Climate-Related Risks and Opportunities

To expand our understanding of likely impacts and refine our response to climate change, PPG proactively undertakes climate scenario analysis, risk assessments and planning. These activities reflect guidance from the Task Force on Climate-related Financial Disclosures (TCFD).

We conduct climate scenario analysis regularly to consider the resilience of our strategy against a range of possible future scenarios. Climate scenario analysis is a well-established method for developing and testing strategic plans. Our analysis includes input from more than 700 participants representing a wide range of business units and functions across PPG. We have a range of possible climate scenarios based on well-established, publicly available resources including:

• International Energy Agency Sustainable Development Scenario
• Principles for Responsible Investment Inevitable Policy Response (Forecast Policy Scenario)
• Intergovernmental Panel on Climate Change RCP 8.5
• Intergovernmental Panel on Climate Change RCP 6.0

In addition to our scenario analysis work, we conduct risk assessments to understand our exposure to physical impacts of climate change. Our physical climate risk assessment starts with a high-level, qualitative perspective on climate change stressors with potential to affect PPG's global portfolio of facilities. We evaluate sites across our portfolio to understand their exposure to these stressors and assign relative risk scores based on site-specific data. Working with a third party, we use global climate models to assess the relative risk of each facility against six climate change stressors: drought, flooding potential, extreme heat, extreme seasonal precipitation, sea level rise and high wind speeds. PPG personnel can explore the outcomes of this analysis through an interactive dashboard, which can be filtered by type of risk, business unit, region, country and type of facility.

Sites with high relative risk scores and those that are most important to our continued operations are included in a more thorough risk assessment. This assessment includes more refined climate modeling and detailed site information, such as site plans and information on critical infrastructure. Results of the climate risk assessment are reviewed with regional and global operations management teams.

We have formal processes in place throughout PPG to ensure we identify and capture climate-related opportunities. For example, we hold regular structured meetings with our customers to understand how PPG can help them meet their environmental objectives - through our existing products and through research and development to address unmet customer needs. Each of PPG's businesses has a dedicated sustainability subject matter expert to ensure that sustainability considerations are integrated into customer engagement across our product lines. This process helps us identify new end users for our existing products, and ensures that we are developing the right technologies to meet our customers' needs.

Understanding nature-related risks and opportunities

PPG relies on natural capital across every aspect of our global business. We transform raw materials into high-performing paints and coatings. In order to do so, we rely on a range of ecosystem services for everything from access to clean water to flood mitigation around our facilities.

We have a sophisticated understanding of the chemicals we use and take responsibility for minimizing the environmental impacts of our products. As we continue to innovate new sustainably advantaged products, we see opportunities to develop and scale bio-based and circular products and services. Looking ahead, we are committed to advancing our understanding of nature-related impacts, dependencies, risks and opportunities in our operations and value chain. We are also following the evolving work of standard setters to help provide guidance in this area.

Managing risks and opportunities in our operations

Transition risks arise from action taken to transition the economy away from fossil fuels through policy, technology change and shifts in industry or consumer preferences. These risks also present opportunities for companies focused on supporting the low-carbon transition through enhanced resource efficiency. We focus on reducing our environmental impact in line with our scope 1, 2 and 3 emissions reduction targets, which have been validated by the Science Based Targets initiative (SBTi). In line with the goals of the Paris Agreement, we have aligned our scope 1 and 2 greenhouse gas emissions goals to the reductions necessary to limit global warming to 1.5 degrees Celsius above pre-industrial levels and aligned our scope 3 approach to a well below 2 degrees Celsius future.

PPG has a rigorous approach to managing physical climate risk across our facilities. We undertake climate change scenario analysis, climate risk modeling and strategic planning based on guidance from the Task Force on Climate-related Financial Disclosures (TCFD).

We utilized Climate Risk Assessment Methodology and evaluated 261 sites against six climate stressors: extreme heat, extreme seasonal precipitation, drought, flooding, high winds and sea level rise. From there, we identified 10 critical sites identified as higher risk. A detailed assessment then outlined site-specific information, physical impacts to PPG property and equipment, and impacts to the supply chain. Based on the site’s risk profile, a list of capital improvement actions were incorporated into site plans to strengthen these operations against the impacts of climate change.

Each year, the local emergency management team at our facilities around the world must review and update its emergency response plan to reflect current conditions and changes in risk. Emergency preparedness and response is a key element of PPG's environment, health and safety (EHS) Management System. This includes assuring employees are properly trained and the equipment needed to respond to emergencies is available. Each site also performs an emergency response exercise, and our global leadership monitors conformance with these requirements through an internal corporate auditing process. Our regional and global crisis management teams conduct similar crisis response exercises annually. Global, regional and local plans consider the risk of natural disaster, infectious disease, supply chain interruptions, employee safety, asset protection, customer impacts and other business continuity requirements.

Managing risks and opportunities in our value chain

We're also focused on opportunities to support decarbonization along our value chain. We pursue supplier management strategies that help us make more sustainable choices in what we buy and from whom. We work with EcoVadis to evaluate and improve our suppliers’ environmental performance, recognizing that efficiency improvements throughout our value chain represent opportunities for saving costs and reducing our environmental impacts. PPG has also analyzed tier one suppliers' carbon emission contribution and reduction potential of top raw materials which contribute to scope 3 emissions. This analysis provides insights on potential scope 3 reductions and also sets the basis for further analysis on upstream value chain transitional risks related to shifting to a low carbon economy.

Our products and processes can help consumers live more sustainably and help industries reduce their impact on the planet. We identify products in our research and development pipeline that are sustainably advantaged, and are constantly working to increase the percentage of our sales that come from sustainable solutions. Sustainably advantaged product options help our customers address market and regulatory transition risks in their own operations. Examples include products with less energy intensive application and curing processes, high performance coatings that are light weight and require fewer natural resources, and bio-based products that use lower-carbon feedstock.

Creating sustainably advantaged products and supporting more responsible processes along our supply chain are just a couple of the tools that we use to combat climate change. Industry-wide change and legislative support are important magnifiers of these efforts. Through our Government Affairs department and membership with trade associations and coalitions, we engage directly and indirectly on an ongoing basis with policymakers at the local, state and national levels on issues related to climate change. Two key focus areas are energy efficiency and clean energy generation. We support an "all-of-the-above" approach to energy generation, which includes clean energy generation methods such as wind and solar. We believe that clean energy generation must occur in a measured way, without significant price fluctuations and without harming our production, suppliers and business customers.

We are constantly exploring ways to better support the growing industries that will aid the transition away from fossil fuels. As a producer of advanced coatings that go into clean energy generation, we closely follow the advanced energy manufacturing industry. We frequently support the advocacy efforts of wind, solar and other clean energy stakeholders. We also work with alternative energy providers to source more renewable electricity for our operations.