Guided by our Purpose, Vision, and Mission, and supported by our Values & Guiding Principles, we are dedicated to transforming the grid for a more sustainable energy future while caring for our team members, customers, and communities. This 2023 Sustainability Report details our sustainability strategy, aspirations, key milestones, and results to date.
2023 SUSTAINABILITY REPORT TRANSFORMING THE GRID EMPOWERING PEOPLE,
TABLE OF CONTENTS 1 INTRODUCTION 1 About This Report 2 CEO Message
3 About S&C Electric Company 4 Our Purpose, Mission, Vision, and Values & Guiding Principles
5 Our Approach to Sustainability 7 Ethics, Integrity, and Governance
12 OPERATIONAL EXCELLENCE
13 Climate Change and Decarbonization 18 Energy Efficiency 20 Waste Management 22 Air Quality 23 Water Conservation 24 Supply Chain Management
26 PEOPLE-FIRST CULTURE
27 Team Member Health and Safety 31 Talent Attraction and Retention 32 Team Member Engagement and Development 34 Diversity, Equity, and Inclusion 38 Team Member Well-Being 39 Social Impact and Community Engagement
41 CUSTOMER-CENTERED INNOVATION 42 Product Innovation and Sustainability
44 Product Quality 44 Product Safety 45 Product Life Cycle 46 Customer Focus and Support
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INTRODUCTION
About This Report This 2023 Sustainability Report details S&C Electric Company’s sustainability strategy, aspirations, key milestones, and results to date. It covers the period from January 1, 2023, to December 31, 2023, except where otherwise noted. Guided by our Purpose, Vision, and Mission, and supported by our Values & Guiding Principles, we are dedicated to transforming the grid for a more sustainable energy future while caring for our team members, customers, and communities. In 2023, S&C continued to advance the strategy, reporting, and disclosure around our sustainability efforts, including the environmental, social, and governance (ESG) issues that matter most to our stakeholders. S&C’s sustainability pillars and material topics guide our reporting disclosures. This report was also developed with reference to the Global Reporting Initiative (GRI) standards as well as other established sustainability and ESG reporting frameworks, such as the United Nations Sustainable Development Goals.
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CEO Message There has never been a more important time to be in the electrical industry. The ongoing energy transition toward clean electricity and the impacts of climate change are driving investment in a resilient and reliable electrical grid. That grid starts with S&C and our team members, who are the heart of everything we do. Working together, our innovative technologies help customers solve some of our planet’s biggest challenges. None of this is possible without our team members; their health and safety are our top priorities. To emphasize this importance, all meetings open with a “safety moment,” where we acknowledge potential risks and how to handle them. Additionally, we expanded nursing staff availability and launched a new multi-faceted ergonomics program to prevent musculoskeletal and soft tissue injuries. We also focused on employee engagement activities to foster a safety culture throughout the year. These activities highlight our safety mantra: “If you see something, say and do something.” We believe all safety incidents are preventable. And, as reported via our engagement survey, 90% of our team members believe S&C is committed to their safety. We are proud of our diverse workforce and continue to focus on ensuring an inclusive and equitable working environment that reflects our core value of Respect for People. In 2023, we expanded healthcare benefits for domestic partners and instituted mandatory inclusion and implicit bias training for all company leaders. All Quarterly Leadership Meetings feature a DE&I moment to emphasize our continuing progress.
This year, we formalized our decarbonization goals with a commitment to achieve net zero emissions by 2050 and interim reduction targets by 2030. We are off to an excellent start in pursuing these ambitious targets. Our manufacturing processes have been 100 percent powered by renewable sources globally since 2020. And compared with our baseline year, 2014, we have reduced our greenhouse gas (GHG) emissions by 78 percent. Alongside these achievements, we continue to drive innovation in technology and product development. In 2023, we launched the first self-healing solution for residential underground distribution circuits, the EdgeRestore® Underground Distribution Restoration System. Developed in close collaboration with one of our customers, this industry-leading solution identifies faults in single-phase underground residential circuits. It then reroutes electricity from an alternate source within 60 seconds, reducing extended power outages for residential consumers and advancing grid resilience. In 2023, we announced the expansion of our footprint across the U.S. with a 275,000-square-foot facility in Palatine, Illinois. This facility, expected to be fully operational this year, expands our capacity and enables us to meet the growing demand for our technology. As we grow, sustainability is a significant consideration in construction, upgrades, and enhancements. We are pleased Palatine will achieve LEED certification and be fully enabled for electric vehicle charging. Finally, on our Chicago campus, we unveiled the Arlys Conrad Memorial Park and Native Pollinator Gardens. The 12,500-square-foot garden is open to the public and includes 45 plant species, many of which provide a habitat for essential pollinators. We embrace our Value
& Guiding Principle of Responsible Stewardship in our communities by supporting activities such as the native garden, recycling events, volunteer efforts, and, more broadly, through the S&C Fund. Through this fund, we donated over $1 million to more than 50 organizations in 2023. On behalf of S&C, I want to thank our team members for their excellent work and commitment to S&C and our customers. To our customers and partners, I thank you for your collaboration, support, and trust. Together, we will transform the grid and advance an outage-free, sustainable electrical energy future.
Anders Sjoelin President and Chief Executive Officer S&C Electric Company July 2024
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About S&C Electric Company
More than 100 years ago, S&C transformed electricity distribution with the invention of the Liquid Power Fuse, leading to a new era of safer and more reliable power delivery. Today, S&C’s diverse, global workforce develops and manufactures innovative solutions for a more intelligent and resilient electrical grid. Building on this legacy of technological innovation and customer service, S&C empowers the transformation of the grid for an outage-free, sustainable electrical energy future. S&C is an employee-owned company that operates with a people-first mentality. We cultivate an inclusive workplace with career growth opportunities to support our team members as we transform the grid together. With hundreds of patents, we build on our century of industry expertise to innovate for a more resilient and reliable electrical energy future and the evolving needs of our global customers. Learn more at sandc.com.
S&C AT A GLANCE
Global Reach and Longevity Founded in 1911 Headquartered in Chicago
Operations in the U.S., Australia, Brazil, Canada, China, Mexico, and the UK
Impacting Lives Globally employs 4,000+ team members
Specializes in the switching, protection, and control of electric power systems
Serves thousands of utility and commercial and industrial customers across the globe
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Our Purpose, Mission, Vision, and Values & Guiding Principles Our people embody our Purpose, Vision, Mission, and Values & Guiding Principles every day.
Our Purpose Empowering people to transform the grid.
Our Vision Together, we create an outage-free, sustainable electrical energy future.
Our Mission Build upon our legacy of caring for team members, excellence in customer service and operations, and technology leadership to deliver innovative solutions for a safer, reliable, resilient electrical grid.
Values & Guiding Principles
Personal Integrity • All our dealings are bound by rock-solid integrity.
Commitment to Excellence • We continuously improve what we do and how we do it by learning, contributing ideas, and initiating change. Responsible Stewardship • We are dedicated to private ownership, planning for the long term, and reinvesting in our business. • We are committed to reducing the environmental impact of our products and business activities and enhancing the use of renewable energy sources. • We maintain strong and supportive relationships with the communities in which we work.
Respect for People • We strive to meet the highest standards for workplace safety. • Our culture promotes trust, teamwork, dignity, and respect within our diverse workforce. • We select suppliers for the long term and favor those that support our continuous improvement. • All relationships are based on quality, dependability, integrity, and mutually beneficial results.
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Our Approach to Sustainability
SUSTAINABILITY GOVERNANCE S&C’s sustainability strategy is overseen by our president and chief executive officer (CEO), with roles and accountability established throughout the entire organization.
Our team members and customers are central to our success, and we uphold a culture that keeps them at the center of our decision-making. Our Values & Guiding Principles are the foundation of our approach to sustainability, and we recognize our responsibility to be good stewards of the environment and the communities in which we work. SUSTAINABILITY STRATEGY Our sustainability strategy and pillars directly align with S&C’s corporate strategy and guiding principles, which serve as the foundation for our actions and decision-making. This alignment underscores the importance of sustainability at S&C and its critical integration into the expectations we have for ourselves and our aspirations for the future. We work closely with our customers to deliver innovative solutions for a more resilient and reliable electrical grid. Through these relationships, we address the ever-evolving needs of our industry, stakeholders, and planet through innovation and teamwork. Working together, we enhance existing programs, advance key initiatives, and transform our processes, products, and services in support of S&C’s Vision. In 2023, we emphasized the critical role S&C plays in the ongoing global transition to clean electricity. In response, we strengthened our focus on our Operational Excellence pillar and formalized our commitments to environmental sustainability. Read more in Operational Excellence.
S&C’S SUSTAINABILITY GOVERNANCE STRUCTURE
S&C President and CEO Guides the company’s sustainability strategy and progress Board of Directors Ratifies the company’s sustainability strategy and quantitative targets
Sustainability Steering Committee Includes S&C’s president and CEO (chair); chief operating officer; chief marketing and communication officer; director–global health, safety, environmental & sustainability; director–corporate strategy; and senior manager–environmental services and sustainability Develops and advances our comprehensive sustainability strategy
Senior Manager – Environmental Services & Sustainability Leads S&C’s environmental sustainability strategy while supporting companywide initiatives, baselining, and continuous improvement efforts
Team Members Implement programs and initiatives in support of our sustainability commitments
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S&C’S SUSTAINABILITY PILLARS AND MATERIAL TOPICS Our three sustainability pillars focus on key topics where our organization can have a measurable impact on the challenges facing our world.
Operational Excellence Embracing our Value & Guiding Principle of Responsible Stewardship to demonstrate our commitment to sustainability in all areas of our operations and solutions • Climate Change and Decarbonization • Energy Efficiency • Waste Management • Air Quality • Water Conservation • Supply Chain Management
People-First Culture Fostering an inclusive, people-first culture where the diversity, expertise, and collaboration of our team members drive shared growth and success • Team Member Health and Safety • Talent Attraction and Retention • Team Member Engagement and Development • Diversity, Equity, and Inclusion
Customer-Centered Innovation Developing innovative and resilient solutions to navigate the energy transition and help our customers keep the power
on around the world • Product Innovation
• Product Quality • Product Safety • Products and Solutions • Customer Focus and Support
• Team Member Well-Being • Compensation and Benefits • Social Impact and Community Engagement
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Ethics, Integrity, and Governance
We commit to the highest standards of ethics, integrity, and governance and believe these elements are critical to S&C’s long-term success. ETHICS AND INTEGRITY S&C commits to treating all team members, customers, suppliers, and stakeholders fairly; to acting ethically; and to upholding the highest standards of integrity in our operations and business dealings. Our Values & Guiding Principles drive our actions, enabling us to build long-term relationships and uphold our reputation as a trusted partner and esteemed employer. Our associate general counsel, global compliance, labor, and employment and our ethics and compliance director are responsible for our compliance program, policies, and procedures. These compliance professionals report directly to the general counsel and are under the purview of S&C’s president and CEO, as well as the audit committee of the board of directors. The general counsel and ethics and compliance director serve as chair and co-chair, respectively, of the S&C Compliance Committee, which includes global leaders from each functional area and members of our senior leadership team. Members of the S&C Compliance Committee work together to oversee our compliance strategy and conduct annual risk assessments. S&C’s Required Ethical Standards, Code of Business Conduct provides team members with guidance on making ethical business decisions and complying with all applicable laws, rules, standards, best practices, and regulations in the communities in which we operate.
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Team members complete annual training on our Required Ethical Standards, Code of Business Conduct, which codifies our approach, responsibilities, and commitments to: • Understand the needs of customers – whether within or outside S&C – and perform the work • Treat all team members, customers, and suppliers in a manner that promotes trust, dignity, fairness, and respect • Maintain workplace safety and seek ways to reduce S&C’s environmental impact • Seek ways to continuously improve upon S&C’s practices, as well as team members’ own work, that best meets those needs • Behave ethically at all times
to maintain the high standard of product and service quality for which we are known • Strive to ensure S&C complies with all applicable laws, rules, standards, best practices, and regulations • Protect S&C’s assets Team members are encouraged to report any work-related behavior that may be a violation of the law, our policies, or ethical standards in person, in writing, or through S&C’s anonymous helpline, which is operated by an independent, third-party provider. We continuously assess our policies and procedures and implement new solutions to ensure effective compliance and controls.
Embodying Our Commitment to Ethics and Integrity
In 2023, we partnered with a third party to conduct our first Employee Ethical Culture Survey to better understand our team members’ engagement in and perception of our ethics and compliance culture. The results of this survey revealed: • 89.3 percent of team members reported S&C has clearly communicated ethical expectations to them. • 88.3 percent of team members reported they knew how to report ethical concerns or observed misconduct at S&C. • S&C scored nearly 6 percent above the third party’s peer-group benchmark for the rate at which team members would report misconduct, if observed. Based on the survey results, we implemented a new Web-based intake form, streamlining the process for managers and human resources to document reports of ethical concerns. We also developed a new disciplinary policy and matrix. We plan to conduct this survey again in 2025 to continue refining our culture of integrity and excellence.
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CORPORATE GOVERNANCE As a privately held, employee-owned company, S&C makes decisions for the long-term benefit of our team members while aligning with our sustainability objectives. We believe strong corporate governance is central to this commitment and the success of our business. Guided by S&C’s board of directors (the board) and led by senior leadership, we prioritize social equity and inclusion, risk mitigation, and ethical business practices throughout the organization to serve the interests of our team members, customers, and other stakeholders. Board of Directors S&C’s board oversees the strategic direction and operational performance of the company in addition to leading senior leadership succession planning. The board supports the long-term interests of team members and, in keeping with our Values & Guiding Principles, always considers our full range of stakeholders in decision-making. Board members are accomplished leaders from diverse backgrounds and bring the unique perspectives, skills, and experience necessary to provide effective oversight. The board is led by its chair, John Estey, former S&C president and CEO. Thirty-three percent of the board members are diverse in race, ethnicity, or gender. When selecting new board members, the board’s governance committee uses a detailed skills matrix with the objective of bringing diverse and complementary perspectives to guide the business. The trustee of the ESOP component of the S&C 401(k) Retirement Savings and Employee Stock Ownership Plan (KSOP) ratifies the election of all board members.
BOARD COMMITTEES' OVERSIGHT SUMMARY
Board Committee Oversight Responsibility Governance
Assists the board in overseeing board structure and governance practices, including: • Assessing board skills and experience in light of the company’s strategy and recommending candidates that align with that strategy • Ensuring new directors receive sufficient and appropriate orientation and opportunities for continuing director education • Making sure the board engages in an objective and self-critical evaluation of its individual and collective performance • Monitoring board diversity and inclusiveness
Human Resources and Compensation Assists the board in carrying out its overall responsibility relating to: • Executive compensation, including compliance and programs • Management development and succession
• Broadly applicable human resource, compensation, and benefit programs • Diversity, equity, and inclusion programs
Audit
Assists the board with respect to matters involving accounting, financial reporting, internal control, and risk management in its oversight of: • The integrity of S&C’s financial statements • The strength of S&C’s system of internal controls regarding financial reporting and accounting • S&C’s compliance with legal and regulatory requirements applicable to financial matters • S&C’s independent auditors’ qualifications, independence, and performance • The performance of S&C’s financial function • Compliance with S&C’s Guiding Principles and Required Ethical Standards, Code of Business Conduct • Together with S&C leadership, periodic review of certain business risks delegated and assigned to the committee by the board under the company’s enterprise risk management program
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Expanding Collaboration and Advocacy In 2023, S&C established a government relations function to foster better industry collaboration and advocacy on key legislation and regulations that impact our industry. This function focuses on policy analysis and educational outreach to third-party stakeholders on issues relevant to our business. In addition, the government affairs director also monitors and engages in a variety of legislative and regulatory efforts at the federal, state, and local levels and tracks federal funding opportunities for grid modernization. S&C maintains the following relationships to support the government relations function: • National Electrical Manufacturers Association (NEMA) • National Association of Manufacturers (NAM) • Advanced Energy United (AEU) • Edison Electric Institute (EEI) • American Public Power Association (APPA) • National Rural Electric Coop Association (NRECA) • GridWise Alliance
Executive Leadership Team Under the direction of the board, S&C’s executive leadership team sets and executes our corporate strategy to provide long-term value for our customers and team members. The executive leadership team creates the roadmap for innovation, accountability, and continuous improvement in line with business and sustainability objectives. These objectives include increasing the gender and ethnic diversity of our leadership team. As of year-end 2023, 33 percent of our executive leadership is diverse in terms of gender, race, or ethnicity.
S&C’s Governance Policies • Required Ethical Standards, Code of Business Conduct • Supplier Code of Conduct • DE&I Statement
• Quality Policy • Environmental Policy Statement
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ENTERPRISE RISK MANAGEMENT S&C’s key internal and external risks are managed through our Enterprise Risk Management (ERM) program, which is overseen by the board. The ERM program identifies, assesses, measures, and monitors business risks while promoting strategic priorities, including safety, innovation, operational excellence, global growth, and human development. The systematic identification, assessment, and monitoring of risk is designed to facilitate effective decision-making and drive business performance. In 2023, S&C established a separate information technology risk management team focused solely on cybersecurity matters and protection of our sensitive information and customer data. The board reviews cybersecurity matters and strategy on a quarterly basis. We also established a corporate cybersecurity council with senior leadership representation. The council meets monthly to review all elements of cybersecurity strategy, key risk indicators, and the latest cyber-related events. INFORMATION SECURITY S&C’s information security program governs the handling, storage, and deletion of all printed and digital information while conducting business. Team members are required to manage private and confidential information with care and in accordance with our documented processes and all applicable laws and regulations. We require personal or confidential information collected by, or for, S&C be properly safeguarded and used for business purposes only. This includes nonpublic or private information about S&C, as well as our team members, customers, suppliers, and contractors.
All team members are responsible for adhering to our privacy and cybersecurity policies and protocols to promote security throughout S&C. Introduced in 2023, our cybersecurity awareness training consists of three distinct security courses with 11 topic-specific training modules. Each year, all S&C team members with access to external internet and email are required to complete cybersecurity awareness training. In addition, formal, role-based training is provided, as needed, to team members with cybersecurity roles or job duties or with interest in professional development in this area. A portfolio of cybersecurity training is also available to the software development teams. In 2023, S&C made the decision to align our information security program with the International Standards Organization (ISO) 27001 standard. This will enable us to enhance our privacy and cybersecurity controls to protect our digital information and systems from cybersecurity attacks and unauthorized access. Our cybersecurity controls are strictly enforced to help ensure the information of S&C’s team members, customers, and business partners remains secure. ISO 27001 certification audits will commence in 2024 to validate the enhancements to S&C’s information security management system and conformance to ISO 27001. We will implement continuous improvement activities based on the results of the ISO 27001 certification audits.
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OPERATIONAL EXCELLENCE
Our Value & Guiding Principle of Responsible Stewardship drives how we manage the environmental impact of our business activities. Our operations are certified to the International Organization for Standardization (ISO) 14001:2015 Environmental Management System standard, including all U.S. manufacturing facilities (recertified in 2023) and our four global locations.
13. Climate Change and Decarbonization 18. Energy Efficiency 20. Waste Management 22. Air Quality 23. Water Conservation 24. Supply Chain Management
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Climate Change and Decarbonization
S&C works to mitigate the impact of our operations on the environment through our comprehensive environmental sustainability program, which includes our stated commitment to achieve net zero greenhouse gas (GHG) emissions by 2050.
S&C’s board of directors has reviewed and approved this strategy. It reflects key metrics, performance indicators, and medium- to long- term targets integrated across all applicable areas of the business and within our growth plans. We referenced the Science Based Targets initiative best practices in setting our targets, choosing a 2014 baseline in accordance with our first emissions inventory. We also used the United Nations Sustainable Development Goals (UN SDGs) framework to develop our strategy and are pursuing activities associated with the Scopes 1, 2, and 3 emissions reductions. Our environmental sustainability strategy will continue to evolve. From accelerating our sustainability targets to investing in our teams, our efforts to advance decarbonization and waste management initiatives remains a top priority.
ADVANCING OUR DECARBONIZATION STRATEGY We have made steady progress since our
decarbonization journey began in 2014, reducing our absolute Scopes 1 and 2 emissions by 75 percent and 37 percent, respectively. These reductions are a result of new technology, process improvements, and capital investments that promote energy efficiency and reduce our fuel consumption. In 2023, we took meaningful steps to advance our decarbonization strategy, including formalizing our decarbonization goals. With an ultimate goal of achieving net zero emissions by 2050, our strategy includes developing more sustainable alternatives for some of our switching products that rely on sulfur hexafluoride (SF 6 ) gas, increasing our energy efficiency, reducing use of natural gas, investing in renewable energy generation, and evaluating our supply chain emissions.
S&C’s Environmental Policy Statement outlines our approach to reducing our environmental impact and highlights our key commitments.
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MID- AND LONG-TERM DECARBONIZATION TARGETS
Emissions
UN SDG
Mid-term Targets
Long-term Targets
• Reduce emissions by 85% from 2014 to 2030 • Reduce natural gas use by 30% from 2014 to 2030 • Reduce SF 6 gas emissions by 89% from 2014 to 2030 • Eliminate SF 6 gas use in Scada-Mate® Switching Systems by 2030 • Develop roadmap to invest in renewable energy generation by 2025 • 100% electricity generated via owned or leased renewable energy sources by 2030*
• Reduce emissions by 90%-95% from 2014 to reach net zero target by 2050
Scope 1 – Direct
• Invest in renewable energy generation
Scope 2 – Indirect Purchased Energy
• Develop global baseline by 2025
• To be determined based upon baseline
Scope 3 – Indirect Value Chain
*S&C has purchased renewable energy certificates since 2020 to meet 100% of global electricity use. Read more in Energy Efficiency.
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Scope 1 Emissions To build on our progress to date, we are focused on addressing two main sources of emissions: the use of SF 6 gas and stationary sources that run primarily on natural gas. Reducing, and eventually eliminating, SF 6 gas: Our sustainability, quality, production operations, and engineering teams are collaborating to implement production technologies and process improvements to reduce emissions that occur during the production of products containing SF 6 gas, and throughout these products’ lifetimes. Longer term, we aim to eliminate SF 6 gas from our products as we continue to develop more sustainable product alternatives. By 2030, we intend to transition our Scada-Mate® Switching Systems from the use of SF 6 gas. We continue to work with our supply chain partners to source and innovate alternative solutions that maintain or exceed the quality and performance our customers expect from S&C. Read more in Product Innovation & Sustainability, including information about our products that do not contain SF 6 gas. Investing in energy efficiency: Most of S&C’s fossil fuel emissions come from stationary sources, such as boilers, heaters, and ovens, at our Chicago and Toronto facilities. With our investments in energy efficiency, we aim to reduce these emissions. For example, in 2023, our Toronto facility conducted an energy audit aimed at uncovering energy efficiency opportunities, which resulted in both no-cost and capital expenditure recommendations (e.g., process-related changes, upgrading equipment, and reducing heat losses). In 2024, we will implement applicable energy efficiency improvements identified by the audit. We also plan to conduct an audit at our Chicago campus to identify and implement energy efficiency improvements. We developed specific strategies to reduce our Scopes 1 and 2 emissions, and we have worked to better understand our Scope 3 emissions to achieve our decarbonization targets, as outlined below:
Scope 1 Net Zero Roadmap (MT CO 2 e)
76,828
Historical reduction
19,359 (-75%)
11,524 (-85%)
Reduce SF 6 to 25/year Reduce natural gas by 15%
3,841 (-95%)
Eliminate SF 6
2014
2023
2030
2040-2050
S&C roadmap to reach net zero Scope 1 emissions by 2050
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Aligning with the United Nations Sustainable Development Goals We leveraged the UN SDGs framework to develop our decarbonization strategy and targets. Specifically, we aligned with three UN SDGs: 7. Affordable and Clean Energy: Efforts include our development of intelligent solutions to navigate the energy transition and help our customers ensure resilient and reliable power worldwide, capital investment projects to improve the energy efficiency of our global facilities, and identification of opportunities to invest in renewable energy to power our campuses. 12. Responsible Consumption and Production: Efforts include our environmental stewardship and lean manufacturing values. These guide us as we enable a circular economy that eliminates waste and pollution from our products and operations while keeping materials in circulation for as long as possible. 13. Climate Action: Efforts include embracing the opportunity to support the electrical industry in mitigating the impacts of climate change by lowering the GHG emissions associated with electrical systems and enabling the transition to cleaner energy sources.
Scope 2 Emissions Renewable energy presents the largest opportunity to reduce our Scope 2 location-based emissions, and we are exploring photovoltaic (PV) solar installation projects as an option at various S&C sites. We are also assessing other opportunities, such as grid-connected private and community solar projects, to determine viability and benefit to S&C’s decarbonization efforts. Read more about our renewable energy efforts in Energy Efficiency. Scope 3 Emissions We continue to take steps to better understand our Scope 3 (value chain) emissions, including all applicable categories, with a mid-term goal to establish our global baseline by 2025. Scope 3 emissions are estimated to represent more than half of all S&C’s emissions. Our estimates include six of the 15 categories defined by the Greenhouse Gas Protocol: business travel, employee commuting, fuel- and energy-related activities, purchased goods and services, upstream transportation and distribution, and waste generated in operations. In 2023, we refined our estimates, with a focus on our Chicago campus. We identified emissions from purchased goods (Category 1) as representing more than half of our Scope 3 emissions in Chicago attributable to our use of iron and steel, aluminum, and epoxy resin. In 2024, we will aim to create a global Scope 3 baseline, which will allow us to develop an action plan to effectively reduce these emissions in 2025 and beyond.
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SCOPES 1 AND 2 GLOBAL GHG EMISSIONS In 2023, a third-party auditor certified our Scopes 1 and 2 emissions for the second year in a row in accordance with the globally recognized Greenhouse Gas Protocol. Our Scope 1 and SF 6 gas emissions increased 3 percent and 12 percent, respectively, compared to 2022. This was attributed to increased sales of one of our product lines containing SF 6 gas. However, process-improvement projects have resulted in a continued decline of our global GHG emissions intensity.
Demonstrating Improvement Through Transparent Reporting We demonstrate our commitment to transparency through our disclosures to CDP, which we have reported to since 2018. In 2023, we achieved a B score (based on 2022 data), indicating steady year-over-year improvement. Our performance improved across most categories, and we will continue to use this as a resource for future reporting.
Global GHG Emissions (MT CO 2 e) 1
Global Scope 1 GHG Emissions 1 (MT CO 2 e) 1,2
34,420 111,248
76,828
11,779
Year 2018 2019 2020 2021 2022 2023
Score D D D C C B
41,596
19,359 21,602 40,961
76,828
40,873
61,829
18,303 19,218 22,570 22,378
10,439 8,648 19,218
11,250 7,660 18,910
9,668 8,083 18,303
2014 (baseline)
2021
SCOPE 2 (LOCATION-BASED) 2022 2023
SCOPE 1
2014 (baseline)
2021
2022
2023
FUGITIVE SF 6
STATIONARY SOURCES
Global GHG Emissions Intensity (Scope 1+2 MT CO 2 e/$ Million Revenue) 1
In September 2023, we recognized Zero Emissions Day for the first time at S&C. As part of this celebration, we announced a new commuter program available to our Chicago, Franklin, and Palatine team members. The program offers team members a reliable and sustainable mode of transportation to and from work while also reducing transportation barriers and providing cost savings.
2021
2022
2023
-79%
-77%
-81%
VARIANCE FROM 2014
1 2022 data in this report may not be consistent with data in the 2022 S&C Sustainability Report because of inconsistencies identified by a third-party audit conducted in 2023. 2 Fugitive SF 6 gas and stationary source emissions presented in this chart may not add up precisely to the totals provided because smaller sources included in the totals are not shown in this chart.
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GRI INDEX
Global Electricity Use (kWh in Millions)
Energy Efficiency Energy efficiency is a key component of our decarbonization strategy and our commitment to reducing our footprint. We aim to reduce our Scope 1 emissions by conducting energy efficiency audits, reducing our natural gas use, and minimizing emissions from stationary sources, namely boilers, heaters, and ovens. S&C invests in renewable energy certificates and capital improvement projects to drive efficiency, including automation systems, LED lighting, green building practices, equipment upgrades, and electric vehicle (EV) charging stations, which have a direct impact on our Scope 2 emissions. We are also assessing new programs, including renewable energy generation, electrification of our owned and leased vehicle fleets, and installation of additional EV charging stations at our global locations. In support of our goal to reduce our Scope 2 emissions by transitioning our operations to renewable energy sources by 2050, we implemented the following initiatives in 2023: • LED lighting retrofit projects: S&C Toronto completed its LED retrofit project in 2023, and Chicago made substantial progress toward its goal to convert 100 percent of lighting fixtures to LED. As of the end of 2023, 90 percent of the 46-acre campus had been converted, with the remaining work to be completed in 2024. Our Suzhou, China, team also conducted an LED lighting retrofit cost and impact analysis, with implementation expected to begin later in 2024. • EVs: Select S&C sites began offering hybrid vehicle options for those using a company car. In addition, our team in Canada added EV charging stations to the parking lot for team member use. • Solar energy installations: We took initial steps to explore a potential solar installation at our Chicago campus.
51
51
50
41
2022
2023
1990s
2021
Global Electricity Usage Intensity (kWh/$ Million Revenue)
2023
2022
2021
-30%
-36%
-44%
VARIANCE FROM 2014
18
INTRODUCTION
OPERATIONAL EXCELLENCE
PEOPLE-FIRST CULTURE CUSTOMER-CENTERED INNOVATION
GRI INDEX
RENEWABLE ENERGY As a longstanding member of the U.S. Environmental Protection Agency’s (EPA) Green Power Partnership, S&C supports the development of renewable energy sources, such as wind, solar, geothermal, biogas, eligible biomass, and low-impact hydropower. S&C has purchased renewable energy certificates (RECs) since 2012 as part of our effort to source cleaner energy. Since 2020, 100 percent of our global electricity is sourced from RECs, resulting in zero Scope 2 market-based emissions. NATURAL GAS USE We use natural gas, primarily in our Chicago and Toronto facilities, for heating in the winter and in our manufacturing processes, including boilers and curing ovens. In support of our goal to reduce natural gas use by 30 percent by 2030, compared to our 2014 baseline, we mitigate and reduce use through green building practices, ventilation systems, increased automation, equipment upgrades and replacements, and use of high-efficiency boilers where possible. ENVIRONMENTAL CONSIDERATIONS IN OUR FACILITIES S&C follows green building standards, with three of our U.S. buildings certified with the Leadership in Energy and Environmental Design (LEED®) building framework. As our business grows and we expand our physical footprint, sustainability remains a significant consideration in the construction, upgrade, and enhancement of our facilities and processes. In 2023, we announced the expansion of our U.S. footprint with a 275,000-square-foot facility in Palatine, Illinois. With the facility expected to be fully operational in 2024, this expansion in capacity enables us to meet increasing demand for technology that makes the electrical grid more resilient and reliable. We are seeking LEED certification for the facility, marking the first time S&C has pursued this certification for a leased building. The expansion will also enable EV charging for personal and fleet vehicles.
Global Natural Gas Use (Therms in Millions)
1.72
1.64
1.49
1.45
1990s
2021
2022
2023
Global Natural Gas Usage Intensity (Therms/$ Million Revenue)
2022
2023
2021
-49%
-51%
-62%
VARIANCE FROM 2014
19
INTRODUCTION
OPERATIONAL EXCELLENCE
PEOPLE-FIRST CULTURE CUSTOMER-CENTERED INNOVATION
GRI INDEX
Waste Management Our waste management program, which has existed since the early 1990s, focuses on prevention, reuse, recycling, and recovery initiatives, including composting. We design products that enable a circular economy by eliminating waste and pollution while keeping materials in circulation as long as possible. OUR WASTE MANAGEMENT STRATEGY Responsible waste management practices are critical to our circularity strategy, which focuses on diverting as much waste as possible from landfills. Our ultimate goal is to meet and maintain 99 percent landfill-free status at all global manufacturing sites year over year. Based on an analysis completed by the health, safety, environmental & sustainability (HSE&S) team in 2023, we have identified the following strategies as focus areas for 2024: • Streamlining the waste metric calculation and reporting process while ensuring data integrity • Deploying standardized bins and signage across our U.S. manufacturing sites to simplify proper waste separation • Creating a voluntary action team in production operations to help coach team members on waste-related procedures and initiatives • Increasing team member engagement with our waste management program via regular communications
WASTE DIVERTED FROM LANDFILL, GLOBAL WASTE GENERATION In 2023, S&C’s landfill-free performance decreased from 98.71 percent to 96.50 percent. Waste generation increased by 10 percent from 2022 to 2023. The increase is primarily attributed to a single, nonhazardous event that required us to resurface a portion of the parking lot on our Chicago campus. This resurfacing resulted in a large amount of asphalt that couldn’t be recycled or recovered. In addition, we changed our calculation method in 2023 at our Franklin, Wisconsin, facility from using an EPA estimate factor to measuring and recording waste generation onsite. S&C introduced several initiatives in 2023 to advance our 99 percent landfill-free target. At our Mexico facility and all U.S. sites, we introduced new bins, signage, and training to simplify proper waste segregation. We also streamlined our waste metric calculation and reporting process and assigned a dedicated project engineer to optimize our waste management program. To drive team member engagement, we increased communications around our landfill-free initiative and created a voluntary action team in production operations to help coach team members on waste-related procedures.
Global Waste Diverted from Landfills
GLOBAL
Target
99%
93.70% 98.42% 98.71% 96.38%
2018 BASELINE
2021
2022
2023
20
INTRODUCTION
OPERATIONAL EXCELLENCE
PEOPLE-FIRST CULTURE CUSTOMER-CENTERED INNOVATION
GRI INDEX
2023 Global Waste Disposal
S&C Partners with 49 th Ward in Chicago for Earth Day Event In conjunction with Chicago’s 49 th Ward, where S&C’s headquarters is located, S&C Chicago hosted its first public event for Earth Day and welcomed residents of the surrounding community to our campus for an electronic waste collection and recycling event. We collected nearly 8,000 pounds of electronic waste for sustainable disposal.
79.26%
13.60%
3.62%
2.01%
1.11%
0.40%
Recycled
Converted to Energy
Reused
Treatment
Compost
Landfill
Global Waste Generation (Millions of Pounds)
16.62
16.05
17.66
2021
2022
2023
21
INTRODUCTION
OPERATIONAL EXCELLENCE
PEOPLE-FIRST CULTURE CUSTOMER-CENTERED INNOVATION
GRI INDEX
Air Quality We manage our emissions of volatile organic compounds (VOCs) and hazardous air pollutants (HAPs) as required by the Clean Air Act and regulated by the U.S. EPA. Our manufacturing locations comply with all regulatory limits. We have reduced our VOC and HAP emissions in the U.S. by 97 percent and 99 percent, respectively, since the 1990s, thanks to investments in new technology and process improvements. Today’s emissions are well below our compliance requirements and remain negligible. Even as our organization grows to meet customer demand, we will continue to proactively manage our emissions and avoid air pollution. We are following all applicable environmental regulations as we complete the expansion into our new facility in Palatine, Illinois. Any changes to VOC and HAP emissions will be noted in future reports, if applicable. S&C’s standard procedures require any new materials used in our products to be reviewed by our HSE&S team. The team also maintains a database available to all team members to continuously monitor and evaluate environmental concerns and new regulations.
VOC Emissions – U.S. Only (Tons)
43.50
1.34
1.16
1.19
1990s
2021
2022
2023
HAP Emissions – U.S. Only (Tons)
22.50
0.027
0.023
0.027
1990s
2021
2022
2023
22
INTRODUCTION
OPERATIONAL EXCELLENCE
PEOPLE-FIRST CULTURE CUSTOMER-CENTERED INNOVATION
GRI INDEX
Water Conservation We leverage lean manufacturing practices, facility upgrades, shared best practices, and conservation efforts to reduce our water consumption. Our manufacturing processes at all our sites (Canada, Mexico, and China) require water use; however, our Chicago facility registers the most water use. To reduce our water consumption, we use the following measures at our sites: • Cooling towers • A dry cooler system • An evaporative fluid cooler • Low-flow devices on faucets and bathroom fixtures
Enhancing Green Spaces for Our Communities and Facilities As part of our commitments to the environment and our communities, S&C dedicates time and resources to creating and enhancing green spaces near our facilities. In July 2023, we unveiled the Arlys Conrad Memorial Park and Native Pollinator Garden at our Chicago campus. The garden is named after Arlys Streitmatter Conrad, wife of John R. Conrad, S&C’s longtime president and son of S&C co-founder, Nicholas Conrad. The 12,500 square foot garden includes 45 plant species, many of which attract pollinators such as butterflies and bees. Soon after the garden’s unveiling, we recorded a sighting of the endangered rusty-patched bumble bee, demonstrating the environmental benefits of this space. The garden is open to the community and provides food and shelter for insects and birds. During Canadian Environment Week, the S&C Canada team spent time planting native trees and foliage in a neighborhood park near our Toronto facility. Team members planted 18 trees and learned about the native Canadian land in the park. Continuing the tradition S&C established in 2022, we donated 3,700 seedling trees to represent S&C team members around the globe. This year, the trees were planted in Chippewa National Forest in celebration of Arbor Day.
Global Water Use (Millions of Gallons)
175
70
65
65
1990s
2021
2022
2023
Global Water Usage Intensity (Gallons/$ Million Revenue)
2021
2022
2023
-44%
-53%
-57%
VARIANCE FROM 2014
23
INTRODUCTION
OPERATIONAL EXCELLENCE
PEOPLE-FIRST CULTURE CUSTOMER-CENTERED INNOVATION
GRI INDEX
Supply Chain Management
Leading the Way in Supply Chain Sustainability S&C maintains membership in the Sustainable Supply Chain Alliance (SSCA), an organization of public utilities and suppliers that work together to advance sustainability best practices. In 2023, the SSCA presented S&C with a Leading Practices in Supply Chain Sustainability Case Study award. The award recognizes S&C’s global initiative to become a 99 percent landfill-free company and was presented at the 2023 SSCA Sustainable Sourcing Conference.
We conduct screening processes to ensure potential suppliers align with S&C’s values. Our global sourcing and strategic supply chain team regularly conducts interviews, facility tours, financial reviews, and other assessments to ensure ongoing compliance. If a supplier does not pass the initial approval process, we provide guidance on corrective actions and conduct a re-evaluation. PROMOTING SUSTAINABILITY THROUGH OUR SUPPLY CHAIN We expect suppliers to conduct their operations in a manner that protects the environment and complies with all applicable environmental laws and regulations. As part of our environmental stewardship responsibility, we mitigate our environmental impacts through practices that include: • Sourcing regionally to reduce environmental impact from transportation • Promoting efficient materials use and mitigating waste in packaging • Mapping efficient routes and optimizing load size to drive energy efficiency and reduce emissions
We partner with suppliers that share our values and commitments to maintain a reliable and responsive supply chain. We prioritize suppliers that pursue continuous improvement and demonstrate focused efforts around diversity and inclusion, human rights, and environmental stewardship. Our Supplier Code of Conduct outlines our approach to supply chain management and is included in our contracts. Key principles include expectations on specific topics, including: • Brand and trademarks • Health and safety
• Information confidentiality • Labor and human rights • Environmental responsibility • Diversity and equal opportunities • Accuracy of records • Compensation and working hours • Conflicts of interest • Payments, gratuities, and gifts
We actively participate in industry organizations and contribute thought leadership to advance a more sustainable, resilient grid. These memberships are part of our efforts to foster collaborative relationships and share best practices.
24
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