and summarize plans to achieve them. The targets and plan should cover the Company’s full range of operational and supply chain emissions.

SUPPORTING STATEMENT: In assessing targets, shareholders recommend,

· Taking into consideration approaches used by advisory groups like the Science-Based-Targets initiative;

· Developing a transition plan that outlines how the Company plans to achieve its goals, taking into consideration criteria used by advisory groups like the Task Force for Climate-Related Financial Disclosures, CDP, and Transition Plan Taskforce;

· Consideration of setting targets for renewable energy, supply chain engagement, and other measures deemed appropriate by management.

1 https://www.swissre.com/institute/research/topics-and-risk-dialogues/climate-and-naturalcatastrophe-risk/expertise-publication-economics-of-climate-change.html 

2 https://www.sec.gov/ix?doc=/Archives/edgar/data/49826/000004982623000008/itw-20221231.htm 

3 itw.com/media/g43hzfpx/itw_2022sustainabilityreport_final.pdf 

4 https://www.itw.com/media/g43hzfpx/itw_2022sustainabilityreport_final.pdf 

5 https://www.bloomberg.com/news/articles/2023-09-12/california-moves-toward-broad-emissions-rules-for-big-business